Earnings Call Transcript
Chunghwa Telecom Co Ltd (CHT)
Earnings Call Transcript - CHT Q4 2020
Operator, Operator
Good afternoon, ladies and gentlemen. Welcome to Chunghwa Telecom conference call for the company's fourth quarter 2020 operating results. During the presentation, all lines will be in listen-only mode. For 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. Now I'd like to turn it over to Ms. Angela Tsai, the Director of Investor Relations. Ms. Tsai, please go ahead.
Angela Tsai, Director of Investor Relations
Thank you. This is Angela Tsai, the Director of Investor Relations for Chunghwa Telecom. Welcome to our fourth quarter 2020 results conference call. Joining me on the call today are Harrison Kuo, our President; and Vincent Chen, our Chief Financial Officer. During today's call, management will begin by providing an overview of our business during the quarter, followed by a discussion of operational and financial highlights. And then we will move on to the Q&A session. On Slide 2, please note our Safe Harbor statement. And now, I will turn the call over to President Kuo. President Kuo, please go ahead.
Harrison Kuo, President
Thank you, Angela, and hello, everyone. Welcome to our fourth quarter 2020 earnings call. Let's begin on Slide 4. In the fourth quarter of 2020, mobile competition was relatively stable, and the operators were more focused on 5G migration. We are pleased that the number of 5G sign-ups exceeded our annual target more quickly than we had expected. The iPhone 12 launch continued to push up the adoption of high-priced 5G plans. We observed that 88% of iPhone 12 subscribers choose plans of TWD 999 or above. In addition, construction of our 5G base station is ahead of schedule. By the end of 2020, we managed to establish over 4,500 base stations nationwide and expect to exceed 10,000 base stations by the end of 2021. In terms of 5G vertical application, we participated in the world's first 5G millimeter-wave enterprise private network for the semiconductor industry, which launched in Kaohsiung City during the fourth quarter, marking another milestone in our efforts to develop 5G smart manufacturing. We intend to leverage the government's 5G subsidies to substantially accelerate 5G network construction from five years to three years, which we will elaborate on later. Now I will provide key highlights from the fourth quarter of 2020. For our broadband business, we are pleased to see continued ARPU uplift as a result of an ongoing increase in higher price plan adoption. Subscriber migration to our broadband of 300 megabits per second or higher continues to increase by approximately 69% year-over-year, contributing to year-over-year broadband revenue growth for the 11 months in a row. The number of home Wi-Fi devices also increased 373% year-over-year. Now allow me to walk you through each of our business lines. Turning to Slide 5, you can see an update on our mobile services business. In the fourth quarter of 2020, we maintained our leading position in the mobile market as the subscriber market share, excluding IoT SIMs, reached 36%, and the revenue market share increased to 38.4%. We are pleased to see our post-payment mobile subscriber net adds maintained positive for four consecutive quarters, marking a whole year attributable to effective 4G subscriber retention and 5G migration, which we believe will continue to support our mobile business on a healthy trajectory. We have seen an uptake in our 5G offerings, which continued to enhance the contribution of higher price plans. Our aim is to accumulate 2 million 5G subscribers this year. We remain optimistic about our mobile performance and multi-development in 2021. Please turn to Slide 6 for an update on our broadband business in the fourth quarter. During the quarter, our broadband ARPU increased by 3% year-over-year, reflecting our success in migrating subscribers to adopt higher-speed services and other benefits from stay-at-home opportunities in the new normal. The number of subscribers that signed up for connections of 300 megabits per second or higher increased by 69% year-over-year, while VPN secure revenue contributions from enterprise customers grew as well. Thus, we are confident that we will maintain the overall upward trend in our broadband business despite the ongoing decline in the number of low-speed subscribers quarter-over-quarter. Going forward, we will focus on developing data-driven subscription enhancement, home-centric applications, and high-speed migration to expand our household and market share. Slide 7 demonstrates our MOD business performance. In the fourth quarter of 2020, our MOD/IPTV platform continued to be the largest video platform in Taiwan. Our business remained relatively resilient under the headwinds of the COVID-19 pandemic impacting major sports events and movie releases. Subscription