Good afternoon, ladies and gentlemen. Welcome to Chunghwa Telecom Conference Call for the company's Third Quarter 2023 Operating Results. During the presentation all lines will be on listen-only mode. [Operator Instructions] For your 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. And now I would like to turn it over to Ms. Angela Tsai, the Director of Investor Relations. Thank you. Ms. Tsai, please go ahead.

I'm Angela Tsai, Assistant Vice President of Financial Department of Chunghwa Telecom. Welcome to our third quarter 2023 results conference call. Joining me on the call today are our Chairman, Harrison Kuo; President, Ivan Lin; and Vincent Chen, our Chief Financial Officer. During today's call, management will begin by providing Chairman's message, our business overview and followed by a discussion of our segment performance and the financial results and then we will move on to the question-and-answer portion of the call. Slide 2, please read the disclaimers and note concerning forward-looking statements. Now without further delay, I will turn the call over to our Chairman. Chairman Kuo, please go ahead.

Thank you, Angela, and hello, everyone. Welcome to our third quarter results conference call. Chunghwa Telecom has been committed to staying ahead in every aspect during the ongoing market consolidation. Before our business overview, I would like to highlight our dominant spectrum assets. One of our solid advantages to sustain our leading position and the growing momentum in post-merger landscape. Currently, we are the #1 when it comes to the ownership of the mainstream sub 6 gigahertz spectrum. All of the 290 megahertz sub 6 gigahertz spectrum is in use to provide fastest mobile speed for our customers, outstanding us in the industry. In addition, we have the most mobile-based stations nationwide. We are also the operator [indiscernible] with the largest mobile capacity and the widest coverage in Taiwan. On top of that, our leading -- our leading capabilities have exclusively completed the two-carrier aggregation of a 3.5 gigahertz and 2.1 gigahertz to provide fastest 5G services with theoretical peak speeds of 2 gigabits per second, far beyond the industry standard. In terms of high band of 28 gigahertz, we are now with 600 megahertz at hand, which is next to the unsold slots that can be used for satellite services. We are immediately ready for low-earth orbit satellite services. We will monitor the update of spectrum releases and is confident to make another consecutive spectrum at 28 gigahertz, contributing to the always broadband connected environment, we commit to customers. To sum up, we are confident to maintain our leadership going forward given our better spectrum assets and the outstanding network quality. Another unique strength of ours and a significant highlight during the quarter was the expansion of our international footprint to Europe. We are proud to announce our strategic collaboration with EXATEL Telecom from Poland. This partnership allows us to join, exploring emerging business opportunities, develop network infrastructure and assist our clients in expanding their presence. This step marks a significant milestone, not just aligned with our strategy to replicate Taiwan's success abroad, but also solidifying our overall success and the leadership in Taiwan's telecom industry. Now I would like to hand the call over to President Lin for the business overview in the third quarter.

Thank you, Chairman Kuo, and hello, everyone. Now please flip to Page 5 for the update of our performing mobile business. In the third quarter, we successfully achieved a remarkable milestone by acquiring more than 14% of the revenue share in the Taiwan mobile market and widening our leader against our peers. At the same time, our subscriber share also outperformed in the industry by increasing to 37.1% incremental exit revenue share about our subscriber share reach [indiscernible]. We are confident in accelerating our lead in consolidation landscape due to our better revenue generation capability and healthier and custom structure. Let's go back and review the outperform -- outperforming metrics of our mobile business. In the third quarter, our mobile service revenue delivered above 7% year-over-year. Increased maintaining its growth for 16 consecutive quarters owing to the upsell result from the 5G migration. International roaming recovered an increase of the postpaid subscriber numbers. In addition, the postpaid ARPU report 5.1% year-over-year increase. Continuing its consequently growth for the tenth quarter for customers who migration from our 4G to the 5G, we observed an average [indiscernible] that there's some uplift in the later months mobile monthly fees, maintaining and expanding of trajectory. Last, I move on to Slide 6 for an update of our fixed broadband business. In the third quarter, we are glad to see the positive performance in the fixed broadband sector. The revenue and ARPU increased by 2% and 1%, respectively, on a year-over-year basis, mainly attributed to the increase of the higher speed service adoption in the third quarter and sign up for our service of the 300 megabit per second or higher, which is currently the mainstream among or speed mix and maintained its high growth rate of the 41% year-over-year. In addition to stable growth…

