Chunghwa Telecom Co., Ltd Sponsored ADR Stock

Good afternoon, ladies and gentlemen. Welcome to Chunghwa Telecom Conference Call for the company's second quarter 2026 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.

And now I would like to turn it over to Ms. Angela Tsai, the Vice President of Finance. Thank you. Ms. Tsai, please go ahead.

Thank you. I'm Angela Tsai, Vice President of Finance at Chunghwa Telecom. Welcome to Second Quarter 2026 Earnings Results Conference Call. Joining me on the call today are Chunghwa's President, Rong-Shy Lin; and our Chief Financial Officer, Audrey Hsu.

During today's call, management will begin by sharing our recent strategic achievements and providing an overview of our second quarter business results. This will be followed by a discussion of our segment performance and financial highlights. We will then open the floor for questions and answers. Please turn to Slide 2 to review our disclaimers and forward-looking statement disclosures.

Now without further delay, I will turn the call over to President. President Lin, please go ahead.

Thank you, Angela, and hello, everyone. Welcome to our second quarter 2026 results conference call. We are excited to announce robust second quarter and first half results with revenue, operating income, net income and EPS all exceeded the high end of our guidance. Notably, total revenue for the second quarter climbed to its highest for any second quarter since 2010, driven by the solid business growth. In addition, our ICT revenue reached its highest second quarter level since 2021. Based on our outperformance in the first half, we are confident in achieving our full year performance targets.

In 2026, we continue to invest in AI and see concrete results. In the morning today, we announced the kickoff of the operation of our newly built AI data center in Lunping, Taoyuan, which is expected to add up to 36 megawatts to our total IDC capacity upon full build-out. In July, we were pleased to sign a memorandum of understanding with Taiwan Stock Exchange to provide dedicated colocation capacity within our new AI data center in Taichung, currently under construction, further expanding our market-leading financial colocation ecosystem in Taiwan.

Both achievements demonstrate our ability to convert AI infrastructure investments into long-term financial return. Furthermore, leveraging our leading AIDC infrastructure and Sea-Land-Sky network deployment, we are positioning Chunghwa Telecom as the region's unique AAA Hub for the AI era. Powered by our IOWN network and distributed AIDCs, the AAA Hub delivers 3 core values: assurance, providing resilience sea-land-sky connectivity, All-Photonics, enabling ultra-high capacity, low latency and energy-efficient networking through IOWN and AI Hub connecting distributed AI, computing resources across the Asia Pacific to support customers' AI development.

In addition, in terms of IOWN, we would like to highlight the IOWN AI Fund, which is the financial instrument we jointly established with global partner in June. The fund aims to not only build the IOWN ecosystem, but also create new business opportunities through technology investments as all investors believe the optical ecosystem is essential to the AI development.

Our subsidiaries also continue to seize AI-related opportunities. In the second quarter, Chunghwa Telecom Precision Tech commenced new factory construction to meet growing AI semiconductor testing demand, while Chunghwa Telecom -- Chunghwa leading photonics tech, which stands to benefit from potential opportunities in the AI supply chain. Began trading on the emerging stock exchange in June.

Finally, we are delighted to report thast ESG recognitions received in the second quarter, including the CDP's top A-List rating for the supplier engagement and the Best Issuer for Sustainable Finance and the Best Sustainability Bond award from The Asset. And the top 5% of Taiwan Stock Exchange listed companies for the corporate governance. Additionally, we are proud to report that despite continued revenue growth in 2025, we remained on track with our SBTi commitments reducing Scope 1 and Scope 2 greenhouse gas emission by 24.5% from our 2020 baseline and Scope 3 emissions by 10.8% from our 2021 baseline.

Now let's move on to our second quarter 2026 results. In the second quarter, we continued our market share leadership in Taiwan's mobile market. Our mobile revenue market share continued to increase, climbing to a record high of 41.2%, while our subscriber market share rose to 39.8% according to our telecom regulator. We would particularly like to highlight the strength of our premium revenue base as our revenue share continued to exceed our subscriber share.

Our 5G performance was equally impressive. The 5G market share in Taiwan reached 39.4% maintaining #1 status, while 5G penetration rate among smartphone users increased to nearly 49% as of June. The average monthly fee uplift from 5G migration remained stable at 36% and the postpaid churn rate stayed at a low level of 0.36%, reflecting strong customer loyalty. Thanks to the market-leading subscriber base, growing 5G adoption and the increased roaming revenue on a year-over-year basis, our mobile service revenue grew by 3.2%, outperforming the industry average.

Meanwhile, postpaid ARPU increased by 2.4% or TWD [ 13 ]. Notably, we observed our roaming revenue increased 19% year-over-year in the second quarter with inbound roaming revenue growing 42%, benefiting from the robust tourism demand and increasing international travel activities.

Let's move on to Slide 6 for our fixed broadband business update. In the second quarter, we were glad to see the number of the subscriber adoption services speeds of 300 megabits per second and above reached 42% of our total fixed broadband subscriber base and the number continued to increase quarter-over-quarter. Among them, subscribers adopting 1 gigabits per second and above increased 61% year-over-year, supporting by the continued of our broadband promotion package.

As a result, fixed broadband revenue in the second quarter posted a 3% increase year-over-year, while the ARPU rose year-over-year by TWD 20 to TWD 824 per month. Fixed broadband subscriber also continued to deliver positive growth year-over-year. We will continue to keep the business up and sustainable.

Page 7 highlights the performance of our million subscriber consumer services. In the second quarter, signs up of our multiple-play offering, which integrates mobile fixed broadband and Wi-Fi services continued to grow year-over-year for the 18th consecutive quarter, representing a 14% increase year-over-year and driven up over our overall telecom revenue growth. Notably, our Wi-Fi penetration among fixed broadband subscribers reached 57% as a solid basis for the smartphone connectivity.

As the 2026 FIFA World Cup kicked off in June and ran through July, it successfully boosted video subscription number to their annual peak in July. At the same time, the introduction of data payment, real-time match data and highlights feature during this FIFA World Cup helped drive total views of tech-supported broadcast across MOD and Hami Video up 24% compared with the previous tournament. As a result, we are glad to see our total OTT revenue in the second quarter increased 20% year-over-year. With the upcoming Asia games in the third quarter, we are optimistic about our video performance through the next quarter.

Lastly, our digital services continued to deliver solid growth. The subscriber number of our consumer cybersecurity services maintained over 1 million and delivered 11% year-over-year growth, supported by the rising awareness of digital security. Meanwhile, the number of transacting users of our Digital Carrier Billing or DCB increased by 4.7% year-over-year as customers continue to adopt digital net content, gaming and AI application tool. We continue to see the potential growth in DCB services going forward.

Slide 8 illustrates the key developments in our Enterprise ICT business. Through the collective efforts across the group, our ICT business delivered another strong quarter with revenue increasing 32% year-over-year, driven by the continuous expansion of emerging services. Recurring ICT revenue also grew by 9%, maintaining solid momentum across major service lines, particularly IDC, cybersecurity and international public cloud services.

Among our core ICT service pillars, Big Data, Cybersecurity and IDC are the key growth driver drivers, posting year-over-year growth of 167%, 34% and 14%, respectively. Big Data revenue surged and Cybersecurity revenue grew strongly, driven by the recognition of large-scale projects for public sector customers, while IDC revenue growth was supported by the installation project for the manufacturing companies.

Notably, a key highlight is our second high ICT order intake built on the strong momentum in ICT contract acquisitions during the first quarter, our ICT order intake remained robust in the second quarter with contract value increasing by 30% year-over-year. As a result, the total ICT contract value secured in the first half of the year has already matched full year's total amount achieved in 2025, reflecting a strong project pipeline and reinforcing our confidence in future growth.

As of June, our major contract win in the second quarter include large-scale AIDC projects, which are expected to further increase AI-related revenue. Flagship Taipower energy storage project positioning us with us for additional smart grid opportunities and multiple smart surveillance projects from correctional institutions, demonstrating our ability to replicate successful deployment across the sector.

In addition, we became the first telecom operator to provide cloud-based encryption sharing services to the financial industry, further reinforcing our differentiated ICT market leadership.

Slide 9 highlights the robust performance of our international subsidiaries and the global network performance. In the second quarter, our international subsidiaries delivered impressive performance as aggregate revenue increased 242% year-over-year, particularly due to the large-scale ICT project deliveries across the United States and the Southeast Asia. In the United States, revenue increased more than 11-fold year-over-year, mainly due to the delivery of the large-scale AI supply chain projects in Texas.

Meanwhile, revenue in Southeast Asia doubled on year, supported by the ongoing construction project for key customers in Singapore and Vietnam. Encouragingly, with our proven overseas IC integration expertise, we have successfully secured new projects across the United States, Singapore and Thailand, providing strong visibility into future growth. In addition to the strong momentum of overseas ICT business, our network resilience business continued to expand with our Asia Pacific AAA Hub strength.

