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Chunghwa Telecom Co., Ltd (NYSE:CHT)

Q3 2012 Earnings Call

October 26, 2012 5:00 AM ET

Executives

Fu-Fu Shen – Director, IR

Shyue-Ching Lu – President and CEO

Shu Yeh – CFO

Analysts

Chate Benchavitvilai – Credit Suisse

Steven Liu – Standard Chartered Bank

Joseph Quinn – Macquarie

Gary Yu – Morgan Stanley

Sydney Zhang – Bank of America

Piyush Mubayi – Goldman Sachs

Operator

Good evening, ladies and gentlemen, welcome to Chunghwa Telecom Conference Call for company’s Q3 2012 Operating Results. During the presentation, all lines will be on listen-only mode. When the briefing is finished, direction for submitting your questions will be given in the question-and-question session. For your information, this conference call is now being broadcasted live over the Internet. Webcast replay will be available within an hour after conference call is finished. Please visit www.cht.com.tw/ir under the In Focus section.

Now, I would like to turn it over to Fu-Fu Shen, the Director of Investor Relations. Thank you. Ms. Shen, please go ahead.

Fu-Fu Shen

Thank you. This is Fu-Fu Shen, the Investor Relations Director of Chunghwa Telecom. Welcome to our third quarter 2012 results conference call. Joining me on the call today are Dr. Lu, Chairman and Dr. Yeh, CFO.

During today’s call, management will first discuss business, operational and the financial highlights then followed by Q&A. On slide number two, please note our Safe Harbor statement.

Now, I would like to turn the call over to Chairman Lu.

Shyue-Ching Lu

Thank you, Fu-Fu. Hello, everyone. This is Shyue-Ching Lu, Chairman of Chunghwa Telecom. Thank you all for joining our third quarter 2012 earnings results conference call. Before getting into our business overview on slide number 4, I’m going to share with you that according to the recent third-party customer surveys, our broadband and MOD services continue to be extremely well received and high rate (inaudible) by our customers. The Global View Magazine found that our fiber access service enjoyed the high-risk customer satisfaction rating among other various broadband access technologies including ADSL, cable modem and data cards.

Since Chunghwa provides the most comprehensive fiber access services in Taiwan, we believe that we are well-positioned to capitalize on-growing customer demand for such high quality entertainment options. Additionally, in a recent survey, by the Taiwan Digital Convergence Development Association show that customers regard Chunghwa’s IPTV services as more superior than our competitors’ cable TV in terms of picture quality, channel selection as well as overall general service satisfaction.

In fact approximately 94% of the respondents said that they were impressed by Chunghwa’s MOD broadcast of the Olympic Games this summer, which has led to greater interest from the advertising customers. We are encouraged by these great results which clearly demonstrated the value of our customer plan in Chunghwa’s diversified and innovative services. We will continue to offer innovative and high quality services to meet the needs of our customers in today’s evolving digital and mobile world.

Now let’s go through our businesses, please refer to slide number 6 for our mobile business. We continue to maintain our leadership by providing fast, reliable and a seamless wireless access, and at the same time a greater customer service experience for our customers. We also continue attracting new customers with our price-competitive mobile frames by leveraging our customer base through attractive data plan upgrades. Our smartphone adoption expectations remain on track. For the third quarter of 2012, smartphone accounted for 67% of all new handset sales. As a percentage of postpaid subscribers, smartphone penetration increased to 35.3% at the end of the third quarter. By year-end, we expect this rate to approach 39%.

In addition, we continue the expansion and the transformation of many of our retail stores, but at the same time, expanding open hours in our high traffic locations to better service our customers. During the third quarter, we added 30 service stores, bringing our accumulated total to 605 service centers and stores island-wide.

Moving on to slide number 7, mobile Internet service revenue continues its strong growth momentum in the third quarter 2012 with over 51.5% year-over-year growth. We believe that this trend remains sustainable as we continue to see the strong adoption of smartphones and other mobile Internet devices. We continue to roll out new promotional campaigns targeting new and existing customers began offering a new promotional plan that provides subscribers favorable voice tariffs with mobile Internet service built on this competitive offering in the market with the deal, this continue to be well received by customers on our preliminary results.

Slide number 8 shows the results for our broadband businesses. Attracting new customers when migrating existing broadband customers to higher speed service continues to be our key strategy in the forecast.

