To Shareholders
To all of our shareholders,
2011 marked another year of continued execution across our core business segments and significant progress on our key long-term growth drivers. Against a global backdrop of new technology advances and ongoing adoption of more intelligent, integrated and innovative fixed-line and mobile broadband applications by both consumers and businesses, Chunghwa Telecom solidified its position as the most trusted and reliable telecoms company in Taiwan.
Our key focus in 2011 remained on the expansion of our customer base for fixed-line and mobile broadband solutions, and further development of our value-added service (VAS) offering. In addition, we made significant progress on the roll-out of our Multimedia-on-Demand offering (MOD). We are proud to announce that we achieved significant milestones in many of our key focus areas, having reached over 1 million customers for our MOD service and over 10 million subscribers in our mobile business, representing a new record in Taiwan. Leveraging on the solid progress on our core business segments, we also made further strides throughout the year on our new initiatives including our corporate ICT offering, convergence services and cloud computing solutions.
For 2011, our total consolidated revenue for the full year increased by 7.4% year-over-year to NT$217.49billion, of which 42.8% was from the mobile business, 36.5% was from the domestic fixed business, 11.4% was from the internet business, 7.0% was from the international fixed business, and the remainder was from our other business segment. Our Company’s revenue growth in 2011 was driven primarily by growth in mobile VAS revenue and handset sales relating to strong uptake of smartphone devices as well as increase in fixed line revenue resulting from the shift in the pricing right of a fixed-to-mobile call from mobile operators to fixed network operators. EBITDA for 2011 decreased by4.4% to NT$87.37billion and operating profit decreased by 4.0% to NT$55.08 billion, mainly as a result of the interconnection costs and transition fees resulting from the shift in pricing right of fixed-to-mobile calls, the increase in costs of handset sold and the maintenance and material expenses for mobile internet and broadband operation.
2011 Highlights
Mobile
Customer demand for more robust and content-rich mobile access has reached a new high in Taiwan, as demonstrated by increasing smartphone adoption. For the full year, the percentage of Smartphones among all handsets sold reached over 48%. The surge in Smartphone adoption and overall healthy demand for mobile internet access supported our full year results for this segment. Mobile internet customer growth of over 694 thousand subscribers in 2011 brought our total subscriber count for the year to more than 1.5 million, representing over 86% growth over 2010. We expect to reach 2.2 million mobile internet customers by the end of 2012. Nevertheless, the surge of mobile internet usage resulted in network congestion in some hotspots. To response to customers’ expectation of quality service, we offered discounts as compensation to subscribers whose monthly data usage is no more than 1GB.
In order to keep pace with this high level of demand, we are constantly expanding our network coverage and the capacity of our mobile network, including expanded development of WiFi hot spots in certain key geographic areas with especially high traffic and usage levels. We have built about 20,000 WiFi APs by 2011 and will continue the development to 30,000 WiFi APs as needed to support our mobile network. Underpinned by our robust mobile platform, we have continued to expand our rich content offering through the development of our Hami platform, our primary VAS brand in the mobile space. On top of Hami platform, we offer Hami Apps, now totaling over 3,390. Moreover, Hami bookstore, Hami music and Hami video services, which allow subscribers to download continuously enriched contents, are also available on Hami platform. Mobile access to multi-media, applications and information has evolved into a near necessity of daily life, and our robust Hami offering is proving to be a valuable asset and customer draw.
In addition, we are working to expand our already comprehensive device line-up. In December 2011, we announced the launch of iPhone 4S pre-registration, and the response has been nothing short of phenomenal, with over 200,000 customers pre-registering. That represents a record high for any single device launch in Taiwan, and it indicates the strong momentum and demand for high quality, high-end smartphones. We also believe that significant demand exists for quality, mid- to low- level smartphones at reasonable prices, and we are well positioned in this segment, with many products on offer that provide a high level of functionality and good value. We believe this focus on both the high and middle-to-low markets will allow us to drive further smartphone penetration among our mobile subscribers, building on our leading position and ultimately helping to enhance our mobile ARPU.
