Investors

To Shareholders

 

Letter to Shareholders

 

Dear Shareholders,

2015 was a fruitful year for Chunghwa Telecom. Owing to concerted efforts from our entire team, we set a new record high for total revenue in 2015, and have achieved our highest earnings per share since 2012. Considering the current turmoil in the global financial markets and the economic slowdown in Taiwan, we are quite proud of our overall strong performance during the year.

During the course of 2015, we witnessed the rapid adoption of 4G mobile broadband services throughout Taiwan. In last October, 4G subscribers in Taiwan reached a record 10 million, and by the end of the year that figure further climbed to 11.6 million or 49% of the Taiwanese population. Since the launch of 4G mobile broadband services in May 2014, healthy competition in the industry, along with market demand for faster connections, has significantly boosted customer growth, market penetration and data usage in Taiwan, which now rank among the world’s highest.

Chunghwa Telecom worked aggressively to meet customers’ demands for 4G speed and coverage by providing market-leading comprehensive mobile services.  As of the end of December 2015, Chunghwa Telecom had amassed over 4.4 million 4G customers, widening the lead over our closest competitor to over one million, and representing a market-leading 38.2% market share in Taiwan.

In addition to achieving solid results in the 4G arena, we also endeavored to promote our other services including voice optimization, fixed-line broadband services, corporate customer business and other value-added services. These efforts continue to benefit us and strengthen investors’ confidence in our approach to provide comprehensive telecom services.  The portion of our shares held by foreign investors increased from 15.2% in the beginning of 2015 to more than 24% by the end March 2016, and our stock price has also reached a new record high. These strong results are a tremendous source of encouragement for the entire company.

 

Financial Results

The consolidated annual total revenue of Chunghwa Telecom for the full year 2015 was NT$231.8 billion, representing a solid annual growth of 2.3%, which exceeded our earlier expectations. Both mobile Internet and 4G mobile customers continued to expand rapidly. Mobile value-added services revenue also showed strong growth, and provided a significant boost to our overall sales revenue. Furthermore, our increasingly robust and effective ICT business also progressed solidly and helped contribute to the top-line expansion.

Annual consolidated costs were NT$181.3 billion, a decrease of 0.6% compared with 2014. The decrease was mainly due to the reduction in network interconnection costs and depreciation expenses, partially offset by increased cost of goods sold. Capital expenditures were NT$25.1 billion. In order to strictly control overall capital expenditures, we closely observed market demand, dynamically adjusted expenditure planning and increased investments in mobile broadband network construction to maximize the economic efficiency of our capital expenditures. Due to the continued revenue growth and effective cost control measures, net income attributable to the stockholders of the parent company was NT$42.8 billion or NT$5.52 per share, which exceeded our prior guidance by 14.2%.

 

Continued Leadership in Mobile Broadband Market

 

In order to provide fast, stable and high-quality 4G broadband services and maintain our market leadership position, we accelerated the construction of our 4G network. By the end of 2015, network coverage reached 99% of the population, allowing most Taiwanese customers to enjoy the convenience of high-quality mobile Internet services. In addition to expanding our market share, we are also committed to increasing ARPU, through improving value-added services. We provide the “Brilliant Hami Packages” that contain KKBOX, Hami Pass, Hami TV, Hami Games and Hami Bookstore at affordable prices over our high-speed 4G network.

To fuel the healthy long-term development of mobile broadband services, we participated in the second round of 4G bidding for the 2500MHz / 2600MHz frequency bands launched by the National Communications Commission on November 17, 2015. On December 7, 2015, at a price of NT$9.96 billion, we acquired the industry's largest FDD spectrum with both uplink and downlink bands of 30 MHz. These bands have been put into use in March of 2016. Through utilizing the Carrier Aggregation (CA) technology, we are able to integrate the 2500 /2600 bands with the 900MHz and 1800MHz bands into 3CA and  boost the data transfer speeds by over 300 Mbps . The combination of high and low frequency capabilities can effectively enhance the quality of communication, and provide customers with a better mobile broadband experience.

