Chunghwa Telecom Co Ltd (CHT) 2017 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to Chunghwa Telecom Conference Call for the company's Fourth Quarter 2017 Operating Results. (Operator Instructions) For your 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.

女士們、先生們，午安。歡迎參加中華電信電話會議，了解公司 2017 年第四季營運表現。（操作員說明）僅供參考，本次電話會議現透過網路進行現場直播。會議結束後一小時內將提供網路直播重播。請造訪 CHT IR 網站 www.cht.com.tw/ir 的 IR 日曆部分。

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

現在請投資人關係總監沉芙芙女士介紹。沈女士，請講。

Thank you. This is Fu-Fu Shen, the Director of Investor Relations for Chunghwa Telecom. Welcome to our Fourth Quarter 2017 Results Conference Call. Joining on the call today are Mr. Sheih, our President; and Mr. Kuo, our CFO.

謝謝。我是沉福福，中華電信投資人關係總監。歡迎參加我們的 2017 年第四季業績電話會議。今天參加電話會議的還有我們的總裁謝赫先生；以及我們的財務長郭先生。

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 QA session. Now I would like to hand the call over to President Sheih. And please note our safe harbor statement on Slide #2.

在今天的電話會議中，管理層將首先概述我們本季的業務，然後討論營運和財務亮點。然後我們將進入 QA 會議。現在我把電話轉交給謝赫主席。請注意幻燈片#2 上的安全港聲明。

President Sheih, please go ahead.

謝總統，請繼續。

Thank you, Fu-Fu, and hello, everyone. Welcome to our fourth quarter 2017 earnings conference call. For the fourth quarter of 2017, we continued to retain our market-leading position in mobile subscribers and in mobile revenue, despite a competitive landscape. And we are pleased to report we have the lowest churn rate and lowest decline of mobile service revenue among peers.

謝謝福福，大家好。歡迎參加我們的 2017 年第四季財報電話會議。2017 年第四季度，儘管競爭激烈，我們仍然在行動用戶和行動收入方面繼續保持市場領先地位。我們很高興地報告說，我們的客戶流失率和行動服務收入下降幅度是同業中最低的。

In the fourth quarter, we continued to narrow our focus to guide mobile subscription toward high-end clients, and we saw a significant year-over-year increase in user subscription for plans that cost TWD 30.99 or more during the end of 2017. Looking ahead, we will retain this policy to enhance margins in our mobile business and take steps to strengthen new subscriber acquisition.

第四季度，我們持續聚焦高階客戶的行動訂閱，2017 年底，30.99 新台幣或以上套餐的用戶訂閱量較去年同期大幅成長。展望未來，我們將保留這項政策，以提高行動業務的利潤率，並採取措施加強新用戶的獲取。

In addition, we have further solidified our broadband customer base and successfully mitigated subscriber loss. Meanwhile, the number of MOD subscribers and revenue grew significantly in the fourth quarter, as we endeavored to facilitate the overall TV operational environment, while continuing to enrich content and enhance our user experience.

此外，我們也進一步鞏固了寬頻客戶基礎並成功減少了用戶流失。同時，我們在努力改善整體電視營運環境的同時，持續豐富內容並提升用戶體驗，第四季MOD用戶數量和收入大幅成長。

We're also pleased to report strong performance in our ICT-related business. Our IoT platform had demonstrated smart city, smart agriculture, smart manufacturing and other IoT-related application. In the fourth quarter 2017, which is well received and our highest rated IDC brand had continued its second phase rack installation to meet increasing demand. Going forward, we will continue to utilize our IDC and CDN advantages to offer upgraded broadband service to attract more high-end users, start higher-speed service adoption and strengthen our broadband environment.

我們也很高興地報告我們的 ICT 相關業務的強勁表現。我們的物聯網平台展示了智慧城市、智慧農業、智慧製造等物聯網相關應用。2017年第四季度，廣受好評、評價最高的IDC品牌持續進行第二期機架安裝，以滿足不斷成長的需求。未來，我們將持續利用IDC和CDN優勢，提供升級的寬頻服務，吸引更多高階用戶，開啟更高速的服務普及，強化寬頻環境。

Now I will walk you through each of our business lines. On Slide 5, I will like to update you on our mobile business. As of December 2017, our total number of 4G subscribers has exceeded 7.9 million. Mobile Internet adopters continue to grow, reached 82.9% of total postpaid subscription, which consequently drove up our mobile Internet revenue by 5.1% year-over-year. Moreover, since we've strengthened subsidies and incentives to attract high-end plan adoption, our users signed up for plans that cost TWD 900 -- starting TWD 99 or more increased significantly. It proves that our subsidy efficiency has improved considering the cost of handset subsidies versus the revenues broadening during customers' entire track period. We will continue this effective strategy to enhance margins in our mobile segment and roll out incentives for existing customers to consolidate the subscriber base.

現在我將向您介紹我們的每條業務線。在投影片 5 上，我想向您介紹我們行動業務的最新情況。截至2017年12月，我們的4G用戶總數已超過790萬人。行動網路用戶持續成長，佔後付費用戶總數的82.9%，帶動行動上網收入較去年同期成長5.1%。此外，由於我們加強了補貼和激勵措施以吸引高端計劃的採用，我們的用戶簽約花費新台幣 900 元的計劃——99 台幣起或更多的計劃大幅增加。這證明，考慮到手機補貼成本與客戶整個追蹤期內收入的擴大，我們的補貼效率有所提高。我們將繼續實施這項有效策略，以提高行動業務的利潤率，並為現有客戶提供激勵措施，以鞏固用戶基礎。

Slide 6 shows the performance of our broadband business. In fourth quarter, we saw a decrease in broadband subscriber number, which we believe is resulted from a one-time debt. Although the number of our broadband subscribers slightly declined year-over-year, we still see our subscriber loss has been mitigated, and we continue to mitigate the loss. In addition, we continue to see a migration of our broadband subscribers to higher-speed fiber services. We are pleased with the number of users signed up for connection speed of 100 megabits per second or higher, which grew by 9.5% year-over-year to 1.28 million in the fourth quarter. We expect to improve this number by upselling with operators that bundled with our MOD, Wi-Fi, information security.

