Taiwan Mobile Co Ltd
TWSE:3045
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
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 |
97.2
118.5
|
| 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.
This alert will be permanently deleted.
Taiwan Mobile Co Ltd
You don't have any saved screeners yet
Good afternoon, ladies and gentlemen. Welcome to the Taiwan Mobile conference call. And our Chairperson day is Mr. Jamie Lin. Mr. Lin, please begin the call, and I'll be stand by for the question-and-answer session.
Thank you, operator. Good afternoon, everyone. Welcome to Taiwan Mobile's Fourth Quarter 2022 Earnings Conference Call. Before I start our presentation, let's go over our disclaimer as per usual. Disclaimer: The information contained in this presentation, including all forward-looking information, is subject to change without notice, whether as a result of new information, further events or otherwise, and Taiwan Mobile Company Limited and/or hereafter, the company, undertakes no obligation to update or revise information contained in this presentation. No representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein, nor is the information intended to be a complete statement of the company, markets or developments referred to in this presentation.
All right. Now that we're done with the housekeeping, let's head straight to business overview. Please turn to Page 4 for highlights of 2022. So Taiwan Mobile's 2022 consolidated revenues rose by 10% year-over-year to over TWD 170 billion, setting a new record. This was propelled by solid output by our 3 core engines, namely: 5G, e-commerce and home broadband.
5G postpaid penetration steadily increased during the year, driven by the iPhone 14 series as well as our unique bundles, namely momobile or [Foreign Language] in mandarin; Double Play or [Foreign Language]; Disney+; and OP Life or [Foreign Language]. As a result, smartphone postpaid ARPU climbed by 1.6% year-over-year, while our bundled mobile service revenue growth accelerated to 2.6% year-over-year.
For e-commerce, momo's 2022 consolidated revenues rose by 17% Y-o-Y, setting another record high and crossing the TWD 100 billion milestone despite a COVID-related high base. Home Broadband, on the other hand, continue to see double-digit revenue growth as demand for Double Play bundles remained favorable.
With more benign competition in the telecom industry, consolidated EBITDA grew 4% Y-o-Y, feeding our full year guidance and reaching an all-time high. Next, let's turn to Page 5 for a closer look at our mobile business. So 4Q '22 marked the seventh consecutive quarter of Y-o-Y equipment in smartphone postpaid ARPU and mobile service revenue, driven by accelerated 5G conversion that was in turn added by the new iPhone as well as stable 4G pricing.
The monthly fee uplift from the renewals to 5G remained steady at 24% during the quarter. In addition to iPhone 14 bundles, our unique rate plan packages continue to play a key role in upselling customers. As of 4Q '22, 17% of our smartphone users were on one of these bundles, up from 15% in the previous quarter.
Momobile users contribution to momo's e-commerce revenue further advanced, reaching 8.4% in December versus 6.7% a quarter ago. Meanwhile, we expanded our footprint of Double Play bundles by 18%, with 60% of our users on TWD 999 or higher rate plans, providing steady tailwind to ARPU.
Disney+ bundles continue to see sign-up momentum while OP Life bundles has 50% of the sign-ups on TWD 1399 or higher rate plans and a significantly higher proportion of users on 48 months or longer contracts than that of our regular 5G handset bundles. On top of our wide variety of unique rate plans and add-on services, our continuous investments in 48-month handset bundles since 5G launch also started to pay off, resulting in a lower postpaid monthly churn rate of 0.84% in 2022.
I'm pleased to share that this churn rate dropped even further this January to a historical low of 0.66%. Our Game Publishing business, on the other hand, had another solid quarter delivering a 43% Y-o-Y rise in its revenues. We have secured exclusive distribution rights to the iconic Legal of Legends title last November and saw elevated momentum on the back of its launch in January.
Roaming business grew as well, reporting a 38% Q-o-Q revenue boost as international travel gradually recovered. On the enterprise side, data and access, cloud and IoT services segments, all delivered healthy growth.
Now let's turn to Page 6 for updates on our e-commerce business. Despite a COVID driven high base for Taiwan's e-commerce players, momo's top line improved by 19% in 2022, outgrowing its peers by a wide margin. A higher e-commerce take rate also demonstrated our increasing scale advantage. EBITDA margin fell Y-o-Y given the very tough base in 2021 when demand skyrocketed. But overall, e-commerce EBITDA still grew 10% year-over-year.
On the logistics side, we have 54 warehouses at the end of the year, 10 more than the year before, while total warehouse space rose by 16% Y-o-Y. The southern distribution center should be up and running by end of 2023 with the central distribution center to follow in a few years, expanding the coverage area of our rapid deliveries and rising -- and raising the bar for competition.
As for [ momo coin ] and its ecosystem, we will continue to focus on broadening its usability by onboarding group companies and popular third-party products and services. We will also introduce customer loyalty programs dedicated to our more momobile bundle users to enhance stickiness and gain wallet share. Together, this will lead to further growth in a wider mode.