Satellite services revenue increased 14% year-over-year, supported by increasing adoption of satellite connectivity solution across industry. Notably, satellite-related ICT contracts secured in the first half exceeded TWD 200 million, highlighting the growing demand for the diversified communication infrastructure. Another key growth driver from AAA's Hub, strength is International Private Leased Circuit business, whose revenue increased 8% year-over-year, mainly driven by SJC2 and Apricot submarine cable.

Looking ahead, given the run-up of the AI-driven data traffic and the growing international connectivity demand resulting from the geopolitical uncertainty, we are well positioned to capture these opportunities, supported by continued investment in submarine cable and satellite projects.

Now let's move on to the Page 10 for the financial performance of our 3 business groups. In the second quarter, our core telecom business remained strong. Growth in mobile services, fixed broadband and handset sales drove Consumer Business Group revenue up 4.8% year-over-year, while income before tax increased a solid 3.6%. Beyond our core telecom business, ICT business continued to be a key growth engine. Strong ICT demand, along with the growth in mobile and broadband services lifted the Enterprise Business Group revenue by 3.7% year-over-year, while income before tax increased 2.1%.

In the second quarter, the strongest performance came from our International Business Group, which saw growth across every segment, resulting in an approximately 79% increase in the revenue on year and a 31% increase in income before tax on year, respectively. This was propelled by rising demand for ICT integration projects, mainly driven by the relocation of AI supply chain, contribution from the SJC2 and Apricot submarine cables as well as the strong roaming revenue increase.

That concludes the business overview for the second quarter. Now I would like to hand the call over to Audrey for the financial update.

Thank you, President. Good afternoon, everyone, and thank you for joining us today. I'm pleased to walk you through our financial performance for the second quarter of 2026. Please turn to Slide 12. In the second quarter, we delivered record high performance for the period. Consolidated revenue reached TWD 61.36 billion, representing an 8.2% increase year-over-year and making our highest Q2 top line since 2010.

This strong momentum was driven by 3 primary engines. First, our ICT business achieved its highest Q2 revenue since 2021. This is also propelled by our overseas subsidiaries fulfilling major AI supply chain projects in the U.S. and Southeast Asia, alongside the domestic growth in the Big Data, Cybersecurity and AIDC capacity. Second, product sales grew behind elevated handset ASPs at Chunghwa and strong AI testing contribution from Chunghwa Precision Test. Third, our core telecom service continued their steady expansion, reinforced by ongoing high-tier 5G migration and broadband speed upgrades.

Moving to operating profitability. Income from operations rose 5.7% year-over-year. Beyond top line scale, this operating growth reflects high margin flow-through from our core telecom business, supported by 5G adoption and fixed broadband speed upgrades, paired with margin accretive contribution from Chunghwa Precision Test.

On the bottom line, EPS expanding to TWD 1.38, up from TWD 1.31 in the prior year period makes our highest second quarter EPS in 10 years. EBITDA also increased 4.1% to TWD 23.52 billion, maintaining a healthy EBITDA margin of 38.32%. Turning to our year-to-year performance shown in the final column, H1 revenue increased 7.8% year-over-year, driven by broad-based growth across ICT, mobile sales and core telecom service.

Operating income rose 5.2% to TWD 26.36 billion. Net income grew 3.9% to TWD 20.75 billion, and EPS reached TWD 2.68, up from TWD 2.57 last year. EBITDA expanding 3.8% to TWD 46.82 billion underscoring our recurring cash flow strength. Overall, this balanced result gives us strong confidence in achieving our full year targets.

Please turn to Slide 13 for an overview of our balance sheet position. Total asset increased by 3.3% year-to-date, primarily driven by current assets. This was mainly due to growth in cash, time deposits, NCDs and inventories, reflecting higher investment in ongoing ICT projects. On the liability side, total liabilities rose 27.1% compared to year-end 2025, largely driven by the seasonal recognition of dividend payable.

As of June 30, 2026, our reported debt ratio stood at 31%. Excluding dividend payable, our adjusted debt ratio improved to 23.72%, down from 25.21% at year-end 2025. More importantly, our interest-bearing debt ratio remains very low at approximately 5%, reflecting minimum financial leverage and prudent balance sheet management. Our core financial health remains robust with a current ratio of 122.3% and a net debt-to-EBITDA ratio standing at 0, underscoring our solid financial position.

Moving to Slide 14 for our cash flow summary for the first half of 2026. Net cash provided by operating activities remained healthy over the 6-month period. Working capital was mainly impacted by higher inventory spending for ongoing ICT projects, but this was largely offset by strong cash inflows from contract liabilities and lower payable outflows.

On the investment side, first half total CapEx was TWD 9.85 billion, down 14.3% year-over-year. Mobile CapEx declined 9%, reflecting the normalization of investment following the peak phase of 5G network deployment, while nonmobile CapEx decreased 16.3%, primarily due to a higher comparison base last year. We also expect a greater portion of CapEx this year to be deployed in the second half of the year. As a result, our 6-month free cash flow reached TWD 21.89 billion. Our overall cash position improved year-over-year and remains very solid continuing to comfortably support both ongoing business expansions and shareholders' returns.

Turning to Slide 15 for our performance relative to guidance. As our President noted at the beginning of our call, we delivered outstanding second quarter results with top line revenue exceeding our expectations. This outperformance was supported by continued ICT momentum, steady core telecom growth and stronger-than-expected product sales. Importantly, revenue growth outpaced operating expense growth, reflecting solid operating leverage and cost discipline.

Although project-related costs grew alongside higher ICT revenue recognition, total expenses remained well within target. Consequently, all key profitability metrics, operating income, net income, EPS and EBITDA came in above the high end of our guidance. That concludes my financial overview. Thank you for your time.

I will now hand the call back to the operator for Q&A.

[Operator Instructions] Firstly, we'll have Charlie Bai of HSBC for questions.

Congratulations on this very strong result. I saw spectacular growth in the international sector. May I know more about the long-term guidance and visibility in this segment, because I know that some could be project based and how do we see the long-term demand? And would you mind breaking down for different regions such as U.S., Southeast Asia, et cetera.

Charlie, thank you very much for your question. I guess the question is you want to look at the outlook for the international sector and long-term guidance and visibility in the segment. As we see the global trend of the AI development, we continue to see growing interest from international customers, particularly in AI infrastructure, international connectivity and data center service in the U.S. and also in Southeast Asia.

While our primary market remains Taiwan, we believe that this AI expansion across the Taiwan, U.S. and Southeast Asia is continued in -- aligned with the AI development growth. Is there -- do you need any -- I mean, is there anything that you want me to add on for this issue?

Yes. Maybe more color on the project type. Are they mostly AI data center build-out or any kind of more color is really appreciated.

Okay. Charlie, maybe I can give you some information. As the projects we acquired, we see in the United States market, actually, we -- so far, we see just like Audrey said, we see a lot of opportunities related with the AI supply chain, right? Actually, for the opportunities, actually, I think in this year or next 2 to 3 years, the opportunities is like several billion NT dollars.

Next one, Ranjan Sharma, JPMorgan Singapore.

I have 3 questions. Firstly, on the AIDC, what is the required investment to build out the 36 megawatts of the data center capacity? And what is your projected IRR? The second question is on IOWN. You talk about expanding investments. Can you help us understand what you're doing here? What is the required investment? And what is the impact that you see on your financial outlook going forward?

The last question is, if you can remind us on the enterprise ICT side, there seems to be a lot of volatility in the revenues from one quarter to another quarter. If you can help us understand the drivers of that?

Ranjan. Thank you very much for the issue about the AIDC. For the question about AIDC that as we mentioned earlier that our Lunping AIDC and Taichung AIDC are under construction to provide AIDC service for our confirmed customers. While you are interested in this IRR, we don't usually disclose the expected IRR for individual projects. However, just to give you some idea that regarding the Taiwan's IDC market, we would like to highlight our leading position. On a group basis, combining the capacity of Chunghwa Telecom subsidiary, Chief Telecom, our IDC market share in Taiwan reached 78% as of the second quarter, maintaining our position as a market leader.

I think this information may give you some idea about our value of the IDC in Taiwan. Also another point is that while we don't disclose the detailed IRR for individual projects, each investment is subject to our very disciplined capital allocation framework and investment evaluation. We only proceed with projects that meet our financial and strategic return requirement and can help create long-term shareholder value, then we will consult the project. I hope this is helpful for your question about the first question.

Yes. Can you help with like the amount of investment required to build out 36 megawatts of capacity?

Okay. Ranjan, are you asking the total capacity of IDC and AIDC right?

Yes, the amount of investment required to build that capacity.

Investment required for what?

To build the capacity, how much capital do you need to deploy to build the capacity?

Well, actually, for the Lunping AIDC, we say that when it's build out -- we completed the build-out, then the maximum it could provide is the 36 megawatts. But the AIDC is building by phases. Our investments injected is by phases, yes. But we don't disclose the total capital we invest for the Lunping AIDC, yes.

