Good afternoon, ladies and gentlemen. Welcome to Chunghwa Telecom Conference Call for the company's Fourth Quarter 2023 Operating Results. During the presentation, all lines will be on listen-only mode. When the briefing is finished, directions for submitting your questions will be given in the question-and-answer session. 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.

Thank you. I'm Angela Tsai, Assistant Vice President of Financial Department for Chunghwa Telecom. Welcome to our fourth quarter 2023 results conference call. Joining me on the call today are our Chairman, Harrison Kuo; our President, Ivan Lin; and Vincent Chen, our Chief Financial Officer. During today's call, management will begin by providing the Chairman's message, our business overview, a discussion of our segment performance and the financial results, followed by management guidance for 2024. After, we will move on to the question-and-answer portion of the call. On Slide 2, please read our disclaimers and notes 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 fourth quarter results conference call. And I would like to begin with our strong financial performance for 2023. We concluded 2023 with an EPS of NT$4.76, while both revenue and EPS exceeded the high end of our full year guidance and hit six-year highs. We are proud to beat the full year guidance and also commit to investors to give all-out efforts for this year. During the fourth quarter of last year, Taiwan's telecom industry entered a new three-player landscape, where Chunghwa Telecom continues to be the largest telco, followed by the other two players. Our market cap represents 60% of the industry market value. Our revenue share in Taiwan mobile market also exceeded 40%. In addition, we have the most 5G subscribers in Taiwan, with more than 3 million, not to mention, the overall mobile subscriber number. All the stats highlight that our leading position far outweighs our peers. At the same time, we are happy to see the domestic industry evolution, and believe that under the current structure, value creation for customers will continue to remain the industry focus and the digital transformation will continue to develop and serve as one of the key strong growth drivers. Keeping our #1 position, we reiterate our confidence in widening our leading against the peers due to our solid strengths and growth momentum. In 2023, our mobile postpaid subscriber numbers continued its year-over-year growth throughout the whole year despite the total number of mobile SIMs in Taiwan decreased in 2023. We also achieved the highest mobile service revenue in the industry. Our success in attracting subscribers speaks for our network strengths, including the most extensive mobile coverage, largest capacity and fastest speeds, supported by our most numerous number -- mobile base station already in use. We believe our mobile subscriber gains and revenue growth in 2023 will continue and roll over to 2024. Our competitive advantage also come from our cross-sector business wins, including our growing fixed broadband business, accelerating technology momentum -- monetization and the ongoing investment in content and digital ecosystems. With our continuous efforts and the business development, we maintain optimistic about positive outlook for the next year ahead. Last, I am pleased to share that we are establishing a subsidiary in Germany in the first half of 2024, which will serve as the forerunner for International Business expansion in Europe. This marks a meaningful milestone of our international expansion. Now, let me hand the call over to Ivan for the business update of the fourth quarter of 2023.

Thank you, Chairman Kuo, and hello, everyone. Now, please flip to Page 5 for an update on our outperformance in the mobile service. As of November 2023, we maintained our leading position in Taiwan's mobile market with the largest subscriber share of 37.1%. Meanwhile, we were excited to see our revenue share reach a remarkable milestone, [exceeding] (ph) 40% in the third quarter and hitting 40.2% by the end of last November, further widening our lead against our peers. Our excess revenue share over subscriber share increased to 3.1%, [which] (ph) is encouraging. In addition, our mobile service revenue in fourth quarter recorded 5.8% year-over-year increase, maintaining its growth for 33 consecutive months. While our postpaid ARPU report 4.3% year-over-year increase, continuing this consecutive growth for 11th quarter. This increase was mainly owned to the 5G migration upsells, international roaming recovery and the increase of the postpaid subscriber numbers. Thanks to 5G adoption, we see the average monthly fee uplift from customer who migrate from 4G to 5G increase to 49% in the fourth quarter, further from the 44% in the third quarter, maintaining an [inspiring upward] (ph) trajectory. Going forward, we expect the overall 5G penetration in Taiwan will continue to steadily develop in 2024. We believe that Chunghwa will benefit the most, given our #1 position in the best 5G quality ranked by the well-known international institutes. Let's move on to Slide 6 for update in our fixed broadband business. In the fourth quarter, we are glad to see a positive performance in the fixed broadband sector, as the revenue and ARPU increased by 2.6% and 1.1%, respectively, on a year-over-year basis, mainly attributed to the increased higher-speed migration. Our sing-ups for service of the 300 megabit per second or higher continue to be popular among all speed…

