Operator
good afternoon ladies and gentlemen welcome to junghua telecom conference call for the company's fourth quarter 2025 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 q a session and for your information this conference call is now being broadcasted live over the internet. A webcast replay will be available within an hour after the conference is finished. Please visit CHT IR website at www.cht.com.tw.ir under the IR calendar section. And now I would like to send the quote over to Ms. Angela Tsai, Vice President of Financial Department. Thank you. Ms. Cai, please begin.
Thank you. I'm Angela Cai, Vice President of Finance at Zhonghua Telecom. Welcome to our First Quarter 2025 Earnings Reconference Call. Joining me on the call today are Chonghua's President Yong Xilin and our Chief Financial Officer Al-Zhi Shi. During today's call, management will begin by sharing our recent strategic achievements, and providing an overview of our fourth quarter business results. This will be followed by a discussion of our segment performance and financial highlights. We will then open the floor for questions and answers. Please turn to slide two to review our disclaimers and forward-looking statements, disclosures. Now, without further delay, I will turn the call over to our president. President Lin, please go ahead.
Thank you, Angela, and hello, everyone. Welcome to our fourth quarter 2025 results conference call. To begin, I am pleased to report our exceptional financial performance for 2025 driven by our dedicated efforts. Zhongha Pelican's revenue, operating income, income before tax, and EPS for 2025 all exceeded the upper end of our guidance, reflecting our strong discussion and the market leading position. On the revenue front, our full-year revenue reached an all-time high, demonstrating our continued focus on strengthen our core businesses and the active expansion in the ICT sector. Notably, our full-year EPS of NT 4.99 marked an eight-year high, extending our annual growth momentum for the sixth consecutive year. This milestone underscores our commitment to driving innovation and enhancing long-term shareholders' value. Based on the strong auto performance in 2025, we are entering 2026 with confidence for our telecom businesses. Our mobile market remains stable and favorable to us as the market leader. We are also pleased with our fixed broadband performance and will extend the successful existing strategy for further our pool enhancement. In terms of ICT business, our technology capability will continue to remain cutting edge to support future growth. A particular highlight is our satellite opportunities as we believe demand of satellite services as the communication backup solution satellite operation in 2025. The Chinese satellite will join in second half of 2026 to enhance our multi-layer satellite capability. Furthermore, we will also focus on extending pre-6G related opportunities in AIoT, satellite and big data services and expect their combined revenue to surpass the $10 billion in 2026. In particular, we expect to integrate AI into their operational processes, legal compliance, and infrastructure management. In addition, as a leader in AI drive connectivity, we are introducing AI edge computing into our AIDC to create a new revenue. We are honored with multiple awards, recognizing both our ESG accomplishments and the technical Acknowledgement for our small company, most trustworthy companies, 2025 in Taiwan mobile market, Taiwan's mobile market for 2025 with record highs. Across all dimensions, according to data from our telecom regulator, our mobile revenue market share climbed to unprecedented 41 percent while our subscriber market share rose to 39.7 percent mainly driven by continued growth in the postpaid subscriber we are pleased with this strong result our 5g performance was equally impressive based on regulators data our 5g subscriber market share increased to 39.2%, further solidified our industry-leading position. The 5G penetration rate among our smartphone users climbed to 46.4% by the end of 2025, while the average monthly fee uplift from 5G migration remained robust at 41 percent. Given this solid momentum, we were especially encouraged by our strong mobile service revenue growth in the fourth quarter, which achieved a recent record high of 4.7 percent year over Post-pair pool also grew 3.6 percent year over year. We expect this positive trajectory to continue, supported by Taiwan's favorable mobile market landscape. Let's move on to slide 6 for our fixed broadband business update. In the fourth quarter, our fixed broadband is upward trajectory 19. This 3.8% increase in revenue and 0.5% increase in subscribers year-over-year. This strong result was driven by our high-speed upgrade promotion and MLT bundle packages, which successfully boosted customer adoption of higher-key plans. Subscribers' choosing speed of 3Gbps and above grew by 13% year-over-year, while those opting for 500Mbps and above recorded