Chunghwa Telecom Co., Ltd.

Good afternoon, ladies and gentlemen. Welcome to Zhonghua Telecom conference call for the company's third quarter 2026 operating results. During the presentation, all lines will be on listen-only mode. 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 is now being broadcasted live over the internet. Webcast replay will be available within an hour after the conference is finished. Please visit CHT IR website www.cht.com.tw slash IR under the IR calendar section. Now I would like to turn it over to Ms. Angela Tsai, the Vice President of Finance. Thank you. Ms. Tsai, please go ahead.

Thank you. I'm Angela Tsai, Vice President of Finance at Chongha Telecom. Welcome to our third quarter 2026 earnings conference call. Joining me today are Chongha's President Rong-Shy Lin and our Chief Financial Officer, Audrey Xu. During today's call, management will begin by sharing our recent strategic achievements and providing an overview of our third quarter business results. This will be followed by a discussion of our segment performance and the financial highlights. We will then open the floor for questions and answers. Please turn to slide two to review our disclaimers and forward-looking statement disclosures. Now I will turn the call over to our president. President Lin, please go ahead.

Thank you, Angela, and hello, everyone. Welcome to our third quarter 2026 results conference call. To begin with, we are proud to report the excellent performance in the third quarter. Our revenue, operation income, net income, EBITDA, and EPS all beat the upper ends of our guidance and hit their highest level for any third quarter since 2009. We are satisfied with our continuous leadership in Taiwan's mobile and fixed broadband markets, and even more pleased to highlight that our ICT revenue alone reached its highest third quarter level since 2021. Our asset revitalization efforts have also paid off, contributing a one-off gain in the third quarter and validating the soundness of our policy. With all these achievements, we are quite confident that we will exceed our four-year forecast. While delivery started a third-quarter performance, we also continue to lay the foundation for the future growth. For standalone 5G network deployment, we continue to upgrade our best station with population coverage expected to exceed 50% by the end of 2026. primarily in metropolitan areas and along high-speed rail routes with nationwide coverage to follow in 2027. Consumers are expected to experience network slicing functionality in 2027. In addition, we sustained our continuous AI-related deployment across all fronts of our business Earlier today, we announced an extended collaboration with Google to broaden our AI-enabled services and accelerate consumer AI adoption, which we expect to enhance the digital services we offer to customers and strengthen our long-term growth positioning. On the enterprise front, in addition to our existing AIDC services, We are also expanding our AI-related business through new ventures. Jones Invent AI, which we sponsored years ago, is already gaining traction with its Gen AI governance and agent hub services. We have seen increasing demand from the financial and public sectors and have begun to generate revenue. Following this success, we took another step forward in AI by establishing Zhonghua Telecom's Intelligent Vision Intelligence and HAI Technologies. These strategic moves led the foundation for our future growth in the AI area. Finally, we are delighted to report that our ESG-related achievement. First, we became one of the first companies worldwide to obtain BSI's AI Mark of Trust, validating our AI governance and against international standards and strengthen Stakeholder Trust. We were also recognized globally for our leadership in sustainability, telecommunication services, and 5G innovation by Time Magazine as a front-end service. Domestically, we are again named among the Taiwan's top 100 companies preferred by foreign institutional investors and received multiple honors for digital transformation from Harvard Business Review. These achievements reflect our continued progress and leadership across key areas. Now let's move on to our third quarter of 2026 results. Please turn to page 5 for our success in Taiwan's mobile market. In the third quarter, our market share continued to outperform peers across all metrics. Our mobile revenue market share climbed to a record high of 41.2%, while our subscriber market share rose to 39.9%, according to our telecom regulator. Particularly, our revenue share continued to exceed our subscriber share, reflecting the premium quality of our subscriber base in the industry. Our 5G performance was equally impressive. In the third quarter, our 5G market share in Taiwan reached 39.4%, maintaining number one status. In addition, our 5G penetration rate among smartphone users increased to 49.6% as of September, and we anticipate it will surpass 50% by year-end. The average monthly fee uplift from 5G migration remained stable at 40%, and our post-pay trend rate set at a low level of 0.41%, reflecting strong customer loyalty. As a result, we are glad to see a nearly 3% year-over-year revenue increase in our mobile service in the third quarter due to a growing 5G adoption, mostly driven by the high-end smartphone sales and the increased roaming revenue, which delivered an 18% increase year-over-year in the third quarter. Meanwhile, Post-Pay Up-Pool increased by 2% of NT$11, sustaining the growth trajectory. Let's move on to slide 6 for our fixed broadband business update. In the third quarter, our fixed broadband revenue and subscriber number increased by 3% and 0.7%, respectively, driven by our success in promoting speed upgrade. In the third quarter, sign-off of 300 Mbps and above maintained double-digit growth. at 14.4% year-over-year, while signs-up of 1 Gbps and above increased by 42% year-over-year. Accordingly, signs-up of 300 Mbps and above reached 43% of our total fixed broadband customer base. Serving as a strong driver to spearhead fixed broadband business. As a result, our fixed broadband revenue posted a 3% increase year-over-year in the third quarter, while the APU rose by 1.6% of $80.12 year-over-year. We expect the growth dynamics to continue alongside the ongoing digital demand. Page 7 highlights the performance of