Thank you, President Ivan. Good afternoon, everyone. Now, I will present a financial summary of our fourth quarter results in 2023 and financial guidance for 2024. Let's begin with Slide 14, income statement highlights. During the fourth quarter in 2023, total revenue increased by 4% compared to the same quarter last year, primarily attributed by growing ICT business revenue, sales revenue, mobile service revenue and broadband service revenue. Income from operations and net income decreased by 4.6% and 1.7% on year, respectively, mainly due to the impairment loss of telecom equipment caused by the phase-out of 3G network and the impairment loss of investment property. Excluding the impact of aforementioned one-time impairment losses, income from operations and net income increased by 2.2% and 7.2% on year, respectively. For the full year results, total revenue increased by 3% year-over-year as a result of solid growth of our mobile, ICT and broadband services. Income from operations decreased by 1% due to the one-time impairment losses mentioned above. Excluding the one-time effect, income from operations grew by 0.6%. Net income increased by 1.2% on year. EPS rose from NT$4.7 to NT$4.76. It's noteworthy that both of our revenue and EPS reached a six-year high and have maintained growth momentum for four consecutive years. Now, move on to Page 15 for balance sheet highlights. As of December 31 of 2023, total assets increased by 0.2% on year, mainly due to the increase in current assets, long-term investments and other assets, which offset the decrease in intangible assets. Total liabilities decreased mildly on year primarily attributable to the decrease in accounts payable. Additionally, debt ratio decreased slightly and net debt over EBITDA remained zero. Altogether, we continue to maintain a strong balance sheet with great financial flexibility to fully support our operations and business expansions…

Thank you, Vincent. On Slide 19 is our awards and ESG achievement highlights in the fourth quarter. In 2023, Chunghwa Telecom was recognized by the Dow Jones Sustainability World Index as #1 of the world-class telecommunication sustainability leaders, as well as the Emerging Market Index reflecting recognition from investors for our ESG practices. We also received a AA ESG rating from MSCI. In addition, we were reaffirmed the highest AA credit rating by S&P Global Ratings, continuing our exclusive leading position among global telcos. Besides to enhance interest alignment between top management team and shareholders, we are the only telecom operator in Taiwan to follow the international best practice of implementing the Incentive Compensation Clawback Policy. In addition, as we implemented an internal carbon pricing mechanism of NT$1,600 per ton in 2023, we are delighted to report that the internal carbon fee collected for 2023 was approximately NT$1 billion, all used to encourage carbon reduction initiatives and technologies. In the fourth quarter, we also completed carbon credit procurement to further utilize product carbon neutralization. Meanwhile, we initiated the first environmental footprint standard of network equipment in Taiwan to facilitate a low carbon supply chain. 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 is coming from Neale Anderson of HSBC. Go ahead, please.

Good afternoon. I have two questions, please. The first one is on revenue and specifically on the Enterprise Business Group and the emerging enterprise application revenue. So that fell last year I think because you had a high base of one-time revenue in 2022. Do you face the same situation for this year, or do you think that can return to growth with a large amount of recurring revenue without the one-time factor? So that's the first question. And the second one is on the guidance for the cost increase and the investment in growth business. Are you able to give any more color on -- I assume most of that would be going to the Enterprise Business Group. But I also wonder how much is going to the International Business Group given that you're opening up in Germany and I think other markets as well. So, could you give any additional comments on that? Thank you.

Okay. So, thanks, Neale, for your questions. So, for the first question about the Enterprise Business -- the revenue in the Enterprise Business segment, right, so in 2022, we have a high base because we have several big projects, and for 2024, whether we will face such situation again. So, we think this situation will moderate. So, for the ICT in the Enterprise Business Group, we expect it's going to grow in quite a reasonable rate. So, this is for the answer for your questions. The second one is the guidance for the cost increases, right? So, what we will say is, as I just mentioned in the PowerPoint, for the 2024, we will keep investing in talents and infrastructures and also we will make an investment in contents, because that will attract more subscribers and that will help to develop our own platforms and attract more customers and return more customers. So, this is the area where we will put in our resources. So, the cost in relation to contents will also go up. And some of the cost will go up is related to revenue. For example, like sales revenue, such that our cost of goods sold will also go up. And for the International business, actually we will expect the International Business segment will also grow very well, because we have the footprint in Europe and we expect there will be more demand from our customers from overseas markets. Thank you.

Understood. Thank you.

Thank you, Neale. Next question is from Sara Wang, UBS. Go ahead, please.

Thank you. I have two questions. First is on EBG revenue. So, I think management just mentioned that the ICT revenue in fourth quarter increased as well as the margin. So, just wondering why the income before tax, if holding the 3G impairment, still declined by mid-single digit. And then, second question is on the CapEx guidance for 2024. So, I noticed that non-mobile CapEx is guided to increase quite meaningfully. So, could you elaborate more on where are the key investment area? Thank you.