Now let's take a look at our broadband business on the next page. In 4Q '22, we continue to outperform our MSO peers in Y-o-Y trends of basic TV subscriptions and broadband service penetration. Steady demand for faster home broadband as well as the success of our Double Play bundles led to sequential increase in broadband subs and ARPU.
Total broadband subscribers, including those are on Double Play bundles who opted for speeds of 300 mega bps or higher, rose by 79% year-over-year. As a result, broadband revenue grew by 10% Y-o-Y in the quarter. Now let me pass the virtual mic over to our CFO, George Chang, for financial overview.
Thanks, Jamie. Good afternoon. Let's start with the performance by business. In 4Q '22, consolidated revenue rose by 12% Y-o-Y as our 3 core engines all deliver Y-o-Y growth. Mobile service revenue grew Y-o-Y for 7 quarters in a row, thanks to ARPU improvement and made continuous 5G conversion and benign 4G pricing.
Telecom EBITDA saw a 3% Y-o-Y uptick in 4Q '22 as telecom service revenues Y-o-Y growth reached a 7-quarter high. Telecom D&A, depreciation and amortization Y-o-Y growth decelerated to the lowest level since turning positive in 4Q '20, causing telecom EBIT to grow 8% Y-o-Y for the quarter. Momo's EBITDA Y-o-Y growth accelerated to 17% Y-o-Y in 4Q '22 and by higher tax take rate and operating leverage of e-commerce business. Cable TV EBITDA was stable as broadband momentum compensated for pay TV decline.
Let's go to the results summary. In 4Q '22, consolidated operating income rose by 10% Y-o-Y, reflecting top line growth, accelerated EBITDA Y-o-Y growth in telecom and momo along with [indiscernible] depreciation and amortization increase. For the full year 2022, consolidated revenue reached a historical high.
Consolidated EBITDA also set an all-time high, growing 4% Y-o-Y and beating our guidance of 1% to 3%, thanks to better-than-expected telecom performance. The Y-o-Y increase in nonoperating losses mainly came from a top phase of disposal gains and higher financing cost amid rising interest rates. Excluding the one-off tax benefit from the previous year, net income would have increased by 3.5% Y-o-Y in 2022.
Let's move to balance sheet. On the asset side, receivables rose Q-o-Q and Y-o-Y through 4Q '22 owing to higher monthly fee contribution from our mobile bundled plans. Inventories grew in a similar manner, driven by new iPhones and Google smartphone accessories as well as momo's business expansion. Long-term investment climbed Y-o-Y due to our ventures into cloud services, sharing economy, et cetera.
As for liability, the Y-o-Y uptick in payables was attributable to momo's e-commerce business growth. Long-term borrowings due in 1 year as well from a year ago, that state, we are in the process of issuing new straight bonds and will seek new funding facilities in order to lift the proportion of long-term borrowings. Benefiting from our EBITDA growth, net debt-to-EBITDA ratio decreased Y-o-Y and Q-o-Q.
Lastly, let's look at the cash flow. Thanks to improving EBITDA growth in telecom and e-commerce business, operating cash inflows increased by 9% Y-o-Y in 4Q '22. Investing cash outflow saw an uptick in 4Q '22 due to a high base in 5G government subsidies. Excluding subsidies, investing cash outflow would have decreased by 9%. For the full year, cash earnings showed steady Y-o-Y growth, while operating cash flow declined as we make more payments for handsets and accessories.
Despite in 2022 investment cash outflow reflected a TWD 2 billion increase in momo's CapEx payments and also an increase in long-term investment. Financing activity had more outflows in 2022 as we pay off some bank borrowings in contrast to inflows from more borrowings a year ago. In addition, momo also increased its dividend payment in 2022.
Full year free cash flow calculated on the pre-IFRS operating cash flow reach TWD 15.74 billion, translating into a free cash flow yield of 5.9%. Let me turn the presentation back to Jamie for the update and key message.
Thank you, George. Page 14 summarizes the awards and recognitions that we received during the quarter for your reference. Page 15. Earlier this year, the Board approved TWD 12.8 billion consolidated CapEx for 2023, where 5G CapEx will decline Y-o-Y. Momo's CapEx will rise alongside e-commerce distribution since expansion, while Cable TV's investment in broadband growth will continue. We know that momo's actual CapEx payment in 2023 should be similar to last year despite TWD 6.83 billion CapEx budget.
Now let's turn to Page 16 for Board resolutions. This morning, our Board resolves to issue an unsecured corporate straight bond with a total amount larger than TWD 6.5 billion and a tenure of no longer than 10 years as we aim to increase the proportion of our long-term borrowing that George just mentioned.
Finally, please turn to Page 17. To wrap up our presentation, here's a key message we would like for you to take away with. In 2022, Taiwan Mobile delivered resilient results with best-in-class top line performance and 5% operating income growth. Telecom free cash flow expanded alongside momo's rising profits and strong cash position.
Looking into 2023, we expect revenue growth momentum similar to recent levels to trickle down to our consolidated EBITDA amid favorable market dynamics on the premerger basis. With that, we open the floor to -- for questions. You're also welcome to send your questions via chatbox on the webcast page. We will begin by addressing the telephone line questions before we move on to queries from the web page. So operator, please go ahead.