 

Continuous upgrade on fixed-line broadband with big data analytics

We continued to improve the speed for our fiber-optic broadband Internet access service. Following the launch of 100Mbps broadband services in 2013 and the subsequent launch of 300Mbps services in 2014, we introduced speeds of 500Mbps and 1Gbps in October 2015. By the end of 2015, we had 1.59 million customers signed up at speeds of 60Mbps and higher and 1.05 million customers at speeds of 100Mbps and higher. As a result of our effective strategies to upgrade subscribers to higher speed services, we were able to further grow broadband service revenue, despite facing significant market competition which hindered our subscriber growth.

To further promote our broadband services among target customers and maximize the return of our broadband network investment, we have increasingly leveraged our big data capabilities to analyze customer behavior and optimize locations for marketing and construction.

We launched a bundled package for our broadband and MOD services to attract more applications. For MOD service, we offered Subscription Video on Demand (SVOD) services to cater to customers’ various interests and successfully accumulated subscribers. In addition, MOD and OTT content could be consumed on different broadcast terminals over fixed-line and mobile networks. Our success here reflects the internal operational synergies of an integrated telecom carrier. We will continue to enrich the content of our programs and improve our brand image with the goal of becoming a leader among multi-screen providers in an era of digital convergence.

According to the “2015 digital convergence report" authored by the Taiwan Digital Convergence Association, consumers are more satisfied with MOD than cable TV due to MOD’s visual quality, overall service and channel diversity.

 

Actively promoted new ICT services

ICT services are one of the key drivers that fuel the continuous development of the telecommunications industry. Our ICT services take advantage of our robust broadband network capacity to improve business performance and administrative efficiency.

The development of the ICT business in 2015 included cloud services, information security, and Internet of Things (IoT) capabilities. We have succeeded in targeting projects from relevant government and enterprise customers, and customizing products according to their needs. For example, we introduced a streetlight monitoring system, which provided quality lighting in the city of Hsinchu.  Additionally, to respond to the government’s low-carbon energy policy, we established a dedicated team aimed at developing open service platforms to form a cross-industry product solution ecological chain and also played an important role in several environment-related government projects. In August 2015, Chunghwa Telecom signed a strategic partnership agreement with Microsoft to jointly provide cloud services to governments and enterprises alike. This cooperation was seen as a new model for cloud services in Taiwan. In addition, we actively built a world-class cloud data center in accordance with stringent international standards as it relates to electronic, mechanical and telecommunications infrastructure. The completion of the center in the second quarter of 2016 will help to support the development of our businesses.

 

R&D and Achievements

In 2015, Chunghwa Telecom’s research and development efforts covered key topics including convergence services, the IoT, information security, big data, cloud computing and intelligent broadband. We had some impressive achievements in the following fields:

1)      Convergence Services: fixed-mobile convergence  services, multiscreen video services, intelligent interface technologies

2)      IoT: Intelligent video surveillance solutions, intelligent manufacturing solutions;

3)      Information Security: Identification solutions, enterprise APT defense solutions;

4)      Big Data: Big data platforms and analytics;

5)      Cloud Computing: public and private cloud management solutions, common frameworks for cloud applications;

6)      Intelligent Broadband: Advanced LTE solutions, G.fast high speed broadband networks management solutions, new VoIP applications for enterprises; and

7)      Intellectual Property (172 patents filed and 162 granted)

 

Uphold high standards of corporate social responsibility

Chunghwa Telecom is a company that both benefits from and serves the entire community. With Chunghwa’s expertise and resources, we have been consistently striving to improve our business operations as well as our CSR programs in order to build a sustainable community and environment. 