Okay. So, thanks, Sara. For the EBG, right, in fact for the ICT business for the revenue and also for the margin actually is improving. But why the overall segment profit declined? One, as we just mentioned, the 3G impairment and also the long-distance call, that also matters. Also there is a charge internally, we have the internal carbon fees, that also affect the bottom-line in the Enterprise Business segment. So that's for your question one. So, for your second question for the CapEx guidance, right, for the 2024. So, basically, for the non-mobile CapEx, because it increased a lot, that's mainly attributed to IDC, because we have several construction ongoing. So that actually accounts for a big chunk of the investments. And also, as I just mentioned, the submarine cables and also for the fixed-line network, that's also the regular items we have for the non-mobile CapEx. Thank you.

Got it. Just a quick follow-up on the IDC revenue. So, in fourth quarter, the total IDC revenue declined although the recurring IDC revenue increased. So, just wondering could you give an example of like what's the non-recurring IDC revenue. Thank you.

Yeah. For the one-time -- because some are set up the revenue for our customers. For example for some switch office, the cloud switch office, so that's one of the examples.

Got it. So, theoretically, for the IDC CapEx, that will bring recurring revenue, right?

Yes, yeah.

Okay. Got it. Thank you.

Okay. Next question comes from our Internet is from Rob Lowe. Could you please elaborate more on the business plan for the German office? Does the company plan to team up with European telecom companies for business expansion or the company plans to expand the exposure to European ICT services, et cetera? Thanks.

Thank you for your question. For 2024, we will continue to expand international outreach by mainly following Taiwanese clients' global footprint and replicate our successful use cases in 5G private networks and smart cities to overseas market. In addition, Europe will be a new focus in 2024 as we have seen growing ICT demand from clients' global expansion in Europe. Therefore, we plan to set up a subsidiary in Frankfurt to provide business support and we don't rule out the possibility to increase offices in different locations in Europe. Thank you.

[Operator Instructions] And on the telephone, we have another question, which is from Rajesh Panjwani, JPMorgan. Go ahead, please.

Thank you very much. A couple of questions. First one, you mentioned that the increase in the non-mobile CapEx in 2024 is mainly due to IDC CapEx. Can you just give us some idea about what proportion of the total CapEx is going in IDC in 2024 versus 2023? Second, do you expect the non-mobile CapEx to remain at an elevated level after 2024, or do you expect it to decline after that? Lastly, can you give us some more idea about your International Business expansion? What exactly are the kind of projects you are targeting in international markets? Thanks.

Okay. So for the first question for the nonmobile, right, so actually, the IDC investment increased by about 10% and more. So that's the increase in the non-mobile CapEx. And for the international projection and targets, so actually we don't disclose figures, but we do have some orders in hand. That's why we deploy our staff and resources overseas. Thank you.

Just a follow-up on this. So, I'm not asking for numbers. I'm like what is the kind of projects that you are likely to do in the international markets going forward? Can you give us some idea of that? And also, you said the IDC investment has increased by 10%, but your non-mobile CapEx is going up by 25%, which means that investment in non-IDC areas is probably even higher. So, can you give us some breakup of that? And also whether the CapEx is likely to remain at an elevated level beyond 2024 also?

Yeah. For the CapEx, right, actually the undersea cable also increased a lot. So, these are the two big ones. For the regular like fixed-line, actually it just increased at a steady rate. As for the international projects, right, so basically we help our customers to deploy their not only the CT but also ICT business in Europe and in U.S. and in Japan, in these overseas areas. So, currently, we cater to many Taiwanese clients, but also we are expecting there will be more foreign customers, clients to use our ICT services. So, these are the main areas for the IBG. Thank you.

Got it. And can you also comment on whether the CapEx is likely to remain at elevated level beyond 2024? Or once your subsea cables is commissioned, CapEx will fall in 2025?

Because for the 2025 and outwards, we haven't finalized the numbers, so we cannot give any indication or any prediction for the moment. Thank you.

Okay. Thank you.

Thank you. [Operator Instructions].

Now, we have another question from our chat box. Could you please give us the outlook -- the ICT business outlook for 2024?

We will continue to cultivate in our three major [billion-dollar] (ph) service and many pro-IDC cybersecurity and IoT service in emerging sectors. And we also work on 5G applications and AI solutions to capture the increasing demand. And looking forward to 2024, we maintain culturally an optimistic outlook for our ICT business and are positive about achieving our full year guidance as we are continuing to see healthy order intake and project completion and we will continue leveraging our ICT capabilities to further enhance our ICT margin. And given the order intake in our pipeline, we expect the ICT revenue to deliver the positive growth on year in 2024. Thanks for your questions.

[Operator Instructions] Thank you. If there are no further questions at this point, I will turn it back over to Chairman Kuo. Chairman Kuo, please proceed.

Thank you for your participation. Happy New Year. Goodbye.

Thank you, Chairman Kuo. And ladies and gentlemen, we thank you for your participation in Chunghwa Telecom 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.