投影片 6 顯示了我們寬頻業務的業績。第四季度，我們看到寬頻用戶數量下降，我們認為這是一次性債務造成的。儘管我們的寬頻用戶數量同比略有下降，但我們仍然看到我們的用戶流失已經減輕，並且我們將繼續減輕流失。此外，我們繼續看到寬頻用戶轉向更高速的光纖服務。我們對每秒 100 兆或更高連線速度的簽約用戶數量感到滿意，第四季年增 9.5% 至 128 萬。我們希望透過向營運商追加銷售我們的 MOD、Wi-Fi、資訊安全產品來提高這一數字。

Going forward, we will continue to encourage customers to migrate to higher-speed services and stay ahead of our competitors by enhancing user experience in our network, through smart home services that leverage our Wi-Fi advantages as well as MOD and OTT offerings.

展望未來，我們將繼續鼓勵客戶遷移到更高速的服務，並透過利用我們的 Wi-Fi 優勢以及 MOD 和 OTT 產品的智慧家庭服務來增強網路中的用戶體驗，從而保持領先於競爭對手。

Moving on to Slide 7, we're glad to report that our IPTV subscribers exceeded 1.6 million in fourth quarter 2017, thus representing a 20.3% increase year-over-year. Our IPTV revenue continued to grow trajectory in fourth quarter 2017 with 15.7% increase year-over-year, primarily driven by the healthy growth of IPTV and SVOD subscribers. We are pleased to see that our IPTV customers continue to sign up for additional SVOD programs, and the number of SVOD subscribers is expected to exceed 1 million in the first quarter of 2018.

轉到投影片 7，我們很高興地報告，2017 年第四季我們的 IPTV 用戶數量超過 160 萬，年增 20.3%。我們的 IPTV 營收在 2017 年第四季持續成長，年增 15.7%，這主要是受到 IPTV 和 SVOD 用戶健康成長的推動。我們很高興看到我們的 IPTV 客戶繼續訂閱更多 SVOD 節目，預計 2018 年第一季 SVOD 訂戶數量將超過 100 萬。

We started on-demand service. We differentiated our IPTV service product by introducing popular international sports events such as 2018 Winter Olympics Games and 2018 FIFA World Cup as well as eSports to further expand channel subscription base.

我們開始按需服務。我們推出差異化的IPTV服務產品，引進2018年冬季奧運、2018年FIFA世界盃等熱門國際運動賽事以及電子競技，進一步擴大頻道訂閱基礎。

Going forward, the quality and the diversification of our IPTV content offerings will continue to be our priority to further strengthen user acquisition and user signals. We will also plan to carry more OTT offerings to increase customers' total contribution to our revenue.

展望未來，我們的IPTV內容產品的品質和多樣化將繼續成為我們進一步加強用戶獲取和用戶訊號的首要任務。我們還將計劃提供更多 OTT 產品，以增加客戶對我們收入的總貢獻。

Please turn to Slide 8 for an update on our ICT initiatives. We're delighted to see solid growth in ICT business in the fourth quarter of 2017. Our ICT business continues to remain on the growth trajectory. In December last year, our IoT platform continued to demonstrate the latest solutions concerning smart agriculture, smart manufacturing and smart transportation. In 2017, the accumulate IoT revenue increased 23.3% year-over-year. We're also glad to report that our IDC accumulated revenue grew 18% year-over-year in 2017. Our highest-rated brand, IDC has started second phase rack installation to meet increasing demand from the financial industry and international content providers, and we expect it to be complete in the first quarter of 2018.

請參閱投影片 8 以了解我們 ICT 方案的最新資訊。我們很高興看到 2017 年第四季 ICT 業務的穩健成長。我們的 ICT 業務持續保持成長軌道。去年12月，我們的物聯網平台持續展示了智慧農業、智慧製造、智慧交通等領域的最新解決方案。2017年，累計物聯網營收年增23.3%。我們也很高興地報告，2017 年我們的 IDC 累計收入年增 18%。我們評價最高的品牌 IDC 已開始第二階段機架安裝，以滿足金融業和國際內容提供商日益增長的需求，我們預計將於 2018 年第一季完成。

Going forward, we remain committed to leveraging our competitive advantages in network infrastructure, IDC and CDN, to offer reliable, customized and comprehensive ICT solutions to our enterprise customers to develop new opportunities in other innovative business lines and establish a comprehensive ecosystem with the sectors.

未來，我們將繼續發揮在網路基礎設施、IDC、CDN等方面的競爭優勢，為企業客戶提供可靠、客製化、全面​​的ICT解決方案，在其他創新業務領域開拓新機遇，與產業建立全面的生態系統。

Now I will like to hand over the call to Mr. Kuo for our financial results.

現在我想把我們的財務表現轉交給郭先生。

Thank you, President Sheih. Now I will go through our financial results in detail.

謝謝謝主席。現在我將詳細介紹我們的財務表現。

Beginning on Slide 10. Slide 10 provides you with highlights from our income statement. For the first quarter of 2017, total revenues increased by 4.4%, and the operating costs and the expenses increased by 5.2% year-over-year. Our income from operations increased by 5.1%, and our net income increased by 11.7% year-over-year. In addition, our EBITDA margin decreased to 30.29% in the first quarter from 31.01% in the same period of 2016.

從投影片 10 開始。投影片 10 為您提供了我們損益表的重點內容。2017年第一季，總營收年增4.4%，營運成本和費用年增5.2%。營業收入較去年同期成長5.1%，淨利年增11.7%。此外，我們的 EBITDA 利潤率從 2016 年同期的 31.01% 下降至第一季的 30.29%。

Please refer to Slide 11 for revenue breakdown by business segments. The increase in total revenue for the fourth quarter of 2017 was driven by increased handset sales and ICT project revenue, which partially offset the decrease in voice revenue.

