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 2020 Fourth 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.
And now I would like to introduce Mr. Gary Lai, the IR Officer. And Gary, please begin.
Good afternoon, everyone. Thank you for attending Far EasTone's Fourth Quarter 2020 Results Conference Call. Today, our President Chee; and CFO, Sharon, both here with us in the call.
Before President Chee's presentation, please pay attention to our safe harbor statement in the first page of our presentation.
Now let me pass to Chee for presentation. Thank you, Chee.
Thank you, Gary. Good afternoon, ladies and gentlemen. Yes, thank you for joining us for this IR call today. So I would just -- like before, I will update you on our mobile market in Taiwan, which you probably are already familiar with, that it is a saturated market. And if you look at the total subscribers number, it's about flat and then a little bit up in the fourth quarter for 29.3 million. And then on the right-hand side is the mobile number portability customers.
So the market has been very cold, and then the pandemic certainly did not help. So the third quarter, even though we launched 5G, but at that time, there were only a couple or 3 5G devices available on the market. So -- and I think many people were waiting for iPhone to launch. So you can see from the chart here, the third quarter is the lowest. So it has only 482,000 people available on the market. And then in the fourth quarter, thanks to iPhone's launch or release, it did come up a little bit. But still, if you look at the previous data, that is still relatively cold.
All right. And then in terms of FET's own mobile service performance, we are happy to report that we have continued to grow the postpaid customers. Even though the market is already very saturated and the NT market is very cold, but we still managed to continue to grow our base of subscribers.
And then in terms of the churn rate, we keep getting the record low for ourselves. And then in January, it's 1%. And then for the ARPU, we continue to lead our peers in terms of the both blended ARPU and also postpaid.
And on the next page, in terms of our 5G update. 5G certainly is a good thing for telcos. I think it is a new chapter. So, so far, we are very encouraged with the steady and then strong 5G adoption that we continue to see. And also, most importantly, 95% of these 5G customers, they signed up for our higher rate plan, which is TWD 999 and above, like TWD 1,399. Okay.
And then the average monthly fee for our renewal customers before and after, it has shown more than 15% uplift, okay? And then that uplift actually continues to get bigger as we go. And also, for -- so far, 4,600 5G stations have been deployed, and they cover 61% of our population island-wide, okay? And then also, we are going to target 90% of the coverage by the end of the year 2021.
And as you might have heard, Taiwan is ranked #3 in terms of 5G download speed by OpenSignal. And then, of course, I have to say, I think FET has a lot to do with it because if you look at our download speed, which is 351 versus the 272 average speed for Taiwan, and then we are ranked #1 in Taiwan. And that is also the case by Ookla Speedtest. Okay.
And then in terms of our new economy performance, as you know, we have started our transformation journey, and we continue to grow our new economy. And then even last year, under the COVID-19, we still managed to grow 13% of our new economy overall. And then in some areas, they -- some do better than the others.
On the consumer side, our media services, which includes the text and also we have some data analytics and service as well, that grew 15%. And our e-commerce, although very, very tiny compared with our peers, Momo, it is still reporting a 23% growth. Okay. And then, of course, this is an area we will continue to work on and continue to grow.
And then our direct carrier billing, it shows an 11% growth as well, and we are still the #1 in Taiwan for the direct carrier billing. And our active -- monthly active user base has gone up by 20% for the friDay Video. That, of course, benefit from the pandemic. People now have time for it. But then also, I have to say, we had very -- we had added many interesting content, and so we were investing -- we are investing in the content to boost the viewership. Okay.
And then on the ICT side, that is on the enterprise side, our ICT grew 17% overall. And then for the cloud service, the resell, and then this includes cloud -- public cloud resell and also our own private cloud that FET provides in our IDC together is showing a 68% year-over-year growth. And our IoT areas that has done very, very well and is 57%.
And in particular, I'd like to point out the telemedicine, which is considered under the IoT category, the umbrella or the family. But then I pointed out only because this is utilizing 5G, and we start -- we kicked off the service. We provided this service in Taitung City. And then since then, we -- Taitung Province, I should say. And then we have more engagement and work with New Taipei City and then a couple of other provinces as well. So we do see -- we have seen a 34% increase growth from last year, and then we see even bigger growth for this year as we projected.
So it's a very exciting area, and it really helps the underprivileged folks that are in the hard-to-reach areas. So we take pride in us doing this as a pioneer and using our 5G technologies, okay? And in the security area, we also grew 29%.
And then the last 2 slides before I turn the stage to the CFO are just a list of award and recognition that we have received. As you know, FET has very committed to the ESG or the CSR-related work. So we've got quite a few awards in that area. And I also like to turn your attention to the innovation awards, the kind of recognition we got for the advanced ICT work that we did, like the smart city innovation and also our AIoT innovation. So that was something in our new economy as our focus. So getting those recognition was very encouraging and exciting.
And then as
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a lot of efforts in improving our customer service and the customer satisfaction. So in the service awards, we continue to be recognized for our customer service. And then we got Best Service in Taiwan, that's 9 years in a row, by the Commercial Times. And also, we have the Customer Service Excellence Award from TCCDA in 2020. We also have a few of our store managers get recognized as the best store managers in Taiwan and actually get to meet our President Tsai just recently.
