Far EasTone Telecommunications Co Ltd (遠傳電信) expects net profit to shrink 4 percent annually this year due mainly to a higher corporate tax rate, extending a downward spiral over the past few years amid fierce competition.
The nation’s third-largest telecom said the industry is consolidating, which helps stabilize competition among the nation’s five major players.
Two smaller firms, Taiwan Star Telecom Co (台灣之星) and Asia Pacific Telecom Co (亞太電信), together accounted for only 8 percent of the industry’s total revenue, Far EasTone said.
“The top line of the industry is to trend down just a bit” this year, Far EasTone president Yvonne Li (李彬) told investors at a teleconference on Friday.
The company would see revenue decline 2.4 percent annually this year to NT$89.89 billion (US$3.07 billion) from last year’s NT$92.07 billion, Li said.
Net profit is expected to drop from last year’s NT$10.86 billion to NT$10.42 billion this year, as the corporate tax rate is to climb from 16 to 20 percent, the company said.
Earnings per share are expected to slide from NT$3.3 to NT$3.2, Far EasTone said.
It said it has been seeking to revert the bottom-line downtrend by offering services beyond its traditional businesses.
Those services fall into two categories: information and communication technology (ICT) and digital services primarily for enterprise clients, the company said.
“Our management team is confident that the company’s bottom line will start trending up in the first half of 2020,” Li said.
The ICT service is expected to grow 82 percent this year, while the digital service is expected to grow 30 percent, she said.
“Those two areas are the growth drivers for the company this year,” Li said. “The new businesses will not only help grow our bottom line, but also our earnings before interest, taxes, depreciation and amortization.”
The company aims to increase revenue contribution from the two businesses to 11.8 percent, it said.
Last year, revenue from the two segments amounted to 7.8 percent of the overall revenue amid annual growth of 45 percent.
To support growth, the company plans to increase employees with data analysis skills to 20 percent of its total workforce, up from 15 percent last year, Li said.
Despite constant decline in net profit and revenue, Far EasTone would maintain a stable dividend distribution policy, given that it has been generating healthy free cash flow, Li said.
The company’s board has approved a cash dividend of NT$3.75 per common share, the same as last year.
That represents a payout ratio of 113 percent, as the firm is to allocate part of its capital surplus to pay the cash dividend in addition to last year’s earnings.
The company plans to spend less capital budget on equipment at NT$8.5 billion this year, compared with NT$8.8 billion last year, with about NT$6 billion of this year’s outlay earmarked for mobile network deployment, it said.
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