請參閱投影片 11 以了解按業務部門劃分的收入明細。2017年第四季總營收的成長是由手機銷售和ICT專案收入的成長所推動的，這部分抵消了語音收入的下降。

Moving on to Slide 12. Our operating costs and expenses increased by TWD 2.49 billion or 5.2% year-over-year in the fourth quarter due to higher ICT project costs and cost of goods sold.

繼續看投影片 12。由於ICT專案成本和銷售成本增加，第四季營運成本和費用年增24.9億新台幣或5.2%。

On Slide 13, cash flow from operating activities for the fourth quarter of 2017 decreased by TWD 6.58 billion, about 20.8% compared to the same period of 2016, mainly due to larger amount of change in receivables. In November 2017, we acquired 4G mobile broadband license in 1.8 gigahertz and 2.1 gigahertz frequencies, which resulted overall of TWD 10.94 billion. As of December 31, 2017, we had TWD 28.89 billion of cash and cash equivalents.

投影片 13 中，2017 年第四季經營活動現金流量減少 65.8 億元新台幣，較 2016 年同期減少約 20.8%，主要是應收帳款變動較大所致。2017年11月，取得1.8GHz及2.1GHz頻率的4G行動寬頻執照，合計收益109.4億元新台幣。截至2017年12月31日，我們擁有現金及現金等價物288.9億元新台幣。

Slide 14 shows our operating results as compared to our guidance. We are pleased that our performance in 2017, including income from operating, net income, EPS and the EBITDA met our full year guidance.

投影片 14 顯示了我們的營運結果與指引的比較。我們很高興 2017 年的業績，包括營業收入、淨利潤、每股收益和 EBITDA 達到了我們的全年指引。

Moving on Slide 15, which shows our 2018 consolidated guidance. Looking ahead, total revenue for 2018 is expected to increase from 1.7% to 2.4%. The increase in revenue is expected to come from enterprise ICT business, Internet application value-added service and the government service and multiservice. Operating costs and expenses for 2018 are expected to increase from 0.7% to 1.9%, primarily driven by the growth in our ICT business, smart device sales and the enhancement of digital content.

接下來是投影片 15，其中顯示了我們 2018 年的綜合指導。展望未來，2018年總收入預計將從1.7%成長至2.4%。收入的成長預計將來自企業ICT業務、網路應用增值服務以及政務服務和多業務。2018年的營運成本和費用預計將從0.7%增加至1.9%，主要受到我們的ICT業務成長、智慧型裝置銷售和數位內容增強的推動。

Additionally, S&A cost and the amortization cost for 4G spectrum were increased year-over-year. Given these projections, we expect 0.9% to 8.8% year-over-year increase in operating income and 4.1% year-over-year decrease to 3.7% year-over-year increase in net income. Moreover, the net income guidance has already factored in the increase of income tax rate from 17% to 20%, the act was passed in the Parliament earlier this month.

此外，S&A成本以及4G頻譜的攤銷成本也較去年同期增加。鑑於這些預測，我們預計營業收入將年增 0.9% 至 8.8%，淨利潤將年減 4.1% 至 3.7%。此外，淨收入指引已將所得稅稅率從17%提高至20%，該法案於本月初在議會獲得通過。

Lastly, Slide 16, We are projecting CapEx of TWD 33.1 billion for 2018. We will focus on investments in our core business, including FTTx, 4G, IDC and service platform among others under our precision construction principle.

最後，投影片 16，我們預期 2018 年的資本支出為 331 億新台幣。我們將依照精準建置的原則，重點投資FTTx、4G、IDC、服務平台等核心業務。

Thank you for your time. Now we will like to open the line for questions.

感謝您的時間。現在我們要開通提問專線。

(Operator Instructions) Our first question is coming from Peter Milliken, Deutsche Bank.

（操作員說明）我們的第一個問題來自德意志銀行的 Peter Milliken。

Congratulations on being able to return to profit, hopefully -- profit growth in 2018. I've got two questions. Firstly, the MOD and SVOD subs increased sharply in the fourth quarter. Can you tell us what contents you added to T-IFRS in the period? And the second question is, you talk about mobile subs with a proportion of 999 and above mobile sub increasing in 2017. But I didn't really notice that in the month-by-month revenue trends or ARPU trends. Is this something that you're actually -- is this something very recent?

恭喜您能夠在 2018 年扭虧為盈，實現利潤成長。我有兩個問題。首先，第四季MOD和SVOD訂閱量大幅成長。您能否告訴我們，本期T-IFRS新增了哪些內容？第二個問題是，你談到行動用戶，2017年999以上行動用戶的比例正在增加。但我並沒有真正注意到逐月收入趨勢或 ARPU 趨勢。這真的是最近發生的事嗎？

Peter, I think for your question number two, mobile subscriber number, I think what we've mentioned about it -- it's about the mobile Internet subscribers, okay. So that really had some increase. But you understand that in the -- for the whole mobile market in Taiwan, the subscriber number is still decreasing. So it's inevitable for us to have this kind of impact, but for us, I similarly feel it's critical to have customer migrate to mobile Internet. I think that, hope, answer your question.

彼得，我想對於你的第二個問題，行動用戶數量，我想我們已經提到過——它是關於行動網路用戶的，好吧。所以這確實有增加。但你知道，就台灣整個行動市場而言，用戶數量仍在減少。所以對我們來說產生這種影響是不可避免的，但對我們來說，我同樣覺得讓客戶遷移到行動網路是至關重要的。我想，希望能回答你的問題。

As for the MOD, SVOD subscribers question, the priority is to the large customer base and enhanced value-added service, application service, along with the launch of OTT service and continuous introduction of VOD programs on our platform, we are expecting our subscriber number will continue to increase and revenue sharing from OTT service providers will also contribute to the revenue growth going forward. We aim to make MOD a mobile open platform in the interest of consumers by acquiring local channels, including TV shopping channel, leading to launch MOD 4K trial service and, again, MOD user interface and so on. In 2017, we invited international and local OTT service providers to offer up their service on our MOD platform, which enriched our content as well as strengthened our MOD services. Thank you.

