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 2021 Third Quarter Earnings Conference Call. [Operator Instructions] For your information, the webcast replay will be available within an hour after the conference is finished. Please visit www.fareastone.com.tw under the Investor Relations section.
And now I would like to introduce Mr. Gary Lai, the IR Officer. And Gary, please begin.
Good afternoon, everyone. Thank you very much again to attend Far EasTone's Third Quarter 2021 Conference Call. Today, our President, Chief and CFO, Sharon, both here with us on the call. Before Chee Ching's presentation, please pay attention to disclaimer and safe harbor statement.
Let me pass to Chee. Thank you.
Good afternoon, everyone. Okay. So it's our third quarter IR call, and thank you for joining us. So I'll start with Taiwan's mobile market kind of dynamics. As you can see on the left-hand side, the chart shows that the penetration of the mobile market has been pretty saturated for quite a while with little fluctuation and then a lot of that is to do with the second theme. And then on the other hand, though, if we look at the mobile service revenue, we do see the growth momentum continued for 2 quarters already. And of course, this is major -- mainly driven by the 5G deployment and 5G itself. And then -- so especially FET is leading the pack, and we turn positive from the Y-o-Y since March. And the incremental, we are looking every month, we also show the biggest among our peers. So this is a positive news, and we are also pleased to report that.
And then if you look at our 3Q third quarter performance across the board, we have beaten our guidance. Starting with the total revenue, we exceeded by 1.4% and EBITDA is 2.5%. And the net income and the EPS is both exceeded by 10%. And then year-to-date, for the first 3 quarters, it's also showing the exceeding the target across the board. And when it comes to the net debt. So we were able to pay down our debt a little bit. So the net debt and also the borrowing, both have come down. And then if you look at the net debt-to-EBITDA ratio, it also has been reduced. And in terms of the free cash flow, we are at TWD 11.89 level, and this is very healthy and then it remained healthy. And also in terms of the cash-based CapEx for the year, and right now, we are at TWD 9 billion watermark. It is in line with our guidance, which is around TWD 14 billion for the year.
Okay. If you turn to the next page and so some financial highlights for your information as well. So we have been higher third quarter total revenue growth. It was mainly -- well, it was attributed to 2 things. First is the strong iPhone 13 launch, which happened this year in September. And if you remember, last year, iPhone Apple delayed its launch for 1 month. But then this year, it was on time. So it was launched on September 24, I think. The first day, it was actually -- it was the second largest event for iPhone on the first day itself. So we had a very good iPhone launch this year.
And then also, our new economy revenue has been doing very well this quarter despite of the pandemic, so my team really pulled through. If you look at it, so the Y-o-Y, and then we are looking at for the second quarter, it was 44%. And then in the third quarter, it is 11.4%, and then on the right-hand side, it is our EBITDA. It's also growing and then the growth expanded to 4.7% Y-o-Y for this quarter. And then so this is, of course, the better sales from the merchandise and ICT and [ DCB ] margins And then also, we have completed the Phase 1 APT collaboration or our sharing of the 3.5G spectrum deal. So the Phase 1 was completed, was approved, and then so there is the injection of APT's payment for the spectrum this year, okay? That also helped.
And then if you look at the next page, So for our mobile service revenue, it definitely has rebounded. So we look at the Y-o-Y positive, it started in March, and then it continued for 2 quarters in a row. And now we are looking at 3% growth for this quarter together. And then also in terms of the postpaid customers, it continued to grow in the third quarter for the 12th consecutive quarter.
And I know there are some numbers that is posted by the authority, but that is a blended, both postpaid and prepaid. But for those of you that have been following this telecom industry, you would know the prepaid number is more fluffy sometimes and every company has different policy as to how to manage the prepaid numbers. And then we are really focused on the postpaid, and this is showing for 12 quarters in a row that it is -- it has been growing, and we are very glad to see that. And for this quarter, in particular, it's 1.4% Y-o-Y compared to last year's in time.