Our competition in cable market is becoming more intense. We believe that the higher part of it, we offer through our competitively priced fiber and ADSL connections. We will continue to attract new subscribers helping strengthen our leadership.

Broadband ARPU remained stable at NT$704 in the third quarter. We’re also happy to see more subscribers signing up for higher speed connections which would contribute to incremental ARPU growth over the (inaudible).

As of the end of September, subscribers signing up for 15 megabits per second connections reached 8,801 – I’m sorry, 818,000 subscribers signing up for 15 megabits connections which 818,000 of more subscribers migrate to higher speed services going forward. We expect broadband ARPU will continue to grow moderately as well.

On slide number 9, ARPU for MOD increased by over 8% to NT$147 in the third quarter from NT$136 in the second quarter. This increase was attributable to the higher package subscriptions and advertising revenue during the London Olympic Games. We expect advertising revenue to more than double in the second half of 2012 as compared to the first half based upon the strong leadership that advertisers experienced during the London Olympic Games.

In addition, we will continue to enhance the new platform’s interactive capabilities and offer interactive programs, advertising and applications to subscribers in order to not only enhance users’ overall enjoyment but also to create new opportunities for advertisers.

On slide number 10, our ICT and the cloud computing businesses are growing in importance as revenue come to (inaudible) for Chunghwa Telecom. As customer demand increases, we bring to scale with it and that we are progressing a trend. In addition to CaaS, SaaS and the PaaS, we continue to offer innovative cloud services to our retailer and the corporate customers since 2009 and leveraging our past experience with many government projects started operating ICT services to a wider variety of corporate customers.

Current example of projects include intelligence strict monitoring systems for local governments, government taxation in government systems, logistics management and smart residential buildings.

Recently, we have owned major contracts for projects such as motor vehicle registration and optimization system, cropping the cloud platform and many others. In addition, many of these major projects will allow us to continue generating stable revenue from ongoing maintenance services once completed.

We believe that more time will be needed to further stimulate user demand and trust for cloud services. But as demand slowly gaining traction and market acceptance, we will be well positioned to penetrate directly with our wide range of services.

On slide number 12 for the regulatory updates. As you are all aware, the Executive Yuan returned the draft for the Telecom Act amendment to the NCC for reconsideration. We would like to see the amendment of Telecom Act to be considered as part of the digital convergence digitization along with the three forecasting-related regulations in order to facilitate across business operations. In doing so, we believe this would further provide the proper legal framework necessary to help further advance this relative industry’s future development as the media consumption habits in today’s society continue rapidly evolving.

Additionally, the NCC announced the draft amendment for the regulation governing network interconnection among telecom enterprises in September this year, which is meant to create a standard practice for IP peering. Commentary in this new regulation’s preliminary form would be required to provide free IP peering to other ISPs with certain requirements.

In late September, we provided our appearance to the NCC. So, this (inaudible) revoke the threat because it does not conform to internationally accepted practices, which ultimately like regulation under previous negotiation among ISPs. As a matter of fact, we haven’t seen any case in any market where its government authority has imposed such regulation on IP peering.

Now, I would like to turn to Dr. Yeh for our financial overview.

Shu Yeh

Thank you, Chairman Lu, and good day, everyone. Thanks for joining us today. I will review our financial results in detail, beginning with slide number 14.

On slide number 14, our income statement highlights. While total revenue for the third quarter was 2.1% lower year over year, operating cost and the expenses reported at 1.1% increased year over year. As a result, income from operations and the net income decreased by 12.8% and 14.6%, respectively.

Please refer to slide number 15 for our business segment revenues. While the mobile VAS and the handset sales revenue from the company’s subsidiary, Senao, continued their strong growth momentum during the quarter, total net revenue decreased. This decrease was primarily attributable to several declining factors, including mobile voice revenue attributable to Chunghwa’s market competition and the NCC’s tariff reduction.

Revenue recognized under domestic fixed and the Internet segment from the government taxation information systems project which is near completion. Domestic service revenue due to mobile substitution, as well as domestic long distance broadband and ISP revenue due to tariff cuts.

Slide number 16 shows the breakdown of operating cost and the expenses. The operating cost in expenses increased in the third quarter was mainly from the cost of handset sold from our subsidiary Senao and the pension cost of NT$500 million due to an early retirement program offered during the third quarter. In line with our strategy, maintenance, material, rental and the depreciation expenses increased in order to support our broadband and the mobile Internet service is out.