至於MOD、SVOD訂戶問題，首要的是龐大的客戶基礎和增強的增值服務、應用服務，隨著OTT服務的推出以及我們平台上VOD節目的不斷推出，我們預計我們的訂戶數量將會繼續增加，來自OTT 服務提供者的收入分成也將有助於未來的收入成長。我們的目標是透過收購包括電視購物頻道在內的本地頻道，推出MOD 4K試用服務以及MOD使用者介面等，使MOD成為符合消費者利益的行動開放平台。2017年，我們邀請國際和本地OTT服務提供者在我們的MOD平台上提供服務，豐富了我們的內容，也加強了我們的MOD服務。謝謝。

Great. Just one follow-on question. It is nice to see revenue increasing again. Would you say that that is more from the Internet business side? Or is it also mobile is expected to do better in 2018?

偉大的。只是一個後續問題。很高興看到收入再次增加。您說這更多是來自網路業務方面嗎？或者說行動領域也有望在 2018 年表現更好？

Are you talking about the guidance for '18?

你說的是18年的指導嗎？

Yes. Yes, I am.

是的。我是。

Yes. I think the guidance for '18, you see, we give a range this time, you understand that, okay. So we -- I think, we're really expecting that we still have some growth (inaudible) like in ICT, and we do like to continue likely our consumer -- mobile consumer too -- we're talking about Internet business side, right?

是的。我認為 18 年的指導，你看，我們這次給了一個範圍，你明白，好吧。所以我們——我認為，我們真的期望我們仍然有一些增長（聽不清楚），就像資訊通信技術一樣，我們確實希望繼續我們的消費者——移動消費者——我們正在談論互聯網業務方面，正確的？

I'm just talking about --

我只是在談論——

You are talking about overall revenue increase. Yes. I think, of course, the Internet business side, we do see some innovative business coming like we're talking about our IDC, our -- like IoT and cloud business, Big Data. This is all kind of innovative side. This shows that we are quite optimistic about this business.

你說的是整體收入的成長。是的。當然，我認為，在網路業務方面，我們確實看到了一些創新業務的出現，就像我們正在談論的 IDC、物聯網和雲端業務、大數據一樣。這都是創新的一面。這說明我們對這個業務還是相當看好的。

Our next question is coming from Neale Anderson, HSBC.

我們的下一個問題來自匯豐銀行的尼爾安德森。

Two questions from me. First one to the broadband side. You posted a decline in customers in the fourth quarter. Where are those customers going? What's been the change in competition? And does that have anything to do with quite significant increase in CapEx you've planned for the domestic fixed business? The second question is on the wireless side. And I was encouraged to see you mention on Slide 5, moving towards tier-pricing. That makes just a little bit of change of thinking. I understood, that is going to be very difficult, now that flat-rate pricing has been so prevalent and so standard in Taiwan for so long. So could you talk a little bit more about that? And how yourselves in the market want to move to tier-pricing?

我有兩個問題。第一個是寬頻端。您公佈第四季度的客戶數量有所下降。這些顧客都去哪了？競爭發生了什麼變化？這與您計劃為國內固定業務大幅增加資本支出有什麼關係嗎？第二個問題是無線方面的。我很高興看到您在幻燈片 5 中提到轉向分級定價。這只會帶來一點點想法的改變。我明白，這將是非常困難的，因為統一定價在台灣已經如此普遍和標準了這麼久。那你能多談談這個嗎？市場上的你們希望如何轉向分級定價？

Part of the growing side, we do -- we did have a decline in customers in fourth quarter. But that just likely was recognition in the very beginning of the presentation. We think that's a onetime kind of event. For IDC, this is a one company, building company, is kind of local in the publicity only, you have got some this kind of operational publicity government. And that part you know is still -- to our understanding is kind of onetime and it's a very small scale. We believe the growth -- the probing notion doesn't really change. So still this year, I think, we should forecast in some small net add for our customer number.

作為成長方面的一部分，我們確實在第四季度的客戶數量有所下降。但這很可能是在演講一開始就得到的認可。我們認為這是一次性事件。對IDC來說，這是一家公司、建築公司，只是一種地方性的宣傳，你已經得到了一些這種營運性的宣傳政府。據我們了解，這部分仍然是一次性的，而且規模非常小。我們相信成長——探索的概念並沒有真正改變。因此，我認為今年我們仍然應該預測我們的客戶數量會出現一些小幅淨成長。

As for question two, we still believe that tier-pricing and fair usage policy is the right direction operator should move forward. However, there is always a demand for unlimited data plan in the market. So we think it will take longer time than we expected in the beginning.

關於第二個問題，我們仍然認為分級定價和公平使用政策是營運商應該前進的正確方向。然而，市場上始終存在著對無限數據計劃的需求。所以我們認為這將比我們一開始預期的時間更長。

Just a follow-up on the broadband CapEx. So if the increase there is -- that relates to expanding coverage may be outside the urban areas, what's the reason for that increase in the domestic fixed CapEx?

只是寬頻資本支出的後續行動。那麼，如果成長與城市地區以外的覆蓋範圍有關，那麼國內固定資本支出成長的原因是什麼？

For fixed broadband CapEx, we will enter from fewer customers demand for upgrading broadband speed to 100 megabits per second. In addition, we will increase the 1 gigabits per second coverage in metropolitan areas and continue to strengthen our fiber techniques in high-speed broadband network.

對於固定寬頻資本支出，我們將進入從更少的客戶需求升級寬頻速度到每秒100兆位元。此外，我們也將增加城域網路每秒1GB的覆蓋範圍，並持續強化高速寬頻網路的光纖技術。

Our next question is coming from Jack Hsu, SinoPac Securities.

