Business Context and Reporting Period
This Form 6-K filing by Chunghwa Telecom Co., Ltd. is dated December 10, 2020. The report discloses operating results for November 2020, year-to-date sales through November 2020, and specific related-party transactions involving the acquisition of right-of-use assets by subsidiaries Honghwa International Corporation and CHT Security Co., Ltd.
Key Financial Metrics
Revenue and Profit (November 2020)
- Consolidated Revenue: NT$18.19 billion (Year-over-Year increase of 3.61%).
- Operating Costs and Expenses: NT$15.87 billion.
- Operating Income: NT$3.54 billion.
- Income Before Tax: NT$3.45 billion.
- Net Income (Parent Company): NT$2.65 billion.
- Earnings Per Share (EPS): NT$0.34.
Year-to-Date Sales (January - November 2020)
- Net Sales: NT$183.02 billion (Year-over-Year decrease of 2.32%).
Financial Instruments and Guarantees
- Funds Lent: NT$0 for both parent and subsidiaries.
- Guarantees: Accumulated limited amount for subsidiaries is NT$2,872,505 thousand.
- Derivatives: Outstanding forward contracts (non-trading) totaled NT$111,860 thousand (non-hedge) and NT$189,189 thousand (hedge accounting).
Material Changes vs. Prior Period
November 2020 revenue increased by NT$633.3 million compared to November 2019. This growth was driven by higher handset sales (specifically the iPhone 12 series), increased ICT project revenue, and data communications revenue. These gains offset declines in international voice, mobile service, and local voice revenue. Conversely, operating costs rose due to higher ICT project costs, cost of goods sold, and amortization, partially offset by lower interconnection expenses. Year-to-date sales through November 2020 declined by 2.32% compared to the same period in 2019.
Guidance, Outlook, and Related Party Transactions
Management Commentary and Guidance
Management noted that operating income, pretax income, and EPS for November 2020 all exceeded the fourth-quarter guidance previously announced by the company.
Related Party Transactions
Two subsidiaries acquired right-of-use assets (office premises) from the parent company, Chunghwa Telecom:
- Honghwa International Corporation: Acquired 19 pings of office space in Taichung. Total transaction amount: NT$720,000. Right-of-use asset value: NT$653,132. Payment term: Monthly from Jan 2021 to Dec 2025.
- CHT Security Co., Ltd.: Acquired four properties in Taipei, Taichung, and Kaohsiung. Total transaction amount: NT$15,022,382. Right-of-use asset value: NT$14,199,062. Payment terms: Monthly, primarily for the 2021 calendar year.
Transactions were approved by the Board of Directors based on price negotiation or previous contract prices, citing cost appropriateness and operational requirements.
Investor Verification Checklist
- Verify the sustainability of the revenue growth driven by the iPhone 12 launch in subsequent months.
- Confirm the impact of the year-to-date 2.32% sales decline on full-year 2020 projections.
- Review the valuation methodology for the related-party right-of-use asset acquisitions to ensure fair market pricing.
- Monitor the exposure to financial derivative contracts, specifically the unrealized gains/losses recognized in 2020.
- Assess the offsetting factors between rising ICT costs and declining voice service revenues.