In terms of your last question is about the ICT volatility, the ICT revenue, right? Actually, we foresee that for this year, the ICT revenue, the volatility is the pattern is similar to the previous year. We are quite confident to beat our ICT revenue target for this year, yes.

Okay. The last question on IOWN.

Sorry, could you repeat the question about IOWN?

Yes. Can you help us understand the investments that you're making in IOWN? How much capital that you're deploying there? And how does that impact your business outlook going forward?

If you are asking about the IOWN AI fund, right? Is there a question you want to ask?

Yes. And also like how -- what is the revenue opportunity from IOWN?

Actually, we see that IOWN ecosystem is quite important in the AI era because in our plan, we want to connect our AIDC, the distributed AIDC at home and abroad through the IOWN network -- connected by IOWN network. But this is still in the early stage that we invest in building up this kind of network. In terms of revenue, I think it still takes time to gain the real revenue from IOWN network, yes.

To add on some -- I think nowadays in the semiconductor, the All-Photonics issue is becoming a key driver for the next generation of the data center. I think IOWN is quite important for the next-generation data center. We believe that this kind of -- at this moment, this can help us to build our competitive advantage given that, as I just mentioned that AIDC, we are the major player.

We take almost reaching 80% of the market share in Taiwan, and we believe that -- and given that so many customers in Taiwan have the position across the Asia Pacific. We view IOWN as both the technology and business initiative. While this ecosystem development takes time, we believe it provides an important foundation for future AI-related service and next-generation network capabilities.

[Operator Instructions] If there are no further questions, I will turn it back over to President Lin. Thank you.

Okay. Thank you very much for your participation. See you. Bye-bye.

Thank you, President Lin. Ladies and gentlemen, we thank you for your participation in Chunghwa Telecom's 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. Thank you again. Goodbye.

Good afternoon, ladies and gentlemen. Welcome to Chunghwa Telecom Conference Call for the Company's First Quarter 2026 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.

Now I would like to turn it over to Ms. Angela Tsai, the Vice President of Finance. Thank you. Ms. Tsai, please go ahead.

Thank you. I'm Angela Tsai, Vice President of Finance, Chunghwa Telecom. Welcome to our first quarter 2026 earnings conference call. Joining me today are Chunghwa's President, Rong-Shy Lin; and our Chief Financial Officer, Audrey Hsu.

During today's call, management will begin by sharing our recent strategic achievements and providing an overview of our first quarter business results. This will be followed by a discussion of our segment performance and financial highlights. We will then open the floor for questions and answers.

Please turn to Slide 2 to review our disclaimers and forward-looking statement disclosures. Now without further delay, I will turn the call over to our President. President Lin, please go ahead.

Thank you, Angela, and hello, everyone. Welcome to our first quarter 2026 results conference call. To begin, we are pleased to announce that our 2025 cash dividend per share is set to TWD 5.2 with a payout ratio of 104.2%, reflecting both our confidence in operational performance and the commitment to shareholders. For 2026, we are glad to see strong financial performance of the first quarter with all metrics exceeding quarterly guidance. Our revenue for this first quarter hit a record high for any first quarter since 2012, mainly driven by outstanding ICT revenue growth. In addition to our strong mobile and fixed line performance, our operation income, net income and EPS in the first quarter further elevated on a healthy upward trajectory. This represents a very positive start to the year.

Given the steady business growth in 2026, we plan to further deploy resources for the capturing pre-6G and the AI-related opportunity. In the mobile front, we will continue our gradual construction of 5G stand-alone network. The SA deployment in our plan is a necessity to transition to 6G and will be progressively rolled out in phases, based on demand. Certain select verticals such as unmanned vehicle and autonomous driving are using SA network. In addition, we are extending SA deployment to high-traffic areas to support commercial demands and events like exhibitions, sport games and the art performances.

Another important development in 2026 is the utilization of agentic AI building on the generative AI catalyst initiatives launched internally in 2025. We further expanded the use of agentic AI to enhance operational workload and upgrade our service offering. From a revenue perspective, we continue to monetize our AI infrastructure, delivering solid revenue growth particularly driven by AI data center. On the technology front, we would like to highlight our self-developed CHT AI Factory platform by integrating DeepFlow solutions, compute power and a portfolio of AI models and agents. The platform not just supports the development of our own enterprise copilots through various AI agents, but also enable us to offer AI-enabled applications to enterprise customers, including smart home ecosystem and smart manufacturing in 2026. We remain confident in the growth potential of this AI-enabled solution.

Finally, in the first quarter, alongside our technological leadership, we remain equally dedicated to setting new global ESG benchmarks. We retained our MSCI ESG rating of AAA in 2026, underscoring our position as the top-tier telco with the highest scores among global peers by April. In February, 1 year ahead of regulators' requirement, we successfully became the first in Taiwan to file a group-based sustainability-related financial information of 2025, fully compliant to IFRS standard 1 and Standard 2, representing our transparent ESG financial disclosure. In addition, at the forefront of the industry, we ranked in the top 5% of the S&P Global Sustainability Yearbook for the fourth consecutive year and maintained our position in the Dow Jones best-in-class World Index and Emerging Market Index. Furthermore, we secured our third consecutive A ranking from the CDP survey, maintaining the climate leadership position.

Now let's move on to our first quarter 2026 results. Please turn to Page 5 for our success in Taiwan's mobile market. In the first quarter, we continued our market share leadership in Taiwan's mobile market. According to data from our telecom regulator, our mobile revenue market share rose to 41.1%, a historic high, while our subscriber share among peers climbed to 39.7%, mainly driven by the continued growth in the postpaid subscribers and the strong roaming performance in the quarter. Our 5G performance was equally impressive. Based on regulators' data, our 5G subscriber market share was up to 39.4%, maintaining our industry-leading position. The 5G penetration rate among our smartphone users further increased to near 48% by this March, while the average month fee uplift from 5G migration slightly decreased to 36% due to a onetime factor.

With the combined strength of our expanding subscriber base and the growing 5G adoption, our mobile service revenue growth outpaced the industry, achieving an exciting 4.4% increase year-over-year. Postpaid ARPU also grew by 3.6%, TWD 20 on a year-over-year basis. We expect this positive trajectory to continue, supported by Taiwan's favorable mobile market landscape.

Let's move on to Slide 6 for our fixed broadband business update. In the first quarter, we are glad to see the number of subscribers adopting service speed of 300 megabits per second and above reached 40% of our total fixed broadband subscriber base, which is encouraging. As a result, our fixed broadband revenue in the first quarter posted a 3% increase year-over-year, while the ARPU obtained a year-over-year rise of TWD 20 to TWD 818 per month. Fixed broadband subscribers delivered a positive growth year-over-year. Going forward, we will continue to promote high-speed services such as 500 megabits per second and 1 gigabit per second and above to further enhance our customer profile and gain incremental ARPU.

Page 7 highlights the performance of our million subscriber consumer services. The first growth driver was our multiple-play offering. which integrated mobile, fixed broadband and Wi-Fi services, subscription surpassed the milestone of 1 million in the first quarter, representing a 15% year-over-year growth. Notably, our Wi-Fi penetration among fixed broadband subscribers reached 55%, reflecting our significantly enhanced in-home coverage, anchoring customer loyalty and driving sustained ARPU expansion. The most encouraging performance was recorded in our video business, thanks to the excitement around the 2026 World Baseball Classic. In the first quarter, total video subscribers, including MOD and Hami Video recorded a 6% quarter-over-quarter increase, successfully exceeding 3 million subscribers. Meanwhile, Hami Video ARPU also demonstrated encouraging double-digit growth year-over-year.

Looking ahead, as we are preparing for the upcoming FIFA World Cup in the second quarter and the Asia game in the third quarter, we plan to leverage long-term subscription offering and sustain user engagement across consecutive major sports events throughout the year. Lastly, our digital service delivered 2 additional million subscriber milestone. The subscriber number of our consumer cybersecurity services maintained above 1 million during the quarter, while the number of transacting users of our DCB services also exceeded the 1 million threshold during the same period, reflecting the sustainable growth momentum of our digital ecosystem.

Slide 6 (sic) [ Slide 8 ] illustrates the key development in our enterprise ICT business. With the group collaboration, our group ICT revenue in the first quarter increased 25% on year due to continued expansion of emerging services. Recurring ICT revenue also grew by 11% maintaining strong growth momentum across all major services line, particularly cybersecurity, IDC and international public cloud services. Among our core ICT services pillars, IDC, cloud and AIoT continue to be the key growth drivers, posting year-over-year growth of 29%, 43% and 26%, respectively. IDC revenue was mainly driven by the installation projects from a manufacturing company. Cloud revenue received contributions from government taxation projects and the smart environment solutions continue to support AIoT revenue growth.