我們的下一個問題來自永豐金證券的 Jack Hsu。

It's Jack Hsu. And also I have two questions. The first question is could you give us the guidance or of the view about 4G subscriber in 2018? And also -- this is the first question. And my second question is how do we see the -- our ICT business because we have mentioned, the ICT business will grow in 2018. Could you give us some numerical guidance or some overall range? How -- what will the ICT business grow in 2018?

是徐傑克。我還有兩個問題。第一個問題，您能否給我們一些關於2018年4G用戶的指導或看法？而且──這是第一個問題。我的第二個問題是我們如何看待我們的 ICT 業務，因為我們已經提到，ICT 業務將在 2018 年成長。您能給我們一些數字指導或整體範圍嗎？2018年ICT業務將如何成長？

Because of the termination of 3G license, we will move our -- migrate our 3G services to 4G network. So at the end of 2018, 4G subscriber will reach 10.5 million.

由於3G牌照終止，我們將把我們的3G服務遷移到4G網路。因此，到2018年底，4G用戶將達到1050萬。

And -- answer your question number two. We expect our ICT revenue year-over-year growth in 2018, we will get back to the similar level of 2016. And with the ICT revenues this year, we expect 10% of our total consolidated revenue.

並且——回答你的第二個問題。我們預計 2018 年 ICT 營收將年增，將回到 2016 年的相似水準。今年 ICT 收入預計將佔合併總收入的 10%。

And just one follow-up question. We see the -- our 4G subscriber number in the end of 2017 is around 800 million -- sorry, 8 million -- is around 8 million. It's a little bit below with guidance in the beginning of 2017. Is that caused by the competition from the peers or something else?

還有一個後續問題。我們看到 - 2017 年底我們的 4G 用戶數量約為 8 億 - 抱歉，800 萬 - 約為 800 萬。與 2017 年初的指導相比，它略低一些。是同行競爭造成的還是其他原因？

Actually, probably hard to understand that by end of this year, I think according to the NCC agenda, I think all the 3G customer will migrate to 4G. I think we are -- I think very -- I think the efforts to be so to try to migrate our customer to 4G. I think that's pretty much why I mentioned about the target for -- the target for the -- by the end of this year. We -- I think the number it's just -- operator just mentioned. Also as I mentioned about the '17, I think '17, the overall margin a really huge margin -- the subscriber numbers still decreasing. So we will make even more efforts to do so.

實際上，可能很難理解，到今年年底，我認為根據 NCC 議程，我認為所有 3G 客戶都將遷移到 4G。我認為我們正在努力將我們的客戶遷移到 4G。我認為這就是我提到今年年底目標的原因。我們──我想就是剛才提到的數字──接線生。另外，正如我所提到的“17 年”，我認為“17 年”的整體利潤率非常大——訂閱者數量仍在減少。所以我們會為此付出更多的努力。

Our next question is coming from [Amber] (inaudible).

我們的下一個問題來自 [Amber]（聽不清楚）。

My first question is, I see smart device sales is one of the reason to drive 2018 revenue. So can you share your view on handset sales on first quarter? Do you see sustained demand for iPhone 8 or 10 on a Q-o-Q basis? Or is -- do you mean demand is probably for on second half of this year? My second question is, do we have one-off cost last year, so our dividend payout ratio is nearly 96%. So this year without the one-off cost, can we expect the payout ratio can be similar to 2015, which is above 100%?

我的第一個問題是，我認為智慧型設備銷售是推動 2018 年收入的原因之一。能否分享一下您對第一季手機銷售的看法？您認為 iPhone 8 或 10 的需求環比是否持續？還是——你的意思是今年下半年的需求可能會出現？我的第二個問題是，我們去年是否有一次性成本，所以我們的股利支付率接近96%。那麼今年如果沒有一次性費用，我們是否可以預期派息率可以與2015年類似，超過100%？

I'll take the question one. The iPhone sales, I think Apple offers iPhone 8 and 8 plus and iPhone X through models in the year of 2017. iPhone 8 and 8 plus sales volume is slightly lower compared with that of iPhone 7 or 7 Plus in the beginning. However, iPhone 10 demand is not as high as the market expected. The overall iPhone sales for the last 3 months was actually weaker year-over-year. Android phones performed better in the first quarter of 2017 year-over-year, which contribute to the handset sales revenue.

我來回答問題一。iPhone銷售方面，我認為蘋果在2017年提供了iPhone 8和8 plus以及iPhone X的型號。iPhone 8和8 Plus的銷量較年初的iPhone 7或7 Plus略低。不過，iPhone 10 的需求並不像市場預期的那麼高。過去 3 個月 iPhone 的整體銷售實際上同比疲弱。Android手機在2017年第一季同比表現更好，這對手機銷售收入做出了貢獻。

For question number two, dividend payout depends on the operational performance and the CapEx, and the final decision is up to the March board approval.

對於第二個問題，股利支付取決於營運績效和資本支出，最終決定取決於三月董事會的批准。

So do you see sustained handset sales in 1Q this year? Or handset sales is probably for our second half of the year -- second half of this year?

那麼您認為今年第一季手機銷售會持續嗎？或者手機銷售可能是在今年下半年——今年下半年？

Sorry. I think -- ma'am, can you repeat your question?

對不起。我想—女士，您能重複您的問題嗎？

Sorry. Because I see smart device sales is one of the reason to drive this year's sales revenue -- sales growth, so I was wondering, do you mean, you see strong handset sales in 1Q? Or you expect the strong handset sales is probably for on second half of this year?

對不起。因為我認為智慧型裝置銷售是推動今年銷售收入（銷售成長）的原因之一，所以我想知道，您的意思是，您看到第一季的手機銷售強勁嗎？或者您預計今年下半年手機銷售可能會強勁？

Usually, handset sales related to the -- handset models in markets, right? Yes, I think we had some kind of estimation, but I think we are not going to talk into that details here.

