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Chunghwa Telecom expects stellar profits from 4G service

TAIPEI, Taiwan -- Institutional investors yesterday stated that they are expecting stellar profitability for Chunghwa Telecom Co. (中華電信) following the launch of the company's fourth-generation (4G) mobile broadband network, under the carrier's sound cost control strategy.

While the high costs of establishing the 4G network may represent a tremendous burden for telecom companies, Chunghwa Telecom, Taiwan's largest wireless carrier, may be able to stand against the tide, institutional investors said.

Rick Tsai (蔡力行), the new chairman of Chunghwa Telecom, said that the company will refrain from focusing solely on expanding the number of mobile subscribers to offset the enormous expense of building the new network. Instead, it will seek broader revenue horizons through offering high-speed fiber-optic Internet, and a variety of cloud computing services where users may share resources, software and files across their devices, in addition to the new 4G network for mobile subscribers.

Although Chunghwa Telecom has much confidence in the burgeoning 4G market, the company has to stay alert for the relatively low rates launched by competing telecom carriers, said institutional investors, adding that following further approvals by the National Communications Commission (NCC), the level of competition in the field will be heightened as rival heavyweights including Taiwan Mobile Co. (台灣大哥大) and Far EasTone Telecommunications Co. (遠傳電信) encroach on the company's market share.

Views on Current Chairman of Chunghwa Telecom

Meanwhile, according to Wealth Magazine (WM, 財訊), Tsai, a former executive of the Taiwan Semiconductor Manufacturing Company (TSMC, 台積電), may have trouble managing a telecommunication company since his experience in the semiconductor field may not translate to the telecom sector.

The magazine noted a number of controversial issues surrounding Tsai, including his order to restrict employees' promotions and salary hikes shortly after taking the chairmanship. Tsai's decision came from his abrasive management style widely known during his time at TSMC, according to WM.

In addition, Tsai, as the new chairman, is also facing the problem of maintaining amicable relations with fellow managers and staff members. According to WM, Tsai has been absent from numerous company meetings and activities, and has very few trusted allies among top executives at the telecom company, a situation exacerbated by his lack of interaction with his core management team and rapport with line employees.

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