Fri, Nov 30, 2007 - Page 12 News List

Far EasTone warns of profit slide in fourth quarter amid pricing pressure


Far EasTone Telecommunications Co (遠傳電信), the nation's third-largest mobile service operator, yesterday said that its pre-tax income may contract nearly 4 percent sequentially this quarter given pricing pressure in a saturated market.

Consolidated pre-tax income may drop to NT$3.56 billion (US$110 million) in the fourth quarter, compared with NT$3.7 billion in the third quarter, Far EasTone said. On an annual basis, the decline would be around 8 percent from NT$3.87 billion in the final quarter of last year.

"Voice [service] pricing pressure is continuing and the market is saturated," Far EasTone vice chairman Jan Nilsson told a conference call, adding though that he expected the price competition to remain "rational."

He said that "EBITDA [earnings before income taxes, depreciation and amortization] margin" would slide further to 46.5 percent in the three-month period ending Dec. 31, from 47.2 percent in the third quarter and 50 percent a year ago.

Rising expenditure from mergers and marketing would also contribute to the decline.

Far EasTone had a 30 percent share of the domestic mobile market as of last month, with a subscriber base of 6.16 million, including 1.43 million high-speed, third-generation (3G) users.

Service revenues may edge up 0.1 percent quarter-on-quarter, or 1.3 percent year-on-year, to NT$14.91 billion in the current quarter, Far EasTone forecast.

The company said it planned to invest NT$6 billion over six years to build up its WiMAX, or 3.5-generation, infrastructure.

The telecom firm plans to start offering WiMAX service for laptop computers in the third quarter of next year and expand its services to cover mobile phone users before the end of next year.

Separately, Nilsson said the company would continue to seek acquisition opportunities to improve its service and content portfolio.

He said that the company was interested in buying cable assets -- but not at current market prices -- to facilitate its move into Internet Protocol TV (IPTV) after expanding its capacity to deliver TV programs via the Internet.

Chunghwa Telecom Co (中華電信), the nation's leading telecom company, is currently the only firm that offers IPTV service.

Far EasTone also said it planned to complete integration of its services and finances with fixed-line company New Century Infocomm Tech Co (新世紀資通) by the end of this year at the earliest.

The company announced in August that it was buying 24.51 percent of New Century Infocomm from Singapore Telecommunications Ltd via a share-swap agreement.

Far EasTone shares jumped 5.88 percent to NT$42.3, while Chunghwa Telecom's advanced 2.09 percent to NT$63.4 yesterday.

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