momentum decelerated as a result; however, MOD ARPU slightly increased quarter-over-quarter as subscribers of OTT services such as Netflix continued to grow. In addition, we continue to see upsell in our tiered price channel packages and digital convergence packages. Going forward, we will continue to differentiate our products by enriching 4K content as well as AI and VR services, along with the core growth-oriented games, which have been delayed and are expected to take place in 2021. We also plan to enhance revenue by promoting core sales on the platform to further enhance ARPU. Please turn to Slide 8 for an update on our ICT business. Overall, ICT project revenue increased by 49.9% year-over-year in the fourth quarter due to revenue recognition of large government ICT projects. Our emerging ICT service revenues increased year-over-year as well. IDC revenue increased by 75.6% year-over-year due to the completion of large projects. Cloud revenue increased by 28.6% year-over-year, as we see revenue increase in both projects and international public cloud services. Cybersecurity revenue increased 23.8% year-over-year, with a significant contribution from financial-related budgets. As ICT project revenue accounted for a greater portion of our total revenue year-over-year, we will continue to enhance ICT technologies and be more selective in selecting projects to further enhance project margin and profitability. At this time, I would like to turn the call over to Vincent, who will review our financial results.
Vincent Chen, Chief Financial Officer
Thank you, President Kuo. Good afternoon, everyone. I will now discuss our fourth quarter financial results. Please turn to Slide 10, which provides highlights from our income statement. For the fourth quarter of 2020, on a year-over-year basis, total revenues increased by 7.7%, and operating costs and expenses increased by 11.3%. Income from operations increased by 5.7%, and our net income increased by 5.8%. In addition, our EBITDA margin decreased to 33.44% in the fourth quarter from 33.94% in the prior year period. Please turn to Slide 11 for a breakdown of drivers by business segment. In the fourth quarter of 2020, total revenue increased by 7.7% year-over-year, mainly due to the increase in ICT project revenue, Internet-related revenue, and handset sales revenue, which offset the decrease in revenues from voice and mobile services as a result of market competition and voice IP substitution. Moving on to Slide 12, our operating costs and expenses in the fourth quarter increased by TWD 5.1 billion, or 11.3% year-over-year, mainly due to higher ICT project costs and cost of goods sold. Slide 13 shows that cash flows from operating activities for the fourth quarter of 2020 increased by TWD 3.82 billion, or 16.2%, compared to the prior year period. This was mainly driven by an increase in accounts payable. As of December 31, 2020, the balance of cash and cash equivalents was TWD 30.44 billion, a decrease of TWD 3.61 billion, or 10.6%, relative to 2019. The decline was primarily attributable to the transaction fee payments from the 5G frequency spectrum auction. On Page 14, you may find a table that compares our financial results versus forecast. As you can see, for Q4 2020, our performance measures, including income from operations, net income, EPS, EBITDA, and EBITDA margin all exceeded our forecast. Revenue net guidance attributed to higher handset sales and ICT project revenues. Moving now to Slide 15. Please see our consolidated guidance for 2021. Looking ahead, total revenue for 2021 is expected to increase by 0.8% to 1% compared to 2020. The increase in revenue is expected to be driven by increases in mobile communications revenue, Internet, and handset sales. Operating costs and expenses for 2021 are expected to increase by between 0.4% to 0.5% as a result of the increase in the cost of goods sold and depreciation expense in 5G equivalents, as well as the amortization expense for 5G concession. Given these projections, we expect a 2.5% year-over-year decrease to a 2% year-over-year increase in EPS. Lastly, please turn to Slide 16. Our CapEx spend in 2020 was TWD 23.3 billion, which was lower than the budgeted amount of TWD 30.7 billion. In spite of the CapEx increase of 5G network construction, the actual spending decreased owing to price negotiations with vendors during the procurement and internal optimization review process, as well as changes in projects, which include some spending to be carried into 2021. For 2021, we are budgeting TWD 43.1 billion in CapEx, including spending on business forecasts in 2021, such as accelerating the construction of the 5G network, IDC, and Submarine Cable, as well as deferred items from 2020. Thank you for your time. Now we would like to hand the call over to President Kuo for highlights of our strategy in 2021.