double-digit growth, and the subscription for 1Gbps and above doubled in the fourth quarter, provided a detailed overview of the highlights from our consumer application services. In the fourth quarter, mobile fixed broadband and Wi-Fi services increased by 17% year-over-year, marching the 16th consecutive quarter of expansion and representing. In 2025, despite the absence of major global voting event broadcasting, resulting in overall subscription loss, our Hami video service demonstrated that solid resilience as is our pool increased by more than 25% year over year in the fourth quarter. Looking ahead with the launch of Disney Plus, Bungo this January, and our ongoing partnership with Netflix coupled with the exciting pipeline of popular sporting events such as the FIFA World Cup, Asia Games, and etc. We expect to drive further revenue growth throughout the 2026. Meanwhile, our consumer cybersecurity subscription recorded at 11%. Year-over-year growth, with revenue also achieving double-digit gains, contributing to the steady growth for For our consumer business, slide A illustrated the key development in our enterprise ICT business declined by due to a higher comparison base in the same period of last year. Below, our full year ICT revenue still recorded robust year-over-year growth. Meanwhile, our recurring ICT revenue grew 15 supported by increases across all major service line, particularly contributions of AIoT, IDC, and international public cloud services. Looking at the specific service categories, revenue from IDC, big data, and the 5G private network, 19%, 3%, and 88% year-over-year, respectively, IDC performance benefited primarily productivity from project completion in Mexico, while big data service revenue increased driven by its recurring revenue growth, revenue from 5.2 private network surged, supported by the project revenue recognition from both public and private sector customers. However, revenue from cloud and AIDC business declined by 16% and 27% year-over-year, respectively, due to a high base last year. Our cybersecurity services revenue also decreased by 16% year-over-year as the majority of our cybersecurity revenue for 2025 had already been recognized in three quarters. Notably, despite both cloud service and cybersecurity business still deliver full-year revenue growth. We are also proud to share an AI customer service solution to build the first-term integrated AI customer services system for a leading financial institution in Taiwan. Furthermore, we secure a flagship integration project to the infrastructure, in addition to further leverage our C-LAN network deployment for satellite business scale, I incorporated our satellite services as part of the government's contract framework, taking the way for more long-term service contracts from government agencies, brought us five additional new projects in the fourth quarter, with a total contract value nearing NP-150 million. We expect to further replicate and scale this success in the coming year, illustrated the performance of international subsidiaries 7% year-over-year, mainly due to sovereign demand for voice services as well as higher comparison bets in the United States at the Japan ICT market last year. However, we were glad to see a 12% year-over-year loss in multiple planned construction projects in Singapore and Thailand, a trend that we expect to continue through 2026. Notably, our Malaysia subsidiary commenced operations in December 2025, aiming to provide the more timely, high-efficient ICT integration services for Taiwanese and multinational enterprise in the growing Southeast Asia market. Look ahead of 2026, we maintain a relatively good development as we have secured in the United States in our pipeline in Texas and California, which is expected to significantly can be boosted our U.S. market performance in 2026. We move on to page 10 for the financial performance of our three business groups. In the fourth quarter, our CVG delivered a robust 6% year-over-year revenue growth supported by steady and fixed broadband services driven by the iPhone demand. However, its income before tax slightly decreased, mainly dragged by the final phase of the of 3G telecom equipment impairment, which has fully recognized in the fourth quarter and a higher comparison base, 9%, as most of our major ICT projects have already been resulting in ICT revenue. Income before tax was also in-time impairment mentioned earlier. Encouragingly, EBG mobile and fixed broadband services as well as its satellite services still deliver solid growth momentum this quarter. As for our IBG business, revenue grew by 2.5% and income before tax increased by 1.8% year year-over-year, driven by rising demand for the international IDG services and the stronger roaming revenue. Furthermore, we are pleased to report that our summary cable SDG2 and the first phase of SDG2 and further boosted IDG's revenue by 2.2% year-over-year. Now I would like to hand the call over to Audrey for initial updates.