As shown on slide number 17, cash flow from operating activity decreased to NT$15.8 billion during the third quarter. This was mainly due to the decline in income from operation. We maintain a strong cash position with cash and the cash equivalents amounting to NT$38.8 billion as of September 30 this year.

Meanwhile, the EBITDA margin decrease was primarily due to tariff cuts and the higher handset sales from our subsidiaries – of which the EBITDA margin is relatively lower than our traditional telecom service. The EBITDA margin decrease for the parent company was less than 1 percentage point.

Slide number 18 show our 2012 and consolidated forecast and the results of our third quarter this year operation. Although we continue to experience regulatory pressure and the market competition, we are pleased that our results for the first nine months of this year were in line with our earlier guidance. With the changing telecom landscape and the fierce market competition, we will continue to focus on stabilizing our business and that we will maintain our full-year guidance which has been factoring the impact of iPhone 5. However, the EBITDA margin maybe slightly lower because we revised up the estimate handset sales in the fourth quarter.

As stated in our earlier guidance, we moderately increased our capital expenditure budget for 2012 with a forecast on fixed and the mobile broadband construction. The execution rate for the first nine month is at 68%. We expect the year-end execution rate will reach more than 90% which is higher than that of last year.

With increased CapEx devoted to the (inaudible) mentioned the two area, we definitely improve our customer experience and the satisfaction and that we will further facilitate the customer migration to high-speed fiber solutions and enhance the quality of our mobile network. We will review our CapEx budget and the execution on a regular basis, focusing on making a more cost-effective spending decision possible.

Lastly, recently our property subsidiary, Light Era, acquire land from a private party in Taoyuan, which is located near high-speed rail station. This property will be used to develop smart residential buildings. We will plan to deploy state-of-the-art technologies and the services including fiber broadband, ICT services, energy-saving technology and remote surveillance service technology to these properties.

Thank you for your attention. And now we would like to open up for question.

Question-and-Answer Session

Operator

We would now begin our question-and-answer session. (Operator Instructions) Your first question is Chate Ben from Credit Suisse. Please go ahead.

Chate Benchavitvilai – Credit Suisse

Hi. Good afternoon and thank you very much for the presentation and the opportunity to ask a question. I have, in total, three major question. The first one is related to your broadband and IPTV subscriber target for the year. I understand that looking at full year and the run rate over the past nine months, it seems like you are expecting a significant increase in net additions for both broadband and IPTV subscribers into the fourth quarter. Would you be able to elaborate for us how would you would be able to achieve that? What would drive an acceleration in net add in the fourth quarter?

The second question is related to the IPTV revenues. What is your IPTV revenue contribution right now and how much of that is coming from advertising?

And the third question is related to the CapEx budget. I understand that it’s still very early right now, but would you be able to provide some color on how your CapEx budget for FY 2013 might look like compared to this year? Thank you very much.

Shyue-Ching Lu

The target number of customers on our IPTV, we had revised during previous conferences call. Our net add for this year, towards end of the year would be 250,000. It’s still off 0.5 million we projected earlier. And we will continue our marketing and sale on our MOD services. Actually, a survey indicated that we reported earlier that the quality and the variety of our IPTV service is very well-received during this summer. So, we would promote our MOD service further for the remaining of this year, yes.

The IPTV revenue is still low, but we indicated the ARPU from IPTV so you can calculate the amount of level we generate from IPTV service. Our CapEx for next year, we are still in the preparation for next year’s business plans. So, it’s not final yet. I believe our CapEx for next year probably will be in line with our projection this year or slightly higher because we like to expedite growth out of fiber solutions and also expand or improve the quality of our broadband – mobile broadband network.

Chate Benchavitvilai – Credit Suisse

Thank you very much. Just a follow-up question – two follow-up questions. The first question is related to your broadband subscriber target. I understand that you are targeting 4,700, 4,800 of subscribers for broadband by the end of the year. That would imply, I understand, around 180,000 net additions in the fourth quarter compared to around 12,000 to 13,000 you have add per quarter year-to-date. So, is there any like specific marketing campaign or effort on the broadband side that might drive up the subscriber pickup in the fourth quarter that you can share?

And the second follow-up is on the IPTV revenue. What’s the percentage of IPTV revenues coming from advertising right now? Thank you very much.