Harrison Kuo, President
Please turn to Slide 17. Now I would like to highlight some key items as part of our 2021 development strategy. As mentioned earlier, in 2021, we will accelerate 5G network development to ensure our network speed and quality remains ahead of our peers, thereby boosting our 5G subscriber base while increasing overall mobile service revenue. For fixed broadband business, we will continue our success in fixed broadband migration to enhance fixed broadband revenue in the always broadband-connected environment. To grow the overall ICT business, we will focus on 5G enterprise private network opportunities and strengthen our partnership to develop smart applications by leveraging government incentives used to encourage regional forward-looking development. To expand new services and market share, we aim to grow ICT ecosystems by acquiring, building, and/or collaborating with industry partners, particularly in the realm of Cybersecurity, IDC, Cloud Computing, and IoT applications. To capture business opportunities from overseas partners, we will continue to invest in submarine construction as we hope to build Submarine Cable double rings in the Asia Pacific region and become the APAC region's submarine cable center. Finally, Slide 18 illustrates our awards and recognitions from the fourth quarter, highlighting our extension in brand value corporate governance and sustainability, as well as our strength in mobile, IDC, and cloud services. It’s also worth noting Chunghwa was the first operator to receive validations of Azure Expert Managed Services Provider and AWS Managed Services Provider, further demonstrating our cloud service capabilities and the potential business opportunities. Thank you for your time. Now we would like to open up the line for questions.
Operator, Operator
Thank you. Our first question is coming from Neale Anderson from HSBC. Go ahead please.
Neale Anderson, Analyst
Hi there, good afternoon. Two questions, please. The first is on the ICT business. I would like to ask when you can give details on the revenue contribution from ICT and the margin contribution. If that's not possible now, would it be possible to discuss the margin trends in this part of the business? The second question relates to the CapEx, which is obviously quite high this year due to some rollover on 5G. Can you give us some indication of how much you expect that to come down again next year? And how much is sort of one-offs? And related to that, how much do you expect to spend on millimeter wave rollout, which has been slower in other countries due to the lack of a millimeter wave ecosystem, handsets, etc.? Thank you.
Harrison Kuo, President
Okay. Thank you for your question. Our fourth quarter margin and EBITDA margin was TWD 19.89 billion, an increase of 6.1% from the same period last year, mainly due to the increase in income from operations and amortization costs. One of the reasons for the increase in income from operations is the increase in fixed broadband ARPU, which reflects our success in migrating subscribers to adopt higher-speed service. Another reason is that more large ICT projects were recognized in the fourth quarter last year, so the margin was a little bit higher than last year. And then the second question is about the CapEx.
Vincent Chen, Chief Financial Officer
Okay. If I may, let me add to the answer to the first question. So regarding the ICT margin, the margin depends on the size of the ICT project. So on average, the margin is about 15% plus in 2020. But for flagship projects, the margin will be lower. For the second question with respect to CapEx, for our CapEx, as you can see in 2021, the CapEx is expected to be TWD 43.1 billion. We believe the peak of our CapEx will be the highest in 2021, and it will turn down in the following year.
Neale Anderson, Analyst
That's great. Thank you. Do you have any comment on the millimeter wave deployment, please?
Vincent Chen, Chief Financial Officer
Okay. First off, we think 5G is a game changer for the industry. So actually, we invest quite a lot in the 5G base station. Also, we enter the Taiwanese policy to shorten our 5G base station construction from five years to three years. So we expect the CapEx of the mobile segment will continue for the next two or three years, and the amount will be quite steady.
Harrison Kuo, President
And millimeter wave 5G stations will be deployed based on private companies, so we don't disclose this number of base station numbers. Thank you.