In addition, on a year-over-year basis, our big data service revenue grew by 8% and the 5G private network services revenue surged, both thanks to project revenue recognition from both domestic and international public sectors. However, revenue from cybersecurity services declined due to the high comparison base last year. We are even more proud to share that our ICT order intake in the first quarter recorded a new high with country value amounting to TWD 20 billion mainly representing opportunities from network resilience, project and a large follow-on project on national fiscal and surveillance assistant Notably, the value of the smart surveillance project obtained exceeded TWD 1 billion, underscoring our #1 market leadership position in surveillance services.

in addition, our home ground AI traffic flow, identification and analysis technologies continue to win us smart transportation projects. While our subsidiary. Next bank also worked with us to leverage our telecom data on loan decisions both represent replicable solution for more future projects in specific verticals. Slide 9 highlights the robust performance of our international subsidiaries. In the first quarter, international subsidiary revenue is -- grew 20% year-over-year mainly driven by major ICT project delivers across the United States and the Southeast Asia market. especially U.S. revenue surged 89% year-over-year, driven by a successful revenue recognition of large-scale AI supply chain project. while Southeast Asia revenue increased 16% year-over-year due to contribution from a fast construction project as a key customer facility in Singapore.

We continue to secure large-scale project contracts in the United States while extending this proven expertise into Southeast Asia. Starting from this quarter, we are pleased to report our financial return from network resilience deployment. In the first quarter, our satellite service revenue increased 16% year-over-year, stemming from our satellite connectivity solutions across multiple sectors, including government, multinational enterprise, high-tech and offshore energy industry. Additionally, revenue of international private lease line or Leased Circuit or IPLC rose 6% year-over-year, mainly driven by the recurring revenue contribution from our SJC2 and APRICOT submarine cables, starting from the previous quarter, Excitingly, to meet surging connectivity demands, we expanded the capacity of AUG East submarine cables by additional 18 terabits per second spending routes from Taiwan to Japan and Taiwan to Singapore.

The expansion is expected to support medium- to long-term bandwidth demands across Asia and serve as a key driver of long-term revenue growth.

Now let's move on to Page 10 for the financial performance of our 3 business groups. In the first quarter, thanks to steady revenue growth in the mobile and fixed broadband services higher sales revenue, driven by the strong iPhone demand. Our consumer business group delivered a robust 6.2% year-over-year revenue increase and a solid 5.3% year-over-year income before tax increase broadly underpins the group's outperformance. For Enterprise Business Group, its revenue rose to -- rose by 8.5% year-over-year, driven by strong ICT business and growth in mobile and fixed broadband services.

However, fixed income before tax dropped by 2.7%, mainly due to fixed voice service decrease, which offset the growth in ICT business, as mentioned earlier, for international business group, both of its revenue and income before tax grew positively by 10.7% and 1.6%, respectively, driven by the rising ICT service demand from the overseas AI supply chain, together with a strong roaming performance. That concludes the business overview of the first quarter. Now I would like to hand the call over to Audrey for the financial update.

Thank you, President. Good afternoon, everyone, and thank you for joining us today. I'm pleased to walk you through our financial performance for the first quarter of 2026. Please turn to Slide 12. We reported consolidated revenue of TWD 59.99 billion this quarter. This represents a year-over-year increase. It is also a record high for the first quarter. This growth was driven by 3 key factors. First, our ICT business delivered strong momentum. This was supported by integrated projects, IDC and cloud demand and AIoT expansion. Second, sales revenue was very strong. This was mainly driven by handset demand at both the parent company and our subsidiaries now. Also, our subsidiary, Chunghwa Precision expect also contributes meaningfully Third, our core telecom business remained stable. We saw steady growth in mobile, broadband and data service. Income from operations increased by 4.6%. This growth was supported by the sustained profitability of our core telecom business as well as strong earnings contribution from our subsidiaries.

In addition, the recognition of a higher-value integrated projects, together with the continued scaling of our IDC and cloud operations further improve our operating margins and overall earnings quality. As a result, earnings per share increased from TWD 1.26 to TWD 1.3, reflecting our consistent profitability and making the highest first quarter EPS in the past 10 years. EBITDA for the quarter remained stable at TWD 23.3 billion, with a healthy EBITDA margin of 38.85%.

In summary, these results reflect high-quality earnings growth across our business segments. So now please turn to Slide 13 as we move on to our balance sheet highlights. Total assets increased by 2.3% year-to-date, primarily driven by a rise in current assets. This was led by an increase in time deposits and CDs along with seasonal increases in prepaid expenses, inventories and accounts receivable to support our business operations. Additionally, investment properties rose following the completion of the new rental sites, while the net decrease in PPE reflects depreciation charges for the period.

On the liability side, total obligations increased by 1.1% compared with year-end 2025. The increase was mainly attributable to a higher bonds payable driven by the issuance of convertible bonds by our subsidiary, Chunghwa Precision Test Tech. Aside from this, our liability structure remains stable. Our financial strength is further reflected in our key ratios. The debt ratio improved to 24.92% while the current ratio remained healthy and well above 100%. Most notably, our net debt-to-EBITDA ratio to 0 highlight our solid financial position.

Now let's move to Slide 14 for our cash flow summary, where we will review our performance for the first quarter of 2026, Net cash provided by operating activities remained healthy in the first quarter. Year-over-year changes in operating cash flow were mainly driven by working capital movements. Lower cash inflows from accounts receivable were largely offset by reduced cash outflows from accounts payable. Additionally, we saw an increase in cash outflows related to inventory movements reflecting our efforts to support upcoming business expansions.

On the investment side, CapEx totaled TWD 4.55 billion represent a planned year-over-year decrease of 15.9% and Mobile CapEx declined by 24.4%, in line with our strategy to gradually reduce capital intensity as we move beyond the peak of the 5G deployment cycle. Nonmobile CapEx decreased by 12.8%, mainly reflecting a higher base in the previous year. As a result, free cash flow reached TWD 6.65 billion. Despite modest year-over-year fluctuations, our cash position revamped very solid. Our recurring cash generation continues to comfortably support both business expansion and shareholder returns.

Turning to Slide 15 for our performance highlights relative to guidance. In the first quarter of 2026, we delivered strong results with revenue exceeding our guidance. This performance was supported by continued growth in our ICT business, stable contribution from our core telecom operations and stronger-than-expected sales revenue. Most importantly, revenue growth continued to outpace the increase in operating expenses, reflecting improved operating efficiency and disciplined cost management. While certain project-related costs increased alongside higher ICT revenue recognition. Overall cost control remained well within expectations.

As a result, all key profitability metrics including operating income, net income, EPS and EBITDA came in above expectations for the quarter. So now this concludes our financial results highlights. So thank you for joining us today, and we will now open the call for questions.

And ladies and gentlemen, we will now begin the question-and-answer session.

[Operator Instructions]

Okay. We got a question from our platform that how sustainable is the ICT business? And what is the outlook for the rest of 2026 and beyond? And what is the impact of AI on the IT services industry? Okay.

I mean for the ICT business for the year 2020, I think actually, we think we remain confident and positive for the outlook of our overall ICT business. It is because of the organic growth from the ICT services and the sorry, than the AI contribution and AI, the value creation. Because as you know, for most of the digital services we provide for the customers or for the enterprise sectors. Actually, in this year, we introduced agentic AI, so which can also help to upgrade some services to meet or get it to the enterprise customer requirements. So I think for these parts, it also can contribute some revenue to the ICT business.

But in terms of the impact of AI on the IT services, I think for this part, the major impact came for the enterprise -- our enterprise sectors. And just like I said, we think that we can introduce AI to enhance the services and provide value and bring in the revenues for our overall revenue growth.

[Operator Instructions].

There is a second question from HSBC. That is the -- you had guided for a higher nonmobile CapEx for 2026. estimation. Could you please elaborate on that? And could you get an underlying trend within the nonmobile CapEx guidance. Okay. Okay. For the nonmobile CapEx for 2026 estimates, that's because we have some CapEx increase and like the IDC cost for IDC construction because in 2026, we have some AIDC construction in our pipeline. So we allocated some CapEx for the construction. And then we also continue to -- just like our President, I reported earlier during the results call. We continue to invest in the construction of undersea cable, then to enhance our network resilience. And the undersea cable also continue to contribute to our total revenue for these years.

So that's why we raised our nonmobile CapEx for year 2026.

Okay. I can also add for the 2 previous questions. The first question is about that how sustainable is the ICT. And I think that I just want to provide some overview that because due to the digital transformation demand in the industry. So we see that the ICT demand is quite sustainable. So this is for the first part for the question. And the second part for the nonmobile related CapEx. So nonmobile related CapEx, in fact, it basically includes fixed line, satellite, IDC, AIDC, PSTN. And overall, they are 3 focus. The main focus is on resilience and life cycle management. So we need to make sure that the core network can ensure security and resilience.