通常，手機銷售與市場上的手機型號有關，對吧？是的，我認為我們有某種估計，但我認為我們不會在這裡討論這些細節。

Our next question is coming from Jinjin Wang, UBS.

我們的下一個問題來自瑞銀集團的王金金。

I have two questions. One is regarding the IFRS adoption this year. Whether this is going to have an impact regarding our revenue and net profit? Whether it's going to be a positive impact on net profit? And whether that's also going to translate into maybe better-than-expected dividend payout? Secondly, regarding the 5G progress. I'm not sure what's on your agenda and which spectrum probably you are aiming for?

我有兩個問題。其中之一是關於今年採用國際財務報告準則。這是否會對我們的收入和淨利潤產生影響？是否會對淨利潤產生正面影響？這是否也會轉化為可能優於預期的股利支付？其次，關於5G進展。我不確定您的議程是什麼以及您的目標可能是什麼？

Answer your question number one. The IFRS-T standards provides us the approach for 2018, which will result in onetime adjustment of return earnings on January 1, 2018. And we will close the -- this closely related affected month for the adoption of IFRS 15 in our 2017 year-end financial statements, which will be released in March 2018.

回答你的第一個問題。IFRS-T標準為我們提供了2018年的方法，這將導致2018年1月1日的回報收益進行一次性調整。我們將結束與 2017 年年終財務報表中採用 IFRS 15 密切相關的受影響月份，該報表將於 2018 年 3 月發布。

For the second question about 5G progress, for the total, we have a team average more than 30 corporations and organizations from government, academic and researching factories from the Taiwan 5G alliance -- CHT Pilot Team to accelerate the development of related 5G services in Taiwan. We will leverage our technology capability and cooperate with potential partners to explore opportunity for future 5G IoT business development. So as to lead the service grow up in Taiwan. We came up with Nokia and Ericsson to establish in the LTE trial network last year and are going to build a 5G precommercial trial network by the end of 2018. According to the 5G development schedule by ITU, the 5G technology standard is scheduled to be announced in 2020. We will monitor the development process to be well prepared for network evolution and right time of service product introduction. And about the spectrum property, currently we have 3 consecutive 20 megahertz spectrum in 1800 megahertz, 2100 megahertz and 26 megahertz, respectively after spectrum auction was finalized on November 3 last year. We will leverage our spectrum advantages with high band and a low band, a 900 megahertz, to offer a multicarrier aggregation high-speed and high-quantity mobile broadband service.

第二個問題，關於5G的進展，台灣5G聯盟總共有一個平均超過30家來自官學研廠的企業和組織－CHT試點團隊，加速台灣相關5G服務的發展。我們將利用我們的技術能力，與潛在合作夥伴合作，探索未來5G物聯網業務發展的機會。從而引領服務業在台灣成長。去年我們就聯合諾基亞、愛立信建立了LTE試驗網，並計畫在2018年底前建成5G預商用試驗網。根據ITU的5G發展時間表，5G技術標準計劃於2020年公佈。我們將監控開發過程，為網路演進和服務產品推出的正確時機做好充分準備。至於頻譜屬性，去年11月3日頻譜拍賣結束後，目前我們已經連續3個20兆赫頻譜，分別為1800兆赫、2100兆赫和26兆赫。我們將利用高頻段和低頻段（900兆赫茲）的頻譜優勢，提供多載波聚合高速、高流量的行動寬頻服務。

Can I have a follow-up question? So is that fair to see that a commercial, the larger scale commercial launch and also meaningful 5G CapEx earnings timing is 2020?

我可以有後續問題嗎？那麼，更大規模的商業發布以及有意義的 5G 資本支出獲利時間定在 2020 年，這樣公平嗎？

I think the CapEx for 5G, no. We will have some spending on '19 -- 2019, yes.

我認為 5G 的資本支出不是。是的，我們將在 19 年至 2019 年有一些支出。

But 2019 shouldn't be repeat, right? I'm talking about like more large-scale 5G CapEx.

但2019年應該不會重演吧？我說的是更大規模的 5G 資本支出。

Exactly, yes.

沒錯，是的。

All also for the 5G rollout, are you more prefer the middle range spectrum, the 3 to 6 -- the sub 6 gigahertz or millimeter wave 24 above gigahertz?

所有這些也是為了 5G 的推出，您更喜歡中間範圍頻譜，即 3 到 6（低於 6 GHz）還是毫米波 24 GHz 以上？

I think that the regulators really know, haven't made the final decision for that. So we don't really have any comments on that. Sorry.

我認為監管機構確實知道這一點，但還沒有做出最終決定。所以我們對此沒有任何評論。對不起。

(Operator Instructions) Our next question is coming from Ronny Zhu, UBS.

（操作員說明）我們的下一個問題來自瑞銀集團的 Ronny Zhu。

Just a follow-up question with Jinjin. I know it was mentioned by -- management mentioned that our 4G subscriber target by the end of this year should be like 10.5 million, which is considering we will migrate the 3G subscriber to 4G. So that means we will expect the total subscriber to remain stable this year as top declining? And another question is, could management also give more guidance on uptrends? If there is more subscriber migrate to high-end, can we expect the ARPU to increase on the mobile side?

只是跟金金問一個後續問題。我知道管理層提到過，我們今年年底的 4G 用戶目標應該是 1050 萬，這是考慮到我們將把 3G 用戶遷移到 4G。那麼這意味著我們預計今年的總訂戶數量將保持穩定，因為頂部會下降？另一個問題是，管理階層能否對上漲趨勢給予更多指導？如果有更多的用戶向高階遷移，我們是否可以預期行動端的ARPU會增加？

For NCC -- NCC document, we mentioned about expecting every 3G operator to smoothly migrate -- 3G subscriber to 4G service by the end of this year. And this time, it's a little bit different from that of the 2G network service last year in June. So we don't really have any grace period for that. So I think every one of us will make up (inaudible) to migrate customer to -- from 3G to 4G. I think that's the kind of preliminary information from the regulator.