Neale Anderson, Analyst
Thank you very much.
Operator, Operator
The next question is coming from Vanji from Bank of America. Go ahead please.
Unidentified Analyst, Analyst
Thank you for taking the question. First question, is it possible to share your total number of 5G subscribers that the company had as of the end of July 2020? And just to confirm in the presentation, you mentioned that Chunghwa intends to add another 2 million 5G customers for 2021, is that correct? That's my first question. Second question is going back to the CapEx budget, we noticed that there is a significant CapEx savings in year 2020 because you said you had a budget of TWD 30 billion; now you only spent TWD 23 billion in 2020, but at the same time, the CapEx budget jumps significantly in 2021. Could you walk us through the TWD 43 billion CapEx budget for 2021? How much of that CapEx budget access is so-called moved from 2020 to 2021, and how much is entirely so-called new projects that we have started? Also, within that, the CapEx budget for the internet jumped six times year-on-year. What are the specific projects that lead to such a big jump in terms of the CapEx allocated for the internet business? That's the second question. And then last question is actually going back to the 5G businesses; could you share with us right now or confirm that for all Tier 1 of Chunghwa's 5G customers, when they sign or when they switch from non-5G to 5G, Chunghwa is getting an auto uplift from both customers? Thank you.
Vincent Chen, Chief Financial Officer
Okay. Our total number of 5G subscribers is far beyond our annual target last year. We anticipate we will accumulate over 2 million customers at the end of this year.
Unidentified Analyst, Analyst
So the 2 million is kind of like, we expect we will have 2 million new customers this year, or we will have 2 million 5G customers by the end of this year, if I may clarify? Thank you.
Vincent Chen, Chief Financial Officer
2 million is the total accumulated number.
Unidentified Analyst, Analyst
Okay. Thank you.
Harrison Kuo, President
Thank you. For the CapEx question, actually, we did a very good job at attending to the CapEx, the equipment 5G base station. So basically, we saved a lot of money. For the amount of deferred items, I would say the number is reliable, yes, because we need to respond to the government's policy in the pandemic. So that's why some of the items are deferred to 2021.
Vincent Chen, Chief Financial Officer
And for 2021, for our mobile services, most of the CapEx is on 5G. For the internet business segment, the CapEx is mainly for the ICT, cloud services, and FTTx.
Angela Tsai, Director of Investor Relations
So basically, we're talking about the Internet CapEx. As I mentioned about it, are there any specific projects responsible for this? Of course, we are identifying some special projects. But sometimes, this is a nondisclosure kind of you know, we cannot really disclose what the most of the projects are, but we actually identified them, so we think it's highly likely to happen. So that's why we included it in the budget. I think that's the reason. And this marine cable and our internet data center, we see this kind of international opportunity how likely it will happen this year. So that's why we are budgeting a little more for this year. I think this explains the reason for that for the Internet segment.
Unidentified Analyst, Analyst
And the ARPU uplift?
Angela Tsai, Director of Investor Relations
Yes. I think we talked about your last question. Will they switch from non-5G to 5G? Of course, 90% of our customers - 5G customers come from 4G to 5G, yes, that's the situation because we are the leading mobile operator in this market.
Unidentified Analyst, Analyst
But for those customers, I guess my question is, when they switch from non-5G to 5G package, is the company getting a higher so-called monthly phone bill from those customers when they upgrade them to 5G? Or essentially, are they paying us the same amount of money even after they switch to 5G?
Angela Tsai, Director of Investor Relations
You see, from our presentation, you must notice that this year, our postpaid customers actually received the uplift of the ARPU. I think this is mainly from two sources. First of all, the 4G, the second is the 5G. The 5G is because we have managed to have 4G customers migrate to 5G, we have the uplift of the ARPU. That's one part. For 4G, we have many customers because 13 months ago, we had this Mother's Day and the civil service – that kind of package. We managed more than 90% of customer migration. We have small ARPU uplift. I think that's the major reason for that. So that's why we have a pretty good revenue ARPU uplift for postpaid customers last year.