And also, the second part is that we also as some necessary investment to strengthen our critical infrastructure defense. And finally, we need to make sure we also expand on [ signaling ] and user capacity to meet the 2026 business plan demand for AIoT and 5G traffic. So this is also including some of the, say, functionality in a select area to future proof the network. So these are our mobile-related CapEx. But compared to last year, because last year, we have a high basis. So you could see the slight decrease of mobile CapEx in this quarter.

[Operator Instructions]

And thank you for all your questions. If there are no further questions, I will turn it back over to President Lin.

Thank you very much for your participation. See you. Bye-bye.

Yes. Thank you, President Lin. And ladies and gentlemen, we thank you for your participation in Chunghwa Telecom's conference. There will be a webcast replay within an hour. Please visit www.cht.com.w/ir under the IR Calendar section. You may now disconnect. Thank you again. Goodbye.

Good afternoon, ladies and gentlemen. Welcome to Chunghwa Telecom Fourth Quarter 2025 Operating Results. [Operator Instructions] And for your information, this conference call is now being broadcasted live over the Internet. A webcast replay will be available within an hour after the conference is finished. Please visit CHT IR website at www.cht.com.tw/ir under the IR Calendar section.

And now I would like to turn it over to Ms. Angela Tsai, Vice President of Financial Department. Thank you. Ms. Tsai, please begin.

Thank you. I'm Angela Tsai, Vice President of Finance at Chunghwa Telecom. Welcome to our fourth quarter 2025 Earnings Conference call. Joining me on the call today are Chunghwa's President Rong-Shy Lin; and our Chief Financial Officer, Audrey Hsu.

During today's call, management will begin by sharing our recent strategic achievements and providing an overview of our fourth quarter business results. This will be followed by a discussion of our segment performance and financial highlights. We will then open the floor for questions and answers.

Please turn to Slide 2 to review our disclaimers and forward-looking statement disclosures.

Now without further delay, I will turn the call over to our President. President Lin, please go ahead.

Thank you, Angela, and hello, everyone. Welcome to our fourth quarter 2025 results conference call. To begin, I am pleased to report our exceptional financial performance for 2025, driven by our dedicated efforts. Chunghwa Telecom's revenue, operating income, income before tax and EPS for 2025 all exceeded the upper end of our guidance, reflecting our strong execution and market-leading position.

On the revenue front, our full year revenue reached an all-time high, demonstrating our continued focus on strengthening our core businesses and active expansion in the ICT sector. Notably, our full year EPS of TWD 4.99 marked an 8-year high, extending our annual growth momentum for the sixth consecutive year. This milestone underscore our commitment to driving innovation and enhancing long-term shareholders' value.

Based on the strong outperformance in 2025, we are entering 2026 with confidence for our telecom businesses. We see Taiwan's mobile market remaining stable and favorable to us as the market leader. We are also pleased with our fixed broadband performance and will extend the successful existing strategy for further ARPU enhancement.

In terms of ICT business, our technology capability will continue to remain cutting edge to support future growth. A particular highlight is our satellite opportunities as we believe demand of satellite services as the communication backup solution will increase with our satellites of OneWeb and SES commencing operation in 2025. The Astranis satellite will join in second half of 2026 to enhance our multilayer satellite capability.

Furthermore, we will also focus on extending pre-6G-related opportunities in AIoT, satellite and big data services and expect their combined revenue to surpass the TWD 10 billion in 2026. We particularly expect to convert our AI capabilities into our service offering. We expect to assist our customers to integrate AI into their operational processes, legal compliance and infrastructure management.

In addition, as a leader in AI drive connectivity, we are introducing AI edge computing into our AIDC to create a new revenue stream alongside our continued construction of AIDC in 2026.

Ultimately, in the fourth quarter, we were honored with multiple awards recognizing both our ESG accomplishments and the technical acknowledgment. We won The Asset's Jade Award for corporate sustainability leadership for the fifth time, received the several AI Innovation Award at the World Communication Awards for our smart customer services solution and was recognized as the only Taiwanese telecom company on Newsweek's World's Most Trustworthy Companies 2025 list. More importantly, we have secured 4.6 billion kilowatt hour of renewable energy through a 20-year Corporate Power Purchase Agreement, CPPA, to support our 2045 net zero commitment.

Now let's turn to our fourth quarter 2025 results. Please flip to Page 4 for the business overview. Please turn to Page 5 to review our success in Taiwan mobile market. In the fourth quarter, we solidified our leadership position in Taiwan's mobile market for 2025 with record highs across all dimensions.

According to data from our telecom regulator, our mobile revenue market share climbed to unprecedented 41%, while our subscriber market share rose to 39.7%, mainly driven by continued growth in the postpaid subscriber. We are pleased with this strong result.

Our 5G performance was equally impressive. Based on regulators' data, our 5G subscriber market share increased to 39.2%, further solidify our industry-leading position. The 5G penetration rate among our smartphone users climbed to 46.4% by the end of 2025, while the average monthly fee uplift from 5G migration remained robust at 41%. Given this solid momentum, we were especially encouraged by our strong mobile service revenue growth in the fourth quarter, which achieved a recent record high of 4.7% year-over-year. Postpaid ARPU also grew 3.6% year-over-year. We expect this positive trajectory to continue, supported by Taiwan's favorable mobile market landscape.

Let's move on to Slide 6 for our fixed broadband business update. In the fourth quarter, our fixed broadband ARPU continued its upward trajectory, reaching a new high of TWD 819 per month. This represents a 3.8% increase in revenue and a 0.5% increase in subscribers year-over-year. This strong result were driven by our high-speed upgrade promotion and MOD bundle packages, which successfully boosted customer adoption of higher tier plans.

Subscribers choosing speed of 300 megabits per second and above grew by 13% year-over-year, while those opting for 500 megabits per second and above recorded a double-digit growth and the subscription for 1 gigabits per second and above doubled in the fourth quarter.

Slide 7 provides a detailed overview of the highlights from our consumer application services. In the fourth quarter, our multiple-play packages, which integrate mobile, fixed broadband and WiFi services increased by 17% year-over-year, marking the 16th consecutive quarter of expansion and representing the collective growth momentum of our customer business group. In 2025, despite the absence of major global sporting event broadcasting, resulting in overall subscription loss, our Hami video service demonstrated a solid resilience as its ARPU increased by more than 25% year-over-year in the fourth quarter.

Looking ahead, with the launch of Disney+ bundle this January and our ongoing partnership with Netflix, coupled with the exciting pipeline of popular sporting events such as the FIFA World Cup, Asia Games and et cetera, we expect to drive further revenue growth throughout 2026.

Meanwhile, our consumer cybersecurity subscription recorded 11% year-over-year growth with revenue also achieving double-digit gains, contributing to the steady growth for our consumer business group illustrated the key development in our enterprise ICT business.

In the fourth quarter, our group's ICT revenue declined by 6% year-over-year due to a higher comparison base in the same period last year, though our full year ICT revenue still recorded robust year-over-year growth. Meanwhile, our recurring ICT revenue grew 15% year-over-year, continuing to show strong momentum, supported by increases across all major service lines, particularly contributions of AIoT, IDC and international public cloud services.

Looking at the specific service categories, revenue from IDC, Big Data and 5G private network grew by 19%, 3% and 88% year-over-year, respectively. IDC performance benefited primarily from project completion in Mexico, while big data service revenue increased driven by its recurring revenue growth. Revenue from 5G private network surged, supported by the project revenue recognition from both public and private sector customers. However, revenue from cloud and AIDC business declined by 16% and 27% year-over-year, respectively, due to a high base last year.

Our cybersecurity service revenue also decreased by 16% year-over-year as the majority of our cybersecurity revenue for 2025 had already been recognized in 3 quarters. Notably, despite the quarterly fluctuation, both cloud service and cybersecurity business still delivered full year revenue growth. We are also proud to share that we secured an AI customer service solution to build the first integrated AI customer services system for a leading financial institution in Taiwan. Furthermore, we secured a flagship government system integration project to upgrade the labor insurance platform to next-generation infrastructure with a contract value exceeding TWD 3 billion.

In addition to further leverage our sea, land and sky network deployment and expand our satellite business scale, we successfully incorporated our satellite services as part of the government's joint procurement contract framework, paving the way for more long-term service contracts from government agencies. Lastly, our deployment of remote surveillance platform for correctional institution nationwide brought us 5 additional new projects in the fourth quarter with a total contract value of TWD 150 million. We expect to further replicate and scale this success in the coming year.

Slide 9 illustrates the performance of our international subsidiaries. In the fourth quarter, our international subsidiaries revenue decreased 7% year-over-year, mainly due to softened demand for voice services as well as higher comparison base in the United States and the Japan ICT market last year. However, we were glad to see a 12% year-over-year revenue increase in Southeast Asia market as we completed multiple planned construction projects in Singapore and Thailand, a trend that we expect to continue through 2026.