Thank you, President. Good afternoon, everyone, and thank you for joining us today. I'm pleased to work you through of our financial performance for the fourth quarter and full year of 2025 and share our financial guidance for 2026. So now please turn to slide 12 for our income statement highlights. Let's start with our fourth quarter results shown in the first three columns on the slide. Revenue and operations. We reported consolidated revenue of NT$ 65.65 billion. This represents a year-over-year increase and makes our highest fourth quarter revenue in nearly a decade. This growth was fueled by strong mobile device sales alongside the sustained momentum of our core telecom service. Income from operations decreased by 2.2 percent, this was primarily due to one of impairment losses from the 3G network sunset this quarter, coupled with a high comparative base from last year's investment property valuation gains. Income before tax increased by 2.1% year-over-year. This growth was driven by investment disposal gains reflected in our non-operating income. As a result of this performance, EPS increased from NT 1.16 to NT 1.20. This reflects our consistent profitability and marks the highest fourth quarter EPS in 10 years. Finally, EBITDA for the quarter remains stable at NT$21.55 billion. The EBITDA margin stood at 32.82%. So now let's expand our view to the full year of 2025, shown in the last three columns. The annual view reflects a strong growth trajectory. So for the full year, total revenue reached NT$236.11 billion, a solid increase of 2.7% compared to 2024. The growth was broad-based and driven by three pillars. First, we saw strong momentum in our sales revenue, higher mobile handset volumes, and and the robust performance of our subsidiary John Hwa Precision Test in the semiconductor testing sector. Second, our ICT portfolio continue to deliver with significant contribution from high growth areas such as IDC, cloud, and cybersecurity. Third, we maintain steady growth across our foundational mobile service and fixed broadband business. So, this top-line strength translated directly into profitability. Income from operations grew by 3.6% and net income rose by 4% year-over-year. Consequently, full-year EPS reached NT 4.99 up from NT 4.8 last year. EBITDA also grew 2.6% year-over-year to a strong $88.77 billion. Our EBITDA margin remains stable at 37.6%, broadly consistent with the prior year. So in summary, these results reflect high-quality earnings growth. This profit expansion was driven by a sustained positive momentum in our core telecom business, complemented by the continued scaling of our IDC, cloud service, and other ICT business So now let's turn to slide 13, balance sheet highlights. So total assets increased by 0.4% year-over-year. The growth reflects strategic allocation into long-term investments and prepayments for satellite infrastructure reporting in other assets. The increase was partially observed by a net decrease in property, plant and equipment as depreciation charge exceeded new capital additions, along with a net decrease in intangible assets due to the 4G and 5G spectrum amortization. On the liability side, total obligation decreased by 0.7%. We repay older loans while successfully issuing our first-ever sustainability fund focused on biodiversity. The strategy not only strengthens our capital structure and reinforce our leadership in ESG-driven financing. Our financial help is best illustrated by our key ratios. Our debt ratio improves further to 25.25 percent. Our current ratio remains healthy, well above 100 percent. Most notably, our net debt to EBITDA ratio stood at zero. Moving to slide 14 for our cash flow summary, we will review our performance for the four year 2025. Cash flow flow from operating activities decreased slightly by 2.2 percent. The variation was primarily driven by working capital dynamics, specifically a decrease in accounts payable between 25 and 24. On the investment front, capex declines by 3.7 percent to NT27.7 billion. First, regarding mobile TAPEX, spending decreased by NT$1.4 billion. The reduction aligns with our roadmap to lower mobile capital intensity now that we have passed the peak of the 5G deployment cycle. Second, regarding non-mobile TAPEX, spending increased by 2 percent. The increase was mainly driven by strategic investment in submarine cables. Consequently, free cash flow stood at $49.8 billion, a marginal decrease of 1.4% year over year. Despite this slight variation, we continue to maintain a strong cash position. Our stable cash flow inflows remain fully capable of supporting both our business growth initiatives and our commitment to shareholder returns to slide 15 to review our performance highlights against guidance. So, in the fourth quarter of 2025, revenue exceeds the target showing stronger than expected demand. Key performance measures such as net income and EPS were all in line with our forecast. For the full year 2025, the cumulative results validate our strategy. We are very proud to report that all major metrics, revenue, income from operations, net income, EPS, and EBITDA, either met or exited our full year guidance. Again, this broad-based success was powered by our telecom business, driven by a successful 5G migration and mobile service revenue growth alongside our ICT business, which capitals are expanding demand for IDC and cloud big data overseas markets. So now moving on to slide 16, please see our guidance for 2026. Looking ahead, total revenue for 2026 is expected to increase between 2.5% to 3.2% year-over-year, primarily driven by growth momentum in our core business, where receive 5G service and speed upgrade promotion packages for fixed broadband are expected to continuously enhance our subscriber numbers and our pool. ICT business is also expected to contribute to revenue growth as we continue to see digital transformation opportunities in the market. Operating costs and expenses are expected to increase between 3.5% to 3.7% year-over investment in talent and infrastructure that support future business developments in both core and emerging business. So given these projections, we expect our EPS to be in the range of NT 4.82 and NT 5.02. As for capital budgeting, we have budgeted NT 31.91 billion for 2026. Looking ahead, our strategy remains consistent with our long-term roadmap, balancing discipline efficiency with strategic expansion into resilient and sustainable infrastructure. Our mobile-related CAPEX is expected to decrease by 6.3% year-over-year. This marks the fifth consecutive year of this decline since our peak in 2021. This demonstrates our ability to maintain our mobile leadership through capital efficiency as we move past the heavy 5G construction phase. Non-mobile-related capex is expected to increase by 24%. The investment is strictly aligned with our sea, land, sky strategy to capture emerging business opportunities while fortifying our network. Key investments include expanding submarine cables to boost connectability alongside building our IDC data center. We also strengthen infrastructure resilience by upgrading power, cooling, and cybersecurity systems. We are turning digital resilience into a unique competitive advantage. So, this concludes our financial resource highlights. Thank you for your attention. At this time, we would like to open the conference call for questions.