Broadband
The key underlying trend driving our Broadband business in 2011 was the deployment and promotion of higher speed offerings. In order to migrate customers to higher speed broadband, especially Fiber-to the-x (FTTx) service, we reduced our broadband tariffs in mid 2011, driving a significant subscriber growth for 50Mbps and even higher speed FTTx services. In addition to the ongoing upgrade of Asymmetric Digital Subscriber Line (ADSL) customers to fiber solutions, we also encourage dial-up customers to migrate to broadband service in order to broaden our broadband subscriber base. Our new higher speed offerings were very well received by the market, with our total FTTx and 50Mbps customer base reaching 2.4 million and 434,000 respectively for the year. Total broadband subscribers increased to around 4.5 million by the end of 2011 and we target to have 5 million by the end of 2012. Moreover, we will further launch the 100Mbps FTTx service and the trial for 1G Mbps in 2012 to satisfy customers’ demand for even higher speed services. We believe our ability to provide reliable, high-speed solutions at attractive prices constitutes a key point of differentiation between us and our competitors, and provides us with a solid foundation for the continued growth of our fixed-line business and our mobile operations.
IPTV/MOD
Leveraging our high speed fiber platform, we continued to gain significant momentum with our broadband services, namely IPTV/MOD. Our MOD subscriber base reached 1.06 million in 2011, with many customers drawn by our rich content base and extensive line-up of 133 channels, including 42 High Definition (HD) channels, up from 16 HD channels in the prior year. Our extensive IPTV HD offering is the richest HD content service in Taiwan. Our package services, which contain relatively abundant HD contents, attracted subscription by 75% of our total MOD subscribers. Our MOD channels comprise a broad spectrum of unique viewing options, including news channels, sports channels, music, dramas as well as variety shows. In addition, there are on-demand services such as English language courses and e-government service, providing much broader and deeper offering compared to cable operators. Finally, we expect to launch our second MOD platform in the second quarter of 2012, a highly integrated offering leveraging the idea of a “one-cloud, multi-screen” service, with a new user interface for our customers. We believe that the launch of this second platform and the co-promotion with our broadband service will support greater adoption of our MOD service in the year ahead. With the aforementioned high quality contents and even user-friendly interface, we anticipate to accumulate 1.5 million MOD subscribers by the end of 2012.
Fixed Line
Although local revenue increased year-over-year as a result of the pricing right shift for fixed to mobile calls, the fixed-line voice service remains challenging due to mobile and VOIP substitution. However, by the end of 2011, our market share for local service subscriber was 95.3%, for domestic long distance service traffic was 74.1%, for international long distance service traffic was 54.9%. Chunghwa Telecom still maintains its leading position in all its fixed line segments.
Building the Most Advanced, Intelligent Network for Growth Opportunities
Chunghwa Telecom has built the most powerful and capable network in Taiwan with seamless domestic wireless coverage and the broadest fixed-network. Our network, predicated on the core principals of speed, access and reliability, provides the backbone of our operation and underpins the myriad services and solutions we provide to our consumer and corporate customers. Our underlying goal is to provide our customers with the tools and capabilities needed to succeed in today’s rapidly evolving digital world, whether at work, at home or in their leisure time. We have invested over NT$5 billion annually to expand our 3G network and upgrade to HSPA+ technology while also commencing testing of LTE network technologies in anticipation of 4G licensing in 2015 according to NCC’s announcement. By year-end 2011, we have more than 8,400 3G base stations, including around 2,000 base stations equipped with HSPA+ capability, and more than 20,000 Wi-Fi access points, which will increase to 30,000 by the end of 2012 . Throughout 2011, we continued to increase FTTx network coverage. For 50Mbps and 100 Mbps FTTx service, the household coverage rates had reached 76% and 15% respectively by the end of 2011 and will be enhanced to 80% and 45% respectively by the end of 2012. This transformation to a next generation optical network will enable us to provide customers with higher speed broadband packages and the latest digital services such as mobile broadband, MOD/ IPTV and state-of-the-art enterprise solutions, expanding the limits of possibility for our customers and building a long-term pathway for future growth for Chunghwa Telecom.
