4904 (TWSE) 2010 3Q Investor Update
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4904 (TWSE) 2010 3Q Investor Update Yvonne Li President Disclaimer This presentation contains forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions, some of which are beyond our control. Actual results may differ materially from those expressed or implied by these forward-looking statements. Because of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this presentation might not occur in the way we expect, or at all. You should not place undue reliance on any forward-looking information. In preparing the information herein, FET have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to FET or which was otherwise reviewed by FET. Neither FET nor its advisors have made any representation or warranty as to the accuracy or completeness of such information and nor do they assume any undertaking to supplement such information as further information becomes available or in light of changing circumstances. None of FET, nor any of their respective affiliates, advisers or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with this presentation. Neither this presentation nor any of its contents may be reproduced to a third party without the prior written consent of FET. 2 Agenda I. Market Overview II. 2010 3Q Performance and Business Update III. Strategic Direction 3 Taiwan Telecom Market Market Overview TaiwanTaiwan TelecomTelecom MarketMarket RevenueRevenue MarketMarket PhenomenonPhenomenon (NT$mn) Total Telecom Market Revenue oY increased slightly 1.6% YoY with 100,000 .6% Y 1 Mobile revenue (2G+3G) 2.5% YoY 76,318 77,525 80,000 Fixed line revenue (local calls + Int’l 6,063 6,332 call) 0.5% YoY 17,845 60,000 18,229 Subscriber Total mobile subs 5.4% YoY 40,000 Fixed-line sub 1.1% YoY 52,026 53,348 20,000 Outgoing minutes Mobile outgoing minutes 8.0% YoY 0 Fixed-line outgoing minutes 3.4% 3Q-09 3Q-10 YoY Mobile Local Calls Int'l Calls Source: NCC statistics; fixed-line revenue only contains voice and mobile revenue adjusted based on big 3 operators’ factsheets on consolidated basis 4 Taiwan Wireless Market Market Dynamic MobileMobile ServiceService RevRev ShareShare (2010(2010 Q3)Q3) MarketMarket UpdateUpdate Market Mobile Revenue Market Share of big 3 APBW+ CHT operators has been very stable for last VIBO 34.7% 13.1% few quarters while small operators did take some market share through cheap TWM pricing strategy 26.2% Smartphone’ higher ARPU does help increase mobile revenue but its high FET subsidy also erode operators’ short-term 25.9% profits Source: NCC statistics and operators’ factsheet; mobile revenue adjusted based on big 3 operators’ factsheets on consolidated basis 5 Agenda I. Market Overview II. 2010 3Q Performance and Business Update III. Strategic Direction 6 Operational Performance Gaining Momentum IncreasingIncreasing TotalTotal SubscribersSubscribers ImprovedImproved PostpaidPostpaid ARPUARPU ('000) NT$ Q 8,000 860 % Qo 843 2.7 840 7,000 821 6,237 6,263 6,320 817 22% 820 6,000 1,368 1,373 1,354 800 5,000 1Q'10 2Q'10 3Q'10 1,225 1,147 4,000 1,307 ImprovedImproved PostpaidPostpaid MinutesMinutes ofof UseUse 3,000 78% Million Minutes 2,000 oQ 3,576 3,670 3,800 4000 .8% Q 2 3,759 1,000 3800 3,656 3,539 0 3600 1Q'10 2Q'10 3Q'10 3400 3G Postpaid 2G Postpaid Prepaid Source: company data 1Q'10 2Q'10 3Q'10 7 Financial Performance Growing Top Line ConsolidatedConsolidated RevenueRevenue MobileMobile ServiceService RevenueRevenue ($mn) ($mn) 20,000 20,000 13,844 15,000 13,298 13,405 16,390 10,000 14,715 14,857 14,792 15,000 13,298 13,405 5,000 0 1Q'10 2Q'10 3Q'10 10,000 Fixed-LineFixed-Line ServiceService RevenueRevenue ($mn) 5,000 4,000 3,000 2,320 2,359 2,544 2,000 0 1,000 1Q'10 2Q'10 3Q'10 0 Total Revenue Service Revenue Source: company data; FET & NCIC P&L have been consolidated since Aug 17, 2010 1Q'10 2Q'10 3Q'10 8 Mobile Non -Voice Performance Uptake of Non -Voice Service Subscribers 20102010 3Q3Q Non-VoiceNon-Voice %% ofof ServiceService RevRev Non-VoiceNon-Voice Service*Service* SubscriberSubscriber GrowthGrowth #1: FET keeps the (k subs) leading position 900 18% 861 16.5% 15.8% 16% 14.9% 850 823 Strong growth 14% Strong growth 800 momentum 787 12% 762 10% 750 738 FET TWM CHT 703 711 687 691 FETFET MobileMobile Non-VoiceNon-Voice GrowthGrowth 700 677 Non-Voice% NT$ mn 16.5% 2,500 13.9% 20% 650 15% 2,000 18% 2,288 1,935 10% 600 1,500 5% 1,000 0% 9 0 0 0 0 0 1 -10 1 10 10 3Q-09 3Q-10 r- n-1 g- p-10 Y200 eb-1 p Jul-1 u e Non-Voice Rev Non-Voice % of Service Rev Jan- F Mar A May- Ju A S Source: Company Data; * Non-voice Service includes smartphone related non-voice plans and datacard, broadband, GPS related products 9 Mobile Non -Voice Performance Main Growth Driver from Non -SMS Services SMSSMS %% ofof Non-VoiceNon-Voice