Chunghwa Telecom Co (中華電信) said its profit next year will increase at least 5 percent as a rise in income from cellular and Internet services helps compensate for lower fixed-line sales at Taiwan's biggest telephone company.
The forecast is "conservative," said Chunghwa Chairman Mao Chi-kuo (
Taiwan's former telephone monopoly is being forced to cut prices of its traditional fixed-line services to compete with the lower rates offered by three new rivals. According to Mao, Chunghwa must develop its mobile data services, such as Web access and short messages via cell phones, to boost earnings.
"The question for every operator is how to increase non-voice services," he said.
Taiwan's four nation-wide mobile-phone operators are expanding their services to cope with a market that's nearing saturation. According to government estimates, more than 90 percent of Taiwan's 22 million people have cellular phones, some more than one.
Chunghwa, which is signing on about 3,000 new customers every day for its Internet services, plans to reach a subscriber base of 1 million by the end of this year from 650,000 today. The company generates an average revenue of NT$900 from each mobile-phone customer a month.
"I don't think they can maintain profit growth of 5 percent more than a couple of years as there is a lot of competition in Taiwan's telecommunications market," said Tu Kuei-shiong, who helps manage NT$200 million (US$6 million) in Taiwan stocks at Lian-Shan Investment Management Co in Taipei. Tu has never owned Chunghwa shares.
Separately, Chunghwa won't complete an overseas share sale this year to raise NT$51.52 billion (US$1.5 billion). In January, the company filed with the US Securities and Exchange Commission to sell American depositary receipts.
State-owned Chunghwa twice postponed the sale of 1.15 billion shares, or 12 percent of the company, to foreign investors.
To date, the government has managed to sell off 4.6 percent of Chunghwa. When it began to privatize the company last year, it said it hoped to sell a third of the company by the end of last year and about half by the end of this year.
"A year-end sale is impossible," Mao said. "It's too short a time period and too big a volume." The government is re-examining a timetable that called for half the company to be sold to private investors by December.
Disagreements between the government and investors about the price at which the shares would be sold abroad prompted Chunghwa's bankers, Goldman Sachs Group Inc, Merrill Lynch & Co and UBS Warburg, to recommend postponing the sale, Mao said.
Chunghwa shares rose NT$1.60, or 3.7 percent, to NT$44.80, down 57 percent from their initial public offer price of NT$104 last year.
"We're bullish on Chunghwa Telecom as a defensive play because its cash flow is strong," said Francis Koo, who helps manage about NT$14 billion (US$406 million) in Taiwan equities at ING CHB Funds.
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