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Chunghwa Telecom expects earnings to top earlier forecast

Chunghwa Telecom Co (中華電信), the nation's biggest phone company, expects earnings for this year to exceed a previous projection of NT$4.34 per share, a company executive said yesterday.

"There will be ample room for us to adjust the budget proposal submitted to the Legislative Yuan recently in the company's upcoming financial forecast for 2005," said Lu Shyue-ching (呂學錦), president of the state-run telecommunications carrier.

The phone company is scheduled to release its financial forecast next month.

Earlier expectations

In the submitted proposal, Chunghwa Telecom said it expected earnings this year would slide to NT$41.9 billion, or NT$4.34 a share, as the former monopoly is facing stiff competition from private companies in a market that is approaching saturation in the wake of deregulation.

Chunghwa Telecom's earnings this year are expected to decline by about 10 percent to NT$4.7 a share, said Stevie Chou (周奇賢), a senior telecom analyst with SinoPac Securities Corp (建華證券).

Rising operating spending as a result of new third-generation services will start to eat into the telecom carrier's bottom line, Chou said.

The company yesterday reported audited earnings per share of NT$5.17 last year, up from NT$5.03 the previous year. Net income also inched up 2.8 percent to NT$49.9 billion for last year, up 2.8 percent from NT$48.5 billion in 2003.

Chunghwa Telecom now has 8.19 mobile users, accounting for 38 percent of Taiwan's more than 20-million population.

In light of its strong performance last year, the company decided to give shareholders a cash dividend of NT$4.7 a share, or about 90 percent of its earnings per share.

High yield

That represents a respectable yield of 7.2 percent, based on its closing price of NT$65.2 yesterday. The high yield has attracted investors seeking stable and good returns.

"We expect this dividend policy to be continued after Chunghwa Telecom's privatization," Lu said.

No timetable has been set for further share sales from the government, Lu said.

The Ministry of Transportation and Telecommunications, which holds about 65 percent of Chunghwa Telecom, plans to sell another 17 percent, or 1.45 billion shares, overseas and at home to reduce its holdings to below 50 percent by the end of this year.

To boost profits, Lu said the company plans to increase capital expenditures slightly this year to around NT$23.4 billion from NT$22.9 billion last year, mostly in its fast-growing broadband segment.

Spending on 3G facilities, meanwhile, will be trimmed slightly, to as much as NT$2 billion, he said.

Chunghwa Telecom aims to double its broadband subscribers to 6 million by the end of next year, from the current 3 million.
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