Credit Suisse Group AG is upbeat on Taiwan’s telecoms as the sector’s “big three” make a concerted effort to raise the threshold price for unlimited 4G subscription plans.
Earlier this month, Chunghwa Telecom Co (CHT, 中華電信), the nation’s largest carrier, announced plans to raise the threshold of its unlimited monthly plans — including subsidized purchase of a new handset — from NT$988 (US$30.6) to NT$1,399.
Raising the threshold for unlimited data plans to shepherd the market is in the direction of adopting tier-pricing and fair usage policies, Chunghwa Telecom told an investors’ conference yesterday.
Taiwan Mobile Co (台灣大哥大) and Far EasTone Telecommunications Co (遠傳電信) have followed suit by increasing prices for new unlimited subscription contracts, effective next month.
“We view CHT’s new plans as sentimentally positive as the bar for the true unlimited plans has been set higher,” Credit Suisse analyst Varun Ahuja said in a note issued on April 11.
In addition, the price hikes coincide with the beginning of a 4G renewal cycle that is anticipated to begin in the second half of the year, as contracts expire among high-end customers who were early adopters of 4G, Ahuja said.
The big three will continue to offer monthly plans at about NT$999 and NT$1,199, with generous data allowances of 15GB and 25GB respectively. They are also aggressively promoting lower-end 5GB plans priced at about NT$500.
However, Ahuja said pricing is expected to continue improving over the next two to three years.
In the first quarter, Chunghwa Telecom reported a 0.8 percent annual gain in sales to NT$56.89 billion, with net income rising 11.9 percent annually to NT$11.66 billion, or NT$1.5 per share.
Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 7.8 percent year-on-year to NT$21.92 billion, the company said.
Taiwan Mobile saw its sales last quarter drop 2 percent annually to NT$29.2 billion. Net income declined 1 percent to NT$3.77 billion (NT$1.39 per share), but EBITDA rose 11 percent to NT$8.4 billion.
Far EasTone’s sales last quarter were NT$23.82 billion, 3.9 percent lower than a year ago, while net income rose 0.5 percent to NT$3 billion (NT$0.92 per share) and EBITDA climbed 4.9 percent to NT$6.85 billion.
In a separate note issued yesterday, Ahuja attributed the strong growth in EBITDA to lower handset subsidies which were a result of tepid response to iPhone 6S.
"We expect the benefit of lower handset subsidies to continue until the first half of 2016" ahead of the launch of the new iPhone, Ahuja said in the note.
Overall, EBITDA growth this year may remain robust due to improving pricing dynamics and lower total subsidies, Ahuja said.
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