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September 25, 2017

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Merrill Lynch outlines CHT prospects in the 4G era

TAIPEI, Taiwan -- Following a forum event Merrill Lynch yesterday outlined Chunghwa Telecom's (CHT, 中華電) prospects as the fourth-generation (4G) mobile broadband network approaches commercial operation scheduled in July, while issuing a target price of NT$86 for the company's shares.

According to Merrill Lynch, CHT stands to gain a first-movers' advantage in capturing the market share for the 4G network, adding that the company will be able to leverage its immense service ecosystem based on the 1800MHZ frequency band.

In addition, capital expenditure for CHT is expected to surge for the next three years, and peak throughout 2014. Most notably, CHT executives may elect to opt out of offering unlimited data usage plans for its usership, said Merrill Lynch.

The change in pricing structure is designed to maintain the telecoms carrier's earnings performance amid mounting capital expenditure and waning revenue growth prospects.

Merrill Lynch stated that CHT management is knowledgeable of the importance and strategic implications of a multi-tiered pricing model but will require extensive campaigns to educate and convince its usership of the change.

The company is expecting the average revenue per user rating to increase significantly following the commencement of operations for the 4G market. Merrill Lynch, however, noted that about 70 percent of the company's customers are subscribed to unlimited usage 3G data plans.

CHT is also expanding efforts toward converting its 2G usership to adopt the 3G market. The company last year converted about 740,000 subscribers, and hopes to increase the figure to 1.2 million by the end of this year. To promote the endeavor, the company began offering plans that enable subscribers to use Line, a popular instant messaging app, without incurring additional data charges. The move however, will likely be detrimental to the company's mobile voice call revenues.

Meanwhile, CHT stated that the company intends to maintain its 90 percent dividend payout on earnings, pending the approval of its board of directors' meeting in April. CHT managers also stated that the company does not intend to open up the subscriber line portion of its network infrastructure to competing carriers, as its offer of rental agreements for its "last mile" assets were met with tepid reception.

CHT to Reduce Price of ADSL Prices by 4.4%

Meanwhile, the National Communications Commission has approved the company's decision to cut the monthly subscription price of its ADSL and Light Era Internet service by 4.41 percent to 4.8 percent, effective April 1.

About 1.58 million subscribers are expected to benefit from the change, and will see a NT$6 to NT$26 reduction in monthly bills, collectively yielding savings of about NT$1.9 billion annually for subscribers throughout Taiwan.

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