Chunghwa Telecom Reports Operating Results for Full Year 2008

TAIPEI, Taiwan, March 30 /PRNewswire-Asia-FirstCall/ -- Chunghwa Telecom
Co., Ltd (NYSE: CHT; TAIEX: 2412) ("Chunghwa" or "the Company"), today
reported its operating results for full year 2008. All figures are presented
on consolidated basis and prepared in accordance with ROC GAAP.
(Logo: http://www.prnasia.com/xprn/sa/200707261428.JPG )
(Comparisons, unless otherwise stated, are with respect to the prior year
period) Financial Highlights for Full Year 2008:

-- Total revenue increased by 2.2% to NT$201.7 billion
-- Internet and data revenue grew by 1.7%
-- Mobile revenue decreased 1.9%; Mobile VAS revenue increased by 25.0%
-- Net income totaled NT$45.0 billion, a decrease of 6.7%
-- Earnings per share (EPS) decreased by 6.1% to NT$4.64, or NT$46.4 per
ADS

Financial Highlights for 4Q08:

-- Total revenue decreased by 0.3% to NT$49.8 billion
-- Internet and data revenue grew by 2.6%
-- Mobile revenue decreased 1.4%; Mobile VAS revenue increased by 19.8%
-- Net income totaled NT$8.5 billion, a decrease of 18.9%
-- Earnings per share (EPS) decreased by 23.7% to NT$0.82, or NT$8.2 per
ADS

Management Commentary
Commenting on the fourth quarter and fiscal year 2008 results, Dr. Shyue-
Ching Lu, Chunghwa's Chairman and Chief Executive Officer, said "I am pleased
that we were able to deliver our top-line performance and to continue to
return cash to the shareholders in 2008 given the adverse economic condition.
In 2009, our management's primary focus will be on maintaining market
leadership for our core services, while expanding our strategic digital-
converged services such as, broadband and mobile VAS and MOD/IPTV, as well as
key enterprise solutions. Furthermore, we plan to continue the deployment of
our next-generation networks as a foundation for our long-term growth in
providing high quality total communication solutions. Finally, we will
continue to focus on company-wide operational efficiency improvement to
enhance our profitability. We are confident that our current strategic
initiatives and the healthy financial footing position us for long-term
success. As such, our Board of Directors has just approved a cash dividend,
which demonstrates our confidence and our commitment to maximizing returns for
our shareholders."
Revenue
Chunghwa's total revenue for 2008 increased by 2.2% year-over-year to
NT$201.7 billion, of which 28.3% was from fixed-line services, 35.9% was from
mobile services, 24.8% was from Internet and data services, and the remainder
consisted of handset revenue, data card sales and the consolidated revenue of
Senao International ("Senao").
While Internet and data businesses contributed positively to the overall
revenue, revenue growth was mainly driven by the full 12 months consolidation
of Chunghwa's subsidiary Senao, compared to only 8.5 months of consolidated
Senao's operational results for 2007.
Internet and data revenue in 2008 was 1.7% higher than in 2007, primarily
driven by the increased broadband subscriber base and the successful
initiatives in upgrading the customers to higher speed fiber services.
However,
this growth was partly offset by an ADSL tariff adjustment that took effect on
April 1, 2008. For mobile business, Chunghwa made progress by increasing the
subscriber numbers by 2.9% and by enhancing the VAS service revenues by 25.0%
compared to 2007. However, these successes were offset by the traffic decline
and the price cuts imposed by the National Communications Commission (or
"NCC"), which resulted in an overall revenue decline of 1.9% year-over-year.
Fixed-line revenue decreased by 3.4% year-over-year to NT$57.1 billion for
2008. Local and Domestic long distance revenues decreased by 3.3% and 6.8%,
respectively, year-over-year for 2008, mainly due to mobile and VOIP
substitution. International long distance revenues decreased by 1.4% compared
to 2007. This was primarily because of the increased competition from prepaid
calling card and the decrease in international direct dial traffic. Other
revenue increased over 44%, mostly from the consolidation of Senao.
For the fourth quarter of 2008, total revenue was NT$49.8 billion, a 0.3%
decrease over the same period last year. Internet and data revenue was 2.6%
higher than the same period last year. Mobile revenue decreased by 1.4%,
mainly due to the decrease in traffic. Fixed line revenue as a whole decreased
by 2.4% as compared to the same period last year.
Costs and expenses
For 2008, total operating costs and expenses increased year-over-year by
4.4% to NT$143.0 billion, primarily due to the consolidation of Senao's
operating costs and expenses for the full year, compared to only 8.5 months of
consolidated Senao's operating costs and expenses for 2007. For the parent
company, total operating costs and expenses increased by NT$2.9 billion,
representing a year-over-year increase of 2.3%. This was primarily because of
the increase in handset sale costs, handset subsidies and the employee bonus
expenses. However, depreciation and amortization expense for the parent
company was 4.3% lower than 2007.
For the fourth quarter of 2008, total operating costs and expenses
increased by 1.9% to NT$38.1 billion, mainly due to the increase in personnel
cost resulted from the expensing of the employee bonus.
Income tax
The Company's income tax for 2008 was NT$13.9 billion, a 6.4% increase
compared to NT$13.1 billion for 2007. This was mainly due to the decrease in
tax credit.
EBITDA and net income
EBITDA for 2008 decreased by 3.4% year-over-year to NT$96.8 billion,
resulting in an EBITDA margin of 48.0%, down from 50.8% for 2007. The EBITDA
margin decline was primarily attributed to the increase of handset subsidy,
cost of handset sales for the parent company and the full year consolidation
of Senao, which operates at a lower margin than the parent company.
Net income for 2008 was NT$45.0 billion, a decrease of 6.7%
year-over-year.
The reasons for such decline were due to the increase in operating costs and
expense, as well as the NT$1.2 billion financial asset impairment in the
fourth quarter 2008 and the NT$1.7 billion employee bonus which started to be
expensed in 2008.
Capex
Capital expenditures totaled NT$30.1 billon for 2008 compared to NT$25.1
billion for 2007. The 20.1% increase of capex in 2008 was mainly for the
deployment of the next generation network. Going forward, Chunghwa expects
the capex spending to remain between NT$30billion to NT$32billion over the
next 2 to 3 years.
These future capex investments will focus on core businesses and on
migrating mobile and broadband customers to higher performance platforms.
Cash Flows
Cash flow from operating activities increased by 3.3% to NT$91.9 billion.
The increase was primarily because of a decrease in other financial assets and
an increase in accounts payable. Free cash flow for 2008 decreased by 3.4%
compared with 2007 as capex increased by 20.1%. Still, the cash and cash
equivalents remained solid at NT$81.3 billion as of the end of 2008.
For the fourth quarter of 2008, cash flow from operating activities
increased by 12.1%. This increase was primarily due to the decrease in other
financial assets and the increase in other current liabilities.
Business Performance Highlights:

Internet and Data Services
-- By the end of 2008, Chunghwa Telecom had 410 million HiNet subscribers,
a 0.5% increase year-over-year. Overall, the Company had 4.3 million
broadband subscribers (including ADSL and FTTB) at the end of 2008, a
1.4% increase as compared to the end of 2007. By the end of 2008, FTTx
subscriptions with an average service speed of 10 Mbps reached 1.07
million, representing 24.8% of total broadband subscribers.
-- As of the end of 2008, Chunghwa had 676 thousand MOD subscribers, a
solid 71.4% year-over-year increase.

Mobile Services
-- As of December 31, 2008, Chunghwa had 8.95 million mobile subscribers,
slightly up by 0.87% quarter-over-quarter compared to 8.87 million as
of September 31, 2008.
-- Chunghwa remained the leading mobile operator in Taiwan. According to
statistics published by the NCC, at the end of 2008, the Company's
total subscriber market share (including 2G, 3G and PHS) was 35.2%,
while the revenue market share was 33.5%, respectively.
-- Chunghwa had 322 thousand net additions to its 3G subscriber base
during the fourth quarter 2008, representing an increase of 9.9%
quarter-over-quarter resulting in a total number of 3G subscribers of
3.56 million as of December 31, 2008.
-- Mobile VAS revenue for 2008 was NT$7.0 billion, representing a 25.0%
increase year-over-year, including the increase of SMS revenue by 20.5%
and the increase of mobile Internet revenue by 38.5%.

Fixed-line Services
-- As of the end of 2008, the Company maintained its leading fixed-line
market position, with fixed-line subscribers totaling 12.7 million.