And also, because mobile, we had this 499 event, so this ARPU was definitely very impacted back in 2018. And then -- but then because of the 5G, we have started to see the recovery as well. And then again, we are like they both turned positive for us in April, March time frame and then for both, the postpaid and also blended ARPU. And we remain to be the #1 in our industry. So the average for the ARPU is 574 for the blended and they grew 2.9%. And then for the postpaid, it's higher, it's 708 and they grew 1.4%. So this is very healthy, and this is definitely a good indicator to show the recovery in mobile ARPU. It started climbing up now.
And then the trend on the right-hand side show you more quarters. So you can see what I was talking about since the 5G launch, and we're definitely on the right direction to climb up for the RPO. The next slide is about new economy, how it drives our revenue growth -- so for the year-to-date or to the third quarter, the first 3 quarters together, the new economy revenue, we see a 17.6% increase. It accounted for 16.5% of our total revenue for the 3 quarters. So this is both exceeding our own target that we said. So we were a little bit afraid last year when we had less number of contracts signed and then we thought it would may -- it may have some downtrend effect in this year and also who knew, the pandemic came back. But then with all that, the team really pulled through, we are still doing really, really well in our new economy area.
So on the right-hand side, give you some details or some breakdown. So you see ICT as a whole, we grew like a 15% Y-o-Y. And then the cloud service grew especially a very impressive 49% compared to last year. And our total contract value also increased 62% Y-o-Y. And on the right-hand side, the mobile commerce that's referring to our friDay Shopping, even though our base is small, but we still have growth, really impressive growth Y-o-Y; that is 36%. It's even bigger than the biggest EC out there. And so it is encouraging and we'll continue to grow in this area as well. And our media service and also our direct carrier billing also are growing -- continue to grow in double digits.
And those are more of the financial indicators. And then the next session, I'll just briefly update you on the business side. So if you haven't heard already, I have to repeat again that we won this Global #1 for 5G, and it's certified by OpenSignal. And we won in 3 categories, the downlink, uplink speed and also the video experience. This actually just happened a few days before the iPhone launch.
And then we believe it is -- it also helped boosted our conversion because of this world kind of recognition, and our 5G penetration, and this is referring to the postpaid because at that time, we did not offer the prepaid on 5G service. So we exceeded our 20% for the 5G penetration for our postpaid customers. And then for the average monthly fee for renewal customers, and we look at more than 20% of an uplift. And then currently, we have deployed 8,700 or so 5G stations out there. And then we will reach 90% coverage for the island-wide nationwide by the end of the year.
And also just some iPhone 13 launch, and we had -- actually, we had a real event held in the store instead of virtual events. So we attracted quite a few -- quite a bit of traffic. And also, most importantly, the result was good. So like the long-term contracts they were very popular for iPhone because iPhone, as you know, is higher price than average. And then so we have these bundled offers, and we offer like a 48-month contract, and then you can take the iPhone 13 home free. And then so there is different kind of a combination type of offers that we had. And then 80% of the customers for the shoppers, they signed up for the 30 months or longer kind of contract in the first month. and then 94% overall signed up for rate plan, that is $999, that's [ 13.99 ].
And also for our customer loyalty application, FET Mobile Circle, we -- that is our digital platform where we want to engage with our customers more and then to encourage more traffic and also attract more traffic and also encourage more transactions. So this helped drove up our video take-up rate online. And also it leads traffic for conversion in our friDay Shopping area. So in fact, so far, it has exceeded target that we set for them. This is kind of like our trial kind of a play and it already has exceeded $100 million of a transaction completed. That is from the traffic, the Mobile Circle has led to friDay Shopping. So it was good. And in our analytics and personalized recommendation engine worked as we expected. And then we will do more with that.
And then the next slide is on the enterprise side. Like I said, our enterprise team has done really, really well. And a few highlights, for example, there is a big initiative sponsored by the government that is basically called very -- it very like an air condition in every classroom for the elementary school. So it's a big kind of deal. And then -- so this is also what will come with it beyond this air condition, you need energy management system, given that we all know electricity is something getting scarce these days.
So we actually, Far EasTone we have won 9 contracts out of the 22. We bid for 18 and every single one of them, there are more than 10 vendors competing for it. So we got the highest share of the whole thing, and then that's like 44% or so. and the total amount to about TWD 1 billion, over TWD 1 billion. So -- and then most importantly, this is our homegrown solution. So in that case, the margin is also better than if this is -- if we use a third-party solution, and this is our homegrown.