Shu Yeh

I think, so far, the IPTV advertising revenue is kind of small but is improving. So, we were working on it to make it bigger, okay? But we think that we are pleased to see the improvement.

Chate Benchavitvilai – Credit Suisse

Okay. And on the broadband subscriber target?

Shyue-Ching Lu

For the broadband subscribers, again, our fiber solution is very well-received in the market, and we will have new promotional packages hopefully in this quarter. And we are also forming the surveys we have seen conducted by a third party. We’d like to work harder to check more customers.

Chate Benchavitvilai – Credit Suisse

That’s it and thank you very much.

Operator

The next question is Steve Liu from Standard Chartered Bank. Please go ahead.

Steven Liu – Standard Chartered Bank

Thank you. I have two questions; one is regarding the smartphone after detail – amount of the data usage, your two cap tier, mid-tier and the lower tier. What’s the average amount of the data usage in smartphone users? Yes.

Shu Yeh

Shyue? Shyue?

Shyue-Ching Lu

Regarding the usage of the top-tier subscribers, the amount for their usage is around 2.1 gigabyte, okay?

Steven Liu – Standard Chartered Bank

Okay.

Shyue-Ching Lu

And midrange, about (inaudible).

Fu-Fu Shen

I think you know about the usage of the smartphone usage, I would say that for the less than 1 giga usage, I think the average use is increasing from 1.6 giga to 1.7 or 8 giga, about that range.

Shyue-Ching Lu

Well, the midrange usage is about 271 megabytes. And the goal tier is about 56 megabytes.

Steven Liu – Standard Chartered Bank

How about the Apple? I mean, a top-tier, mid-tier, lower-tier smartphone Apple.

Shyue-Ching Lu

Apple, for the high tier, average is about 1,400, slightly higher than 1,000. 1,400, okay?

Steven Liu – Standard Chartered Bank

Yes, okay.

Shyue-Ching Lu

And for the mid-tier, it’s – Apple is better than 885, okay? And last year, it’s about 700.

Shu Yeh

Yes.

Steven Liu – Standard Chartered Bank

Okay. Can you please repeat the low-tier usage, monthly usage, 400 MB?

Fu-Fu Shen

May I interrupt? When we’re talking about ARPU for the low-, mid- and high-tier smartphone users, usually we don’t really give this kind of data. The data we offer is for the smartphones. You can actually refer to our presentation, that’s on page seven. Here, usually our smart – you can see the – on the bottom left of the chart, we refer. For the smartphone ARPU for the third quarter, it’s around 12 – that is NT$1,231, okay?

Steven Liu – Standard Chartered Bank

Yes.

Fu-Fu Shen

So, we don’t really offer any breakdowns for (inaudible) individual ARPU for that.

Steven Liu – Standard Chartered Bank

Okay. Sure, sure. Okay. Can you repeat the low-tier data usage, low tier is 400 MB?

Fu-Fu Shen

The loads because we do have customer – more than 50% of the customer – of our smartphone users, their multi-usage volume for data volume is less than 1 giga.

Steven Liu – Standard Chartered Bank

Okay.

Fu-Fu Shen

That’s the information we provided, okay?

Steven Liu – Standard Chartered Bank

Okay. And about the property business, I mean could you give some figure about the investment amount over the coming few years, I mean, CapEx-wise, in the properties?

Fu-Fu Shen

The property investment usually we just mention about this specific wind-up from our subsidiary – profit subsidiary. That’s the specific one. We don’t have this – the number for the CapEx for the property investment. Usually, this is well related to our IDC kind of building.

Steven Liu – Standard Chartered Bank

Okay. And lastly, about the 3G utilization or what average utilization in your 3G network...

Shyue-Ching Lu

Our 3G network is – the capacity is – in average is more than enough for the customers (inaudible), okay? So, only in certain selected areas where traffic is concentrated we encounter some complexities during peak hours.

Steven Liu – Standard Chartered Bank

Okay. Thank you. Okay.

Operator

The next question is Joseph Quinn from Macquarie. Please go ahead.

Joseph Quinn – Macquarie

Thanks. I’ve got a few questions. Firstly, just going back on the property angle, I find it a little bit strange on the things we had bit of a different strategy that Chunghwa had taken in the past. You have – you usually develop your own property land banks. You haven’t really purchased a property before to develop it. So, I’m just wondering can you provide me a little bit of thought behind management’s thinking on the change in your strategy. And also, are you planning to sell these properties? Again, this would be different from the past where you tend to develop and rent the property.

