Good afternoon, ladies and gentlemen. Welcome to Chunghwa Telecom Conference Call for the company’s Third Quarter 2022 Operating Results. [Operator Instructions] For information, this conference call is now being broadcasted live over the internet. Webcast replay will be available within an hour after the conference is finished. Please visit CHT IR website, www.cht.com.tw/ir under the IR calendar section. Now, I’d like to turn it over to Ms. Angela Tsai, the Director of Investor Relations. Ms. Tsai, please go ahead.

Thank you. This is Angela Tsai, Director of Investor Relations for Chunghwa Telecom. Welcome to our third quarter 2022 results conference call. Joining me on our call today are Harrison Kuo, our President and Vincent Chen, our Chief Financial Officer. During today’s call, management will begin by providing an overview of our business in the third quarter, followed by a discussion of our segment performance and the financial highlights. After, we will move on to the question-and-answer session. On Slide 2, please note our Safe Harbor statement. Now I will turn the call over to President Kuo. President Kuo, please go ahead.

Thank you, Angela and hello everyone. Welcome to our third quarter results conference call. I will now provide an update on our robust performance in the third quarter. Let’s begin on Slide 4 for an overview of our mobile business. In the third quarter, we see the positive development of Taiwan’s mobile market of operators towards 5G migration in a steady manner. Focusing on creating value for customers, which we predict is good for healthy market competition. Looking into quarter four, the mobile market in Taiwan is expected to remain steady in potential economic uncertainty. In terms of market position, we are pleased not only to maintain our leadership in Taiwan’s mobile market, but also successfully to achieve year-over-year growth in terms of both revenue and the subscriber share for four consecutive quarters. In the third quarter, we increased our revenue share to 39.4% and the subscriber share to 36.5% on a year-over-year basis respectively. Our overall positioned revenue share is larger than the subscriber share suggesting that our customer attention business strategy is proving successful. We are confident that we can maintain our leadership position going forward. Please turn to Slide 5 for a closer look at our mobile business. In the third quarter, our total mobile service revenue increased by 4.2% year-over-year, attributable to the outperforming subscriber number increase and the up-sell resulting from 5G migration. Mobile subscriber members, excluding IoT SIMs increased by 2.6% year-over-year, possibly due to the increase of both postpaid and prepaid SIMs. In particular, our prepaid numbers grew significantly, reflecting our success in enhancing sales in the segment of 5G offers. In addition, our churn rate continues to remain the lowest among our peers. Our postpaid ARPU reached 1.8% year-over-year growth in the third quarter, maintaining its upward trajectory for six consecutive quarters.…

Thank you, President Kuo. Good afternoon, everyone. I will now walk you through our third quarter financial results. Let’s start with Slide 14, income statement highlights. For the third quarter of 2022, total revenues grew by 5.2% on a year-over-year basis, mainly due to increased ICT project completion and higher revenues from core businesses, such as mobile services and broadband access. Meanwhile, operating costs and expenses increased by 4.7%, owing to higher manpower expenses and depreciation expenses from 5G network deployment. Income from operations increased by 6.7%. Net income and EPS remained stable compared to the prior year period. Additionally, our EBITDA recorded a 5% Y-o-Y increase and EBITDA margin remained stable in the third quarter. Now move on to Page 15 for balance sheet highlights. Compared to December 31, 2021, total assets decreased by 1.9% mainly owing to decreased cash and cash equivalents for dividends payment and the acquisition of property, plant and equipment. Total liabilities is lower by 1.9%, primarily attributed to payment of accounts payable for equipment and suppliers, which offset the increase of bonds payable. We continue to maintain a healthy balance sheet as our debt ratio stays at about 24% level and net debt over EBITDA is zero. Page 16 presents the summary of our cash flows. Cash flows from operating activities decreased by 1.6% on year, mainly due to the settlement of accounts payable. As for capital expenditure, mobile-related CapEx including 5G decreased year-over-year as 5G capital spending reached peak in 2021. Additionally, free cash flows increased by 8.3%, compared to same period last year. Taken together, our healthy balance sheet and strong cash flows enable us to manage economic uncertainty and support business developments through challenging times. On Slide 17, we provide a table that compares our financial results with our financial guidance. In the third quarter of 2022, all performance measures with respect to revenue and profitability exceeded our financial forecasts. Revenue beat guidance mainly attributable to better-than expected performance of core businesses as a result of growing subscriber numbers, 5G migration, and broadband business. Operating costs and expenses were higher than our third quarter guidance due to higher costs of goods sold from smart devices and depreciation expenses. EBITDA and net income top our forecasts due to the steady growth of core businesses and improved profitability of emerging businesses. That concludes the overview of our Q3 financial results. Let me turn the call over to our President, Harrison.