New Initiatives to Meet Diversified Customer Needs
With our industry leading position and already robust digital based service offerings, we are well positioned to meet the needs of our customers in this evolving environment. Our key new initiatives in place to capitalize on these industry wide trends include our convergence services, corporate ICT services and cloud computing services.
Our convergence services are supported by our integrated fixed-line and mobile broadband platform to provide enhanced services to meet customer demand. Our emphasis is on delivering a “multi-screen, one cloud” cross platform offering allowing access to content through multiple platforms including television, internet, smartphones and tablet PCs. We intend to leverage these capabilities in the coming year for the 2012 London Olympics, for which we have already secured exclusive broadcasting rights for New Media in Taiwan. As a result, our customers will be able to access Olympic coverage and content through a variety of platforms, whether via MOD on television, through HiNet for internet users and via mobile internet for smartphone and tablet users. We believe this will be a key driver for our broadband business and a highlight of our convergence services.
In term of our corporate ICT services, we continued to gain momentum in 2011 and laid the foundation for the continued expansion of this segment. Revenue for our corporate ICT business including government projects for 2011 reached NT$6.2 billion, representing a year over year increase of 29.8%. Our ICT services include iEN (Intelligent Energy Networks), ITS (Intelligent Transportation System), PBX (private branch exchange), call centers, IDC (internet data centers) and information security. One area of particular success has been our collaboration with real estate services companies, whereby we have provided IT solutions for new development projects. This has been a successful endeavor, creating value for all the parties involved, and we intend to expand collaborative relationships with enterprises in varying industries in the future.
Finally, Cloud Computing remains one of our key new business initiatives, as it is expected to be one of the main long-term growth platforms for telecom operators in the coming years. We made advances in this segment throughout 2011 which we believe will position us to lead over the long-term. We continue to cooperate with the government network communication entities and independent software vendors to promote innovative cloud services and applications. We have already begun to offer IaaS (Infrastructure as a Service), SaaS CRM, hicloud CaaS/StaaS and cloud Antivirus/ Anti-hacker services, cloudbox services and hicloud Apps mall to service SME and public users. Since ROC government is now promoting six emerging industries in Taiwan, we would like to seize the business opportunity and develop relevant could applications. In the first half of 2012, we will cooperate with relevant partners to offer personal, storage and enterprise could services. Underpinning the rollout of our cloud computing services is our strength and experience in offering datacenter services to enterprise customers, including our ongoing initiative to build the largest cloud computing data center in Taiwan in anticipation of growing demand for this service. We believe the strength and reliability of our technology and services provide us with competitive advantages that will allow us to continue expanding our cloud computing services in the coming years.
Driving Customer Satisfaction through Quality Services
The rapidly increasing access and capacity that we have been implementing over the past few years will provide our customers with truly innovative services and an improved user experience. Continued enhancement in our infrastructure, services and content will provide new opportunities for the Company to further satisfy our customers. To improve the quality of service, we established a brand new spectrum of service channels. In these new channels, customers could self-experience all of our services such as wireless data services and IPTV services. We added 20 service channels in 2011 and expect to increase 120 more in 2012.
These initiatives will be our continued focus on quality of service, both in terms of the delivery of service or access to our customers, and in terms of customer service. We have worked hard to improve our customer service in recent years, and our efforts were recognized in 2011 by Global View Magazine which awarded us a Best Service Award for the second consecutive year. We will continue to strive to deliver improving customer service as we believe this is the most critical element in driving customer retention and market share growth.