Thank you, President Ivan. Good afternoon, everyone. I will now provide a financial summary of our third quarter results. Let's begin with Slide 14, income statement highlights. During the third quarter, total revenues increased mildly compared to same quarter last year. The main reason is growing mobile service revenues offset decreased voice revenue and the recognition of a onetime government grant income from the same period last year. Income from operations and net income decreased by 5.9% and 2.9% on year, respectively, mainly due to an increase in electricity expenses and manpower costs. Overall, for the first nine months of the year, total revenues increased by 2.6% year-over-year, primarily fueled by strong growth of our mobile, ICT and broadband services, which offset declining voice revenue and the contribution of a one-time government grant income. Net income grew by 2.1% on year, mainly due to our growing ICT business. EPS rose by 2.1% on year to $3.69 billion. The growth of EBITDA remained in positive trajectory and EBITDA margin remained at about 40%. Now move on to Page 15 for balance sheet highlights. As of September 30, 2023, total assets compared to the end of 2022, decreased by 2.1%, mainly due to the decrease in current assets, PPE and intangible assets, which offset the increase in other financial assets. Total liabilities decreased by 2.7%, primarily attributable to the decrease in accounts payable. Additionally, debt ratio decreased slightly and net debt over EBITDA remains 0. Taken together, these debt ratios demonstrated the robustness of our balance sheet. Page 16 provides a summary of our cash flows. Our cash flows from operating activities remained robust, which increased by 5.7% on year. Capital expenditures decreased by 6.6% compared to the same period last year, of which mobile-related CapEx was reduced by 28.4% whereas non-mobile CapEx increased by 12.9%. The latter was primarily attributable to greater IDC investments. On top of that, Free cash flow was up by 14.9% on year. Collectively, our strong operating cash flows, along with the robust balance sheet enable us to be future-ready, and create sustainable and long-term value for our shareholders. On Slide 17, the table presents financial results against management guidance. During the third quarter, revenues slightly fell short of our expectation due to declining ICT business revenues, while net income and EPS meet our expectations, mainly driven by strong performance of mobile and broadband services. For the first nine months of 2023, our revenue and profit matches with our forecast as a result of outperforming core and emerging businesses. That concludes the overview of our Q3 financial results. Let me turn the call over to Chairman Harrison.

Thank you, Vincent. On Slide 18 is our awards and ESG recognitions received in the third quarter. In October, The Asset, a widely recognized business news and the research organization announced that we won the Jade Award, the highest level of The Asset ESG Corporate Awards for the third consecutive year. We are the only company in Taiwan to stand out from the cross-industry and the cross-country selections for our extraordinary ESG efforts. Moreover, we are glad to share that our efforts in ESG are widely recognized and received by investors as we are the only telco included as one of the top 10 constituents by Financial Times SE4Good Taiwan ESG index. Meanwhile, we were honored as the most outstanding company in Taiwan within the communication services sector by Asia Money, reflecting our high-quality telecommunication services, excellent governance and great ESG initiatives acknowledged by global investors. This concludes our prepared remarks. Thank you for your attention. At this time, I would like to open our conference call for questions.

Thank you, Chairman Kuo. [Operator Instructions] And our first question will be Neale Anderson of HSBC. Go ahead please Neale.

Thank you. Good afternoon. I have a question relating to the government subsidies in the third quarter of last year. Is it possible to give the amounts that were booked? It looks like they were booked in both the Consumer business group and the Enterprise business group? I'm just trying to work out the pressure on profit from that because you also mentioned some other cost increases, electricity, et cetera. Thank you.

Okay. So regarding the government grant income, so that's because of the satellite subsidy. So the amount is about $0.4 billion. So for this quarter -- actually, last year same quarter because we record this amount. So that will affect our income on the bottom line for this quarter because of the higher base.

Thank you. And that's split between the Consumer and the Enterprise business group. Is that correct? Are you able to give any detail on the split?