Thank you, Vincent. The next page demonstrates our ESG efforts. In the third quarter, we announced to participate in the global Renewable Energy 100 initiative to demonstrate our resolution to transition to 100% renewable power by 2040. In addition, we secured the single largest corporate power purchase agreement in Taiwan this year, which allows us to realize the use of 100% renewable electricity for our IDCs in 2030. Additionally, we worked with world famous Taiwanese badminton player, Tai Tzu-ying, to initiate tree planting project, aiming to plant 15,000 trees in next 3 years. Chunghwa’s ongoing ESG efforts have been recognized globally, receiving multiple awards from international institutions and organizations. Going forward, we will continue to develop our ESG practices to satisfy the UN Sustainable Development Goals and to promote the greater good for our local and global communities. Thank you for your attention and support. At this time, I would like to open up our conference call for questions.

[Operator Instructions] Our first question is coming from Neale Anderson from HSBC. Go ahead please.

Thank you. Good afternoon. Two questions, please. The first relates to the International Business Group that was quite strong. Can you give us any color on how big you think that market can become. And whether you can sustain this type of 20%-plus growth? The second question is a general question on costs. And I would be very interested to know if you are seeing any cost inflation pressures in any areas of your business such as energy, wages, etcetera? Thank you.

Okay. So, for the first question about the margins from the International Business Group, the amount – we don’t disclose the margin yet, but roughly for all of the margin – EBITDA margin of our business groups is in the range of 30% to 42%. So, it’s around this range. And we are quite confident that because we see there is a demand from the overseas digital transformation and also there is an IDC demand locally. So, we believe the margin can be sustainable. For your second question about the cost pressures from inflation, so basically, we do face the pressure because the government raised the electricity rate three months ago, but likely because we have been undertaken the energy saving initiative 2 years or 3 years ago. So, the energy savings from our operations kind of offset the rising utility bills. So, that’s my answer.

Understood. Thank you very much.

Thank you.

[Operator Instructions] The next question is coming from Sara Wang from UBS. Go ahead please.

Hi. Thank you for this opportunity to asking questions. So, I actually only have a very quick question. So, in third quarter this year, we see that both EBITDA and operating income saw quite good growth, but net profit remained flat. I am just wondering what the gap is on the non-operating items?

So, if I understand your question correctly, so basically, Sara, you are talking about why EPS actually is – it remains flat, right. For our EBITDA, actually there is Y-o-Y growth of 6%, 7%, right. 6% to 7%, right. So, that’s because of our, sort of, non-operating business because we have invested – we have made several investments in venture capital. And some of our investments actually in the last year, same period because of the bond market. So, we have recorded valuation gains. But because for this year, there is a market correction, so there is an valuation adjustment. So, that heavily affected our non-operating income.

Got it. That’s clear. Thank you.

Thank you.

The next question is coming from Neale Anderson, HSBC. Go ahead please.

Thank you for letting me ask another one. Could I ask about the 5G uplift and how you expect that trend, particularly next year. So, it’s still quite high, 32%. Do you think that can be sustained into 2023? Thank you.

For the 5G, right. So basically, we will disclose more detailed information in early January or February in the next results call.

Okay. Thank you.

[Operator Instructions] As there are no further questions, I will turn it back over to President, Kuo. Go ahead please. End of Q&A:

Thank you for your participation. Bye-bye.

Thank you. Thank you, President, Kuo. Thank you for your participation in Chunghwa Telecom’s conference. There will be a webcast replay within an hour. Please visit www.cht.com.tw/ir under the IR Calendar section. You may now disconnect. Goodbye.