Notably, our Malaysia subsidiary commenced operations in December 2025, aiming to provide more timely, high-efficient ICT integration services for Taiwanese and multinational enterprise in the growing Southeast Asia market.

Look ahead of 2026, we maintain a relatively optimistic outlook for our global market development as we have secured several AI supply chain projects in the United States in our pipeline, including key projects in Texas and California, which is expected to significantly boost our U.S. market performance in 2026.

Now let's move on to Page 10 for the financial performance of our 3 business groups. In the fourth quarter, our CBG delivered a robust 6% year-over-year revenue growth, supported in both mobile and fixed broadband services, plus higher sales driven by the iPhone demand. However, its income before tax slightly decreased, mainly dragged by the final phase of 3G telecom equipment impairment, which has fully recognized in the fourth quarter and a higher comparison base from government subsidies recorded in the same period last year.

Our EBG revenue decreased by 7.9% year-over-year as most of our major ICT project has already been recognized in previous quarters, resulting in a 7% year-over-year drop in the EBG ICT revenue. Income before tax was also impacted by the onetime impairment mentioned earlier. Encouragingly, EBG mobile and fixed broadband services as well as its satellite services still delivered solid growth momentum this quarter.

As for our IBG business, revenue grew by 2.5% and income before tax increased by 1.8% year-over-year, driven by rising demand for the international IDC services and stronger roaming revenue. Furthermore, we are pleased to report that our submarine cables, SJC2 and the first phase of Apricot were completed this quarter and further boosted IBG's fixed line services revenue by 2.2% year-over-year.

Now I would like to hand the call over to Audrey for financial updates.

Thank you, President. Good afternoon, everyone, and thank you for joining us today. I'm pleased to walk you through our financial performance for the fourth quarter and full year of 2025 and share our financial guidance for 2026.

So now please turn to Slide 12 for our income statement highlights. Let's start with our fourth quarter results shown in the first 3 columns on the slide. Revenue and operations. We reported consolidated revenue of TWD 65.65 billion. This represents a steady 0.5% year-over-year increase and makes our highest fourth quarter revenue in nearly a decade. This growth was fueled by strong mobile device sales alongside the sustained momentum of our core telecom service.

Income from operations decreased by 2.2%. This was primarily due to one-off impairment losses from the 3G network sunset this quarter, coupled with a high comparative base from last year's investment property valuation gains.

Income before tax increased by 2.1% year-over-year. This growth was driven by investment disposal gains reflected in our nonoperating income. As a result of this performance, EPS increased from TWD 1.16 to TWD 1.20. This reflects our consistent profitability and marks the highest fourth quarter EPS in 10 years. Finally, EBITDA for the quarter remained stable at TWD 21.55 billion. The EBITDA margin stood at 32.82%.

So now let's expand our view to the full year of 2025, shown in the last 3 columns. The annual view reflects a strong growth trajectory. So for the full year, total revenue reached TWD 236.11 billion, a solid increase of 2.7% compared to 2024. The growth was broad-based and driven by 3 pillars. First, we saw strong momentum in our sales revenue. This was fueled by higher mobile handset volumes and the robust performance of our subsidiary, Chunghwa Precision Test in the semiconductor testing sector. Second, our ICT portfolio continued to deliver with significant contribution from high-growth areas such as IDC, cloud and cybersecurity. Third, we maintained steady growth across our foundational mobile service and fixed broadband business. So this top line strength translated directly into profitability.

Income from operations grew by 3.6% and net income rose by 4% year-over-year. Consequently, full year EPS reached TWD 4.99, up from TWD 4.8 last year. EBITDA also grew 2.6% year-over-year to a strong TWD 88.77 billion. Our EBITDA margin remained stable at 37.6%, broadly consistent with the prior year. So in summary, these results reflect high-quality earnings growth. This profit expansion was driven by sustained positive momentum in our core telecom business, complemented by the continued scaling of our IDC, cloud service and other ICT business operations.

So now let's turn to Slide 13, balance sheet highlights. So total assets increased by 0.4% year-over-year. The growth reflects strategic allocation into long-term investments and prepayments for satellite infrastructure reported in other assets. The increase was partially offset by a net decrease in property, plant and equipment as depreciation charge existed new capital additions, along with a net decrease in intangible assets due to the 4G and 5G spectrum amortization.

On the liability side, total obligation decreased by 0.7%. We repaid older loans while successfully issuing our first-ever sustainability bonds focused on biodiversity. The strategy not only strengthened our capital structure and reinforce our leadership in ESG-driven financing.

Our financial health is best illustrated by our key ratios. Our debt ratio improved further to 25.25%. Our current ratio remained healthy, well above 100%. Most notably, our net debt-to-EBITDA ratio stood at 0.

Moving to Slide 14 for our cash flow summary. We will review our performance for the full year 2025. Cash flow from operating activities decreased slightly by 2.2%. The variation was primarily driven by working capital dynamics, specifically a decrease in accounts payable between '25 and '24.

On the investment front, CapEx declined by 3.7% to TWD 27.7 billion. First, regarding mobile CapEx, spending decreased by TWD 1.4 billion. The reduction aligns with our road map to lower mobile capital intensity now that we have passed the peak of the 5G deployment cycle. Second, regarding nonmobile CapEx, spending increased by 2%. The increase was mainly driven by strategic investment in submarine cables.

Consequently, free cash flow stood at TWD 49.8 billion, a marginal decrease of 1.4% year-over-year. Despite this slight variation, we continue to maintain a strong cash position. Our stable cash flow inflows remain fully capable of supporting both our business growth initiatives and our commitment to shareholder returns.

So now let's turn to Slide 15 to review our performance highlights against guidance. So in the fourth quarter of 2025, revenue exceeds the target, showing stronger-than-expected demand. Key performance measures such as net income and EPS were all in line with our forecast.

For the full year 2025, the cumulative results validate our strategy. We are very proud to report that all major metrics, revenue, income from operations, net income, EPS and EBITDA either met or exceed our full year guidance. Again, this broad-based success was powered by our telecom business, driven by successful 5G migration and mobile service revenue growth alongside our ICT business, which capitals on expanding demand for IDC and cloud big data overseas markets.

So now moving on to Slide 16. Please see our guidance for 2026. Looking ahead, total revenue for 2026 is expected to increase between 2.5% to 3.2% year-over-year, primarily driven by growth momentum in our core business. Well-received 5G service and speed upgrade promotion packages for fixed broadband are expected to continuously enhance our subscriber numbers and ARPU. ICT business is also expected to contribute to revenue growth as we continue to see digital transformation opportunities in the market.

Operating costs and expenses are expected to increase between 3.5% to 3.7% year-over-year as a result of the investment in talent and infrastructure that support future business development in both core and emerging business. So given these projections, we expect our EPS to be in the range of TWD 4.82 and TWD 5.02.

As for capital budgeting, we have budgeted TWD 31.91 billion for 2026. Looking ahead, our strategy remains consistent with our long-term road map, balancing disciplined efficiency with strategic expansion into resilient and sustainable infrastructure.

Our mobile-related CapEx is expected to decrease by 6.3% year-over-year. This marks the fifth consecutive year of this decline since our peak in 2021. This demonstrates our ability to maintain our mobile leadership through capital efficiency as we move past the heavy 5G construction phase.

Non-mobile related CapEx is expected to increase by 24%. The investment is strictly aligned with our sea, land, sky strategy to capture emerging business opportunities while fortifying our network. Key investments include expanding submarine cables to boost connectability alongside building our IDC data center. We also strengthened infrastructure resilience by upgrading power, cooling and cybersecurity systems. We are turning digital resilience into a unique competitive advantage.

So this concludes our financial results highlights. Thank you for your attention. At this time, we would like to open the conference call for questions.

[Operator Instructions] Now the first one want to ask questions, correct me if I pronounce wrongly, okay? Rajesh Panjwani from JP Morgan.

A quick question on the CapEx. If you can give some more detail about the big increase in the nonmobile CapEx, which is almost 24% for 2026? And also, can you provide some more details about -- you're looking at like almost 3.5% to 4% increase in the operating costs, which is higher than the revenue growth as well. So can you talk a bit about that as well?

Okay. Thank you very much, Raj. So the first question is about CapEx, about more detail on mobile CapEx, about 24% increase in 2026. So there are a couple of categories, as I just mentioned, this includes the fixed line maintenance, which consists of quite the big proportion of the fixed line maintenance. And the second is about the satellite and also the cables. And the third one is the IDC.

I should say that mainly that the increase mainly coming from the IDC and also the satellite portion. And so this is for the first part.

And the second part about the increase about 3.5% of operating cost. I think that one of the main -- there are 2 main portions. One, a couple of the reasons is that one is the human resource, the talent. I think that, as you know, that we are in emerging -- in a growing -- we have a lot of the sectors in IDC. We need a lot of the AI-related talent. So investment in the human resource is one important area. And the second is that electricity. I think that we are not so sure about the electricity policy in Taiwan. So we are a bit cautious. Also, this is also a second big area that takes the cost.

