Chunghwa Telecom Co., Ltd.

Good afternoon, ladies and gentlemen. Welcome to Zhonghua Telecom conference call for the company's third quarter 2024 operating results. During the presentation, all lines will be on listen-only mode. And when the briefing is finished, directions for submitting your questions will be given in the question and answer session. For your information, this conference call has now been broadcast live over the internet. Webcast replay will be available within an hour after the conference is finished. please visit the CHTIR website, www.cht.com.tw, slash IR, under the IR calendar section. And now I would like to turn it over to Ms. Angela Tsai, Assistant Vice President of Investor Relations. Thank you. Ms. Tsai, please go ahead.

Thank you. I'm Angela Tsai, Assistant Vice President of the Finance Department for Zhonghua Telecom. Welcome to our third quarter 2024 result conference call. Joining me on the call today are Rongxi Lin, our recently appointed president, and Audrey Xu, our new chief financial officer. As usual, I would like to remind everyone to read our disclaimers and note the related forward-looking statement on page two. Before I turn the call over to President Lin, I would like to briefly introduce our newly appointed president and CFO. President Rong Shilin holds a Ph.D. degree in computer science from National Yangming Jiao Tong University and has previously served as our chief business officer, chief technology officer, and chief information security officer, possessing comprehensive experience in business developments and technology advancements in the telecom industry. Our new CFO, Audrey Xu, holds her PhD degree in accounting and finance from Lancaster University and was serving as professor of accounting at the National Taiwan University. She was also the associate dean of international affairs and director of GMBA of National Taiwan University. We warmly welcome our new executives, President Lin and Dr. Xu to the earnings conference. And now I will turn the call over to President Lin for the business updates, who will be followed by Dr. Hsu for the financial highlights. Afterwards, we will move on to the Q&A session. President Lin, please go ahead.