Commitment to Corporate Social Responsibility
CSR remained a core focus of the company in 2011, and our commitment to corporate governance, responsibility, transparency and disclosure was again recognized by trusted industry observers. We have been recipient of the Reader’s Digest Trusted Brands Platinum Award for Telecom Company in Taiwan for the eighth consecutive years. We were awarded the Excellence in Corporate Social Responsibility Award by the Common Wealth Magazine and received an “A+” ranking and ranked as one of the top 10 listed companies in “Transparency and Information Disclosure” from Taiwan Securities and Futures Institute for the sixth consecutive year. We were also awarded for the “Best Financial Disclosure in Asia Pacific and Greater China” by 2011 IR Global Rankings and ranked third for the “Best Corporate Governance” and “Best Corporate Social Responsibility” by 2011 FinanceAsia Award. We will continue to maintain our leadership position in the area of CSR and corporate governance by constantly striving to further improve our efforts and practices, including the practices of electronic voting for the annual shareholders meeting.
We also continued to put a strong emphasis on our human resources management and the development of our staff company wide. Our guiding principal with regards to human resources is to do the right thing at the right time with the right people. As such, we implemented a voluntary early retirement program coupled with ongoing recruiting efforts to attract and retain key employees in research and development and elsewhere in the organization with the necessary skills to help advance our new technology initiatives. In fact, over the past few years, we have maintained a steady focus on recruitment, allowing us to renew our human resources, providing us with the necessary skills to compete in the years ahead.
Finally, we continued to maintain our commitment to environmental sustainability, with our overall green procurement totaling NT$ 882 million in 2011, versus NT$ 410 million in 2010. We are also working to expand our energy savings solutions through our iEN offering for corporate customers. Our experience with our customers to date has shown that our system can deliver on average 6-10% savings in energy consumption. As a result of our efforts, we received several awards in recognition of our efforts to protect the environment in 2011. Chunghwa Telecom was the only telecom service provider in Taiwan to be awarded the “1st Taiwan Green Classic Award” among distinguished Taiwanese enterprises committed to green principles. We also received the “Energy Saving Award” from Taiwan Energy Service Association.
Outlook
While the global macroeconomic environment remains uncertain with continued volatility expected in the year ahead and the regulator is expected to announce further initiatives, we believe that the telecom market will maintain its defensive characteristics. As such, our overall outlook for 2012 is cautiously optimistic. Our primary growth initiatives for the year ahead will center on the four key areas: innovation, broadband, VAS and convergence. Specific initiatives include the continued expansion of our broadband platform and our fiber network as we continue to migrate customers from ADSL to fiber, including the planned introduction of 100 Mbps and the trial of 1 Gbps broadband access for fixed-line in 2012, which we believe will help to further differentiate Chunghwa Telecom from the competition. In our mobile business, we will work to further build out our capacity and drive smartphone penetration, supported by the launch of the iPhone 4S which will certainly be a key growth driver. In addition, the 2012 London Olympics will play a key role in highlighting our content rich, cross-platform convergence services, complemented by the launch of our new MOD platform. On a longer-term scale, we expect 4G licenses to be issued, and Chunghwa Telecom will definitely seek to secure a license.
As we work to deliver profitable growth in the year ahead, we remain committed to returning value to our shareholders. Our first priority is to invest in our core business, including broadband deployment in both fixed-line and mobile, and developing cross-platform applications, and we believe we have sufficient cash on hand to meet our investment needs in these areas. Second, we are constantly seeking prudent investment opportunities that complement our core business drivers and strategy that also ensure effective deployment of our assets. Our third priority is to return cash to our shareholders through our stable dividend policy, which has remained consistent throughout the years. With our sound balance sheet and zero debt, we are quite confident that we have the necessary financial flexibility to meet all of our growth investment needs while also returning the capital to our shareholders.
With our experience, leading market position and continued investment in technology, Chunghwa Telecom is well-positioned to further solidify its position as a trusted information and communications service provider. I am extremely proud of our entire team for each accomplishment and achievement made during the year; it was truly a team effort. Continuing our firm commitment to sharing our successes with our shareholders, we will continue our stable dividend policy. I want to thank our shareholders, customers, partners and vendors for their continued support, and am looking forward to reporting our future successes.
