Far EasTone Telecommunications Co Ltd
TWSE:4904
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Far EasTone Telecommunications Co Ltd
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Welcome, everyone, to Far EasTone's 2024 First Quarter Earnings Conference Call.
[Operator Instructions] For your information: A webcast replay will be available within an hour after the conference is finished. Please visit www.fareastone.com.tw, under the Investor Relations section.
I would like to turn -- introduce Gary Lai, IR officer.
Gary, you may begin.
Good afternoon, everyone. Thank you to attend Far EasTone 2024 First Quarter Results Conference Call.
Both President Chee and CFO Sharon join the call with us today.
Before Chee's presentation, please kindly pay attention to our disclaimer page. Let me pass to President Chee. Thank you.
Thank you, Gary. Good afternoon, everyone. Thank you for joining us for this First Quarter IR Call.
So first of all, I think we have a very good quarter. And organically, the FET business performed very well for both core and new business and also across our BUs. And the carried-over business from APT, it continued. They actually contributed to higher EBITDA and also revenue than we originally had forecast, so that was all good. And our migration of APT mobile users continue with very good uplifts. And then also the [ MP ] market, from where we can see, is also very encouraging.
So let me go to the financials. So the first chart shows that all KPIs have exceeded guidance with, of course, the merger synergy. So the total revenue came to TWD 25.75 billion, and that is 15 -- more than 15% of growth year-over-year. And in terms of the goal achievement, it's over the goal by 2%. And our EBITDA also shows TWD 8.89 billion. That is a record high for us. It's 11.9% compared with the same quarter last year, and it is also exceeding our Board target.
And the net income. We have got TWD 2.92 billion versus our original forecast that is TWD 2.54 billion. So it's a 6.1% growth from the same time last year and also 15% more -- better than our goal target.
Okay, the EPS. So remember our number of shares have increased by almost like 10%, 9%-ish. So it is TWD 0.81. And then compared to the same quarter first -- last year, that is minus 4.1% Y-o-Y, but then compared to our own forecast, that's 15% over, okay?
And just some highlights and looking at the trends. So our first quarter revenue, of course, the growth is contributed by not only the revenue synergy from the merger. And also our organic 5G upgrades also is going very well and steadily, and also the handset sales. Of course, our new economy revenue continues to grow very steadily. So the total revenue, we have seen a positive Y-o-Y growth for 14 consecutive quarters now.
And it comes to the EBITDA. The first quarter EBITDA, as I mentioned earlier, this TWD 8.89 billion, actually reached the record high for Far EasTone. And then of course, this is attributed to merger synergy and also better margin from expanded core business in general, okay?
And for the net income, it's TWD 2.92 billion, and it is a new high for the same quarter in 8 years. In the first quarter, net income grew 6.1% Y-o-Y. This is attributed to higher EBITDA and also the non-op gains that we have seen and from some short-term investments. And so even we do get some higher D&A because of the merger, but then we were able to offset that in our first quarter performance.
Okay. And then look at our -- some other financial metrics. So our net debt and net debt-to-EBITDA ratio have remained healthy, as you can tell. And then our free cash flow continues to be strong. And then CapEx is in line with our 2024 guidance. That is 8.1 billion.
All right. So in terms of the mobile core business, we have -- this mobile service revenue has gone -- has grown 18.3% Y-o-Y to TWD 14.99 billion. It's almost TWD 15 billion. And then our mobile postpaid ARPU, because of the merger -- so the denominator is now bigger with APT users combined. And of course, APT users average, their ARPU was lower. And then so that did kind of hurt our ARPU a little bit, from in the 700s now to -- down to below 700s, but we still outperform our peers in this category, okay?
And then in terms of the total number of customers. It comes to 9.079 million. And then in terms of the 5G penetration, as we have mentioned before, actually, before the merger was effective on December 15, Far EasTone has already achieved the target for last year for the 40% penetration. And then of course, after the merger, the base is bigger now, but then even with that, at this point, we already have reached 39% penetration.
And our new economy continues to grow, and then also we continue to expand our margin. And then in the first quarter, the growth is 12% Y-o-Y. This is mostly organic Far EasTone because APT or -- yes, just really wasn't particularly doing anything in this area. And then also our margin has increased with a Y-o-Y growth rate of 21%, okay?
And some highlights here. So our smart ICT business continued to do well, and it is 18% growth. And then in terms of a margin, that is seeing 30% Y-o-Y. This is partly due to we being more selective. And we derisk. And then so in terms of overall management of our ICT business, it's getting us some better margin and at the same time still keep the revenue growing.
