Chunghwa Telecom Remains Neutral - Analyst Blog

Our long-term recommendation for Chunghwa Telecom Co. Ltd. (CHT) is Neutral, which means the stock will perform mostly in line with the broader marker. Chwnghwa declared solid financial results for the third quarter of 2010 with net income soaring 9.5% year over year.

Chunghwa is the market leader in Taiwan for traditional voice and dial-up services, VoIP, IPTV, broadband and mobile segments. Aggressive roll-out of fiber-to-the- home and 3G wireless networks place Chunghwa ahead of its competitors.

Chunghwa is gradually expanding its subscribers' base for high-speed next-generation FTTx (fiber to the home/building/curb) offerings. Management hopes to add 10 million fiber-based subscribers to its customer base during 2010. Chunghwa is the largest broadband service provider in Taiwan with 84% market share. Broadband penetration in Taiwan is 65.6% which indicates further growth opportunity.

Chunghwa has witnessed significant subscriber growth for its mobile Internet services, thanks to the rising demand for 3G mobile broadband and smart-phones in Taiwan. Management predicts that it will be able to add 200,000 mobile Internet subscribers in 2010.

Chunghwa has started selling Apple Inc.'s (AAPL) 3G iPhone in Taiwan. In addition, the company has introduced an own-brand Android-powered smart-phone targeting the entry-level segment. Chunghwa expects to sell around 390,000 smart-phones this year, of which 240,000 will be bundled with contracts for the company's mobile phone and broadband service plans.

Chunghwa has decided to launch HSPA+ 3G services. Through HSPA+, Chunghwa will be able to offer 21 Mbps mobile broadband download speed to its customers. The company is building large-scale fiber-to-the-home (FTTH) and fiber-to-the-building (FTTB) access infrastructure and is aiming to provide both of these facilities to 75% of Taiwan's population by end 2011.

Nevertheless, the Taiwanese telecom market is quickly approaching maturity and has become extremely competitive following telecom regulatory changes. Chunghwa competes in a tough environment with Taiwan Mobile Company and Far EasTone Telecommunications Co. Ltd., the two other major service providers. We expect fierce competition going forward as the Chinese giant China Mobile Ltd. (CHL) has purchased a 12% stake in Far EasTone Telecommunications.

 
APPLE INC (AAPL): Free Stock Analysis Report
 
CHINA MOBLE-ADR (CHL): Free Stock Analysis Report
 
CHUNGHWA TELECM (CHT): Free Stock Analysis Report
 
Zacks Investment Research