In 2015, our corporate social responsibility footprint was visible throughout Taiwan. When a road collapsed in Xiaogang District, Kaohsiung City, and communication was interrupted due to an electrical engineering problem, we immediately sent technicians to repair the telephone cables. When Wulai district was hit by typhoon Soudelor, our engineers were sent to the severely afflicted area immediately, actively repairing communication equipment and installing temporary toll-free telephone connections. We have stood with the people to confront difficulties together, reflecting our philosophy of brotherhood and upholding our corporate mantra, “we spare no effort to care, no matter when and where.” In addition, we built fiber optic broadband networks, constructed infrastructure in remote islands and villages and participated in various philanthropic activities. We have continued to work towards improving our national competitiveness, minimizing digital divide and supporting disadvantaged groups.

Taking care of our employees is another big component of our corporate social responsibility efforts. We continue to care for the interests of employees, enhance their benefits and provide a medium for communication and consultation. We also strive to maintain good relations with our employees and ensure they work in a stable environment to exhibit their full potential and eventually achieve a win-win-win situation for the company’s management, employees and shareholders. 

 

Awards

Chunghwa Telecom has always endeavored to maintain its superior brand image and trust among customers in the market. However, we will not become complacent, and will continue to strive to exceed customers’ expectations. Owing to this continuous endeavor, we have earned many domestic and international awards recognizing these efforts and corroborating our leadership in service to our customers and community.

In 2015, the World Branding Forum released a list of the winners of the 2015-2016 World Branding Awards. Chunghwa Telecom took home the National Award of Taiwan for our exemplary performance in the areas of financial earnings, marketing, public relations and community engagement. Frost & Sullivan, a reputable international research organization, at its 2015 Best Practices Awards Ceremony, awarded Chunghwa Telecom as the Taiwan Mobile Service Provider of the Year. Chunghwa Telecom was also the only telecom service provider in Greater China to be included in the DJSI World and DJSI Emerging Markets Indexes for the third year in a row. We also placed in Finance Asia’s 2016 Best Companies, as our Chairman and CEO was ranked as one of the best CEOs in Taiwan. Additionally, we received the highest award among “Trusted Brands” in the telecom category from Reader's Digest for the 11th year in a row, which demonstrates customers’ trust in our creative and compassionate services. Chunghwa Telecom also received the Platinum Corporate Award for a third consecutive year from the reputable magazine, The Asset, reflecting our achievements in earnings, management, governance, social and environmental responsibility, and investor relations.

The list goes on with many other awards that recognize Chunghwa Telecom’s efforts in business development, customer service and social responsibility. This recognition encourages us to continue to improve our performance.

 

Looking Forward

In 2016, we will remain committed to our major strategies and focus on the development of 4G mobile broadband networks. We will implement these strategies by utilizing Chunghwa Telecom’s capabilities in network infrastructure construction, product development, and sales and system integration in order to grow revenue and profit.

Chunghwa Telecom has the industry's largest mobile broadband bandwidth of 130 MHz, and will integrate the 900MHz, 1800MHz and 2600MHz band resources into 3CA to enhance communication quality in metropolitan areas and further stimulate the use of value-added services as well as improve ARPU.

In order to cultivate new industry capacity and ultimately boost economic growth for Taiwan, we are prioritizing the development of ICT and IoT solutions and to this end will actively work to integrate these supply chains. Chunghwa Telecom will provide customers with high-quality customized solutions through comprehensive network construction, superior R&D and platform development, combined with big data analysis, as well as close cooperation with our strategic partners.

We understand that there will be challenges along our path of development such as macro-economic softness, competition and regulation. We will continue to prevail against these headwinds, as we strive to optimize overall network performance, build up our technical capabilities, and employ the most advanced communication technologies available. Additionally, in order to attract and cultivate key talent and support our business development, we will further leverage our expertise in internal product packaging, marketing, distribution, research and development and other capabilities throughout Chunghwa Telecom.

Witnessing our strong performance in 2015, please be assured that we will continue to strive to create strong value for our shareholders in the years to come.