And our security service has been doing very well. And then since a year ago, the business is turning around and very good. And the revenue has grown 52%. And even this is a first quarter, usually it's a slower quarter for our subsidiary ISSDU, but then it has done -- already performed very well and then has more evenly kind of revenue performance. And the margin has also come up. And that is 61% year-over-year, so very impressive.
And then on the right-hand side is our consumer business, our friDay video. It is double-digit growth for both revenue and margin. And our handset insurance and also the direct carrier billing payment business, we are seeing a very steady growth. And also it's a pretty big [ base ]. The revenue is 12% Y-o-Y and then the margin is 11% Y-o-Y.
Some highlights from the consumer business, just for information. So our friDay video maintained the #1 local OTT platform position. It's experiencing growth in paid memberships and also revenue. And also we continue to invest in this area. And we have been seeing some good success with the content, original content, that we invested. And just recently, it has done -- premiered a new global movie in March. And then it has hit the box office pretty well, okay?
And then we have also expanded our online candle-lighting blessing. As you know, this blessing business in Taiwan is quite popular; and then we make it digital. And then we lead the market in providing a variety of this online worship, we call the product, year-round. So number of transactions have surged nearly 50% Y-o-Y. So in the past, people do that, like before the new year, but then they -- now they can do it all year round, okay?
And then so for our security feature. That's a network security feature. We have worked with the Israeli company Allot. So we offer this guardian network feature, and we have seen double-digit Y-o-Y growth in subscriber numbers. And also it reached over 60,000 -- 600,000. And then also it's 70% of them would convert to a paid after trial. So that is a very high percentage of conversion compared to other similar or other digital offers that we have done in the past.
And also, as you might have heard, because of the April 3 earthquake that has caused quite damage to Hualien areas -- so we have offered this Send Love to Hualien via our online shopping, friDay shopping. And then so it's a care project, so we offer free shipping and waived fees for the local business. And so we encourage the rest of the country, the consumers buy more products or merchandise from the Hualien merchants, okay? And then we have seen some good results for them as well.
Okay, for the enterprise business highlight. We have, since a year ago, concentrated on 4 particular areas for us to grow our ICT business. And this is also contributing to what we have seen, the higher margin, the much improved margins. And then so, the 4 areas, that's where I show the highlights accordingly.
So in the sustainable smart city, we have some air quality sensor maintenance and operations project. That is ongoing for a big government agency, so this is a kind of recurring business for us. And also we have some construction and maintenance project for rainwater sewer water level monitoring system. This is all related to our smart city solutions. Also, APT, actually they have a -- one particular solution in the water -- the sewer water monitoring that we have integrated into our smart city platform, so that definitely helps [ score there ] as well.
And our telecom-based SI continues to grow very well. And then the merger with APT actually expanded our enterprise customer base. And then so the telecom customers that we already have and plus theirs really give us more uplift or upsell opportunities. So this MPLS VPN circuit integration and cybersecurity equipment upgrade project for connecting all branch ATMs of a local big bank -- big local bank, we have secured that.
And then our telemedicine project already has finished all 14 counties. And then that covers 51 villages and small cities, in terms of this project, that we were -- that was sponsored by the government. And on top of that, we have provided this smart ambulance project. And then so that is kind of tailoring the original platform. On top of it, we customize it for the ambulance use. So this is we are deploying to different counties, various counties. And then so we do that as a charity project as the initial offer. And then -- and we know from Taipei City, as an example, after they have used it. And they do see the effectiveness in how in the -- what they call the golden window, how you can save more lives, right, for those that are transported by the ambulance. So we expect this will expand this service. Demand will come up in due time. Okay.
And there is some digital transformation project there. And then we -- last year, we have got this Microsoft LSP license. So we continue to grow well. And then we have seen very impressive numbers in terms of the contract values that we have secured, and what is good with this business is it is recurring. Once you have secured a contract, like a 3-year contract, then they will renew and recur, so -- and then we will become part of the IT budget for those clients. And then also we have some other work with the drug evidence management system for the coast guard, so we have quite a variety of kind of clients that can use our digital transformation capabilities and professional service here.
Okay, all right, just some major honors and recognitions that we have received in the first quarter and recently: first of all, the Taiwan Stock Exchange. This is like hot off the press, that we are confirming that we ranked in the top 5% again of the listed companies for corporate governance evaluation. And this is actually 10 years in a row now. I think there are very few companies who are in the same tier with us. And then FinanceAsia recently have given us award. And thanks to those of you who have voted for us, that we have received award for best CEO and best mid-cap company in Asia's best companies poll 2024, okay?
