Business Context and Reporting Period
This Form 6-K filing by Chunghwa Telecom Co., Ltd. (CHT) is dated August 12, 2010. The report summarizes significant corporate events, procurement activities, legal judgments, and unaudited financial results for July 2010 and the first seven months of the fiscal year.
Key Financial Metrics
Revenue and Profitability (July 2010)
- Net Sales: NT$15.36 billion (up 1.1% year-over-year).
- Operating Income: NT$4.80 billion.
- Net Income: NT$4.05 billion.
- Earnings Per Share (EPS): NT$0.42.
Revenue and Profitability (January - July 2010)
- Net Sales: NT$107.13 billion (up 1.6% year-over-year).
- Operating Income: NT$33.88 billion.
- Net Income: NT$29.09 billion.
- Earnings Per Share (EPS): NT$3.00.
Capital Allocation and Liabilities
- Dividend: Cash dividend of NT$4.06 per share declared; record date August 19, 2010.
- Legal Liability: Supreme Administrative Court judgment requiring payment of NT$428.36 million in land usage fees to Kaohsiung City Government. Management states this was recognized in fiscal year 2008 and has no impact on 2010 net profit.
Material Changes and Operational Updates
Procurement Activities
The company announced three major equipment procurements totaling approximately NT$1.36 billion:
- FTTx Broadband Remote Access Servers: NT$524.8 million from Nokia Siemens Networks Taiwan Co., Ltd. for network deployment.
- HiNet Traffic Management Devices: NT$528.5 million from SYSCOM COMPUTER ENGINEERING CO. for ISP deployment.
- Hicloud Cloud Service Servers: NT$303.6 million from Chunghwa System Integration Co., Ltd. (a subsidiary) for network deployment.
Strategic Investments
The Board approved the establishment of a wholly owned overseas subsidiary in mainland China to provide ICT services. The planned maximum investment is US$6 million. To date, total actual investment in mainland China is US$670,000, representing 0.005% of total assets.
Reporting Amendments
The company amended its 2009 Annual Report on pages 18, 19, 26, 27, 28, 29, 34, and 106.
Guidance, Outlook, and Risks
- Financial Forecast: On July 27, 2010, the company issued a voluntary condensed financial forecast for the third quarter of 2010. The filing notes these projections are subject to significant uncertainties and contingencies.
- Legal Contingency: The land usage fee dispute with Kaohsiung City Government was resolved by the Supreme Administrative Court. While the liability is significant (NT$428 million), management asserts no financial impact on the current year as it was previously accrued.
- Regulatory Compliance: The filing confirms the company is a Foreign Private Issuer filing under Form 20-F.
Investor Verification Checklist
- Verify the impact of the NT$428 million land usage fee payment on cash flow, despite management's claim of no net profit impact.
- Confirm the execution and timeline of the US$6 million investment in the new mainland China subsidiary.
- Review the specific details of the amendments made to the 2009 Annual Report to ensure no material restatements affect historical comparability.
- Monitor the realization of the voluntary Q3 2010 financial forecast against actual results when reported.
- Assess the competitive implications of the NT$1.36 billion in new network and cloud infrastructure procurement.