 

  Lih-Shyng Tsai         Mu-Piao Shih

                                                     Chairman and CEO                     President

                                                                                                                     April 27, 2016

Letter to Shareholders

 

Dear Shareholders,

2015 was a fruitful year for Chunghwa Telecom. Owing to concerted efforts from our entire team, we set a new record high for total revenue in 2015, and have achieved our highest earnings per share since 2012. Considering the current turmoil in the global financial markets and the economic slowdown in Taiwan, we are quite proud of our overall strong performance during the year.

During the course of 2015, we witnessed the rapid adoption of 4G mobile broadband services throughout Taiwan. In last October, 4G subscribers in Taiwan reached a record 10 million, and by the end of the year that figure further climbed to 11.6 million or 49% of the Taiwanese population. Since the launch of 4G mobile broadband services in May 2014, healthy competition in the industry, along with market demand for faster connections, has significantly boosted customer growth, market penetration and data usage in Taiwan, which now rank among the world’s highest.

Chunghwa Telecom worked aggressively to meet customers’ demands for 4G speed and coverage by providing market-leading comprehensive mobile services.  As of the end of December 2015, Chunghwa Telecom had amassed over 4.4 million 4G customers, widening the lead over our closest competitor to over one million, and representing a market-leading 38.2% market share in Taiwan.

In addition to achieving solid results in the 4G arena, we also endeavored to promote our other services including voice optimization, fixed-line broadband services, corporate customer business and other value-added services. These efforts continue to benefit us and strengthen investors’ confidence in our approach to provide comprehensive telecom services.  The portion of our shares held by foreign investors increased from 15.2% in the beginning of 2015 to more than 24% by the end March 2016, and our stock price has also reached a new record high. These strong results are a tremendous source of encouragement for the entire company.

 

Financial Results

The consolidated annual total revenue of Chunghwa Telecom for the full year 2015 was NT$231.8 billion, representing a solid annual growth of 2.3%, which exceeded our earlier expectations. Both mobile Internet and 4G mobile customers continued to expand rapidly. Mobile value-added services revenue also showed strong growth, and provided a significant boost to our overall sales revenue. Furthermore, our increasingly robust and effective ICT business also progressed solidly and helped contribute to the top-line expansion.

Annual consolidated costs were NT$181.3 billion, a decrease of 0.6% compared with 2014. The decrease was mainly due to the reduction in network interconnection costs and depreciation expenses, partially offset by increased cost of goods sold. Capital expenditures were NT$25.1 billion. In order to strictly control overall capital expenditures, we closely observed market demand, dynamically adjusted expenditure planning and increased investments in mobile broadband network construction to maximize the economic efficiency of our capital expenditures. Due to the continued revenue growth and effective cost control measures, net income attributable to the stockholders of the parent company was NT$42.8 billion or NT$5.52 per share, which exceeded our prior guidance by 14.2%.

 

Continued Leadership in Mobile Broadband Market

 

In order to provide fast, stable and high-quality 4G broadband services and maintain our market leadership position, we accelerated the construction of our 4G network. By the end of 2015, network coverage reached 99% of the population, allowing most Taiwanese customers to enjoy the convenience of high-quality mobile Internet services. In addition to expanding our market share, we are also committed to increasing ARPU, through improving value-added services. We provide the “Brilliant Hami Packages” that contain KKBOX, Hami Pass, Hami TV, Hami Games and Hami Bookstore at affordable prices over our high-speed 4G network.

To fuel the healthy long-term development of mobile broadband services, we participated in the second round of 4G bidding for the 2500MHz / 2600MHz frequency bands launched by the National Communications Commission on November 17, 2015. On December 7, 2015, at a price of NT$9.96 billion, we acquired the industry's largest FDD spectrum with both uplink and downlink bands of 30 MHz. These bands have been put into use in March of 2016. Through utilizing the Carrier Aggregation (CA) technology, we are able to integrate the 2500 /2600 bands with the 900MHz and 1800MHz bands into 3CA and  boost the data transfer speeds by over 300 Mbps . The combination of high and low frequency capabilities can effectively enhance the quality of communication, and provide customers with a better mobile broadband experience.

