Business Context and Reporting Period
This Form 6-K filing by Chunghwa Telecom Co., Ltd. is dated December 10, 2019. The report summarizes operating results for November 2019 and the year-to-date period ending November 30, 2019. It also discloses accounting differences between Taiwan-IFRSs and IFRSs for the third quarter of 2019 and details a related-party asset acquisition by a subsidiary.
Key Financial Metrics
November 2019 Operating Results
- Net Sales: NT$17.55 billion
- Operating Costs and Expenses: NT$14.01 billion
- Operating Income: NT$3.54 billion
- Income Before Tax: NT$3.61 billion
- Net Income (Parent): NT$2.82 billion
- Earnings Per Share (EPS): NT$0.36
Year-to-Date (Jan-Nov) 2019
- Net Sales: NT$187.38 billion
Third Quarter 2019 Accounting Differences (QTD)
- Taiwan-IFRSs Net Income (Parent): NT$8.09 billion (3 months) / NT$25.01 billion (9 months)
- IFRSs Net Income (Parent): NT$7.67 billion (3 months) / NT$25.64 billion (9 months)
- Total Assets (Sept 30, 2019): NT$467.70 billion (Taiwan-IFRSs) vs. NT$467.49 billion (IFRSs)
Liquidity and Derivatives
- Funds Lent: NT$0
- Guarantees (Subsidiaries): Accumulated amount of NT$2.87 billion
- Financial Derivatives: Outstanding forward contracts totaled NT$50.91 million (non-hedge) and NT$66.29 million (hedge). Realized losses for the year were NT$6.25 million (non-hedge) and NT$1.77 million (hedge).
Material Changes vs. Prior Period
- November Sales Decline: Net sales decreased by 3.78% year-over-year to NT$17.55 billion.
- YTD Sales Decline: Net sales for January through November decreased by 4.40% year-over-year to NT$187.38 billion.
- Revenue Drivers: The decline was driven by decreased ICT project revenue, mobile service revenue (due to market competition and VoIP substitution), and fixed-line voice revenue. These decreases offset growth in government internet service and MOD revenue.
Guidance, Outlook, and Risks
The filing does not provide specific forward-looking guidance or numerical outlook for future periods. Management commentary highlights continued market competition and VoIP substitution as headwinds for mobile and fixed-line voice segments. A related-party transaction was disclosed where a subsidiary acquired a right-of-use asset (office space) from the parent company for NT$137,880, effective January 1, 2020, based on market bargaining.
Investor Verification Checklist
- Verify the sustainability of revenue growth in government internet services and MOD to offset declines in traditional voice and mobile segments.
- Review the impact of VoIP substitution on long-term mobile service revenue trends.
- Confirm the reconciliation of net income between Taiwan-IFRSs and IFRSs, specifically regarding the timing of income tax recognition on unappropriated earnings.
- Monitor the exposure to financial derivative losses, noting realized losses of approximately NT$8 million for the year-to-date period.
- Assess the related-party transaction terms for the acquisition of the right-of-use asset in Taipei.