Business Context and Reporting Period
This Form 6-K filing by Chunghwa Telecom Co., Ltd. is dated October 11, 2018. The report covers operating results for September 2018 and the nine-month period ending September 30, 2018. The company is a foreign private issuer based in Taipei, Taiwan.
Key Financial Metrics
Revenue and Profitability (September 2018)
- Net Sales: NT$17.79 billion (down 8.5% year-over-year).
- Operating Costs and Expenses: NT$14.17 billion (down 8.0% year-over-year).
- Operating Income: NT$3.62 billion (down 10.0% year-over-year).
- Income Before Tax: NT$3.77 billion (down 9.4% year-over-year).
- Net Income (Parent Company): NT$2.98 billion (down 10.5% year-over-year).
- Earnings Per Share (EPS): NT$0.38.
Revenue and Profitability (January - September 2018)
- Net Sales: NT$159.99 billion (down 3.98% year-over-year).
Liquidity and Financial Instruments
- Funds Lent: No funds were lent to other parties in September 2018.
- Guarantees: Subsidiaries held accumulated guarantees of NT$2.82 billion with a limited amount of NT$300 million.
- Derivatives: The company held forward contracts for non-trading purposes. Outstanding positions totaled NT$386.58 million (non-hedge) and NT$88.58 million (hedge accounting). Realized losses for the year were approximately NT$3.5 million for both categories.
Material Changes Versus Prior Period
Revenue declined significantly in September 2018 compared to the prior year. The filing attributes the 8.5% drop in consolidated revenue to three primary factors:
- Decrease in voice revenue due to continuing VoIP substitution.
- Decline in mobile service revenue owing to market competition.
- Decrease in ICT project revenue.
Operating costs decreased by 8.0%, driven by lower costs of goods sold and reduced ICT project costs. Despite cost reductions, operating income fell by 10.0% due to the sharper decline in revenue.
Guidance, Outlook, and Corporate Developments
Management Commentary and Strategy
The filing does not provide specific forward-looking financial guidance or numerical targets. However, it highlights strategic initiatives:
- Internet-Only Bank: On October 3, 2018, Chunghwa Telecom announced the establishment of a preparatory office with strategic partners (Mega International Commercial Bank, Shin Kong Financial Holding, and PX Mart) to apply for an internet-only bank license.
- Investor Conference: A conference call for third-quarter 2018 results was scheduled for October 31, 2018.
Executive Changes
On October 2, 2018, Yung-Fong Song resigned as Senior Executive Vice President of Investment. Tian-Tsair Su, Senior Executive Vice President of Administration, was appointed to act in the position pending a permanent replacement.
Investor Verification Checklist
- Verify the sustainability of the revenue decline in voice and mobile segments given the cited VoIP substitution and competition.
- Confirm the timeline and regulatory approval status for the proposed internet-only bank venture.
- Review the full third-quarter 2018 presentation released on October 31, 2018, for detailed segment analysis.
- Monitor the appointment of a permanent Senior Executive Vice President of Investment.
- Assess the impact of ICT project revenue fluctuations on future operating margins.