Business Context and Reporting Period
This Form 6-K filing by Chunghwa Telecom Co., Ltd. (CHT), dated July 10, 2019, reports on corporate governance resolutions from the 2019 Annual General Meeting (AGM) held on June 21, 2019, and operating results for June 2019. The filing covers the election of the 9th term Board of Directors, executive appointments, dividend declarations, and specific related-party transactions involving a subsidiary.
Key Financial Metrics
Operating Results (June 2019)
- Net Sales: NT$16.89 billion (Consolidated).
- Operating Costs and Expenses: NT$13.27 billion.
- Operating Income: NT$3.61 billion.
- Income Before Tax: NT$3.89 billion.
- Net Income (Parent Company): NT$3.14 billion.
- Earnings Per Share (EPS): NT$0.41.
Sales Trends (Year-to-Date)
- Jan-June 2019 Net Sales: NT$101.44 billion.
- Jan-June 2018 Net Sales: NT$107.29 billion.
- YTD Change: Decrease of NT$5.85 billion (-5.45%).
Dividend Information
- 2018 Cash Dividend: NT$4.479 per share.
- Ex-Dividend Date: July 25, 2019.
- Expected Distribution Date: August 28, 2019.
Related Party Transaction
- Transaction: Subsidiary Chunghwa System Integration Co., Ltd. acquired right-of-use assets (office premises) from the parent company.
- Total Transaction Amount: NT$9,163,311 (VAT included).
- Total Right-of-Use Asset Value: NT$8,637,154.
Material Changes and Operational Drivers
For June 2019, consolidated revenue increased slightly by 0.26% compared to June 2018. The filing attributes this to a mix of factors: mobile sales revenue increased due to a lower base period in the prior year, while mobile service revenue decreased due to a higher prior-year base and continued market competition. These declines were offset by increases in application VAS revenue (internet segment), government service revenue, ICT project revenue, and MOD revenue.
Year-to-date sales for the first half of 2019 declined by 5.45% compared to the same period in 2018.
Corporate Governance and Outlook
Board and Executive Changes
- Board Election: The 9th term Board of Directors was elected on June 21, 2019, consisting of 13 directors (8 representing the Ministry of Transportation and Communications and 5 independent directors). The term runs from June 21, 2019, to June 20, 2022.
- Executive Appointments: Chi-Mau Sheih was re-elected as Chairman and appointed as CEO. Shui-Yi Kuo was re-appointed as President and will continue as Chief Financial Officer until a successor is identified.
- Committee Updates: New members were appointed to the Audit Committee and Compensation Committee, composed of the newly elected independent directors.
Outlook and Risks
The filing does not provide specific forward-looking guidance or quantitative outlook for future periods beyond the scheduled Q2 2019 conference call on July 31, 2019. Management commentary highlights ongoing market competition in the mobile service sector as a headwind.
Financial derivative transactions are disclosed for non-trading purposes (hedging), with outstanding forward contract positions totaling NT$247,073,000 (non-hedge accounting) and NT$126,579,000 (hedge accounting) as of the reporting period.
Investor Verification Checklist
- Verify the impact of mobile service revenue decline on full-year 2019 profitability given the 5.45% YTD sales decrease.
- Confirm the timeline for the appointment of a new Chief Financial Officer, as the current President (Shui-Yi Kuo) is acting in this role temporarily.
- Review the details of the related-party asset acquisition by the subsidiary to ensure pricing aligns with market conditions.
- Monitor the Q2 2019 conference call materials (scheduled for July 31, 2019) for updated management commentary on market competition.