Taiwan Mobile Co (台灣大哥大) expects pricing competition to ease in the fourth quarter of this year as low-rate plans for unlimited 4G data transmission have significantly cut into the profits of telecom operators, a company executive said yesterday.
Telecom operators are struggling to stay profitable as stiff competition has delayed the exit of NT$699 per month unlimited 4G data plans, as well as the scrapping of flat data transmission rates as a whole.
“Lower [flat] rates have affected the company’s ARPU [average revenue per user], but I believe the rationalization of competition should start to happen three quarters” later, Taiwan Mobile president James Jeng (鄭俊卿) told investors in a teleconference.
“In my personal view, the three big ones [telecoms] are facing pressure in terms of profitability ... although the fixed data rates will not change in the short term,” Jeng said, referring to the company, Chunghwa Telecom Co (中華電信) and Far EasTone Telecommunications Co (遠傳電信).
Taiwan Mobile’s blended ARPU dropped 2 percent annually from NT$733 to NT$720, company data showed.
To mitigate the erosion caused by low-price service plans, the nation’s second-largest telecoms has reduced handset subsidies and channel commissions, Jeng said.
Lower handset subsidies and subscriber acquisition costs helped lift the earnings before interest, taxes, depreciation and amortization of its telecom business by 1 percent annually, or 4 percent quarterly, in the first quarter, the company said.
However, telecom service revenue will continue to decline over the next few quarters due to market competition, Jeng said.
Telecom service revenue last quarter shrank 2 percent annually to NT$16.02 billion (US$532 million) from NT$16.34 billion a year earlier, the company’s financial statements showed.
However, net profit rose 5 percent annually to NT$3.96 billion last quarter, compared with NT$3.77 billion in the same period last year, while earnings per share climbed from NT$1.39 to NT$1.46.
Taiwan Mobile’s board of directors approved a proposal to distribute cash dividends of NT$5.6 per common share.
Far EasTone yesterday said that the nation’s major telecoms are trying to increase the lowest flat rate for 4G data services above the monthly fee of NT$699 or NT$698.
“I see the market trending upward. It is a good sign,” Far EasTone president Yvonne Li (李彬) told investors. “I do not see the likelihood that the NT$698 [rate plan] will be removed from the product portfolio in the short term, but people are trying to rationalize channel commission. It is a healthy trend for the market.”
Li expects sales of Apple Inc’s iPhone 8 series to encourage consumers to adopt higher-rate plans, offsetting the erosion caused by price competition.
Far EasTone’s net profit contracted 5.5 percent to NT$2.84 billion last quarter, compared with NT$3 billion a year earlier. Earnings per share dropped from NT$0.92 to NT$0.87.
Revenue slid 5.6 percent annually to NT$22.48 billion last quarter.
Taiwan Mobile and Far EasTone expect their 4G penetration rates to increase to 72 percent and 80 percent respectively.
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