The third one is about depreciation. That in the early stage, we have -- although that we try to trend down a lot of the CapEx, in recent years, as I mentioned, that discipline management is a key philosophy in our CapEx policy. But in the early stage that we still have some CapEx. So you will see -- as you see in our cash flow statements, you will see that the depreciation and also the amortization, these 2 portions is a bit much higher than the net increase of the PPE. So is that clear? Or do you want me to clarify any others?

Yes, if you can share like of the total increase in nonmobile CapEx, how much is from IDC?

Actually, we didn't separately disclose the exact number of the CapEx budget for each nonmobile items. But I can share with you that I think the CapEx for IDC and cloud it remain, I mean, like the second largest part of the nonmobile CapEx for 2026, okay? And then I want to add one more point for the mobile CapEx. As we know that the 5G CapEx investments, we had just passed the peak, right, but for 2026, actually, we will invest in as a stand-alone related applications like the network slicing for your reference. But the total mobile CapEx for 2026 actually still less than that of the 2025.

I got it. This is helpful. It would really be helpful if going forward, you can provide greater breakup of nonmobile CapEx because it's almost like more than 3/4 of your CapEx is now nonmobile CapEx. So it would be really helpful to get more details about that in the future.

Okay. Thank you for your opinion.

[Operator Instructions] There seems to be no further questions at this moment. I will turn it over to President Lin. Please go ahead, Lin.

Okay. Thank you very much for your participation. Happy New Year.

Yes. Thank you, President Lin. And ladies and gentlemen, we thank you for your participation in Chunghwa Telecom's conference. There will be a webcast replay within an hour. Please visit CHT IR website at www.tw/ir under the IR Calendar section. You may now disconnect. Thank you again, and goodbye.

Good afternoon, ladies and gentlemen. Welcome to Chunghwa Telecom Conference Call for the company's Third Quarter 2025 Operating Results. [Operator Instructions]

And for your information, this conference call is now being broadcasted live over the Internet. A webcast replay will be available within an hour after the conference is finished. Please visit CHT IR website at www.cht.com.tw/ir under the IR Calendar section. And now I would like to turn it over to Ms. Angela Tsai, Vice President of Financial Department. Thank you. Ms. Tsai, please begin.

Thank you. I'm Angela Tsai, Vice President of Finance at Chunghwa Telecom. Welcome to our third quarter 2025 results conference call. Joining me on the call today are Chunghwa's President, Rong-Shy Lin; and our Chief Financial Officer, Audrey Hsu.

During today's call, management will begin with sharing our recent strategic achievements and provide an overview of our third quarter business results. This will be followed by a discussion of our segment performance and financial highlights.

We will then open the floor for questions and answers. Please turn to Slide 2 to review our disclaimers and forward-looking statement disclosures. Now without further delay, I will turn the call over to President. President Lin, please go ahead.

Thank you, Angela, and hello, everyone. Welcome to our third quarter 2025 results conference call. Extending the outperforming results of this first half, we continue to beat the financial guidance in the third quarter. Our revenue, operating income, net income and EPS all exceeded the upper end of our forecast.

Third quarter revenue hit its highest level since 2017, reflecting the robust growth in our core business and extending ICT services. ICT revenue alone set a new third quarter record, the highest since 2021. As Taiwan's telecom market continued to develop healthy, we are confident in our full year financial results and supported by our leadership across all business segments.

For our midterm to long-term development, we believe that group expansion of -- and AI-related initiatives are critical, and we have taken proactive steps. In this area, we are pleased to see our cybersecurity subsidiary, a Chunghwa Telecom Security, successfully complete its public listing in September with International Integrated Systems soon to follow in its upcoming IPO.

Moreover, in October, we launched InventAI, a new subsidiary spun off from our research division, dedicated to monetizing AI innovation. Our AI capabilities have received significant recognition and honors. On the global stage, our first self-developed Vision-Language Model technology secured first place in the transportation category at the Global AI City Challenge, a prestigious international competition co-organized by NVIDIA and a leading university worldwide.

This recognition was earned through our technology, superior accuracy and predictive capabilities in analyzing highly complex traffic scenario. In Taiwan, we hold the largest portfolio of AI-related patents in the industry, far ahead of our peers, serving as a solid base for future development.

We are proud of these achievements and remain committed to maintaining our competitive advantages. Our technology expertise and resilient network have also created social value to benefit the public. In August, as Taiwan was suffering from catastrophic typhoon, we overcame challenges to deliver portable OneWeb equipment and restore communication in isolated area affected by the breakdown, demonstrating our commitment to social responsibility.

Additionally, as we continue to invest in facilitating ESG practice, we completed the issuance of TWD 3.5 billion sustainability bond in the third quarter to promote biodiversity, EV initiatives and other environmental projects. This reflects our action to integrate ecological conservation, decarbonization and green finance to progress towards net zero.

Now let's move on to the business overview of the third quarter of 2025. Please turn to Page 5 to review our success in Taiwan's mobile market. In the third quarter, we further strengthened our leadership position in Taiwan's mobile market. According to the data from our telecom regulator, our mobile revenue market share climbed to a new high of 40.8%, while our subscriber share among peers rose to 39.4%, representing an encouraging 1.6 percentage point year-over-year increase, mainly driven by continued growth in the postpaid subscribers.

We are pleased with this solid growth momentum. Our 5G performance was equally impressive. Based on regulators' data, our 5G subscriber market share rose to 38.8%, maintaining our industry-leading position. The 5G penetration rate among our smartphone users further increased to 44.7% by the end of the third quarter, while the average monthly fee uplift from 5G migration remained robust at approximately 40%.

With the combined strength of our expanding subscriber base and growing 5G adoption, our mobile service revenue growth outpaced the industry achieving a solid 3.3% year-over-year increase. Postpaid ARPU also grew 1.8% year-over-year. We expect this positive trajectory to continue, supported by Taiwan's favorable mobile market landscape.

Let's move on to Slide 6 for our outperforming fixed broadband business update. In the third quarter, our fixed broadband revenue grew by 3.2% year-over-year, driven by continued high-speed migration and the success of our high net 30th anniversary promotion package alongside our existing bundle plan that combine MOD WiFi and streaming services.

We are pleased to report that the number of subscribers choosing speed of 300 megabits per second and above increased by about 14% year-over-year, while those opting for 500 megabits per second and above recorded a double-digit growth and the 1 gigabit per second and above achieved multiple for expansion. This higher speed migration contributed to strong ARPU performance. In the third quarter, our fixed broadband ARPU rose 3% year-over-year, representing an increase of TWD 23 per month, an encouraging sign of ongoing value expansion.

Slide 7 provides a deep overview of highlights from our consumer application services. In the third quarter, our multi-play package integrating our mobile fixed broadband and WiFi services achieved impressive year-over-year growth of 22%, marking 15 consecutive quarters of expansion. In terms of our video services, subscription fluctuated in line with major sports broadcast declined year-over-year during the quarter, mainly due to the relative high base from -- base from last year Olympic Games broadcast is this event-driven variation.

Our video subscription and ARPU sustained its expected upward trend. Noteworthy, we are proud of to highlight the success of drama investments in the third quarter. For example, The Outlaw Doctor won Best Asia content in Global OTT Award in Busan and [indiscernible] at the 30th Golden Bell Awards in Taiwan with multiple nominations and awards.

With those wins, we will continue our content investment strategy to strengthen value for our subscribers. Meanwhile, our consumer cybersecurity services recorded a 17% year-over-year growth with a steady number of blocked malicious link per user more than doubling compared to the same period.

Slide 8 illustrates the key highlights in our enterprise ICT business. We are pleased with 14% year-over-year increase of our group ICT revenue in the third quarter, fueled by the emerging service expansion. Recurring ICT revenue also grew by 19%, supported by our continued commitment to public cloud in the entity supply contracts in the government sector, which effectively contributed to the steady growth in the cloud service recurring revenue.

Regarding core service pillars, IDC cloud and cybersecurity remain key ICT revenue growth drivers, posting year-over-year growth of 34%, 24% and 19%, respectively. driven by the strong demand from the financial and government-related sector.

In addition, Big Data services surged by 130% year-over-year, largely attributable to the National Taxation System project. Among the newly secured projects during this quarter, we are glad to report the acquisition of our largest ever network infrastructure project, both by scale and the contract value from a leading life insurance company in Taiwan.

This project is expected to generate both onetime and recurring revenue. We also won a landmark project from Taipower to assist in building its large-scale AMI big data analytics platform for smart grid management. Lastly, leveraging our deep expertise in smart transportation, we secured a project to assist Taiwan Railway to develop a smart real-time fleet management solution powered by the digital twin and 5G technologies, simulating training -- train control cabin dashboards, enabling railway operation hub center to proactively identify failing equipment and monitor dispatching vehicles, further enhancing operational efficiency and reducing maintenance costs.

