Chunghwa Telecom Co (中華電信) expects profit to drop for a second year, compared with analysts' estimates for an increase, because of costs for cutting jobs and marketing high-speed wireless services.
"We don't see very firm areas that can give us much higher profitability," Hochen Tan (賀陳旦), chairman of the nation's largest phone company, said in an interview last Wednesday.
"We still have the same situation as last year, where we have to pay significant one-time pensions," he added.
Cuts
Hochen has cut employees by 2,700 to 27,000 since the state-run operator privatized in 2005 and plans to reduce a total of 5,000 by next year. The company's revenue per employer was about 25 percent that of rival Taiwan Mobile Co (
Chunghwa is trying to expand in China, the world's biggest telecommunications market by users, to boost revenue, as user growth slows in Taiwan, which has almost as many mobile subscriptions as people.
Profits last year fell 5.7 percent to NT$44.89 billion (US$1.36 billion) on sales that rose 0.6 percent to NT$184.39 billion, unaudited figures released by Chunghwa Telecom on Jan. 10 showed.
Chunghwa Telecom shares gained 8.8 percent last year, lagging behind the 20 percent gain in the benchmark TAIEX index.
The stock rose 1.3 percent to close at NT$63 yesterday.
"The forecast of a profit decline may result in more pressure on the company's share price," said Charles Chen, a fund manager at JF Asset Management Co in Taipei.
"The market is also concerned about how Chunghwa Telecom is going to attract as many new 3G mobile users this year as it expects," he said.
Future benefits
The company will see benefits in the future from the early retirements as costs decrease, Hochen said, without saying how much job cuts will cost and what the savings will be.
"Handset subsidies were more than expected because we had to promote 3G with more effort," he said.
The company had 942,000 3G subscribers by the end of last year, compared with 8.47 million second-generation customers.
Chunghwa has set a target of 2.2 million 3G users by the end of this year.
To boost revenue, Chunghwa plans to spend NT$130 billion over seven years to lay fiber-optic cables in homes and offices, allowing subscribers to take advantage of content services such as its Internet-based TV offering multimedia on demand services.
Chunghwa is looking to cooperate with Chinese operators in providing 3G services. China has yet to announce when it will issue licenses for the high-speed service and how many it will grant.
Chunghwa would prefer to take an equity stake in a Chinese 3G operator, Hochen said.
Regulations by both governments could prevent the company from investing directly and the alternative is a consulting role in building and maintaining networks.
The company is set to sign a deal with China Telecom Corp (
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