Sincerely,
Shyue-Ching Lu
Chairman and Chief Executive Officer
April 20, 2012
To all of our shareholders,
2011 marked another year of continued execution across our core business segments and significant progress on our key long-term growth drivers. Against a global backdrop of new technology advances and ongoing adoption of more intelligent, integrated and innovative fixed-line and mobile broadband applications by both consumers and businesses, Chunghwa Telecom solidified its position as the most trusted and reliable telecoms company in Taiwan.
Our key focus in 2011 remained on the expansion of our customer base for fixed-line and mobile broadband solutions, and further development of our value-added service (VAS) offering. In addition, we made significant progress on the roll-out of our Multimedia-on-Demand offering (MOD). We are proud to announce that we achieved significant milestones in many of our key focus areas, having reached over 1 million customers for our MOD service and over 10 million subscribers in our mobile business, representing a new record in Taiwan. Leveraging on the solid progress on our core business segments, we also made further strides throughout the year on our new initiatives including our corporate ICT offering, convergence services and cloud computing solutions.
For 2011, our total consolidated revenue for the full year increased by 7.4% year-over-year to NT$217.49billion, of which 42.8% was from the mobile business, 36.5% was from the domestic fixed business, 11.4% was from the internet business, 7.0% was from the international fixed business, and the remainder was from our other business segment. Our Company’s revenue growth in 2011 was driven primarily by growth in mobile VAS revenue and handset sales relating to strong uptake of smartphone devices as well as increase in fixed line revenue resulting from the shift in the pricing right of a fixed-to-mobile call from mobile operators to fixed network operators. EBITDA for 2011 decreased by4.4% to NT$87.37billion and operating profit decreased by 4.0% to NT$55.08 billion, mainly as a result of the interconnection costs and transition fees resulting from the shift in pricing right of fixed-to-mobile calls, the increase in costs of handset sold and the maintenance and material expenses for mobile internet and broadband operation.
2011 Highlights
Mobile
Customer demand for more robust and content-rich mobile access has reached a new high in Taiwan, as demonstrated by increasing smartphone adoption. For the full year, the percentage of Smartphones among all handsets sold reached over 48%. The surge in Smartphone adoption and overall healthy demand for mobile internet access supported our full year results for this segment. Mobile internet customer growth of over 694 thousand subscribers in 2011 brought our total subscriber count for the year to more than 1.5 million, representing over 86% growth over 2010. We expect to reach 2.2 million mobile internet customers by the end of 2012. Nevertheless, the surge of mobile internet usage resulted in network congestion in some hotspots. To response to customers’ expectation of quality service, we offered discounts as compensation to subscribers whose monthly data usage is no more than 1GB.
In order to keep pace with this high level of demand, we are constantly expanding our network coverage and the capacity of our mobile network, including expanded development of WiFi hot spots in certain key geographic areas with especially high traffic and usage levels. We have built about 20,000 WiFi APs by 2011 and will continue the development to 30,000 WiFi APs as needed to support our mobile network. Underpinned by our robust mobile platform, we have continued to expand our rich content offering through the development of our Hami platform, our primary VAS brand in the mobile space. On top of Hami platform, we offer Hami Apps, now totaling over 3,390. Moreover, Hami bookstore, Hami music and Hami video services, which allow subscribers to download continuously enriched contents, are also available on Hami platform. Mobile access to multi-media, applications and information has evolved into a near necessity of daily life, and our robust Hami offering is proving to be a valuable asset and customer draw.
In addition, we are working to expand our already comprehensive device line-up. In December 2011, we announced the launch of iPhone 4S pre-registration, and the response has been nothing short of phenomenal, with over 200,000 customers pre-registering. That represents a record high for any single device launch in Taiwan, and it indicates the strong momentum and demand for high quality, high-end smartphones. We also believe that significant demand exists for quality, mid- to low- level smartphones at reasonable prices, and we are well positioned in this segment, with many products on offer that provide a high level of functionality and good value. We believe this focus on both the high and middle-to-low markets will allow us to drive further smartphone penetration among our mobile subscribers, building on our leading position and ultimately helping to enhance our mobile ARPU.