 

Continuous upgrade on fixed-line broadband with big data analytics

We continued to improve the speed for our fiber-optic broadband Internet access service. Following the launch of 100Mbps broadband services in 2013 and the subsequent launch of 300Mbps services in 2014, we introduced speeds of 500Mbps and 1Gbps in October 2015. By the end of 2015, we had 1.59 million customers signed up at speeds of 60Mbps and higher and 1.05 million customers at speeds of 100Mbps and higher. As a result of our effective strategies to upgrade subscribers to higher speed services, we were able to further grow broadband service revenue, despite facing significant market competition which hindered our subscriber growth.

To further promote our broadband services among target customers and maximize the return of our broadband network investment, we have increasingly leveraged our big data capabilities to analyze customer behavior and optimize locations for marketing and construction.

We launched a bundled package for our broadband and MOD services to attract more applications. For MOD service, we offered Subscription Video on Demand (SVOD) services to cater to customers’ various interests and successfully accumulated subscribers. In addition, MOD and OTT content could be consumed on different broadcast terminals over fixed-line and mobile networks. Our success here reflects the internal operational synergies of an integrated telecom carrier. We will continue to enrich the content of our programs and improve our brand image with the goal of becoming a leader among multi-screen providers in an era of digital convergence.

According to the “2015 digital convergence report" authored by the Taiwan Digital Convergence Association, consumers are more satisfied with MOD than cable TV due to MOD’s visual quality, overall service and channel diversity.

 

Actively promoted new ICT services

ICT services are one of the key drivers that fuel the continuous development of the telecommunications industry. Our ICT services take advantage of our robust broadband network capacity to improve business performance and administrative efficiency.

The development of the ICT business in 2015 included cloud services, information security, and Internet of Things (IoT) capabilities. We have succeeded in targeting projects from relevant government and enterprise customers, and customizing products according to their needs. For example, we introduced a streetlight monitoring system, which provided quality lighting in the city of Hsinchu.  Additionally, to respond to the government’s low-carbon energy policy, we established a dedicated team aimed at developing open service platforms to form a cross-industry product solution ecological chain and also played an important role in several environment-related government projects. In August 2015, Chunghwa Telecom signed a strategic partnership agreement with Microsoft to jointly provide cloud services to governments and enterprises alike. This cooperation was seen as a new model for cloud services in Taiwan. In addition, we actively built a world-class cloud data center in accordance with stringent international standards as it relates to electronic, mechanical and telecommunications infrastructure. The completion of the center in the second quarter of 2016 will help to support the development of our businesses.

 

R&D and Achievements

In 2015, Chunghwa Telecom’s research and development efforts covered key topics including convergence services, the IoT, information security, big data, cloud computing and intelligent broadband. We had some impressive achievements in the following fields:

1)      Convergence Services: fixed-mobile convergence  services, multiscreen video services, intelligent interface technologies

2)      IoT: Intelligent video surveillance solutions, intelligent manufacturing solutions;

3)      Information Security: Identification solutions, enterprise APT defense solutions;

4)      Big Data: Big data platforms and analytics;

5)      Cloud Computing: public and private cloud management solutions, common frameworks for cloud applications;

6)      Intelligent Broadband: Advanced LTE solutions, G.fast high speed broadband networks management solutions, new VoIP applications for enterprises; and

7)      Intellectual Property (172 patents filed and 162 granted)

 

Uphold high standards of corporate social responsibility

Chunghwa Telecom is a company that both benefits from and serves the entire community. With Chunghwa’s expertise and resources, we have been consistently striving to improve our business operations as well as our CSR programs in order to build a sustainable community and environment. 