our million subscriber customer services. In the third quarter, signs up of our multiple play offering, which integrate our mobile fixed broadband and Wi-Fi services, continued their upward trend and grew 13% year over year, driving up our overall telecom revenue growth. Notably, our Wi-Fi penetration among fixed broadband subscribers reached 58%, accelerating the popularity of the smartphone environment for customers. For our video business in the third quarter, thanks to the broadcast of FIFA World Cup in June and the Asian Games in September, Our video subscriber number steadily maintained above 3 million, serving as one of the key revenue contributors in our custom business. Our success in content investment came not only from sports, but also from dramas. For the upcoming 63rd Golden Horse Awards, In Taiwan, we have received the largest number of nominations in the telecom industry this year. Recognizing the quality of our content selection, we are happy to provide appealing content to our customers and look forward to related returns in the future. Meanwhile, our digital services continue to expand. Our consumer cybersecurity service maintained over 1 million subscribers and delivered 12% year-over-year growth, supported by rising demand for digital security. The number of transacting users of our direct carrier billing or DCB increased by 5% year-over-year. We are also seeing DCB used for a broader range of purposes beyond gaming, including AI tools and social media, which we believe will help diversify our revenue stream and support future growth. Slide 8 illustrates the key developments in our enterprise ICT business. With the group collaboration, Our ICT revenue in the third quarter increased 19% year-over-year. Driven by continued expansion of emerging services, the group's recurring ICT revenue also rose by 19% year-over-year, demonstrating strong momentum across major service lines such as IPC cybersecurity and cloud services. In particular, We saw AI-related subscriptions make a positive contribution to our international public cloud service revenue in the third quarter. Among our core ICT service pillars, cloud, IDC, cybersecurity, and AIoT services deliver the strong year-over-year growth of 45%, 26%, 22%, and 14%, respectively. In the third quarter, cloud and cybersecurity revenue growth was primarily driven by transportation and financial projects. While IDC revenue achieved its 10th consecutive quarter of year-over-year growth supported by installation projects for high-tech companies, Additionally, AIOT revenue grew steadily on the back of increased delivery of smart city and smart building projects. We are particularly excited to share that our cumulative ICT order intake by September had already surpassed 1.4 times the four-year 2025 level. With the third quarter order intake up 84% year-over-year, mainly driven by large government-related projects as well as AIDC installation for enterprise customers. Taking a closer look, during the quarter, we secured several smart surveillance and smart transportation projects thanks to our outstanding self-developed AIDC Chiu-Ming Chiu-Ming Chiu-Ming Chiu-Ming Chiu-Ming Chiu-Ming We look forward to related opportunities ahead. Last night highlights the excellent performance of our international subsidiaries and the continued progress in global expansion. In the third quarter, our international subsidiaries delivered an 8% year-over-year revenue increase. The United States market surged 27% fueled by the completion of AI supply chain equipment deployment in California. Meanwhile, Southeast Asia revenue rose 3%, supported by ongoing construction projects in Vietnam. Alongside the solid growth of our overseas ICT business, our network resilience business continues its upward trajectory. A 9.8% year-over-year lift in the satellite-related revenue highlights this expansion due to emerging demand for secure and diversified connectivity. Furthermore, by September, our cumulative satellite-related wins from the government's joint procurement system has reached over $80,000. and 50 million, paving the way for upcoming revenue contribution. Another key growth deliver for the network resilience business was the International Private Listed Circuit or IPLC. IPLC revenue grew 33% year-over-year and the SCC2 and APRICOR submarine cable system steadily generated a recurring revenue stream. Additionally, our new branch in Guatemala officially launched in October to serve as a regional base for ICT service expansion across Central and South America. Building on this momentum, we secured a data center construction project from the Guatemala government, marking a meaningful milestone in our regional growth roadmap. At the same time, we continue to deepen our relationship with Taiwanese enterprise expanding overseas, securing follow-on ICD opportunities in Japan and the United States, as well as capturing ICD projects from SportsTech companies in Thailand in the third quarter. This encouraging win and strong performance concludes a productive third quarter for our global business development. Now let's move on to page 10 for the financial performance of our three business groups. In the third quarter, our core telecom business remained strong. Growth in the mobile services, fixed broadband, and handset sales drove consumer business group revenue up 6.3% year-over-year, while income before tax increased by 1.4%, partially offset by higher-cost funds, sports, Broadcasting Rights. Enterprise business group revenue increased 8.2% year-over-year, supported by robust ICT performance and continued growth in mobile and fixed broadband services. However, income before tax declined slightly due to the group's Higher cost associated with strong ICT revenue growth plus the increased seasonal personal related expense alongside continued investment in talent retention. In terms of our international business group, its revenue increased by a solid 6.6%, while income before tax grew by 12.2% year-over-year. Despite a decline in ICT revenue due to a high comparison base resulting from a one-off project recognized last year, strong contributions from IPOC continued to drive IBG's revenue and profitability Thank you, President, and good afternoon, everyone. I'm pleased to walk you through our financial results for the third quarter of 2026. Now, please turn to slide 12.