The Company is a telecommunications service provider in Taiwan, whose principal services include: fixed line services, cellular services and Internet and data services.
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It’s wiser to term Chunghwa Telecom as a ‘one-stop shop’ that serves all of a customer's telecom needs with the ease of one bill. Chunghwa Telecom, the only integrated provider of fixed-line, wireless, and internet/data services in Taiwan, enjoys a dominant position in each of its key business lines in telecommunications market. As measured by the number of subscribers, it lead the peers, with a market share of 40% in mobile, 85% in broadband, and more than 95% in the fixed-line segment. CHT was privatized in 2005, with the government retaining 42.2% of the company's ordinary shares.
Taiwan, with one of the highest fixed-line penetration rates in Asia, is now experiencing rapid adoption of wireless communications and internet services, including broadband access services. Consequently, mounting demand for wireless and broadband in Taiwan has offset declining fixed-line business, which has helped Chunghwa Telecom maintain growth over the past few years.
Though, the sector faces a high degree of wireless penetration i.e. 87%, the company is aiming to grab a higher market pie with the launch of its third-generation (3G) mobile services. Though, mobile services contributes about 40% of company’s revenues, but with a market share of 50%, the company's fastest-growing business unit is internet and data services. Chunghwa expects to drive future revenue growth by rolling out more customized services for broadband and wireless markets and is migrating broadband customers to higher-speed Asymmetric Digital Subscriber Line (ADSL) services to maintain stable pricing levels.
We see CHT's defensive characteristics as prominent, given a sound estimated dividend yield for 2007, though troubled with a share-buyback effort. Cash build-up amid a debt-free balance sheet, easily cover its capital spending needs, rendering significant scope to enhance shareholder value. We think that these characteristics, combined with its extensive and high-quality networks, build Chunghwa Telecom a fair enough stock to go
Looking to expand enormously, company is expecting its 3G mobile subscribers to rise by whopping 158% to 2.2 million in 2007 due to the migration of 2G users to the 3G service. Frequently in the news company was recently quoted to target 580 thousand multimedia on demand subscribers by 2007, for which it announced the acquisition of 21.11% stake in Elta Technology that will enhance its operation of Internet-based audio/video services through the two existing platforms hiChannel and multimedia on demand.Providing fixed-line services to wireless services and internet and data services, company is regarded as an integrated telecommunications service provider. For December 2006, Chunghwa's revenues increased by 1% reflecting slightly increased service sales due to stabilized market demand. Its 33% of the revenues came from fixed line segment, while 40% from the cellular section. Net income decreased by 6% that was offset by an increased selling, general and research expenses.With over 13.2 million local telephone services subscribers, 1.03 million 3G & 7.5 million 2G users, as well as about 4 million broadband customers, company plans to upgrade its network by deploying Taiwan’s first universal WiMAX network. This will enable customers to access applications such as high speed internet & video streaming in densely populated metropolitan area of Taotyan County. Besides it is also supposed to spend $163 million this year, rolling out a next-generation network under a $1.86 billion five-year plan.Chunghwa Telecom has lowered its forecasts for 2007 revenues to 5.68 billion, earlier expected around 5.61 billion, due to introduction of lower tariffs for mobile and broadband products. Increasing demands for wireless and broadband with associated value-added services in Taiwan have offset declining fixed-line business and helped maintaining growth over the past few years, but wireless market is nearly saturated with a penetration rate of 90%, further consolidation in the sector will put more pressure on the company. On the contrary, with a market share of 50%, the firm's fastest-growing business unit is internet and data services. Despite a highly competitive market and falling ARPU, it has seen 20% average revenue growth in this segment over 5 years. Thus the variety of services provided by the company show positive signs of sustaining and infact increasing the overall revenue.