And also another highlight I'd say that is really the very first 5G application in Taiwan that we have the 5G Telemedicine Service that has now expanded to Miaoli County and more in the pipeline. And in fact, by the end of the year, we will have in 10 and 36 count in these rural areas that they will have the 5G Telemedicine Service available. And we actually got TWD 200 million contract from the government that is Health and Welfare Department to continue to work this, and eventually, it will go to like 14 different counties that will cover like a 50 or so rural areas to have them have this 5G Telemedicine Services.
So this is a continuing going really, really strong because the government is also determined to bridge the gap, the resources gap between the rural area and the urban area, especially in the health area. And this is where we come in to help with our technology. And also this communication platform that we built for this telemedicine is also FET's homegrown solutions. And so we are very proud that we are the first to offer this service, and we are able to really help from giving back to the society and helping the residents in the rural area to get better medical treatment.
And also another good example is that we kicked off this Foxconn Cloud Data Center. So we won this project from Foxconn, with Foxconn that we are going to build this cloud, their first cloud data center in Taiwan for them. And this is with our homegrown monitoring and management solutions that we are using ourselves. So we have our IT professional and experts that will be working on this project. And this is partnered with VMware, and this is a big project and kind of like a key indicator, significant project for Foxconn's journey of digital transformation as well.
So we are very glad that we are part of it, and we are looking forward to the completion of it. Actually, this is just a few months kind of a project. So it won't be long before we see this all completed.
And then we have received several awards and here's just a few of them for your reference. And I think we are mostly recognized quite a bit in our CSR efforts.
And then last is our fourth quarter focus. There are a lot of things, I would say, business as usual, like we need to continue to push for more 4G to 5G user migration. And then at the same time, we will hopefully maintain good uplift. And then also we want to increase our Mobile Circle with monthly active users. And then there is a Double 11 shopping spree that's coming up. And then our EC also, of course, is the participant of it. So we are looking forward, moving forward to some good results as well. And of course, with all those IT -- ICT projects that we have won and then we are going to deliver them on time and on budget. But then most importantly is we will finish the year strong.
And that concluded my presentation for you all, and then I'm ready to take some questions.
[Operator Instructions] And the first question is coming from Neale Anderson of HSBC.
Two questions, please. You were higher in your guidance on all measures but the net income was particularly by 110% and also the margin is higher than the previous trend. So I was wondering if there's any one-off factors in there and how sustainable that net income performance and achievement is? That's the first question. The second one relates to the new economy business. And you again, you've hit year-end target earlier there. Was there any particular part of that business either consumer or enterprise that is growing faster than you expected at any part of the year.
Okay. Thank you, Neale. So to answer your first question, our net income increased 10% over the -- year-over-year. Yes, and there is onetime sale of our one building, in one office building. So that does contribute to it. But then if we exclude that, and we are still looking at 1.3% of the growth. So overall, it is still a positive good story. But then, yes, we sold this building in July. I think that's when we booked the revenue, but that was accounted for in our original forecast for this year anyway. And to your second question about the new economy, if there is any area that is better than I expected.
I think all of them are doing very well. And then really -- so like I said, even though I anticipated maybe there is some lingering effects from last year's that we didn't get as many contracts compared with the year before. But the team was able to catch up, like we got a couple of big contracts this year. And the one that I mentioned about the EMS alone is a TWD 1 billion project. And then the other is Telemedicine, that's TWD 200 million. So we got quite a few big projects like that. And then so I think it's across the board, and the EC or e-commerce is also doing very well. So I cannot complain. All of them are good.
[Operator Instructions]
Well, maybe everyone sees that we have a very good quarter to sum it up.
[Operator Instructions]
If there is no one right now who wants to ask questions, you can always reach IR offline. We are always here -- So we will probably just end the call right now here, and see you next quarter. Thank you very much.
Thank you for your attention and participation. Please feel free to reach to us if you have any questions. We'll be more than happy to discuss with you.
Thank you, President Chee. And ladies and gentlemen, we 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 the Investor Relations section. You may now disconnect. Goodbye.
Bye.