Broadband
The key underlying trend driving our Broadband business in 2011 was the deployment and promotion of higher speed offerings. In order to migrate customers to higher speed broadband, especially Fiber-to the-x (FTTx) service, we reduced our broadband tariffs in mid 2011, driving a significant subscriber growth for 50Mbps and even higher speed FTTx services. In addition to the ongoing upgrade of Asymmetric Digital Subscriber Line (ADSL) customers to fiber solutions, we also encourage dial-up customers to migrate to broadband service in order to broaden our broadband subscriber base. Our new higher speed offerings were very well received by the market, with our total FTTx and 50Mbps customer base reaching 2.4 million and 434,000 respectively for the year. Total broadband subscribers increased to around 4.5 million by the end of 2011 and we target to have 5 million by the end of 2012. Moreover, we will further launch the 100Mbps FTTx service and the trial for 1G Mbps in 2012 to satisfy customers’ demand for even higher speed services. We believe our ability to provide reliable, high-speed solutions at attractive prices constitutes a key point of differentiation between us and our competitors, and provides us with a solid foundation for the continued growth of our fixed-line business and our mobile operations.
IPTV/MOD
Leveraging our high speed fiber platform, we continued to gain significant momentum with our broadband services, namely IPTV/MOD. Our MOD subscriber base reached 1.06 million in 2011, with many customers drawn by our rich content base and extensive line-up of 133 channels, including 42 High Definition (HD) channels, up from 16 HD channels in the prior year. Our extensive IPTV HD offering is the richest HD content service in Taiwan. Our package services, which contain relatively abundant HD contents, attracted subscription by 75% of our total MOD subscribers. Our MOD channels comprise a broad spectrum of unique viewing options, including news channels, sports channels, music, dramas as well as variety shows. In addition, there are on-demand services such as English language courses and e-government service, providing much broader and deeper offering compared to cable operators. Finally, we expect to launch our second MOD platform in the second quarter of 2012, a highly integrated offering leveraging the idea of a “one-cloud, multi-screen” service, with a new user interface for our customers. We believe that the launch of this second platform and the co-promotion with our broadband service will support greater adoption of our MOD service in the year ahead. With the aforementioned high quality contents and even user-friendly interface, we anticipate to accumulate 1.5 million MOD subscribers by the end of 2012.
Fixed Line
Although local revenue increased year-over-year as a result of the pricing right shift for fixed to mobile calls, the fixed-line voice service remains challenging due to mobile and VOIP substitution. However, by the end of 2011, our market share for local service subscriber was 95.3%, for domestic long distance service traffic was 74.1%, for international long distance service traffic was 54.9%. Chunghwa Telecom still maintains its leading position in all its fixed line segments.
Building the Most Advanced, Intelligent Network for Growth Opportunities
Chunghwa Telecom has built the most powerful and capable network in Taiwan with seamless domestic wireless coverage and the broadest fixed-network. Our network, predicated on the core principals of speed, access and reliability, provides the backbone of our operation and underpins the myriad services and solutions we provide to our consumer and corporate customers. Our underlying goal is to provide our customers with the tools and capabilities needed to succeed in today’s rapidly evolving digital world, whether at work, at home or in their leisure time. We have invested over NT$5 billion annually to expand our 3G network and upgrade to HSPA+ technology while also commencing testing of LTE network technologies in anticipation of 4G licensing in 2015 according to NCC’s announcement. By year-end 2011, we have more than 8,400 3G base stations, including around 2,000 base stations equipped with HSPA+ capability, and more than 20,000 Wi-Fi access points, which will increase to 30,000 by the end of 2012 . Throughout 2011, we continued to increase FTTx network coverage. For 50Mbps and 100 Mbps FTTx service, the household coverage rates had reached 76% and 15% respectively by the end of 2011 and will be enhanced to 80% and 45% respectively by the end of 2012. This transformation to a next generation optical network will enable us to provide customers with higher speed broadband packages and the latest digital services such as mobile broadband, MOD/ IPTV and state-of-the-art enterprise solutions, expanding the limits of possibility for our customers and building a long-term pathway for future growth for Chunghwa Telecom.