Slide 9 illustrated the performance of our international subsidiary. In the third quarter, our U.S. subsidiary delivered outstanding results by achieving 70% year-over-year revenue growth, primarily fueled by AIDC construction project of a Taiwan-based high-tech company in Texas. Together with the efforts of our Japan subsidiary, we anticipate securing additional related projects, strengthen our role in the global AI supply chain.

Meanwhile, our Southeast Asia markets continue to thrive with our Singapore and Vietnam subsidiaries actively deliver plant construction services that are expected to contribute to future revenue. Excitingly, this quarter, we successfully introduced our proprietary solution to global markets. First, through close group collaboration, we introduced cybersecurity services from our newly leased subsidiary, Chunghwa Telecom Security, to overseas clients in Southeast Asia and Japan.

Furthermore, we launched our Smart Poles solution in Thailand, fully powered by our proprietary operation platform and integrated AI and IoT solution. The solution delivers services, including adaptive lighting control, localized digital synergy in Thai and traffic flow analytics.

We placed particular emphasis on our AI capabilities, which enable seamless replication of our success to other markets in different language. In addition, by supporting our aligned nations, in developing smart cities, we have leveraged our 5G private network and ICT capabilities to generate overseas smart city revenue from Paraguay and Eswatini.

Last but not least, we are pleased to see the submarine cable SJC2 has commenced operation and is contributing revenue, while another cable Apricot is expected to follow in the fourth quarter.

Now let's move on to Page 11 for the financial performance of our 3 business groups. In the third quarter, thanks to steady growth in mobile and fixed broadband service plus the higher sales driven by the iPhone demand, our CGB delivered a solid year-over-year increase of 2.2% in revenue. Additionally, last year's elevated expense related to the content broadcasting rights contributed to the relative increase of 11.4% year-over-year in CGB's income before tax, broadly supporting the group outperformance.

Our EBG also performed well with strong ICT performance as revenue increased 7.4% year-over-year, while income before tax decreased owing to the reduced fixed voice revenue during this quarter as well as a decrease in sales margin related to a long-term enterprise customer engagement.

As for IBG, revenue declined by 1.9% and income before tax dropped by 19.7%, primarily due to softened demand for voice services. However, we saw a robust growth in IBG, ICT and mobile services, which rose 14% and 19% year-over-year, respectively, supported by clients' global expansion and increased roaming revenue.

Now I would like to hand the call over to Audrey for financial updates.

Thank you, President. Good afternoon. Please turn with me to Slide 12, income statement highlights, where I will cover our performance for the third quarter and first 9 months of 2025. The third quarter demonstrates strong execution and profitability.

First, let's look at the top line. Revenue reached TWD 57.92 billion. This achieved a significant milestone of the highest third quarter revenue level in 9 years. This represents a solid 4.2% increase compared to the same period last year. This growth was primarily fueled by the successful expansion of our ICT business and also robust sales growth, while our core telecom service maintained positive momentum.

Our strong operating performance is clearly reflected in our bottom line. Income from operations rose by 6.4% and net income increased 4.8% year-over-year. This performance was supported by steady growth across our mobile service and fixed broadband business, alongside the expansion of a high-value service, including Internet data center, IDC and cloud service.

As a result of this performance, earnings per share increased from TWD 1.16 to TWD 1.22. This reflects consistent profitability and marks the highest third quarter EPS in 8 years. This operational efficiency also resulted in a strong quarter for EBITDA, which recorded a 4% gain, reaching TWD 22.11 billion for the quarter. The EBITDA margin of 38.17% was virtually in line with the 38.23% recorded in quarter 3 last year.

This demonstrates sustained cash generation. So now moving now to our year-to-date performance through the first 9 months. Please focus on column 5 through 7 for the results. So revenue grew by 3.5% year-over-year, supported by strong momentum in our ICT portfolio and the sales contribution from our subsidiary, Chunghwa Precision Test Tech. Reflecting its top line strength, income from operations and net income rose 5.5% and 4.2%, respectively, primarily fueled by the continued expansion of ICT and cloud service, supported by sustained positive momentum from our core telecom business.

Year-to-date EPS stands at TWD 3.79 compared to TWD 3.64 last year. Furthermore, EBITDA increased 3.6% to strong TWD 67.22 billion. The EBITDA margin stood at 39.43%, broadly consistent with prior year period. So in summary, the results highlighted the dual strength of our stable core telecom foundation and our successful pivot into high-growth ICT service.

Now let's turn to Slide 13 for balance sheet highlights. We will review our financial position as of September 30, 2025, relative to year-end 2024. Our balance sheet continues to reflect our strong commitment to capital discipline and financial flexibility.

Total assets decreased by 4%, a reduction primarily stemming from the utilization of cash and other current monetary assets to meet a debt maturity obligation during the period. In addition, property, plant and equipment declined by 2.1% as depreciation exceeded net additions, reflecting our continued focus on asset efficiency.

Moving to the liability side. Total obligation decreased significantly by 10%. This net reduction resulted from the repayment of a maturing debt obligation and the subsequent partial refinancing through the issuance of our first ever sustainability bond that incorporates biodiversity feature. This reflects our commitment to ESG-based financing.

As a result of this deleveraging, our reported debt ratio stood at a healthy 23.91%, showing a slight decrease compared to year-end 2024. Regarding liquidity, our current ratio remains stable and above 100%, highlighting healthy short-term financial flexibility.

Meanwhile, our net debt-to-EBITDA ratio stood at an exceptionally low 4.5%. This reflects our highly deleveraged position and capacity to sustain our ongoing investment strategy within a balanced capital structure.

Let's move to Slide 14, cash flow summary. We will review our year-to-year performance through the first 9 months of 2025. Cash flow from operating activities decreased by 8.6% year-over-year. This was driven primarily by the timing of the settlements, specifically increased payment for accounts payable and highly accounts receivable as of September 30.

Capital expenditures rose 8% year-over-year, partly reflecting the timing of 5G, 4G deployment. This year's project were front-loaded in the early months, whereas last year's occurred later in the period. Some of this year's payment also relate to projects booked last year, so the increase mainly reflects timing rather than high investment activity.

On an accrual base, CapEx has actually trended lower and full year mobile investment is expected to remain below 2024 level, consistent with our disciplined approach to capital management. As a result of these factors, free cash flow declined by 16.5% to TWD 28.19 billion year-over-year. This result is in line with expectations, given the short-term increase in working capital and the timing of our CapEx investment.

We continue to maintain a strong cash position and stable operating inflows to support both business growth and shareholder return. Moving to Slide 15, performance highlights and guidance. I will summarize our key achievements for the period. In quarter 3 2025, the strength of our execution drove significant acceleration.

We achieved record-setting Q3 revenue and EPS, while our key profitability metrics from income from operations, net income and EBITDA all performed strongly and met or exceeded our internal margin targets. For the full 9-month period, the cumulative results validate our strategy, all major metrics, including revenue, income from operations, net income, EPS and EBITDA performed above or on target for our full year guidance.

The success was powered by the sustained profitability of our ICT service and the reliability of our core telecom business. Crucially, revenue growth outpaced operating expense, reflecting excellent operating leverage and efficiency. So this concludes our review of the financial performance for the third quarter and the first 9 months of 2025. We are now happy to open the door for your questions.

[Operator Instructions]

okay. We got one question from the dashboard. The question is that what is the driver of our international projects business? Okay. For international business, just as we mentioned that in the international markets, besides that, Chunghwa can play a role in the global AI supply chain.

So actually, we see great potential of opportunities in the market of United States. So now our subsidiary in the United States are doing the project in Texas in those states that a lot of Taiwan high-tech company relocate there to do some plant construction and most of them are -- play a very important role for the AI supply chain globally.

And in the Japan market, we also see similar opportunities in Japan, right? And in addition to that, we also try to introduce our self-development solutions to the global market. So for this quarter, our subsidiary, the CHT Security, their cybersecurity services, we successfully introduced the services to Southeast Asian markets and in Japan, okay, with the collaboration of our subsidiaries in Singapore and in Japan.

For the Southeast Asia company, we also see the opportunities from the high-tech companies. That's the main driver of the business growth in Southeast Asia company. And we also try to introduce the smart city-related projects there. So in the third quarter, we see that we successfully introduced our Smart Pole project there. Although we want to notice that the Smart Pole is mainly developed and we introduced our in-house solutions, and we also collaborate with the partners to make it successful in Thailand.

[Operator Instructions] There seems to be no further questions at this moment. I will turn it over to President Lin. Please go ahead.

Okay, everyone. Thank you very much for your participation. See you. Bye-bye.

Yes. Thank you, President Lin. And ladies and gentlemen, we thank you for your participation in Chunghwa Telecom's conference. There will be a webcast replay within an hour. Please visit CHT IR website at www.cht.com.tw/ir under the IR Calendar section. You may now disconnect. Thank you again, and goodbye.