In 2015, our corporate social responsibility footprint was visible throughout Taiwan. When a road collapsed in Xiaogang District, Kaohsiung City, and communication was interrupted due to an electrical engineering problem, we immediately sent technicians to repair the telephone cables. When Wulai district was hit by typhoon Soudelor, our engineers were sent to the severely afflicted area immediately, actively repairing communication equipment and installing temporary toll-free telephone connections. We have stood with the people to confront difficulties together, reflecting our philosophy of brotherhood and upholding our corporate mantra, “we spare no effort to care, no matter when and where.” In addition, we built fiber optic broadband networks, constructed infrastructure in remote islands and villages and participated in various philanthropic activities. We have continued to work towards improving our national competitiveness, minimizing digital divide and supporting disadvantaged groups.

Taking care of our employees is another big component of our corporate social responsibility efforts. We continue to care for the interests of employees, enhance their benefits and provide a medium for communication and consultation. We also strive to maintain good relations with our employees and ensure they work in a stable environment to exhibit their full potential and eventually achieve a win-win-win situation for the company’s management, employees and shareholders. 

 

Awards

Chunghwa Telecom has always endeavored to maintain its superior brand image and trust among customers in the market. However, we will not become complacent, and will continue to strive to exceed customers’ expectations. Owing to this continuous endeavor, we have earned many domestic and international awards recognizing these efforts and corroborating our leadership in service to our customers and community.

In 2015, the World Branding Forum released a list of the winners of the 2015-2016 World Branding Awards. Chunghwa Telecom took home the National Award of Taiwan for our exemplary performance in the areas of financial earnings, marketing, public relations and community engagement. Frost & Sullivan, a reputable international research organization, at its 2015 Best Practices Awards Ceremony, awarded Chunghwa Telecom as the Taiwan Mobile Service Provider of the Year. Chunghwa Telecom was also the only telecom service provider in Greater China to be included in the DJSI World and DJSI Emerging Markets Indexes for the third year in a row. We also placed in Finance Asia’s 2016 Best Companies, as our Chairman and CEO was ranked as one of the best CEOs in Taiwan. Additionally, we received the highest award among “Trusted Brands” in the telecom category from Reader's Digest for the 11th year in a row, which demonstrates customers’ trust in our creative and compassionate services. Chunghwa Telecom also received the Platinum Corporate Award for a third consecutive year from the reputable magazine, The Asset, reflecting our achievements in earnings, management, governance, social and environmental responsibility, and investor relations.

The list goes on with many other awards that recognize Chunghwa Telecom’s efforts in business development, customer service and social responsibility. This recognition encourages us to continue to improve our performance.

 

Looking Forward

In 2016, we will remain committed to our major strategies and focus on the development of 4G mobile broadband networks. We will implement these strategies by utilizing Chunghwa Telecom’s capabilities in network infrastructure construction, product development, and sales and system integration in order to grow revenue and profit.

Chunghwa Telecom has the industry's largest mobile broadband bandwidth of 130 MHz, and will integrate the 900MHz, 1800MHz and 2600MHz band resources into 3CA to enhance communication quality in metropolitan areas and further stimulate the use of value-added services as well as improve ARPU.

In order to cultivate new industry capacity and ultimately boost economic growth for Taiwan, we are prioritizing the development of ICT and IoT solutions and to this end will actively work to integrate these supply chains. Chunghwa Telecom will provide customers with high-quality customized solutions through comprehensive network construction, superior R&D and platform development, combined with big data analysis, as well as close cooperation with our strategic partners.

We understand that there will be challenges along our path of development such as macro-economic softness, competition and regulation. We will continue to prevail against these headwinds, as we strive to optimize overall network performance, build up our technical capabilities, and employ the most advanced communication technologies available. Additionally, in order to attract and cultivate key talent and support our business development, we will further leverage our expertise in internal product packaging, marketing, distribution, research and development and other capabilities throughout Chunghwa Telecom.

Witnessing our strong performance in 2015, please be assured that we will continue to strive to create strong value for our shareholders in the years to come.

 

  Lih-Shyng Tsai         Mu-Piao Shih

                                                     Chairman and CEO                     President

                                                                                                                     April 27, 2016