Business Context and Reporting Period
This Form 6-K filing by Chunghwa Telecom Co., Ltd. (CHT) is dated January 11, 2021. The report summarizes significant corporate events, related-party transactions, and operating results for the period ending December 31, 2020, including specific data for December 2020 and the full fiscal year 2020.
Key Financial Metrics
Full Year 2020 Results
- Total Revenue: NT$ 207.61 billion (up 0.04% year-over-year).
- Operating Income: NT$ 42.36 billion.
- Income Before Tax: NT$ 42.84 billion.
- Net Income (Parent): NT$ 33.42 billion.
- Earnings Per Share (EPS): NT$ 4.31.
December 2020 Results
- Net Sales: NT$ 24.59 billion (up 22.08% year-over-year).
- Operating Income: NT$ 3.39 billion.
- Income Before Tax: NT$ 3.39 billion.
- Net Income (Parent): NT$ 2.81 billion.
- EPS: NT$ 0.36.
Capital and Liquidity
- Securities Disposal: Sold 46,983,000 shares of China Airlines Ltd. for NT$ 569.6 million, realizing a gain of NT$ 16.7 million.
- Derivatives: Outstanding forward contracts totaled NT$ 415.8 million (non-trading) and NT$ 200.9 million (hedge accounting).
- Guarantees: Accumulated guarantees for subsidiaries totaled NT$ 2.87 billion.
Material Changes and Operational Highlights
December 2020 revenue growth was driven by increases in ICT project revenue, Internet Value-Added Services (VAS), and handset sales. These gains offset declines in fixed-line voice revenue, mobile service revenue due to market competition, and roaming revenue impacted by the COVID-19 pandemic. Operating costs and expenses for December rose to NT$ 21.26 billion.
Full-year 2020 performance exceeded management's prior guidance ranges:
- Revenue achievement: 96.4% to 97.0% of target.
- Operating income achievement: 105.2% to 109.9% of target.
- Income before tax achievement: 103.8% to 108.8% of target.
- EPS achievement: 102.9% to 108.1% of target.
Management Commentary, Risks, and Unusual Items
Capital Expenditures
CHT announced significant mobile broadband equipment purchases finalized in late 2020:
- Ericsson Taiwan Ltd: NT$ 6.34 billion for mobile broadband business construction.
- Nokia Solutions and Networks Oy: NT$ 6.25 billion for mobile broadband business construction.
Related-Party Transactions
Multiple subsidiaries acquired right-of-use assets (office premises) from the parent company in December 2020. Total transaction values for these leases ranged from approximately NT$ 137,000 to NT$ 17.97 million per subsidiary, with lease terms generally spanning 2021 to 2023.
Corporate Governance
The Board approved senior management changes effective January 1, 2021, including the retirement of the President of the Northern Taiwan Business Group and the Mobile Business Group, with internal successors appointed.
Risks and Clarifications
CHT clarified media reports regarding submarine cable investments, stating that while the company evaluates such investments based on demand, specific reports of investing in three cable systems within three years were media speculation. The company noted that roaming revenue was negatively impacted by the COVID-19 pandemic.
Investor Verification Checklist
- Verify the impact of the NT$ 12.59 billion combined equipment purchases from Ericsson and Nokia on future depreciation and cash flow.
- Confirm the sustainability of the 22% year-over-year revenue growth in December 2020, specifically regarding ICT and VAS segments.
- Review the terms of the related-party office leases to ensure pricing aligns with market rates.
- Monitor the realization of the NT$ 16.7 million gain from the China Airlines share disposal and its classification in other comprehensive income.
- Attend the Q4 2020 investor conference scheduled for February 4, 2021, for detailed guidance on 2021.