Recent Updates
The company has recently completed the second capital reduction program on
March 20. The total cash returned to the shareholders was NT$19.1 billion.
Financial Statements
Financial statements and additional operational data can be found on the
Chunghwa Telecom website at http://www.cht.com.tw/ir/filedownload .
About Chunghwa Telecom
Chunghwa Telecom (NYSE: CHT; TAIEX 2412) is the leading telecom service
provider in Taiwan. Chunghwa Telecom provides fixed-line, mobile and Internet
and data services to residential and business customers in Taiwan.
Note Concerning Forward-looking Statements
This press release contains forward-looking statements. These statements
constitute "forward-looking" statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, and as defined in the U.S. Private
Securities Litigation Reform Act of 1995. These forward-looking statements can
be identified by terminology such as "will," "expects," "anticipates,"
"future," "intends," "plans," "believes," "estimates" and similar statements.
Chunghwa may also make written or oral forward-looking statements in its
periodic reports to the U.S. Securities and Exchange Commission on forms 20-F
and 6-K., in its annual report to shareholders, in press releases and other
written materials and in oral statements made by its officers, directors or
employees to third parties. Statements that are not historical facts,
including statements about Chunghwa's beliefs and expectations, are forward-
looking statements. Forward-looking statements involve inherent risks and
uncertainties that could cause actual results to differ materially from the
forward-looking statements. A number of important factors could cause actual
results to differ materially from those contained in any forward-looking
statement. Investors are cautioned that actual events and results could
differ materially from those statements as a result of a number of factors
including, but not limited to: extensive regulation of telecom industry; the
intensely competitive telecom industry; our relationship with our labor union;
general economic and political conditions, including those related to the
telecom industry; possible disruptions in commercial activities caused by
natural and human induced events and disasters, including terrorist activity,
armed conflict and highly contagious diseases, such as SARS; and those risks
outlined in Chunghwa's filings with the U.S. Securities and Exchange
Commission, including its registration statements on Form F-1, F-3, F-6 and
20-F, in each case as amended. Chunghwa does not undertake any obligation to
update any forward-looking statement, except as required under applicable law.
This release is not an offer of securities for sale in the United States.
Securities may not be offered or sold in the United States absent registration
or an exemption from registration. Any public offering of securities to be
made in the United States will be made by means of a prospectus that may be
obtained from the issuer or selling security holder and that will contain
detailed information about the company and management, as well as financial
statements.
SPECIAL NOTE REGARDING NON-GAAP FINANCIAL MEASURES
A body of generally accepted accounting principles is commonly referred to
as "GAAP". A non-GAAP financial measure is generally defined by the SEC as one
that purports to measure historical or future financial performance, financial
position or cash flows but excludes or includes amounts that would not be so
adjusted in the most comparable U.S. GAAP measure. We disclose in this report
certain non-GAAP financial measures, including EBITDA. EBITDA for any period
is defined as consolidated net income (loss) excluding (i) depreciation and
amortization, (ii) total net comprehensive financing cost (which is comprised
of net interest expense, exchange gain or loss, monetary position gain or loss
and other financing costs and derivative transactions), (iii) other expenses,
net, (iv) income tax, (v) cumulative effect of change in accounting principle,
net of tax and (vi) (income) loss from discontinued operations.
In managing our business we rely on EBITDA as a means of assessing our
operating performance. We believe that EBITDA can be useful to facilitate
comparisons of operating performance between periods and with other companies
because it excludes the effect of (i) depreciation and amortization, which
represents a non-cash charge to earnings, (ii) certain financing costs, which
are significantly affected by external factors, including interest rates,
foreign currency exchange rates and inflation rates, which have little or no
bearing on our operating performance, (iii) income tax and tax on assets and
statutory employee profit sharing, which is similar to a tax on income and
(iv)
other expenses or income not related to the operation of the business.
EBITDA is not a measure of financial performance under ROC GAAP. EBITDA
should not be considered as an alternate measure of net income or operating
income, as determined on a consolidated basis using amounts derived from
statements of operations prepared in accordance with ROC GAAP, as an indicator
of operating performance or as cash flows from operating activity or as a
measure of liquidity. EBITDA has material limitations that impair its value as
a measure of a company's overall profitability since it does not address
certain ongoing costs of our business that could significantly affect
profitability such as financial expenses and income taxes, depreciation,
pension plan reserves or capital expenditures and associated charges. These
non-GAAP measures are not in accordance with or an alternative for GAAP
financial data, the non-GAAP results should be reviewed together with the GAAP
results and are not intended to serve as a substitute for results under GAAP,
and may be different from non-GAAP measures used by other companies. For more
information on these non-GAAP financial measures, please see the tables
captioned set forth at the end of this release and which shall be read
together with the accompanying financial statements prepared under ROC GAAP.
If you have any questions in connection with the change of accounting
policy, please contact the following person:
Contact name: Ms. Fu-fu Shen
Tel: +886-2-2344-5488
Fax: +886-2-3393-8188
Email: ffshen@cht.com.tw
Address: CHUNGHWA TELECOM CO., LTD.
21-3 Hsinyi Road, Section 1,
Taipei, Taiwan,
Republic of China

SOURCE Chunghwa Telecom Co., Ltd

Fu-fu Shen, Investor Relations of CHT, +886-2-2344-5488, or chtir@cht.com.tw