RevRev Non-SMSNon-SMS RevRev BreakdownBreakdown inin 3Q’103Q’10 Non-SMS portion getting bigger Major growths from: Wireless broadband + Transmission 100% (59%YoY) 80% 32% 36% 51% 53% 55% 61% 63% 66% Entertainment ( 58%YoY) 60% 68% 80% 65.3% 40% 68% 64% 49% 60% 20% 47% 45% 39% 37% 34% 32% 40% 0% 15.0% 12.3% 20% 3.4% 2.2% 2.1% 0 10 10 0% Y2004 Y2005 Y2006 Y2007 Y2008 Y2009 1Q'1 2Q' 3Q' Wireless Mobile Music e-commerce Social Entertainmt Non-SMS rev % to data rev BroadbandAdvrtising Ntwrking SMS rev % to data rev + Source: Company data transmission 10 Consolidated Financial Achievement 2010 YTD vs. 2010 Annual F’cst Item 2010 2010 YTD Achievement% (Unit: NT$ Million, except for EPS & margin) (1-3Q’10l) Forecast Total Revenue 45,962 62,065 74% Service Revenue 41,495 54,970 75% EBITDA 16,516 22,621 73% EBITDA% 35.9% 36.4% - Service EBITDA % 43.5% 43.0% - Net Income 6,617 9,274 71% EPS (1) $2.03 $2.85 71% Source: FET consolidated financials,. FET & NCIC P&L have been consolidated since Aug 17, 2010 (1) EPS was based on current outstanding shares of 3,258,501K 11 Consolidated Financial 20 10 YTD Financial Stats (NT$ mm unless otherwise stated) As of 2010 Q3 As of 2010 Q2 Cash & Cash Equivalents 8,278 15,207 Available-for-Sale Financial Assets & 5,815 2,833 _Derivatives Total Borrowing 11,267 902 Net Cash* 2,827 17,138 Shareholders’ Equity 71,293 67,432 Debt/Capitalization Ratio Gross (%) 13 .6% 1.3% Net (%) ─── ─── Free Cashflows – YTD 9,565 5,954 Cash-based Capex – YTD 6,263 4,149 EPS(NT$) – YTD $2.03 $1.31 * Net Cash = Cash and Cash Equivalent +Available-for-Sale Financial Assets & Derivatives – Total Borrowing Source: FET Consolidated financials 12 Smartphone Statistics Smartphone Take Up Drives Strong Non -Voice Growth SomeSome StatisticsStatistics SmartphoneSmartphone Penetration*Penetration* (%)(%) Smartphone users account for 9.0% of total postpaid subs (%) 12% ~30% of new handset takers choose smartphones 9.0% 9% 8.0% 8.3% 7.3% 7.7% Smartphone user ’s ARPU is more than 6.4% 6.8% 5.9% 6.1% 2x of normal user ’s ARPU 6% Smartphone user ’s non -voice spending increased to 27% 3% (vs. average = 16 -17% ) Current average smartphone user ’s 0% data usage is 400 -500 MB / month 0 0 0 -1 -10 b an-1 e ay-10 Jul-10 J F Mar-10 Apr-1 M Jun-10 Aug Sep-10 * Smartphone penetration means smartphone users as % of total postpaid subs excl data only subs 13 Device Portfolio Full Range of Smartphone and Tablet Devices 2H ’10 Introducing more than 10 key smartphones in 2H 2010 Among them, 10 has been launched HTC Aria (Liberty) HTC Hero Acer Liquid E Nokia X6 Acer beTouch E400 Android 2.1 Android 2.1 Android 2.1 S60 Android 2.1 Acer Stream Samsung iPhone 4 Google Phone Nokia C7 Android 2.1 GALAXY 580 IDEOS Sybiam3 Android 2.1 Android 2.2 4Q ’10 More smartphones to be introduced from Acer, HTC, Samsung … Tablet devices ( Apple Samsung ViewSonic ) also coming iPad GALAXY Tab ViewPad 7 P1000 14 ‘e-Book Town ’ Update Expand Content to Multiple Devices Picture Books Multimedia Books Short , Casual reading Star’s Travel Photo Book Kid’s Story Book Light Novel Coming in November Great for when Great for when you’re on the go you’re sitting down Longer reading In-depth, immersed experience Translated Fictions… Various Magazines 15 Increase Business Diversification New Content, New Services and New Authors e-Book App (Mid Oct) Rental Service (Mid-Nov) Speed-up Acquiring of Multi-media Form of Books Increase Up-takes NT RE KS EBOO More Save e-Comics (Mid Nov~) Include Japanese eComics User Generate Content (UGC) & C2C Service (Nov) Increase Content e-Catalog (Nov) Source / Traffic Increase Repeat Visits 16 ‘S Mart ’ Performance The Most Popular Chinese Android Application Store with Local Relevance and Variety of Apps Launched CMCC Mobile Market “Store in Store ” on Nov 3 ‘‘SS MartMart’’ App App DownloadsDownloads PopularPopular DownloadedDownloaded AppsApps BreakdownBreakdown 110,000 Attract 66% of non-FET users Accumulated 100,654 users download increased to 5 apps 100,000 downloaded apps 60% per month 90,000 > 462K Premium apps : Free apps = 3 : 2 80,000 46% 71,686 70,000 40% 60,000 50,000 41,557 35,807 40,000 31,097 32,935 35,231 30,828 25,573 20% 16% 30,000 24,486 14% 14% 20,000 13,518 7% 8,546 10,000 3% 0 0% 17 Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul - Aug- Sep- Entertain Game Utilities Life Social-Biz/Others 09 09 09 10 10 10 10 10 10 10 10 10 -ment (Tools) Style Network Omusic 1st JV among OP, Music Label, and SP established Omusic, JV among 5 major labels (Universal, Gold Typhoon, Linfair , HIM, Forward), one service provider (Otiga), and FET established on Sep 20, with another 4 music labels hold option for the investment Omusic will start its RBT (Ring Back Tone) service in November, exclusive to FET subscribers.