New Initiatives to Meet Diversified Customer Needs
With our industry leading position and already robust digital based service offerings, we are well positioned to meet the needs of our customers in this evolving environment. Our key new initiatives in place to capitalize on these industry wide trends include our convergence services, corporate ICT services and cloud computing services.
Our convergence services are supported by our integrated fixed-line and mobile broadband platform to provide enhanced services to meet customer demand. Our emphasis is on delivering a “multi-screen, one cloud” cross platform offering allowing access to content through multiple platforms including television, internet, smartphones and tablet PCs. We intend to leverage these capabilities in the coming year for the 2012 London Olympics, for which we have already secured exclusive broadcasting rights for New Media in Taiwan. As a result, our customers will be able to access Olympic coverage and content through a variety of platforms, whether via MOD on television, through HiNet for internet users and via mobile internet for smartphone and tablet users. We believe this will be a key driver for our broadband business and a highlight of our convergence services.
In term of our corporate ICT services, we continued to gain momentum in 2011 and laid the foundation for the continued expansion of this segment. Revenue for our corporate ICT business including government projects for 2011 reached NT$6.2 billion, representing a year over year increase of 29.8%. Our ICT services include iEN (Intelligent Energy Networks), ITS (Intelligent Transportation System), PBX (private branch exchange), call centers, IDC (internet data centers) and information security. One area of particular success has been our collaboration with real estate services companies, whereby we have provided IT solutions for new development projects. This has been a successful endeavor, creating value for all the parties involved, and we intend to expand collaborative relationships with enterprises in varying industries in the future.
Finally, Cloud Computing remains one of our key new business initiatives, as it is expected to be one of the main long-term growth platforms for telecom operators in the coming years. We made advances in this segment throughout 2011 which we believe will position us to lead over the long-term. We continue to cooperate with the government network communication entities and independent software vendors to promote innovative cloud services and applications. We have already begun to offer IaaS (Infrastructure as a Service), SaaS CRM, hicloud CaaS/StaaS and cloud Antivirus/ Anti-hacker services, cloudbox services and hicloud Apps mall to service SME and public users. Since ROC government is now promoting six emerging industries in Taiwan, we would like to seize the business opportunity and develop relevant could applications. In the first half of 2012, we will cooperate with relevant partners to offer personal, storage and enterprise could services. Underpinning the rollout of our cloud computing services is our strength and experience in offering datacenter services to enterprise customers, including our ongoing initiative to build the largest cloud computing data center in Taiwan in anticipation of growing demand for this service. We believe the strength and reliability of our technology and services provide us with competitive advantages that will allow us to continue expanding our cloud computing services in the coming years.
Driving Customer Satisfaction through Quality Services
The rapidly increasing access and capacity that we have been implementing over the past few years will provide our customers with truly innovative services and an improved user experience. Continued enhancement in our infrastructure, services and content will provide new opportunities for the Company to further satisfy our customers. To improve the quality of service, we established a brand new spectrum of service channels. In these new channels, customers could self-experience all of our services such as wireless data services and IPTV services. We added 20 service channels in 2011 and expect to increase 120 more in 2012.
These initiatives will be our continued focus on quality of service, both in terms of the delivery of service or access to our customers, and in terms of customer service. We have worked hard to improve our customer service in recent years, and our efforts were recognized in 2011 by Global View Magazine which awarded us a Best Service Award for the second consecutive year. We will continue to strive to deliver improving customer service as we believe this is the most critical element in driving customer retention and market share growth.