[Operator Instructions] Our first question come from Neale Anderson with HSBC.
I have 2 questions, please. I think many of us on the line will be interested in getting your views on the merger decision by the NCC. Can you comment on that and particularly the spectrum element of that? That's the first one. The second is on the 5G outlook. I see the trends continue to look favorable. We got churn coming down and increasing long-term contracts. Are you able to give any expectation either in ARPU growth or revenue impact of 5G through this year. The reason I'm asking is that in other markets, the benefit from 5G has tended to slow down a little bit as we reach the levels of penetration where Taiwan is now. But I'm thinking that because the 4G prices were lower, the positive benefits can continue. But are you able to quantify that if you do agree with that assumption?
Thank you, Neale. So in terms of NCC's merger decision, like we expressed before the Lunar New Year, we're -- our independent Board of Directors concluded that the decision is sort of borderline, breaching their fiduciary duty per se. And so that is that. And in terms of the spectrum, yes, it's -- if we do end up proceeding with the merger later to having to give back the spectrum, half of Taiwan Star's low-band spectrum by the end of next June would be quite cumbersome, but it's not going to kill our business. In terms of 5G, ARPU lift sustainability, like I said in the presentation, we're observing 24% ARPU lift. That is not too far from where we were a year ago. So like you said, 4G ARPU was low enough in Taiwan. So the dynamics here might be a bit different from other countries.
Just on the first question. So is there any recourse that you have? Can you appeal that NCC decision? Or is that final kind of take it or leave it?
There is ways you can appeal that. But then again, that you -- sort of the duration of that appeal sort of might take years. And so in the meanwhile, if we do proceed with the merger, we're going to do other things to make sure that we provide still sort of state-of-the-art service to the customers.
Okay. And in terms of the time line for your decision, I know the final approval, I think, is with the Fair Trade Commission. But do you expect to decide sort of in line with that whether to go ahead or not?
So if we do go ahead with that, it's sort of the actual merger will most likely be Q3 or Q4. In terms of the sort of the actual deal itself where the 2 sides are still in negotiation and hopefully, we'll have some news to share very soon.
[Operator Instructions]
So operator, if there's no questions from the telephone line. There's actually 1 question from the website, and we're going to proceed to address that. So it's from a guest with no name. The question is [Foreign Language]
So Lucy translated into English will be, Taiwan Mobile and Taiwan Stars merger. Is it -- will it proceed according to the original terms for -- well, the 2 sites renegotiated new terms? And the spectrum return -- what kind of -- in terms of spectrum return, what kind of plan we have? And also in terms of spectrum return, being pro bono, we appeal, so [Foreign Language]
Operator, do you have any questions from the telephone side?
Sorry, Jamie, we don't have questions at this point of time.
Okay. Then we have another question from [indiscernible] on the webcast side. "What's your December '22 dividend outlook?" This I'll refer to George.
I will probably say that on a stand-alone basis -- well, first of all, it's a little bit too early to talk about dividend yet, right, because we still need to get approval from the Board Resolution and it's not going to be at this board meeting. So normally, we don't talk about that until 2, 3 months later. But you can probably think that on a stand-alone basis that the ballpark figure will probably be similar to what we have been paying in the past. But again, the big if will be if we are going to proceed with the TST merger, so please stay tune on that.
So operator, do you have any more questions from the telephone side?
Sorry, Jamie, we don't have questions from the audio side.
Okay. Then on the website...
Sorry, Jaime, we do have 1 follow-up question from Neale with HSBC.
Okay. Neale, go ahead.
Sorry, could you give an English translation of your response to the prior question.
Well, it's basically the same thing I told you. It's basically the same question.
I'm not missing anything there? Okay.
No, you're not missing anything. Sure. So we have another question from the website. It's from [ Panjwani, Rajesh ], if I pronounce your name incorrectly, please forgive me, from JPMorgan Asset Management. "Can you please transfer your previous answer to English, please."
[ Panjwani ], the question is basically the same as Neale's. So the answer is basically the same answer. I just used Mandarin to reiterate our position again. So there's no new information that I provided to the website question one.
If do you have more questions, feel free to either let the operator know or go to our web page.
[Operator Instructions]
There's 1 more question from guests on the website. [Foreign Language] So it says, when will the merger renegotiation produce the result?
Like we said, we're still renegotiating and hopefully, we're going to have news to share pretty soon.
[Foreign Language] Another guest asked on the website. Will the 2 companies merge this year? It's basically the same question, like I said, we're still negotiating. Hopefully, we'll have news to share very soon.
[Operator Instructions]
So operator, there -- it seems like there's no more questions from the website. If there's no more either from the audio side, I think we can call it a day.
Sorry, Jaime, we don't have questions at this point of time in the audio side.
Okay. Then I think we can wrap it up.
Thank you, management. Thank you for the conference.
All right. Thank you, everyone, for your time. We'll see you next time.
Thank you. The conference call has been concluded. Thank you for your participation.