And our microgrid renewable energy application, that is our EMS, energy management system, solution, has won this 2024 smart city innovation application award, okay? And we also ranked the top 5% globally for this S&P Global 2024 Sustainability Yearbook. For the CDP climate change, we are also the only telco in Taiwan to receive the highest A-level rating for 4 years in a row, okay? And then last but not least, it is Taiwan's store -- chain store and franchise association. We have 3 store managers who actually received the national excellent store manager award and then received the award from the President Tsai herself.
Okay, all right. So moving forward, we want to continue, to finish our RAN network migration. And also as you may heard, that we -- the 3G sunset is set for June 30, and after that, we can fully realize our cost savings from the merger. And also, for the 3G sunset, we can finally get rid of these 3G equipment. That will definitely help us with our utilities, okay?
And then we will continue to grow our telecom services revenue with expanded customer base now for both mobile and fixed, okay? And then we'll continue to expand our new economy business growth with smart ICT solutions and an expanded enterprise customer base.
Okay. And also, especially with us, we wanted to increase our presence in consumer space, so we will accelerate our developing and investing in the FET digital services. This is not only enriching the current services that we already have, like we use in -- like gen AI in our friDay video, friDay shopping and all that. Then we are also looking to see the new applications that -- with the gen AI empowered. And that will suit our consumers, so hopefully, this will give us more added value -- and to offer more premium services for those that are willing to pay higher monthly fee and all that. So this is one area definitely we already are working very hard, and hopefully, before soon, we will start seeing some results, okay?
And then final reminder. We are going to have our Annual Shareholders' Meeting on June 21, 2024.
Okay, with that, I think that's my last slide. And I welcome your questions. Thank you.
[Operator Instructions] Our first question, from Neale Anderson of HSBC.
I have 2 questions, please. The first one relates to the merger synergies. And it looks like -- I think you mentioned in first quarter you're on track for June. And that still seems to be the case, but you've exceeded your guidance by quite a lot, so can you give us any more commentary on is there any area of the merger integration that's ahead of plan and leading you to be ahead of your guidance? That's the first question.
Then the second one relates to the new economy business. So the pretty strong percentage increase in margin that you detail in the presentation, I think some of that, you mentioned, is due to the change in mix, but do you think that's sustainable through the rest of this year that you can keep growing at that rate? Can that continue?
Okay, thank you, Neale. Okay, to answer your first question, as I mentioned. So the merger synergy, we do see higher revenue than we original estimated for the APT carried-over business. So that's for one. And then so with that, it also help with more EBITDA coming from the original APT business parts. And also because of that -- and then the bigger base for us to upsell, so that all contributed to the higher EBITDA and also higher revenue. And then our [ NT ] consolidation also -- and then we finish the consolidation from RAN, the RAN network, per se, and before the end of January, as you know, but then there's a lot of follow-up work before we can fully realize the benefit of getting rid of the lease, right, the rental lease, and all that. So that is ongoing. And then we are slightly ahead of the schedule, but then we should see more OpEx savings, starting in second quarter and then more in the second half.
And then your second question, about the new economy margin. Is that sustainable? Yes. Especially, this is only like after we started moving towards these 4 concentration areas. And this year, the first 3 months actually, I was working with my team to further streamline our process and SOPs and simplify some of the processes that when -- we use because in the -- in terms of trying to get to the business demand quickly or more agile. So some of that, we kind of make do with the system and process, but then this time, we made the effort to really sort it through and then make the simplification, so that will help ourselves, this quote-to-cash process a lot more efficient; and then with the 4 concentration everybody now is very familiar, end to end, from the sales all the way to delivery. So I do see this to become sustainable. And the result will be even more significant.
Just on the margin level of the new economy business. I think, before, you indicated that it was, if I remember right, 15% to 20%, around that sort of area. Is that right?
Right.
Yes, okay. So just checking on that.
[Operator Instructions]
Yes. Sorry. I need to make a clarification. When -- I didn't really finish with Neale. So Neale, to be exact: What we were saying before, we were in the [ 20s ]. And now we have actually exceeded 30% margin-wise for new economy. Neale, you got that?
He can hear that. He can hear...
Sorry. Neale is off the line.
Okay.
But he can hear.
Okay.
[Operator Instructions] There are currently no questions. I will pass the call back to Mr. Gary Lai. Gary, please proceed.
Thank you, everyone, to attend our Quarterly Conference Call again. And see you next quarter. Thank you very much.
Yes. Please feel free to follow up with Gary if you have more questions that you didn't get to ask. Thank you again.
Thank you for your participation in Far EasTone's conference. There will be a webcast replay within an hour. Please visit www.fareastone.com.tw, under Investor Relations section. You may now disconnect. Goodbye.