On Mar 20, 2014, we issued an updated research report on
Chunghwa Telecom Co. Ltd.
). 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
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.
Nippon Telegraph and Telephone Corporation
Level 3 Communications Inc.
). 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
LEVEL 3 COMM (LVLT): Free Stock Analysis
NIPPON TELE-ADR (NTT): Free Stock Analysis
SHENANDOAH TELE (SHEN): Free Stock Analysis
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