Operator
Yes, thank you. Ladies and gentlemen, we are now in Q&A session. If you have any questions for any of the today's speakers, please press star key and 1 on your telephone key tab to answer the queue. After you are announced, please ask your questions. If you would like to cancel your questions, please press star key and 2. You are also welcome to send questions via chat box on the webcast page. we will begin with the questions from telephone line first and then move to queries from the webcast page thank you for participants online on telephone line if you would like to ask questions please press star key and one thank you as a reminder we are in q a session right now if you would like to ask questions please press star key and one on your telephone keypad thank Please press star key and one on your telephone keypad if you would like to ask for them. Now the first one to ask questions, correct me if I pronounced wrongly. Rajesh Panjawani from JPMorgan, go ahead please.
Thank you very much. A quick question on the CAPEX. If you can give some more detail about the big increase in the non-mobile CAPEX, which is almost 24% for 2026. And also, can you provide some more details about, you know, you're looking at like almost 3.5% to 4% increase in the operating costs, which is higher than the revenue growth as well. So, can you talk a bit about that as well?
Okay. Thank you. Thank you very much, Racha. So, the first question is about CAPACS, about more detail on mobile CAPACS, about 24% increase in 2026. So there are a couple of categories as I just mentioned. This includes the fixed-line maintenance, which consists of quite a big proportion of the fixed-line maintenance. The second is about the satellite and also the cables. And the third one is the IDC. I should say that the increase mainly is coming from the IDC and also the satellite portion. So this is for the second part about the increase, about 3.5% of procreating costs. I think that one of the main – there are two main portions. One – a couple of the reasons is that one is the human resource, the talent. I think that, as you know, that we are in emerging – in growing – we have a lot of the sectors in IDC, we need a lot of the AI-related talent, so investment in the human resources is one important area. And the second is that electricity. I think that we are not so sure about the electricity policy in Taiwan, so we build This is also a second big area that takes our ... The third one is about depreciation. In the early stage, we have ... Although that we try to train down a lot of the capex in recent years, as I mentioned, that discipline management is a key velocity in our capex But in the early stage that we still have some TAPEs so you will see as you see in our cash flow statements, you will see that the depreciation and also the amortization, these two portions is much higher than the net increase of our TAPEs of the PPE.
If you can share like of the total increase in non-mobile capex, how much is from IDC?
Actually, we didn't separately disclose the exact number of the capex budget for each non-mobile item. But you know, I can share with you that I think the capex for IDC and cloud, you know, it's It remains the, I mean, like the second largest part of the non-mobile CAPEX for 2026, okay? And then I want to add some, one more point for the mobile CAPEX. As we know that the 5G CAPEX investments, we had just, you know, passed the peak, right? But for 2026, actually, we were investing as a standalone related applications like the network slicing for your reference. But the total mobile capex for 2026 actually still less than that of the 2025.
I got it. This is helpful. It would really be helpful if going forward you can provide greater breakup of non-mobile capex because you know it's almost like more than three-fourth of your capex is now non-mobile capex so it would be really helpful to get you know more details about that in the future thank you okay thank you for your uh opinion
Operator
a reminder please press star key and one on your telephone keypad if you would like to ask questions thank you there seems to be no further questions
Operator
at this moment i will turn it over to president lynn please go ahead please okay thank you very much for your participation yeah happy new year yes thank you president lynn and ladies and gentlemen we thank you for your participation in junghua telecoms conference there will be a webcast replay within an hour please visit the CHT IR website at www.cht.com.tw.ir under the IR calendar section. You may now disconnect. Thank you again and goodbye.