對於NCC——NCC文件，我們提到期望每個3G運營商在今年年底前將3G用戶順利遷移到4G服務。而這次，與去年6月的2G網路服務略有不同。所以我們其實沒有任何寬限期。因此，我認為我們每個人都會彌補（聽不清楚）將客戶從 3G 遷移到 4G。我認為這就是監管機構提供的初步資訊。

For question number two, we expect 2018 full year blended ARPU will remain flat to that of 2017 because of the mandatory internet -- interconnection fee reduction and more competition. But the IFRS 15 adoption, we also have a bit of it effect. So that's our view.

對於第二個問題，我們預計 2018 年全年綜合 ARPU 將與 2017 年持平，因為強制網路——互聯費降低和競爭加劇。但 IFRS 15 的採用，我們也受到了一點影響。這就是我們的觀點。

Why not -- sorry, a follow-up question is, it sounds like that we are expecting our mobile business revenue to remain flat next year. And according to the trend, it seems our broadband subscriber may continue to slightly decline this year, but our general guidance is to expect revenue to increase of 1.7% to 2.4%. Could you elaborate more where the growth come from?

為什麼不呢——抱歉，後續問題是，聽起來我們預計明年的行動業務收入將保持穩定。從趨勢來看，今年我們的寬頻用戶可能會持續小幅下降，但我們的整體指引是預期營收將成長1.7%至2.4%。能詳細說明一下成長的來源嗎？

Ronny, I think the majority growth will come from -- could you not understand that for the whole business right now, the voice revenue is coming down. And for the mobile service revenue, I think here we have some contingencies. We will like to see some kind of better performance. I think the Y-o-Y performance, we do like to see some kind of -- not growth, but (inaudible) as I just mentioned about flat. But for the -- we do have some growth within flat, especially like ICT. ICT, we mentioned about for the past several years, we actually continue to have high double digit -- low double-digit kind of growth. In last year, the growth rate bit of slow because maybe for last year, we would like to increase the ICT margin, and we will like to be more selective for the ICT project. So that slowed the growth a bit last year, but this year we do expect to have the growth track will come back to a bit of high, maybe to the circular level of the -- of last year. And also another thing we're talking about the -- our MOD business, okay. The MOD business, we -- although that the revenue scale is still small, but we are quite encouraging by last year -- the second half last year's performance. We would like to continue the momentum, and we did set -- we did set subscriber target for this year we like to achieve, okay. Of course, in addition, the new opportunities from emerging businesses like IoT, Big Data, and (inaudible) especially some other, we mentioned about our IDC capability of cloud computing, Big Data. Overall, we will see a continuous growth. And so I think that's where the increase comes from, what we expect, okay.

羅尼，我認為大部分成長將來自——你難道不明白，對於目前整個業務來說，語音收入正在下降。對於行動服務收入，我認為我們有一些意外情況。我們希望看到某種更好的表現。我認為同比表現，我們確實希望看到某種形式的成長，而不是成長，而是（聽不清楚）正如我剛才提到的持平。但對於——我們確實在扁平化領域取得了一些成長，特別是像資訊通信技術這樣的領域。資訊通信技術，我們在過去幾年中提到，我們實際上繼續保持高兩位數 - 低兩位數的增長。去年，成長速度有點慢，因為也許去年，我們希望增加ICT利潤，並且我們希望對ICT專案更有選擇性。因此，去年的成長速度有所放緩，但今年我們確實預計成長軌跡將回到較高水平，也許會達到去年的循環水平。我們正在談論的另一件事是——我們的 MOD 業務。MOD業務方面，我們——雖然收入規模還很小，但是我們去年——去年下半年的表現還是相當令人鼓舞的。我們希望繼續保持這一勢頭，我們確實設定了我們希望實現的今年的訂戶目標，好吧。當然，此外，來自物聯網、大數據等新興業務的新機會，以及（聽不清楚）特別是其他一些業務，我們提到了我們的IDC雲端運算、大數據能力。總體而言，我們將看到持續成長。所以我認為這就是增長的來源，正如我們所期望的，好吧。

Well answered. And just to clarify that, we are expecting the ICT revenue growth to -- this year to be similar with last year. So last year should be low double digit and should the revenue from ICT comes around 10% to the total revenue, right, last year?

回答得好。為了澄清這一點，我們預計今年的 ICT 收入成長將與去年相似。所以去年應該是低兩位數的收入，ICT 的收入應該佔總收入的 10% 左右，對吧，去年？

Yes, yes. The number is correct.

是的是的。號碼是正確的。

You next question is coming from Jack Hsu, SinoPac Securities.

您的下一個問題來自永豐金證券的 Jack Hsu。

I have two questions. The first question is, we have seen the EBITDA margin in the fourth quarter is lower than expectation and also lower than the period in 2016. I just want to know the reason why the EBITDA margin rate was low -- has been lower. This is the first question. And my second question is, we have mentioned we will develop the IoT business in the future. I just want to know because a lot of the company like HonHai also announced, they will develop the IoT business. What way our strategy will differentiate with the IP company or manufacturing company like HonHai? What's all -- what different is about our strategy? And how do we evaluate the contribution for the revenue into 2018 over 2019? The second question. And then the last question is, we have -- did a lot of efforts for the overseas business likely in South Asia -- the Southeast Asia. Could you give me a more detail about our Southeast Asia strategy in 2018?

我有兩個問題。第一個問題是，我們看到第四季的 EBITDA 利潤率低於預期，也低於 2016 年同期。我只是想知道 EBITDA 利潤率較低的原因——一直較低。這是第一個問題。我的第二個問題是，我們提到未來我們將發展物聯網業務。我只是想知道，因為許多像鴻海這樣的公司也宣布，他們將發展物聯網業務。我們的策略將如何與像鴻海這樣的IP公司或製造公司區分開來？到底是什麼──我們的策略有何不同？我們如何評估2018年相對於2019年的收入貢獻？第二個問題。最後一個問題是，我們為南亞（東南亞）的海外業務做了許多努力。您能否詳細介紹一下我們2018年的東南亞策略？

To answer your question number one, as above mentioned, the increase in total revenue for the first quarter of 2017 was driven by the increased handset sales and ICT project revenue, which margin was broadband, the voice and the data business. So the EBITDA margin is lower in fourth quarter, lower than the affected and the broadband in 2016.

