Updated Research Report on Chunghwa - Analyst Blog

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On Mar 20, 2014, we issued an updated research report on Chunghwa Telecom Co. Ltd. ( CHT ). Chunghwa reported strong financial results for the fourth quarter of fiscal 2013 reflecting strong year over year revenue and net income growth.

Chunghwa is the dominant telecom operator in Taiwan. It holds 80% of the broadband market share, along with 96% of local fixed-line and 77% of long-distance fixed-line market share. The company also commands 34.8% of the Taiwanese wireless market.

Chunghwa is gradually expanding its subscribers' base on the back of high-speed next-generation FTTx (fiber to the home/building) offerings. The company is investing heavily to build a formidable FTTx network in Taiwan.


Chungwa plans to offer both broadband and MOD plan in a single package, thereby driving both MOD subscription and fiber migration. Moreover, the company's IPTV and ad revenues grew 15% and 37%, respectively. The company remains optimistic of maintaining the favorable momentum in the advertisement segment.

On the downside, Taiwanese telecom market is oversaturated and has become extremely competitive following telecom regulatory changes. Chunghwa competes in a tough environment with two other major service providers, Taiwan Mobile Company and Far EasTone Telecommunications Co. Ltd. The market size is small in comparison to other regional country markets, with approximately 23 million potential customers. At present, Taiwan has 115% wireless penetration. We expect fierce competition going forward as the Chinese giant, China Mobile Ltd and Far EasTone Telecommunications, are cooperating for the 4G LTE-TDD network technology.

The National Communications Commission, the telecom regulatory body of Taiwan, has reduced the mobile interconnection rate effective from Jan 5, 2013, for the next 4 years. Accordingly, Chunghwa has to reduce its mobile voice tariff. Additionally, from April 2013, the company has also reduced tariffs for broadband services, IP peering and domestic leased line wholesale services. All these measures will hurt the company's revenues for the next 4 years.

Chunghwa currently carries a Zacks Rank #4 (Sell).

Stocks That Warrant a Look

Other better-ranked stocks in the telecom industry include Shenandoah Telecommunications Co. ( SHEN ) Nippon Telegraph and Telephone Corporation ( NTT ) and Level 3 Communications Inc. ( LVLT ). While both Shenandoah and Nippon carry a Zacks Rank #1 (Strong Buy) while Level 3 has a Zacks Rank #2 (Buy).



CHUNGHWA TELECM (CHT): Free Stock Analysis Report

LEVEL 3 COMM (LVLT): Free Stock Analysis Report

NIPPON TELE-ADR (NTT): Free Stock Analysis Report

SHENANDOAH TELE (SHEN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Business , Stocks

Referenced Stocks: CHT , LVLT , NTT , SHEN

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