Commitment to Corporate Social Responsibility
CSR remained a core focus of the company in 2011, and our commitment to corporate governance, responsibility, transparency and disclosure was again recognized by trusted industry observers. We have been recipient of the Reader’s Digest Trusted Brands Platinum Award for Telecom Company in Taiwan for the eighth consecutive years. We were awarded the Excellence in Corporate Social Responsibility Award by the Common Wealth Magazine and received an “A+” ranking and ranked as one of the top 10 listed companies in “Transparency and Information Disclosure” from Taiwan Securities and Futures Institute for the sixth consecutive year. We were also awarded for the “Best Financial Disclosure in Asia Pacific and Greater China” by 2011 IR Global Rankings and ranked third for the “Best Corporate Governance” and “Best Corporate Social Responsibility” by 2011 FinanceAsia Award. We will continue to maintain our leadership position in the area of CSR and corporate governance by constantly striving to further improve our efforts and practices, including the practices of electronic voting for the annual shareholders meeting.
We also continued to put a strong emphasis on our human resources management and the development of our staff company wide. Our guiding principal with regards to human resources is to do the right thing at the right time with the right people. As such, we implemented a voluntary early retirement program coupled with ongoing recruiting efforts to attract and retain key employees in research and development and elsewhere in the organization with the necessary skills to help advance our new technology initiatives. In fact, over the past few years, we have maintained a steady focus on recruitment, allowing us to renew our human resources, providing us with the necessary skills to compete in the years ahead.
Finally, we continued to maintain our commitment to environmental sustainability, with our overall green procurement totaling NT$ 882 million in 2011, versus NT$ 410 million in 2010. We are also working to expand our energy savings solutions through our iEN offering for corporate customers. Our experience with our customers to date has shown that our system can deliver on average 6-10% savings in energy consumption. As a result of our efforts, we received several awards in recognition of our efforts to protect the environment in 2011. Chunghwa Telecom was the only telecom service provider in Taiwan to be awarded the “1st Taiwan Green Classic Award” among distinguished Taiwanese enterprises committed to green principles. We also received the “Energy Saving Award” from Taiwan Energy Service Association.
Outlook
While the global macroeconomic environment remains uncertain with continued volatility expected in the year ahead and the regulator is expected to announce further initiatives, we believe that the telecom market will maintain its defensive characteristics. As such, our overall outlook for 2012 is cautiously optimistic. Our primary growth initiatives for the year ahead will center on the four key areas: innovation, broadband, VAS and convergence. Specific initiatives include the continued expansion of our broadband platform and our fiber network as we continue to migrate customers from ADSL to fiber, including the planned introduction of 100 Mbps and the trial of 1 Gbps broadband access for fixed-line in 2012, which we believe will help to further differentiate Chunghwa Telecom from the competition. In our mobile business, we will work to further build out our capacity and drive smartphone penetration, supported by the launch of the iPhone 4S which will certainly be a key growth driver. In addition, the 2012 London Olympics will play a key role in highlighting our content rich, cross-platform convergence services, complemented by the launch of our new MOD platform. On a longer-term scale, we expect 4G licenses to be issued, and Chunghwa Telecom will definitely seek to secure a license.
As we work to deliver profitable growth in the year ahead, we remain committed to returning value to our shareholders. Our first priority is to invest in our core business, including broadband deployment in both fixed-line and mobile, and developing cross-platform applications, and we believe we have sufficient cash on hand to meet our investment needs in these areas. Second, we are constantly seeking prudent investment opportunities that complement our core business drivers and strategy that also ensure effective deployment of our assets. Our third priority is to return cash to our shareholders through our stable dividend policy, which has remained consistent throughout the years. With our sound balance sheet and zero debt, we are quite confident that we have the necessary financial flexibility to meet all of our growth investment needs while also returning the capital to our shareholders.
With our experience, leading market position and continued investment in technology, Chunghwa Telecom is well-positioned to further solidify its position as a trusted information and communications service provider. I am extremely proud of our entire team for each accomplishment and achievement made during the year; it was truly a team effort. Continuing our firm commitment to sharing our successes with our shareholders, we will continue our stable dividend policy. I want to thank our shareholders, customers, partners and vendors for their continued support, and am looking forward to reporting our future successes.
Sincerely,
Shyue-Ching Lu
Chairman and Chief Executive Officer
April 20, 2012