Yes, because the customer is mainly for the enterprise customer. So it affects heavily on the EPG performance. And this is a onetime effect.

All right. Okay, thank you. And if I could follow up though. So in the press release and also in your presentation, you mentioned in the Enterprise business group, there was a decrease of fixed voice after the pandemic. So could you give a little bit more detail on that? What's happening there? Are people moving to IP-based services or businesses, I should say, moving to IP-based services and that's resulting in lower revenue?

So basically, during the pandemic period, so the people stayed home, so they used more voice call to connect their relatives or their customers to help. But in the post-pandemic period, so people returned to work, and they are out of their home. And so they use more on the wireless or the broadband. Yes. So in the -- during the pandemic period, so at that time, the voice revenue actually is still declining, but the rate actually is lower. It's about like 4%, 5%. But now in the post pandemic, actually, the declining rate is greater. So that affects our revenue and also our income. Yes.

Got it. Perhaps just finally on the deal with the Polish operator EXATEL, is that to support Taiwanese businesses in Europe? Could you give a little bit more detail about how large or the geographic scope for that business. Is it Poland, specifically or is that the European partner and you're aiming to service its business more broadly?

Okay. So we are still in talks with our counterpart, our partners, and we may collaborate in various areas. Yes, it's not only in the ICT or maybe expand to other areas. And we don't rule out the possibility to expanding the collaborations to our regional partners in Europe. We will keep you posted once we have more details and when the deal is more confirmed.

Understood, thanks very much for your help. Thank you.

Thank you.

[Operator Instructions] If there is no further questions at the moment, then now I hand the call over to the management team to take the questions from the webcast page line. Thank you.

Okay. Now we've received a question from the webcast. It's about the joint class developments of their low-earth orbit satellite services. And is there any cooperation planned with a specific operator? Thank you.

Thank you for the website questions. The development of low-earth satellites primarily complements ground communication network, aiming to expand the overall communication network coverage and enhance our network resilience. We adopt an open approach and actively exploring cooperation opportunities with multiple international low orbit satellite operators, and we're waiting to participate in domestic proof-of-concept projects. However, due to a nondisclosure agreement, specific details of the collaboration cannot be disclosed at this moment. We have obtained licenses for geo synchronized orbit satellites this year, one for medium-earth orbit and one for low-earth orbit. In addition to ongoing negotiations with satellite system operators, we are actively preparing for applying commercial frequency license, network setup and et cetera. In accordance with regulations, our goal is to introduce commercial services for low-earth orbit satellites in Taiwan as soon as possible. For one way, we have NDA, there is not much to share for now. We will do announcements as the agreement is finalized.

[Operator Instructions] And on the call, we have the next question. It's from Rajesh Panjwani, JPMorgan.

Hi thank you for this opportunity to ask this question. I think you -- when Neale asked this question, I think you answered it, but I couldn't properly get the figures. So can you -- the government subsidies project because of which the revenues were lower this quarter versus last quarter, can you just repeat how much was the amount impact on both revenues and operating profit because of that?

Yes, the amount is $0.4 billion. It's about $0.4 billion.

Okay. And this is a revenue impact?

Yes. it's a subsidy yes. So basically, the revenue is [indiscernible]. It's never on the profit.

Okay. Got it. Got it, thanks. And the second question is, in general, like there is further consolidation going on in the industry. But do you expect that your competitors will become relatively stronger going forward as they add to more base stations, more spectrum? Are you concerned about that going forward?

Yes, we recognize ICC's conditional approval of the mergers among our peers as the resulting change is expecting to be positive to the overall mobile market development in Taiwan. We welcome the regulator's decision to require our peers to dispose the excess bandwidth acquired with the mergers, which upholds fair market competition and in line with the original policies and the rules made during the course of the spectrum auction. Our goal and the position not only to shape ourselves as the enablers to perform and expand digital ecosystem but also to expand overall value for customers, shareholders in the ecosystem and us. For example, to upgrade and migrate our customers services to higher speed bandwidth services. And as mentioned -- as I mentioned earlier, we have the most base stations nationwide in Taiwan. So we have confidence to have -- to lead in the Taiwan telecom industry, yes.