The second question is on your broadband side. As some of the other colleagues have highlighted, it does seem it’s a bit difficult to grow the top-line number for broadband users. Can you maybe elaborate in terms of where you think maybe the full potential market is, like are we ready at saturation point than any new users? Do you need to gain them from your competitors such as the cable providers? That’s the second question.

And just thirdly is on the IP peering side. I did – obviously, in your presentation, you did highlight the IP peering issue, but can you maybe provide some numbers around that in terms of how large the revenue impact that would be to your business if there was a case that you have to provide free IP peering? Thank you.

Shu Yeh

Okay. The property subsidiary, Light Era, will continue play a important role in our real estate development and rental service. And so, Light Era will continue to view and maintain its capability. So, it leaves some room for growth in this business. So to attract capable people in the business, we have to find a land for them to build. Okay. So, the land we just purchased would be, as I indicated earlier, would be used to build for some ICT-related building. And we would fill those buildings, okay? And we might find partner in building this land and we – because in the past, the Light Era has contributed to our profit in the – for example, in 2011, it had a net income of 1.2 billion. And this year so far, for the first three quarters, its net income is 0.52 billion, okay.

So, we think this business is on track and we hope they will continue to help the parent company to develop our land, our real estate. Thank you.

Joseph Quinn – Macquarie

Okay. So, can I just follow – yes, sorry.

Shu Yeh

Yes.

Joseph Quinn – Macquarie

Can I just follow up on the property side. So, it could be something in the future that we continue to see some storm of property purchasing as Light Era wants to continue to expand. But can I also just get a maybe – do have a timeframe on when you expect maybe these projects to start to begin to be developed or begin – or began the sale? Actually, you’ll see some impact on Chunghwa’s actual income. Thank you.

Shu Yeh

Okay. I think this land is kind of a big piece of land so we would work on it for a while. And we have some plans to build it, but we don’t disclose the detail yet. Okay. Thank you

Joseph Quinn – Macquarie

Thanks.

Shyue-Ching Lu

On your second question about broadband market potential, let me share with you that at Chunghwa Telecom we still maintain nearly 80% of market share in broadband, okay? And the net increase in number of subscribers, Chunghwa Telecom still, it has the majority, okay? We have over about 60% of the market share for the net add in broadband.

The broadband market will develop if the digital convergence strategy is really taking place. That’s why we encourage you to (inaudible) when they want to revise telecom-related regulations. We emphasize our focus on development of digital convergence. It’s very important. So, as everything gets more ready, we believe the potential still there.

On the third question about IP peering, well, the amount of revenue in IP peering is not really very significant. But we believe the issue here is not the revenue. It’s the environment that we are fostering for IP industry for IP’s Internet services. We really do not believe it’s the right thing to do to offer without any tradition free peering. Okay.

Joseph Quinn – Macquarie

Thank you. That’s very helpful. I’m just wondering, as you’re – presently is he there today also?

Shyue-Ching Lu

Well, probably you are aware that NCC is conducting interview with the three major mobile operators on extension of 2G licenses.

Joseph Quinn – Macquarie

Yes.

Shyue-Ching Lu

Our President, he did (inaudible) to NCC to participate in this interview.

Joseph Quinn – Macquarie

I understand.

Shyue-Ching Lu

(Inaudible) for that.

Joseph Quinn – Macquarie

Understood. Thank you.

Operator

(Operator Instructions) The next question is Gary Yu from Morgan Stanley. Please go ahead.

Gary Yu – Morgan Stanley

Hi. Thank you for the opportunity to ask question. I understand that you have a 20% discount for unlimited data usage whose monthly data usage is below 1GB. Can I know how many of your smartphone users are enjoying this discount? And do you still plan to remove this promotion by the end of this year? Thank you.

Shu Yeh

No. We don’t have – we don’t provide this information.

Gary Yu – Morgan Stanley

Okay. That’s fine. Thank you.

Operator

The next question is Sydney Zhang from Bank of America. Please go ahead.

Sydney Zhang – Bank of America

Hi. Thanks for the call. Actually, I have the similar question to the last one. My question is really just for this 20%, so are you going to plan into cancel this or withdraw this 20% discount any time soon? That’s one question.