Unidentified Analyst, Analyst
If I may just ask a small follow-up question. Also in the presentation, the company mentioned that we have decided to reduce our 5G rollout from five years to three years. Regarding our broad product, are there specific changes in terms of the operating environment that we see out there that prompted this decision for a faster rollout instead?
Angela Tsai, Director of Investor Relations
Of course, to acquire the government – the 5G, we need to accelerate the lower deployment for sure because this is a big investment. But this doesn't really change the whole situation because we would like to be the leading mobile operator in Taiwan. I think this is all - we maintain this kind of leading position either in the 5G era, so this doesn't change in terms of the operation environment. So I think that- I hope this answers your question.
Unidentified Analyst, Analyst
Thank you.
Operator, Operator
Thank you. The next question is coming from Jack Hsu, SinoPac Security. Go ahead please.
Jack Hsu, Analyst
Hi, thanks for giving me the chance to ask a question. I got three questions. My question is about – we have – thanks for the company giving us guidance about the CapEx. But I'm interested because in 2020, our CapEx achieved the achievement rate of maybe around 70% to 80%. So in 2021, we forecast the achievement rate will be almost the same as in '20 or maybe higher? And this is my first question.
Harrison Kuo, President
Okay. Thanks, Jack, for your questions. So although in 2020, the achievement rate is between 70% and 80%, actually, we have done every construction we were supposed to do. So basically, the remaining portion is basically due to the deferred items. Actually, we could save CapEx through that procurement and our bargaining ability. So that's why we did that achievement rate at 70% to 80%. So in 2020, I think we still optimized our procurement and our review process, so I cannot say whether the achievement rate will be one number this year or next year, but we will do whatever we are supposed to do to deploy our 5G construction and the submarine cable, we will do whatever we are supposed to do. Yes, thank you.
Vincent Chen, Chief Financial Officer
And one point because of some spending deferred from 2020 to 2021, it’s good that the deferred items in our total CapEx spending will move to maybe 85% to 90% of our guidelines.
Angela Tsai, Director of Investor Relations
And let me add one thing. One thing worth noting that our reporting actually is on a cash basis, not all accrued, in the presentation. So probably, it's a little bit different.
Jack Hsu, Analyst
Okay. Thank you. My second question is about the 5G base station target, because we have just mentioned that by the end of 2021, we hope to have almost 10,000 5G base stations around Taiwan. The other target will need to be at maybe almost 40,000 by the end of 2024 or 2023. But according to our plan, it seems we will be ahead of the '23 guidance. So could you give us some color about our strategy for our 5G base station deployment? Thank you.
Harrison Kuo, President
Yes. Well, we accelerated the base station construction period. As I mentioned earlier, we will accelerate from five years to three years, and we will construct more than 10,000 base stations by the end of this year. We do not disclose the total number of base stations beyond the end of this year. Thank you.
Jack Hsu, Analyst
Okay. Thank you, sir. Because I got the information from the news, and the news has - the company's guidance will - to maybe can - until 2023 maybe will cover over 90% of Taiwan. And so according to the historical data, it seems we have built over 30,000 base stations, 4G base stations around Taiwan, so we forecast that the company will have almost a similar number of 5G base stations maybe at the end of 2023? Thank you.
Harrison Kuo, President
Yes, we anticipate that after the construction of another 18,000 5G base stations, it will achieve a population coverage rate of 90%. I'm not sure if I answered your question.
Jack Hsu, Analyst
Okay. Thank you, sir. And my third question is about - I'm interested about our ARPU, especially the mobile ARPU, because the mobile ARPU at the end of last year was just around $420. But in comparison to our care plan on the web, it seems only we have three tiers, this tariff plan is below the $400. But I mean, the majority, it seems our tariff plan is about $499. And right now, we try to get our 4G customers to transfer to 5G, and we have good data now, but when we see the mobile ARPU, it seems interesting and we cannot match our campaign under the 5G subscriber growth. So can you give us some details about our mobile ARPU? Thank you.
