Tue, Jan 04, 2005 - Page 11 News List

Telephone firms outstrip TAIEX

HIGH YIELD Taiwanese telephone companies performed exceptionally well last year, returning much higher profits than semiconductor and electronics makers


Shares of Taiwanese telephone companies, such as Chunghwa Telecom Co (中華電信), attracted investors last year as semiconductor and electronics makers slumped. The stocks' dividends may help sustain their rally this year.

"Telecom is what we bet heavily on," said Michael Ding (丁予嘉), president of Fubon Asset Management (富邦投顧). "We just don't see high-tech stocks doing well."

Chunghwa, the nation's largest provider of phone services, advanced 27 percent last year. Taiwan Cellular Corp (台灣大哥大) gained 20 percent. Far EasTone Telecommunications Co (遠傳電信), the second-largest mobile-phone operator, jumped 67 percent.

All three surpassed the TAIEX, which rose 4.2 percent.

The phone stocks carry a higher dividend yield than the 2.9 percent yield for the TAIEX. Government-controlled Chunghwa has the highest payout at 7.1 percent. Dividends helped lift the stock's total return last year to 38 percent.

"Chunghwa is somewhat unusual in a tech-heavy market for being a very defensive play," Peter Wilmshurst of Franklin Resources Inc said in an interview last month.

The former monopoly, with sales of NT$179 billion (US$5.6 billion) last year, is the only Taiwan operator to offer a combination of Internet, fixed-line and mobile-phone services.

Taiwan Cellular's dividends yield 6.7 percent and lifted the stock's total return last year to 30 percent, according to Bloomberg's data.

Far EasTone Telecommunications pays dividends yielding 3.3 percent and handed investors a 75 percent return last year, buoyed by its purchase of smaller rival KG Telecommunications Co (和信電訊).

The telecom companies boosted earnings last year.

Chunghwa's third-quarter net income rose 5.6 percent from a year earlier to NT$13.2 billion. The increase followed a rise in average revenue per user as the company and other operators stopped offering some cheap deals and restricted handset subsidies.

Sales per Chunghwa subscriber rose to NT$740 a month from NT$719 earlier in the year as the company added corporate subscribers, Chairman Hochen Tan (賀陳旦) said in a September interview.

Taiwan Cellular's net income increased 46 percent to NT$5.7 billion in the third quarter on higher earnings per user. Far EasTone, based in Taipei, posted a 74 percent increase following its NT$29.8 billion acquisition of KG Telecommunications.

Taiwan Cellular raised average revenue per user to NT$827 in August from NT$753 in December 2003. The company had 4.9 million subscribers in November.

The three mobile-phone operators are generating "reasonable" profits, Wilmshurst said.

Still, earnings may be hit as the companies spend more on new services.

Earnings per share for Chung-hwa will fall 1.7 percent this year, while Taiwan Cellular's per-share earnings will drop 9.2 percent, according to a Thomson Financial survey of 10 analysts.

A potential threat to Chung-hwa's stock price is a plan by the Ministry of Transportation and Communications to reduce its 65 percent stake to less than 50 percent, Wilmshurst said.

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