Mon, Apr 30, 2018 - Page 16 News List

Chunghwa’s unlimited plan worries investors

By Chen Cheng-hui  /  Staff reporter

Chunghwa Telecom Co (中華電信) on Friday reported that its first-quarter revenue declined from a year earlier, but analysts are more concerned with whether the company’s recently launched unlimited service plan is to have a detrimental effect on its average revenue per user (ARPU) performance this year.

The company last week became the latest telecom provider in Taiwan to offer an unlimited 4G service plan at NT$499 (US$16.84) a month, targeting civil servants, teachers and military personnel, after messaging app Line Corp on Tuesday last week introduced its low-priced, unlimited data service package, priced according to connection speed requirements.

Other players such as Taiwan Mobile Co (台灣大哥大), Asia Pacific Telecom Co (亞太電信), Taiwan Star Telecom Co (台灣之星) and Far EasTone Telecommunications Co (遠傳電信) have introduced similar packages with unlimited access to mobile Internet and unlimited phone calls between subscribers of the same network to attract subscribers.

As mobile service revenue remains the largest contributor to telecoms’ overall revenue, the offering of unlimited data and call services at low prices — while helping them hold on to market share — poses risks for their long-term revenue and growth.

“This kind of NT$499 price plan has been offered by our peers for a while, although not officially,” Chunghwa Telecom president Sheih Chi-mau (謝繼茂) told analysts in a conference call, adding that the company simply reacted to retain its customers. “We needed to fight back to stabilize the market condition.”

The company views the NT$499 service plan as a short-term promotion, Sheih said, adding that it would need to stay nimble, to respond to market dynamics.

Although telecoms continue to provide various packages to meet customer demand, Chunghwa Telecom’s advantage is its network coverage and its number of base stations, he said.

“We don’t rule out the possibility of offering our customers a service plan with a speed cap rather than a data cap, if the demand is there. We will continue to closely monitor developments in the market,” Sheih said.

Shen Fu-fu (沈馥馥), director of the company’s investor relations department, said Chunghwa Telecom would like its customers to upgrade to higher-end service packages, but “market share is still important.”

Responding to an analyst who asked how the company views offering a low-priced mobile package with unlimited data when its revenue has not grown for 15 months, Shen said the market has been really dynamic, and the company needed to have different strategies for different target subscribers.

However, the unlimited service plan is likely to have a negative effect on the company’s APRU, which already declined to NT$581 last quarter from NT$588 the previous quarter, because the firm adopted International Financial Reporting Standards (IFRS) 15, she said.

“The ARPU is likely to show incremental decreases in coming quarters,” Shen added.

In the first quarter, Chunghwa Telecom’s net income attributable to the parent company declined 9 percent year-on-year to NT$8.73 billion, with earnings per share of NT$1.13.

Over the same period, earnings before interest, taxes, depreciation and amortization decreased 0.7 percentage points to 35.26 percent, while consolidated revenue fell 1.7 percent to NT$53.63 billion, according to the company’s financial statement.

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