Harrison Kuo, President
I'll answer your question about the mobile ARPU. As our postpaid mobile subscribers' net adds maintained positive for the whole year last year, we see upsell among 4G users while 5G continues to strengthen the adoption of higher-priced plans, including iPhone users. We aim to strengthen our mobile service revenue and originally expect it to bottom out in 2021. It's the first. However, in 2020, our mobile service revenue decreased year-over-year, mainly due to the decrease of international revenue resulting from COVID-19 impact starting from quarter two last year. So actually, in all this, we do expect our mobile service revenue will increase year-over-year in quarter two this year. The trend we expect is likely to continue. I'd add one point that the branded ARPU is lower because it includes IoT numbers. Thank you.
Jack Hsu, Analyst
Okay. Just one follow-up question. And so could you give us some information about the percentage of the IoT part of the mobile ARPU? Yes, because this is our growing segment in our business, and it also has confusion. So could you give us some detail about the percentage of the ARPU, I mean the IoT ARPU? Thank you.
Angela Tsai, Director of Investor Relations
Basically, I think currently in the entire market one of the - to disclose the IoT customer number, but that is the - the same from our understanding, our IoT customer number already accounted for currently like high single-digit percentage, so I think this kind of diluted our ARPU level.
Jack Hsu, Analyst
Okay. Thank you. Thank you, sir.
Operator, Operator
Thank you. The next question is coming from Amber Lee from Yuanta. Go ahead please.
Amber Lee, Analyst
Hi, two questions here. And sorry, I was on the other calls, so apologies if my questions have been asked. First one, on your profitability this year. I think it looks like EBITDA margin seems to have improved well from last year. However, the most significant improvement seems to be happening in the fourth quarter. So I'm just trying to get more ideas about how this improvement is because throughout the years, your fourth quarter has always been the most difficult quarter for telecom companies, as a whole, and yet you're guiding the highest quarterly EPS this year.
Harrison Kuo, President
Thank you for your question. Yes, our fourth quarter EBITDA and our project ratio increased by about 6.1% from the same period of 2019, mainly due to increased income from operations because of our fixed broadband revenue increase and our postpaid mobile service revenue increased year-over-year. That's the main reason for the margin increase. Thank you.
Amber Lee, Analyst
Yes. Thank you. And that was for 2020, but how about this year? Because I believe you provide a breakdown for your guidance for this year? And it looks like again, in the fourth quarter this year, you still have a very good improvement in your margin, and your quarterly EPS is the highest throughout the four quarters. So are there any specific reasons behind this profitability improvement for this year's fourth quarter?
Harrison Kuo, President
Okay. So because normally in the fourth quarter, we have more EBITDA margin because we have more completion of ICT projects, where margin is lower relative to other projects. But for 2021, we expect EBITDA margin to be higher because we'll be more selective in securing our ICT projects. So that's why we are quite confident that EBITDA margin will be higher in 2021.
Amber Lee, Analyst
I guess it was mostly due to ICT projects.
Harrison Kuo, President
You mean in 2021?
Amber Lee, Analyst
Yes, this year.
Harrison Kuo, President
Okay. And we also believe our broadband services will continue the upturn, so that will also add or raise our EBITDA margin. We believe our mobile services and our broadband services revenue will go up. Yes, that will also increase and affect our EBITDA margin and also the ICT project. We think since we are being more selective in acquiring good ICT projects with higher NPVs, so we think this is one of the main drivers for a higher EBITDA margin in 2021.
Amber Lee, Analyst
Okay. Thank you. And my second question, as a follow-up from the other analysts. For the increased CapEx in the internet sector, will we be able to see internet business sales growth reflect on such levels of investment growth? And since you talked about the CapEx to support some potential business opportunities, have the business opportunities been budgeted to your guidance for this year?
