Chunghwa Telecom Co Ltd
TWSE:2412
US |
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
|
US |
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Mastercard Inc
NYSE:MA
|
Technology
|
|
US |
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
|
US |
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
|
US |
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
|
US |
Visa Inc
NYSE:V
|
Technology
|
|
CN |
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
|
US |
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
|
US |
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
|
US |
Coca-Cola Co
NYSE:KO
|
Beverages
|
|
US |
Walmart Inc
NYSE:WMT
|
Retail
|
|
US |
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
118
128
|
Price Target |
|
We'll email you a reminder when the closing price reaches TWD.
Choose the stock you wish to monitor with a price alert.
Johnson & Johnson
NYSE:JNJ
|
US | |
Berkshire Hathaway Inc
NYSE:BRK.A
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Mastercard Inc
NYSE:MA
|
US | |
UnitedHealth Group Inc
NYSE:UNH
|
US | |
Exxon Mobil Corp
NYSE:XOM
|
US | |
Pfizer Inc
NYSE:PFE
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
Nike Inc
NYSE:NKE
|
US | |
Visa Inc
NYSE:V
|
US | |
Alibaba Group Holding Ltd
NYSE:BABA
|
CN | |
3M Co
NYSE:MMM
|
US | |
JPMorgan Chase & Co
NYSE:JPM
|
US | |
Coca-Cola Co
NYSE:KO
|
US | |
Walmart Inc
NYSE:WMT
|
US | |
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
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.
Now I'd like to turn it over to Ms. Fu-Fu Shen, the Director of Investor Relations. Ms. Shen, please go ahead.
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.
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.
President Sheih, please go ahead.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Now I will like to hand over the call to Mr. Kuo for our financial results.
Thank you, President Sheih. Now I will go through our financial results in detail.
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.
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.
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.
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.
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.
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.
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.
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.
Thank you for your time. Now we will like to open the line for questions.
[Operator Instructions] Our first question is coming from Peter Milliken, Deutsche Bank.
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?
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.
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.
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?
Are you talking about the guidance for '18?
Yes. Yes, I am.
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 [indiscernible] like in ICT, and we do like to continue likely our consumer -- mobile consumer too -- we're talking about Internet business side, right?
I'm just talking about --
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.
Our next question is coming from Neale Anderson, HSBC.
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?
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.
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.
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?
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.
Our next question is coming from Jack Hsu, SinoPac Securities.
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?
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.
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.
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?
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.
Our next question is coming from [ Amber ] [indiscernible].
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%?
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.
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.
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?
Sorry. I think -- ma'am, can you repeat your question?
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?
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.
Our next question is coming from Jinjin Wang, UBS.
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?
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.
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.
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?
I think the CapEx for 5G, no. We will have some spending on '19 -- 2019, yes.
But 2019 shouldn't be repeat, right? I'm talking about like more large-scale 5G CapEx.
Exactly, yes.
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?
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.
[Operator Instructions] Our next question is coming from Ronny Zhu, UBS.
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?
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 [indiscernible] to migrate customer to -- from 3G to 4G. I think that's the kind of preliminary information from the regulator.
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.
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?
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 [indiscernible] 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 [indiscernible] 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.
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?
Yes, yes. The number is correct.
You next question is coming from Jack Hsu, SinoPac Securities.
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?
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.
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.
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.
Our next question is coming from [indiscernible] Insurance.
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?
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.
Would you like to give us a sense that how will be the range of EBITDA target if the old accounting method was applied?
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.
[Operator Instructions] As there are no further questions, I will turn it back over to President, Sheih. Go ahead, please.
Thank you, everybody. Thank you for your attention. Thank you.
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.