So if I may add. So let me provide some financial numbers to show we are quite confident that we will still retain our lead in the post-merger market if we look at the mobile markets, right? So for the mobile service revenue, our annual growth is around 6% to 7% in the past nine months. But if you look at our peers, so their revenue -- their growth rate is about 3% to 5%. So we are -- so it kind of shows our strategy is quite correct. So that we can remain to acquire clients and also we can grow our mobile service revenues. And for our broadband services, so if you look at -- after we draw out this speed upgrade promotion. So our broadband service revenue also maintains a very healthy growth trajectory. So for the year -- so our broadband service revenue, the growth rate is about 2% to 3%. And actually, our subscriber has been increasing. And if you look at our ICT business, so for example, our emerging application services, so if you look at the IDC cybersecurity and also have been doing very well also for the 5G network, the AIoT and for the -- and other emerging applications, they have been done very well. And most importantly, if we look at the ICT profit margin, actually, it has been steady goes up. So we think these are the good signs. And looking forward, because we see the market has turned positive and the macro condition is getting better and better, we also know that digital demand has been growing dramatically. So we believe our ICT business has a good potential to grow, yes. This is what we see. And because we have a very good network and we provide very good quality to customers in a consistent manner. So we are quite confident that our customers will stay with us and actually for the churn rate, we are the lowest among our peers and it's as low as 0.4%. We are quite comfortable about this number, and we believe we can further improve it. And we also have a research lab with a team of 1,000 staff engineers. They actually provide excellent research support. So that's why we can -- as I just mentioned before, that's why we can support our expansion in our ICT business because we can focus on high value-added application services. So that's the supplementary information provided from me.

That is very helpful. Can I ask one more question on your overseas foray, you're doing this in Poland. Now will this focus primarily be on ICT and enterprise services or would you also look at investing in the networks and would you be open to taking stakes in telcos outside Taiwan?

Okay. So basically, for now, we -- as we just mentioned, we collaborate with our Polish partner in various aspects. So ICT enterprise are the main business collaboration we are talking about now, and we may collaborate in other dimensions. But for details, we will reveal as soon as it is getting clear.

Thank you very much.

Thank you.

Thank you.

Okay. Now we have three questions from the webcast. The first is will EBG revenue decline again -- year-over-year decline again in the fourth quarter.

So for the EBG revenue basically it's affected by the decline of the voice revenue because in the post pandemic period, the people they have -- and the customer behavior has changed back to normal. So they use their voice services. And the other key reason is the onetime government grant income. So as I mentioned because last year, during the same period, we recorded $0.4 billion in revenue, also profit. So that heavily affects our revenue and our bottom line. And on top of that, also the electricity expense, because at the early this year because there is electricity, there's a great rate raise in electricity. So that also affects our income. So these are pretty -- the reasons that mainly affect the revenues and the income in the EPG segment. But as I just mentioned before, for -- in terms of the business outlook and terms of the taking we have. So basically, we are still very confident that EPG performance will perform in line with our expectations. Thank you.

And the second question is what is the 5G penetration rate?

So currently, for the 5G subscribers, so now it's over 3 million subscribers and actually, the growth rate has been quite steady.

The next question is, is there a 5G penetration target for this year?

So actually for the 5G penetration, as I just mentioned, actually, the growth rate is quite steady and we are quite comfortable with the number. And in terms of the 5G, the migration, the uplift is over 40%. So we think the growth pattern is good, is healthy, and that's what we are caring about and in line with our expectation.

[Operator Instructions]

Now we have another question from the webcast. The question is that what percentage of EBG revenue is from voice?

So for the voice revenue, it accounts for about 20% of the revenues in the EPG performance of your fixed voice, fixed line. For the fixed line revenue for the voice, it accounts for 20% in EBG.

[Operator Instructions] Okay, if there are no further questions at this point, I now turn it back -- turn the call over back to the Chairman Kuo. Thank you.

Thank you for your participation. Goodbye.

Thank you, Chairman Kuo. Ladies and gentlemen, we 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. Thank you, and goodbye.