Harrison Kuo, President
Okay. We think the CapEx for our Internet segment, as I just mentioned before, is mainly from IDC and FTTx. The first one, IDC business, because we know to tighten cash, so I think this is a good opportunity and we also see large customers coming from overseas to use our IDC services. We still believe the investment in this area is very promising. Secondly, because of the pandemic, there's a boom in the whole economy. And that's why we think the investment in FTTx will also pay off. In fact, we expect to see some improvements, and there will be a rise in our revenue from these areas.
Amber Lee, Analyst
Okay. Very helpful. So all the opportunities that you've seen have been budgeted through your guidance, revenue guidance for this year? Is it?
Harrison Kuo, President
Okay. For our revenue forecast, as you can see, we expect there will be like a 1% growth or so because we believe that our mobile service and internet services will go up. We also think that the sale of handsets will increase. Yes, that's why we think the revenue will be a little bit better than last year. I hope I answered your question.
Amber Lee, Analyst
Okay. Very helpful. Thank you so much.
Operator, Operator
Thank you. Our next question is coming from Jack Hsu, SinoPac Securities. Go ahead please.
Jack Hsu, Analyst
Thank you for giving me another chance to ask a question. One question is about we have the project with the construction company means Tinker. And it seems we have - the construction finished their work in India, so could you give us some details about the profit in our income segment in the fourth quarter in 2020? Thank you.
Vincent Chen, Chief Financial Officer
For this open development project, actually, the profit is about TWD 1.26 billion.
Jack Hsu, Analyst
Okay. So good. Just one follow-up question. So will there be another this kind of income? Will happen in 2021? Thank you.
Vincent Chen, Chief Financial Officer
Yes.
Jack Hsu, Analyst
Sorry, sir? Excuse me?
Vincent Chen, Chief Financial Officer
Okay. So for the rental income, right?
Jack Hsu, Analyst
Yes, yes.
Vincent Chen, Chief Financial Officer
You mean the Indian project?
Jack Hsu, Analyst
Yes, I mean, will there be another gain like this in 2021 or we should not put too much expectation on this item for 2021?
Vincent Chen, Chief Financial Officer
So at this point, we cannot give any details for this question.
Jack Hsu, Analyst
Okay. Thank you, sir. It’s very helpful.
Operator, Operator
Thank you. The next question is coming from Billy Lee with Credit Suisse. Go ahead please.
Billy Lee, Analyst
Thank you, management, for the opportunity. I have got a few quick questions. The first question is, could you help us understand your EBITDA outperformance relative to your guidance, while your revenue is actually below your guidance. So what was the area of cost saving that you did in 2020? That's the first question. And the second question is regarding ICT growth. Obviously, in 2020, it was a big growth relative to last year, could you help us understand the visibility of ICT growth going into 2021? And last question is around CapEx. For CapEx, earlier you talked about the entire 5G cycle being shortened from five years to three years. Does that imply that the CapEx intensity beyond 2021, i.e. 2022 and 2023 will be high as elevated as 2021 as well? Thank you.
Harrison Kuo, President
Yes. As I mentioned earlier, our fourth quarter EBITDA was an increase of about 6.1% from the same period of 2019, mainly due to the increase in our core business, and that means from our fixed broadband revenue increase, and our postpaid mobile service revenue increased year-over-year. That's the main reason for our profit ratio increase. Our ICT growth in 2020, because we recognized a large project in the fourth quarter last year, the ICT revenue, it will be a decrease a bit less than this year. But we anticipate that the ICT profit will increase year-over-year because we were more selective in the ICT projects, as Vincent mentioned earlier.
Billy Lee, Analyst
Great. Thank you.
Operator, Operator
Thank you. The next question is coming from Sara Wang from Morgan Stanley. Go ahead please.
Sara Wang, Analyst
Thank you. So I have two questions. The first is still on the ICT. Could you please give us some examples on, say, some major projects that we like or any - what kind of clients are involving ICT projects? And also on the ICT projects, do we have roughly how much percent, say revenue or profit that ICT projects contribute? Then the second question is about the CapEx. So we try to accelerate 5G rollout in 2021, what kind of metrics do we see that is either revenue opportunity or the adoption rate is better than expected to justify this acceleration of the overall 5G rollout plan? Thank you.
