Fri, Feb 27, 2009 - Page 12 News List

Chunghwa Telecom’s revenues to drop: Fitch


Chunghwa Telecom Co (中華電信), the nation’s biggest telecom operator, may see revenues slide 1 percent or 2 percent this year because of declining phone usage and pressure to lower tariffs, rating agency Fitch Rating said yesterday.

The forecast means that Chunghwa Telecom may again under-perform its peers in the Asia-Pacific region, who could see an average 5 percent growth in revenues this year from last year, slowing from an 8.1 percent annual expansion last year.

“We are seeing a weak economy curtail usage [of telecom services] in Taiwan and the rising jobless rate did affect negatively a small number of people [from using phones],” Fitch analyst Kevin Chang (張崇人) said in a telephone call.

Chang blamed the economic slowdown and the annual 4.88 percent price reduction on 2G mobile services requested by industry regulators as the main reasons for his forecast that Chunghwa Telecom’s revenue would drop this year.

In addition, in saturated telecom markets like Taiwan, there will be little room for local operators to increase their revenues by adding new subscribers, Fitch said.

Chunghwa Telecom said revenues rose by 0.25 percent to NT$186.78 billion (US$5.37 billion) from NT$186.32 billion in 2007.

Chunghwa Telecom’s 1 percent to 2 percent revenue decline forecast by Fitch might be less than the nation’s economic contraction, which Fitch has predicted might shrink at an annual rate of 2.1 percent this year.

“The economic weakness, however, is taking a milder toll on telecom companies [than other industries],” Chang said.

Intensifying competition, which has triggered further price cuts, would drive down Chunghwa Telecom’s EBIDA (earnings before interest, taxes, depreciation and amortization) margin by 1 percentage points to 49 percent this year from 50 percent last year, Chang said.

In its latest report on the Asia-Pacific telecommunications sector, Fitch gave a “stable” outlook on most of the region’s telecom companies it tracks because it expects the firms to weather the economic slowdown better than other sectors.

Telecom operators might be able to maintain their credit profiles this year given their robust liquidity positions, low gearing levels, strong ability of generating free cash flow, flexibility to reduce costs and a lower sensitivity to changes in GDP growth, compared with other sectors, the agency said.

Meanwhile, Far EasTone Telecommunications Co (遠傳電信), the nation’s third-largest telecom firm, predicted in an e-mail statement yesterday that its first-quarter revenues would be NT$15.5 billion and net income NT$2.47 billion.

In the first quarter of last year, it made NT$15.85 billion in revenues and NT$2.43 billion in net profits, the company’s filing to the Taiwan Stock Exchange showed.

Share prices of Chunghwa Telecom and Far EasTone advanced 0.94 percent and 2.04 percent yesterday, to NT$53.5 and NT$32.55 respectively, out-performing the benchmark TAIEX, which gained 0.55 percent.

Shares in the nation’s second-largest phone company, Taiwan Mobile Co’s (台灣大哥大), rose 0.66 percent to NT$46.

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