Thank you, Angela. And hello, everyone. Welcome to our third quarter 2024 results conference call. To begin, I would like to extend a warm welcome from all of China Telecom to our new CFO, Audrey Xu. We are happy to have her join our executive team and participate in today's call. And now please flip to page three for our recent strategic achievements. In the third quarter, we are pleased to announce our continued success in expanding our lead in Taiwan's mobile market. According to the regulator of communications in Taiwan, China Telecom's splendid 5G penetration in the third quarter remained the highest among peers. which has positively contributed to our continued growth in our post-pay subscriber numbers from this year. We are grateful that Zhonghua Telecom continued to outpass the industry in terms of subscriber growth. In addition, we achieved a new single-quarter revenue record for the third quarter, the highest in the last seven years. Meanwhile, we are especially pleased to see our Total ICT revenue reached its third quarter high since 2022 when we transformed our organization to a customer-centric structure. Our proven success and effective strategy has driven our continued ICT industry leadership. Furthermore, putting us far ahead of our competitors, Going forward, we are confident in expanding our industry lead. Another area we are continuously developing is advanced networks and technologies. In the third quarter, we are proud to announce our successful collaboration with NTT Corporation in launching the world's first ION, all-photonic communication link between Taiwan and Japan. This delivers high-speed connectivity with ultra-low latency and power consumption, perfectly suited for the AI-driven future. In addition, as the exclusive one-web low-Earth orbit satellite service provider, we are happy to report that the coverage in Taiwan has reached 90% in the third quarter and expected to achieve 100% in the fourth quarter. This expansion enhances our network resilience and contributes to related revenue. Furthermore, we are making progress in transitioning our air-cooled solution to liquid-cooled solution to support NVIDIA AI servers, which will better enhance IDC's power usage effectiveness and also contribute to the offering of GPU as a services. Lastly, In our pursuit of ESG best practice, I am pleased to report that we have officially reviewed and received SBTI's verification for his net zero greenhouse gas emission target. This achievement made us the first operator in Taiwan to commit to realizing net zero by 2045, ahead of the global accepted 2050 roadmap. In addition, we obtained carbon footprint verification for all of our service centers nationwide, setting us apart as the only telecom company in Taiwan to achieve this milestone. Now let's move on to the business overview of the third quarter of 2024. We are pleased to report another quarter of market share gains in the third quarter of 2024. Our overall subscriber share of Taiwan's mobile market reached to 37.8%, achieving a stable year-over-year increase. We are even more excited to see our industry number one 5G subscriber market share reached to 38.8%. better than that of overall mobile subscriber share. In addition, our revenue share remained over 40%, hitting 40.3% as of the end of September, continuously exceeding our subscriber shares to reflect our healthy growth. As our post-pay subscriber net age continued to outperform peers, Along with growing 5G migration and the steady international roaming contributions, our mobile service revenue recorded a 2% year-over-year increase, maintaining growth for 14 consecutive quarters. In the third quarter, we are glad to see the average monthly fee uplift from 5G migration exhibit a 43% uptick, maintaining heresy momentum. Let's move on to the slide six for an update of our out-of-performing fixed broadband business. In the third quarter, we expanded our cross-tier upgrade promotion package to include one gigabit per second service offerings As a result, our subscriber net age of 1 gigabit per second service doubled during this quarter. Moreover, the number of subscribers with speed of 300 megabits per second and above increased by 20% year over year, maintaining double-digit growth, and the total number of fixed broadband subscribers also rose. Thanks to our successful speed upgrade strategy, Our fixed broadband revenue at ARPU continued to increase by 3.4% and 1.5% over the year, respectively, effectively contributing to our overall performance. Now let's get a close look at the performance of our business groups. Page A presents our performance of our consumer business group. In the third quarter, total CBG revenue increased by 2.1% year-over-year, driven by several factors, including the increase of mobile service revenue due to 5G migration and the increase in post-pay subscribers. The steady growth of fixed broadband revenue and the increase of OTT revenue generated from our exclusive broadcast of the Paris Olympic Games. In addition, the launch of iPhone 16 series during this quarter further drove up the sales revenue by 1.3%, and we anticipate that this momentum will continue into the fourth quarter. Although CBG delivered positive revenue growth in the third quarter, its income before tax slightly decreased year over year, mainly due to the one-time broadcasting rights fee of the Paris Olympic Games. Slide nine further illustrates our CDG highlights. In the third quarter, our multiple play packages, which combine mobile, fixed broadband and Wi-Fi services altogether continued to deliver outstanding year-over-year growth of 65% thanks to our high-quality networks. In terms of applications, our video business demonstrated significant growth due to our exclusive broadcast of the Paris Olympic Games during this quarter. Subscription to our video platform comprising of MOD and Hami Video, successfully succeeded 3 million. Maintaining the largest video platform in Taiwan, compared to the Tokyo Olympic Games, new signs up for Hami Video increased 60%, while advertising revenue more than doubled. Overall, video business related revenue in the third quarter delivered double-digit year-over-year growth, highlighting the success of our content investment. Other than video applications, our consumer cybersecurity subscription increased by 16% year-over-year in the third quarter. Please turn to slide 10 for an overview of our enterprise business group performance. In the third quarter, EVGs total revenue increased by 5.9% year-over-year, mainly driven by our robust growth in ICT business, which saw a 22% year-over-year increase in revenue, mainly fueled by the strong performance of our emerging services. In terms of EDG core services, although we see the ongoing 5G migration and the fixed broadband speed upgrades provided some positive momentum to drive up mobile data revenue and broadband data communication and access revenue, it was not enough to fully offset the revenue decline of mobile voice and fixed line voice in the third quarter. Consequently, the decline of voice services also result in the year-over-year decrease of EVGs income before tax. Slide 11 provides a detailed picture of our enterprise business highlights. We are excited to report that our ICT emerging business outperformed in the third quarter with revenue increasing by 30% year-over-year. All our major applications demonstrated a strong double-digit and even triple-digit year-over-year growth. Notably, 5G private network revenue surged due to the 5G O-RAN project, while big data analysis revenue doubled thanks to smart government initiatives. For our AIoT cloud and IDC business, we are delighted to see year-over-year revenue increase of 44%, 24%, and 21%, respectively. The gains were mainly due to the completion of AIoT projects in smart energy, smart surveillance, and smart transportation, as well as the continued growth in recurring revenues from cloud and IDC business. Cybersecurity revenue also achieved a 24% growth on-year, making the 11 consecutive quarters of year-over-year increase. It is worth noting that in the third quarter, we successfully developed the first 5G private network, Backpack, a smaller and lighter 5G private network, capable of receiving satellite signals, quite useful in the remote area, and fully complementing our overall network resilience. Additionally, we secure a flagship project to help leading franchise retail in Taiwan to integrate network and equipment, and offer services such as surveillance cybersecurity, and cloud solutions, etc. We value not only the secured revenues, but also the recurring contributions from maintenance and consulting services afterward. Lastly, in this quarter, we won another AMI smart energy construction project and further strengthened our position as the leading AMI project operators. With the largest market share of AMI services, we are well positioned to develop and deliver related maintenance and application services going forward. Slide 12 illustrates our international business performance. In the third quarter, IBG's total revenue and income before tax increased year-over-year by 1.4% and 11%, respectively, mainly due to the vibrant demand for cloud and ICD solutions in the international market, as well as contributions from our Japan subsidiary. Excitingly, our European subsidiary in Germany began operations on July 30th, This milestone underscores our efforts in the European market. Our strategy is to collaborate with European telecom operators and ICT service providers to promptly offer ICT solutions to both Taiwanese and European enterprises. We have already secured ICT projects from the high-tech industry in the European market. In August, we also joined the IoT World Alliance, opening up potential opportunities in the Internet of Vehicles and other transnational IoT projects. Now I would like to turn the call to Audrey for our financial highlights.