Sat, Oct 11, 2014 - Page 13 News List

Telecoms profits drop due to iPhone marketing costs

CLOSE CALL:The promotional costs of new Apple Inc smartphones affected earnings, but helped boost sales of 4G handsets and subscriptions of 4G services

By Lisa Wang  /  Staff reporter

The nation’s top three telecommunications operators on Thursday reported thier earnings declined annually last month due to increases in marketing expenses for Apple Inc’s new iPhone 6 and iPhone 6 Plus smartphones.

The three major players also saw weaker earnings before interest, taxes, depreciation and amortization (EBITDA) margins in the past quarter, as 4G-related operating costs and handset subsidies kicked in last month, while there was no revenue contribution from their 4G business yet, Barclays Bank said in a note.

Chunghwa Telecom Co (中華電信), the nation’s largest telecom, said operating costs and expenses expanded 3.8 percent to NTT$15.2 billion (US$450 million) last month from NT$14.65 billion a year ago.

“The expenses increase is primarily because of sales of the iPhone 6 models, but the iPhones also helped boost sales of 4G handsets and subscription of 4G services,” Chunghwa Telecom said in a statement released on Thursday.

Net income shrank 5.8 percent to NT$3.48 billion, or NT$0.45 per share, last month, compared with NT$3.69 billion, or NT$0.48 a share, during the same period of last year, the statement said.

In the first three quarters of this year, net income was NT$30.55 billion up 0.2 percent from NT$30.48 billion in the same period last year.

That helped the company achieve 85.2 percent of its forecast of NT$35.84 billion in net profit for the full year.

Revenue rose 0.8 percent annually to NT$19.14 billion last month from NT$18.99 billion. In the first nine months, cumulative revenue totaled NT$166.97 billion, down 1.3 percent year-on-year and hitting 73.2 percent of its forecast of NT$228.23 billion for this year.

“We expect margins to be pressured in the fourth quarter as associated handset subsidies build up before 4G revenue materially kicks in, which we have not seen given the muted mobile service revenue growth trend so far in 2014,” Barclays Bank’s Singapore-based analyst Anand Ramachandran said in the note.

Taiwan Mobile Co (台灣大哥大), the nation’s No. 2 telecom, said selling the iPhones has pushed up marketing expenses and thereby cut its EBITDA to NT$2.66 billion last month, down 0.75 percent from NT$2.68 billion a year ago, according to a company statement.

Net income last month declined 16.55 percent annually to NT$1.21 billion, or NT$0.45 per share, compared with NT$1.45 biion, or NT$0.53 a share, as last year’s figures included a gain from selling retail business units.

Last quarter, net income dropped 12.41 percent annually to NT$3.74 billion, but exceeded the company’s quarterly net income forecast of NT$3.44 billion.

In the first nine months, net income dropped 0.66 percent year-on-year to NT$11.96 billion.

Revenue grew 7.97 percent to NT$9.48 billion last month from NT$8.78 billion a year ago. In the first nine months, revenue rose 3.05 percent to NT$92.43 billion from NT$79.99 billion during the same period last year.

Barclays said Taiwan Mobile’s third-quarter results beat its own earnings guidance, although the company’s business was ordinary, with service revenue declining for all segments amid weaker margin trends.

Far EasTone Telecommunications Co (遠傳電信) also reported a weaker margin and earnings because of higher handset subsidies, posting EBITDA of NT$1.91 billion for last month, down 17.32 percent from NT$2.31 billion a year ago, and net income of NT$784 million, down 25.33 percent year-on-year.

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