Chunghwa Telecom Co (中華電信), the nation’s biggest telecom operator, yesterday said the board approved a proposal for a 20 percent capital reduction program, allowing it to deliver extra cash dividends of NT$2 per common share and an 8 percent stock dividend, or 80 shares per 1,000 held.
The much-anticipated capital reduction will be the biggest ever launched by the cash-rich Chunghwa Telecom. The phone company planned to slash NT$19.4 billion (US$609.9 million) in capital, which will reduce the number of shares from 9.7 billion to 7.76 billion.
The phone company aims to “better manage its capital” and boost earnings per share to some extent, company financial executive Yeh Shu (葉疏) told an investor conference yesterday.
Canceling outstanding common stock to reduce capital would reduce the company’s cost of capital and improve return on equity, the company said in a statement.
The capital reduction plan will need shareholder approval in the annual general meeting scheduled for June 18.
As of the end of last year, Chunghwa Telecom held NT$73.26 billion, down 9.9 percent from NT$81.29 billion at the end of 2008, the company’s financial statement showed. The company is debt free.
This year, the company planned to boost capital spending by roughly 20 percent to more than NT$30 billion, which could touch its record high, from NT$25.48 billion budgeted for last year.
The expenditures will be used mostly on deploying a high-speed fiber optical network, a 3.5G network and undersea cable construction.
Chunghwa Telecom said net income slid 2.8 percent to NT$43.76 billion, or NT$4.51 per share, last year, compared to NT$45.01 billion, or NT$4.64 a share, as average revenue per user (ARPU) fell on bleak macroeconomic conditions and stiffening competition.
The blended ARPU of the company’s mobile business dropped 4.5 percent to NT$653 last year from NT$684 in 2008.
Chunghwa Telecom has 9.27 million mobile subscribers, seizing a bigger market share of 46.4 percent last year from 42.5 percent in 2008.
Overall revenues edged lower by 1.6 percent year-on-year to NT$198.36 billion with mobile business accounting for the biggest portion of 44 percent last year.
Company chairman Lu Shyue-ching (呂學錦) said he hoped the improving economy would help boost business and offset the adverse impact of rate cuts requested by the National Communications Commission.
Local mobile operators are required by the telecom regulator to lower tariffs by 5.87 percent annually over a three-year period, beginning next month.
Shares of Chunghwa Telecom rose 1.31 percent to NT$62.1 yesterday, beating the TAIEX’s 0.19 percent gain.
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