回答你的第一個問題，如上所述，2017年第一季總收入的成長是由手機銷售和ICT專案收入的成長所推動的，其中寬頻、語音和數據業務的利潤率。因此第四季的 EBITDA 利潤率較低，低於受影響的公司和 2016 年的寬頻公司。

About the IoT development in future, I think so far our strategy, we mentioned a lot about, we built IoT platform, and we like to facilitate the different industry in order to put action on our application to facilitate order the application -- the order service, okay. So I think that the major kind of focus of Chunghwa, but HonHai has a different agenda. I think that's probably the major difference. And you asked about how to evaluate contribution of revenue over profit in '18 or '19. I think we already to give the guidance. I really don't have any comments -- additional comments on that.

關於未來物聯網的發展，我認為到目前為止我們的策略，我們提到了很多，我們建立了物聯網平台，我們喜歡促進不同的行業，以便對我們的應用程式採取行動，以促進訂單應用程式— —訂單服務還可以吧所以我認為中華的主要重點是，但鴻海有不同的議程。我認為這可能是主要的區別。您詢問如何評估 18 或 19 年收入對利潤的貢獻。我認為我們已經給出了指導。我真的沒有任何評論——對此有更多評論。

About question three, overseas business target. First of all, we would like to expand our corporation with our partners such as government and Taiwanese companies -- in Southeast Asia to further explore opportunities in the area. We have established subsidiary in Thailand in 2017, and expect to offer data communication services in the beginning. We also will strengthen our Corporation with [detail] in the field of IoT platforms, smart city and IoT applications. In not only explore market opportunities in Indonesia to further expand fintech in ICT, IoT business. We also have a target the [Laos] government of corporation and smart transportation such as electronic highways to pedestrian assistant. We have continued exploring opportunities in South Asia for years, which is important to our long-term development, and has been one of our existing public safe expansion strategies.

關於問題三、海外業務目標。首先，我們希望擴大與東南亞政府和台灣公司等合作夥伴的合作，進一步探索該地區的機會。我們於2017年在泰國成立了子公司，預計初期將提供數據通訊服務。我們也將在物聯網平台、智慧城市和物聯網應用領域加強我們的公司。不僅在印尼探索市場機會，進一步拓展金融科技在ICT、物聯網領域的業務。我們還有一個目標是[寮國]政府的企業和智慧交通，例如電子高速公路到行人助理。多年來我們不斷在南亞探索機會，這對我們的長期發展很重要，也是我們現有的公共安全擴張策略之一。

Our next question is coming from (inaudible) Insurance.

我們的下一個問題來自（聽不清楚）保險。

I only have one follow-up question, regarding iPhone adoption. On the 2018 guidance, already talking about the adoption of new accounting principle to offset bundled sales from highly amortizing pension subsidy by using relative market value method instead of residual value method of our debt? And the question, the second question will be from -- probably be the range of your EBITDA target, EBITDA IV accounting principle was applied?

我只有一個後續問題，關於 iPhone 的採用。在2018年的指導中，是否已經在談論採用新的會計原則，透過使用相對市場價值法而不是我們債務的殘值法來抵消高攤銷退休金補貼的捆綁銷售？第二個問題可能是您的 EBITDA 目標範圍，是否應用了 EBITDA IV 會計原則？

To answer your question number one. After the participation of IFRS 15, the company -- we recognize more device sales in the counter years and the less communication for this revenue in the subsequent contract periods. Also the incremental cost of [operating] contract will be recognized as an asset to the extent -- to the extent -- we expect to recover those costs. Before the appreciation of IFRS 15, the relevant expenditures such as pension subsidiaries and commissions were recognized as costs, and the application of IFRS 15 -- increase of the -- of our return earnings on January 1, 2018. We will discuss this in fact -- effect numbers in March this year.

回答你的第一個問題。參與 IFRS 15 後，我們確認櫃檯年份的設備銷售增加，而後續合約期間內該收入的溝通減少。此外，[營運]合約的增量成本將在我們預期收回這些成本的範圍內被確認為資產。在 IFRS 15 公升值之前，退休金子公司和佣金等相關支出被確認為成本，而應用 IFRS 15 則增加了我們於 2018 年 1 月 1 日的回報收益。事實上，我們將在今年三月討論這個問題的影響數據。

Would you like to give us a sense that how will be the range of EBITDA target if the old accounting method was applied?

您能否讓我們了解一下，如果採用舊的會計方法，EBITDA 目標的範圍將如何？

I think the EBITDA target in the range under the old accounting method, I think that probably, we -- we are not going to disclose that part. But in our first quarter, financial reports, we have some other kind of method to make the investor have a more comprehensive understanding. But right now, we don't have any range of that to report.

我認為 EBITDA 目標在舊會計方法下的範圍內，我認為我們可能不會透露這部分。但在我們第一季的財務報告中，我們還有一些其他的方法來讓投資人有更全面的了解。但目前，我們沒有任何範圍可報告。

(Operator Instructions) As there are no further questions, I will turn it back over to President, Sheih. Go ahead, please.

（操作員指示）由於沒有其他問題，我將把它轉回主席 Sheih。請繼續。

Thank you, everybody. Thank you for your attention. Thank you.

謝謝大家。感謝您的關注。謝謝。

Thank you, President Sheih. Thank you for your participating 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.

謝謝謝主席。感謝您參加中華電信會議。一小時內將進行網路廣播重播。請造訪 www.cht.com.tw/ir 的 IR 日曆部分。您現在可以斷開連線。再見。