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Chunghwa reports quarterly loss

Chunghwa Telecom Co (中華電信, CHT), the nation’s biggest phone company, yesterday reported 12 percent lower net income for the first quarter largely due to multibillion-dollar losses from a foreign currency derivatives contract.

Net profits fell 11.66 percent to NT$10.68 billion (US$352 million), or NT$1.12 per share, during the quarter ending March 31, compared to NT$12 billion, or NT$1.25 a share, a year earlier, according to a company statement and press release on its Web site.

“Losses from the foreign currency derivatives contract and higher tax rate are the main reasons [behind the profit decline],” said Shen Fu-fu (沈馥馥), a financial executive at Chunghwa Telecom, via telephone.

She did not provide details about the tax rate adjustment.

Losses stemming from a 10-year foreign currency derivatives agreement amounted NT$2.49 billion in the first three months of the year, bringing the total losses to NT$3.08 billion since the agreement took effect last September.

Revenues increased 3.1 percent to NT$46.73 billion last quarter, from NT$45.32 billion during the same period last year, the statement said.

Ratings agency Standard & Poor’s Ratings yesterday removed Chunghwa Telecom from a credit watch list, where the firm was placed with negative implication on March 11, on improving risk control.

The rating agency also affirmed its “AA” long-term foreign-currency corporate credit rating on Chunghwa Telecom. The outlook is stable.

“The rating affirmation is based on Standard & Poor’s expectations that CHT’s recent foreign-exchange derivative losses were a one-off event and that the company will not incur similar losses, given management’s increased commitment to risk management,” said Daniel Hsiao (蕭黎明), a credit analyst with S&P’s local arm Taiwan Ratings Corp (中華信評), in the report.

Separately, Taiwan Mobile Co (台灣大哥大), the nation’s second-biggest telecom operator, yesterday reported NT$4.19 billion, or NT$1.44 per share, for the first quarter net profits, which is about 10 percent growth from last year’s NT$3.81 billion, or NT$0.77 a share.Higher mobile usage and gains from selling Fubon Financial Holding Co (富邦金控) shares offset [new] spending for employee bonus and rising marketing expense," company spokesperson Rosie Yu (俞若奚) in a press release.

Revenues expanded 21 percent to NT$17.25 billion last quarter, compared to NT$14.48 billion a year ago, according to the company.

Far EasTone Telecommunications Co (遠傳電信) said pre-tax stood at NT$3.18 billion in the first quarter, down 12.6 percent from NT$3.64 billion a year ago. Revenues edged up 0.5 percent annually to NT$15.86 billion from NT$15.78 billion.
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