On Mar 20, 2014, we issued an updated research report on
Chunghwa Telecom Co. Ltd.
). Chunghwa reported mixed financial results for the first quarter
of fiscal 2014.
Chunghwa is a dominant telecom operator in Taiwan presently holds
80% of the nation's broadband market and nearly 35% of the wireless
Chunghwa has won 2 slots of 1800 MHz spectrums for the installation
of 4G LTE wireless network. Furthermore, the company intends
to bid for 2600 MHz spectrum in an auction expected to be held in
2015. In 2014, the company plans to deliver data speeds between 300
Mbps and 1 GB. Moreover, Chunghwa intends to initiate LTE mobile
high-speed broadband service this year.
Chunghwa plans to offer both broadband and MOD plans in a single
package, thereby driving MOD subscription and fiber migration.
Moreover, the company's IPTV and ad revenues grew 20% and 37%,
respectively, from the year-earlier quarter. Chunghwa is optimistic
about maintaining the favorable momentum in the advertisement
segment, going forward.
On the downside, the Taiwanese telecom market is oversaturated and
has become extremely competitive following certain telecom
regulatory changes. Chunghwa competes in a tough environment with
two other major service providers, namely, Taiwan Mobile Company
and Far EasTone Telecommunications Co. Ltd. The Taiwanese market is
relatively smaller than other regional markets, with approximately
23 million potential customers.
At present, Taiwan has a 115% wireless penetration. We expect
fierce competition going forward as the Chinese telecom behemoth,
China Mobile Ltd.
) and Far EasTone Telecommunications are collaborating for the
deployment of 4G LTE-TDD network technology.
The National Communications Commission, the telecom regulatory body
of Taiwan, has reduced the mobile interconnection rate effective
Jan 5, 2013, for the next 4 years. Accordingly, Chunghwa has to
reduce its mobile voice tariff. Additionally, from Apr 2013, the
company has reduced charges for broadband, IP peering and domestic
leased line wholesale services. All these measures are likely to
hurt the company's revenues over the upcoming years.
Chunghwa currently carries a Zacks Rank #2 (Buy).
Stocks That Warrant a Look
Other well-performing stocks in the telecom industry include
BT Group plc.
). Both these companies have the same Zacks Rank as Chunghwa.
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