The other question I have is, you mentioned that on the regulation side, that NCC is drafting the next round of tariff reduction plan, can you share a little more how that tariff reduction plan is going to look like? Thanks.

Shu Yeh

Okay. The one first one, the 20% discount, end of December of this year. And we don’t have detail about this season new tariff reduction claim. Thank you.

Sydney Zhang – Bank of America

Okay. Thanks.

Operator

The next question is Piyush Mubayi from Goldman Sachs. Please go ahead.

Piyush Mubayi – Goldman Sachs

Thank you very much for the opportunity to ask question. I’ve got two questions. The first is about slide 25 where you’ve given us the detail for your fiber roll out. Thank you very much for this detail. This is wonderful. Could you just expand so I can better understand the difference between the coverage that entails 100 megabits plus service and the coverage that ends 15 megabit plus service, what exactly it is, is it that makes or allows you to get 25% coverage in 2011 to 70% coverage in 2012?

And then looking ahead, given that you get to 70% by 2012. And I know you talked about CapEx potentially being higher for potentially one more year. But thereafter when you look at 2014 onwards, what sort of CapEx on the fixed line should we – I know this is really far – two years out, but what sort of CapEx should we be putting in our models?

And the second area of question is just if you could remind us what your dividend plan is. Thank you so much.

Shu Yeh

Okay. To answer your first question because now we are – for the 100 mega, we have changed it on a reservation basis. So, the definition of coverage has changed. And so, that is part of the reason it increased of around 24.6% to 70%. And we are working on how to magnify and to let you know the definition soon but not in this presentation. We are still clarifying some of the issue there. Thank you.

Piyush Mubayi – Goldman Sachs

Okay. I know you talked about potentially higher CapEx in 2013 but based on how much fiber coverage you have by the end of 2013, should we expect the CapEx to dramatically fall in 2014, 2015 onwards?

Shu Yeh

We will provide our guidance maybe early February. But so far, as I mentioned earlier because we are continuing building up our broadband Internet fixed net in the mobile broadband. And our customer are kind of pleased with what we offer. So, we have to continue our effort to secure our customers. Thank you.

Piyush Mubayi – Goldman Sachs

Thank you.

Shu Yeh

And in terms of dividend plan, we don’t have a detail yet. But so far you can see in the past, we maintained 90% dividend payout ratio, and I think that would give you some indication. But it’s up to the board to decide. And in terms of the special dividend or the return of capital as we explained many times earlier because now CapEx among is kind of higher than depreciation expenses so we don’t have the source for those extra dividend. So, that is our current situation. Thank you.

Piyush Mubayi – Goldman Sachs

Thank you very much.

Fu-Fu Shen

Yes. May I add one point about the 100 mega fiber coverage? Even though we redefined the 100 mega, the coverage, we still need some additional CapEx for the fiber rollout for the high-speed. It’s just the redefinition can save some of the CapEx just for your information.

Piyush Mubayi – Goldman Sachs

Thank you.

Operator

(Operator Instructions) The next question is Joseph Quinn from Macquarie. Please go ahead.

Joseph Quinn – Macquarie

Thank you. And can I just follow up one item on your CapEx side, as I understand you’re not giving out any particular numbers for 2013, but it does seem that your president made a comment that you will be building a new data center in Banqiao, I believe it may be a cost of about NT$13 billion to NT$15 billion for that project. Could you maybe give some detail on the timeframe for that expenditure if – how much maybe you’d expect to see in 2013 going forward because, obviously, I assume that will have some impact on your CapEx number for next year? Thanks.

Shu Yeh

I think we will start to build the Banqiao project. But in the beginning, the scale is limited. Thank you.

Joseph Quinn – Macquarie

Okay. So, it should be a relatively minor impact at the beginning?

Shu Yeh

Yes, for the year 2013, yes. Yes.

Joseph Quinn – Macquarie

Okay. Thank you.

Operator

(Operator Instructions) There seems to be no more questions. I will turn it back over to Chairman Lu. Please begin.

Shyue-Ching Lu

Okay. Thank you very much for participating in our conference call for third quarter 2012 results call. Thank you very much. Good night from Taipei.

Operator

Thank you, Chairman Lu. Thank you, all, for your participation in Chunghwa Telecom conference call. There will be a webcast replay within an hour. Please visit www.cht.com.taiwan/ir under the In Focus section. You may now disconnect. Good-bye.

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