Vincent Chen, Chief Financial Officer
Okay. For the first question regarding ICT project, in 2020, the revenue from ICT accounts for about 13% of our total revenue on our consolidated income statement. So for example, the large projects they are like something that's adding to that guide and also the solar energy projects in Zhongshan. Yes. So I hope I answered your question.
Sara Wang, Analyst
Okay.
Vincent Chen, Chief Financial Officer
I add one point that we anticipate that as soon as we deploy our base station, there will be more customers to use the 5G services. That's why we want to accelerate the CapEx spending on our 5G base station deployment. Secondly, as a result of the government 5G subsidies, that will help us accelerate the construction. The third one is we want to focus on the new applications of the 5G services. We want to team up with our partners from various verticals to develop 5G services via B2B business model, focusing on areas including smart manufacturing, smart transportation, smart agriculture, smart healthcare, and autonomous driving, etc. These applications will be applied across different verticals. We want to deploy these new applications as soon as possible. That will be healthy for our telecom industry and Taiwan's economy.
Sara Wang, Analyst
Okay, got it. Thank you.
Operator, Operator
Thank you. The next question is coming from Kaz Soma from Fidelity. Go ahead please.
Kazuyuki Soma, Analyst
Hello. Can you hear me okay?
Operator, Operator
Yes, go ahead please.
Kazuyuki Soma, Analyst
Hello? Oh, thanks for the opportunity. Just quickly two questions. I'm still struggling to understand why you are projecting higher EBITDA margin. You previously mentioned this is driven by ICT projects, right? But ICT project margins should be lower, the margin should be lower than your core telecom business. Why is it right tend why can't it be the reason for higher margin? Or is it actually driven by further cost cutting? Could you clarify that point? That's my first question.
Angela Tsai, Director of Investor Relations
I think in the last year, we had several government projects, which were large projects that accounted for a larger revenue portion, which has a lower margin compared with the overall ICT projects. This year, we don't have this kind of project, much less, so the margin will be higher.
Kazuyuki Soma, Analyst
Okay. That's clear. Thank you. And then the second question is, based on your guidance, I guess you're projecting depreciation and amortization expenses to rise by about 5% year-over-year, despite a large increase in CapEx, right? Could you help me understand why? Did you change the depreciation method, or is any of the government subsidies you could potentially get actually factored into your projection? Thank you.
Vincent Chen, Chief Financial Officer
Yes, we don't change our depreciation policy. And for the D&A expenses, for 5G deployment, we only started in July last year, so it's only for half of the year.
Kazuyuki Soma, Analyst
Yes, but my simple question is, your CapEx is projected to increase dramatically year-over-year. Also, in terms of the amortization of spectrum, you only recognized it for the latter half of that year, I mean, for six months versus this year, you'll have to recognize it for the entire year. But what you're saying is it will result in a near 5% increase in depreciation and amortization expenses without changing any of your accounting standards?
Angela Tsai, Director of Investor Relations
For CapEx, probably yes. But for the inspection, the amortization is not right. Amortization actually happened because we launched a service by June 30. So it only happened for half a year. So amortization expenses only account for half a year; we will forecast this for the whole year. But for CapEx, I think we already explained that we are going to accelerate the CapEx spending to deploy the 5G network spending. So that's the reason we want you to know. First of all, we want to acquire government 5G subsidy, and we want to seize the opportunity for 5G.
Kazuyuki Soma, Analyst
Thank you.
Operator, Operator
Thank you. Ladies and gentlemen, if there are no further questions, I will turn it back over to President Kuo. Go ahead, please.
Harrison Kuo, President
Thank you for your participation. Happy Chinese New Year. Bye-bye.
Operator, Operator
Thank you. Thank you for attending the call. 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. Goodbye.