And then in our enterprise area, we also have some major wins last year and then over some major collaborations. For example, our millimeter wave private network with our 28GHz spectrum with MediaTek, which is the world's leading 5G modem design company. And our engagement with Delta and Microsoft in kicking off and actually creating the 5G smart factory. This latest I heard that, actually, in March, they will make it commercially available and then for business and all that. So I'm really excited and looking forward to that.
And then the 5G telemedicine, as I mentioned earlier, we operated in New Taipei, Taitung provinces already. And then we have deployed 80,000 smart streetlights at Taoyuan and then that same work we got recognized for very good network management. This is about some of these smart city projects. People think maybe the telcos only provide connectivity. It's really more than that. Just to manage the availability of these devices to achieve the 99.99% kind of availability, it takes a lot of work and then it takes good network management. So not everybody can do that or not everybody can do it that well. And then we certainly did very well with Taoyuan, that was a good example of our teams demonstrated our capability.
And also, we deployed smart water meters for Taipei City. So the smart city is definitely an area that FET will continue to work on. And we see a lot of opportunities, especially these projects come from the government sector, and we have had many good wins and very good experience working with government agency or local governments in the projects and because we do good work there. Okay.
And I will turn that to Sharon for financial performance.
Thank you, President Chee. Good afternoon, everyone. Now let me go through the financial performance for Q4. For the Q4, the total revenue was TWD 22.8 billion, higher than the Q3 and the last 7 quarters due to the high sales of iPhone 12. With the bank spending control, the Q4 EBITDA is TWD 6.9 billion, quarter-over-quarter improved.
Moving to the next page, it shows our financial results comparing with our guidance. The total revenue for Q4 is TWD 22.8 billion. The achievement rate is 93.6%. [indiscernible] the iPhone launch delayed from September to October with closure spending, operating costs and expense for Q4 is TWD 20.3 billion, which is 8% lower than our guidance. The Q4 EBITDA is TWD 6.9 billion. The achievement rate is 96.4% due to the lower revenue.
With lower depreciation and the funding costs in our original plan, the Q4 net income is TWD 1.9 billion. Earnings per share is TWD 0.58. The achievement rate is 100.8%. The net income for the year 2020 is TWD 8.35 billion. Earning per share is TWD 2.56. The achievement rate is 104%.
Please turn to the next page for the Q4 key financial indicators. The ending cash for the year 2020 is TWD 5.7 billion. The total borrowing is about TWD 74 billion. Net debt is TWD 67 billion. Net debt to EBITDA, the [indiscernible] is 2.43. The free cash flow for year 2020 is TWD 15.2 billion. We have a higher cash payment for the cash CapEx in Q4. The cash CapEx for the full year is TWD 10.9 billion.
Please turn to Page 14 for our 2021 financial forecast. Even the COVID-19 still impacted the roaming business, with more 5G adoption, handset sales and the ICT project delivery in this year, the total revenue for the 2021 is forecasted by TWD 82.3 billion, which is 3.5% year-over-year growth. Higher or [indiscernible] the 5G network rolled out, the operating cost and expense is TWD 72.9 billion, which is 6.5% year-over-year growth. EBITDA is TWD 27.5 billion, slightly down by 0.4%. And our net income for the 2021 is forecasted by the TWD 8.37 billion. And earnings per share is TWD 2.57, slightly higher than last year by 0.2%.
Please turn to next page for our 2021 CapEx guidance. For the year 2021, CapEx is TWD 14.4 billion (sic) [ TWD 14.9 billion ]. The highest CapEx is for [ fixed ] 5G network deployment in this year. [indiscernible] is about 50 to 70 of the CapEx for the 5G network construction.
Thank you for your time. Let me turn to the presentation for the President Chee for the FET 2021 priorities.
Okay. Thank you, Sharon. Okay. So for 2021, as I have been telling my team, I believe the work has passed. Thanks to everybody involved, and the vaccine, whatever, and we believe the ones have passed, although we're still recovering like the roaming revenue that we lost last year. We don't think it will jump right back this year, but then it probably just won't be as bad as last year. So things are recovering.
But in our revenue target, we are still conservatively or cautiously optimistic. Just knowing 5G will definitely help, but on the other hand, we also see the traditional voice on the phone usage has been decreasing. So that offsets some of the growth. So we just have to do more with our 5G.
So the top 1 priority for our 2021 is to accelerate our 5G service adoption. So we'll continue to do that. As I reported earlier, we have been seeing a very strong adoption. So we just need to continue to do that. And then our -- the fact that we got certified as the fastest or most robust 5G network, that certainly would help as well. So we see very active -- we have a good share of the new graph for the 5G customers. So we are pleased to see that. So we'll continue to do that.
And then in the ICT, in our enterprise area, ICT has been considered as our growth engine. And then -- so we'll continue to grow that, and then we will grow the profitable ICT business. In the last 2 years, by our work for our IT and also the transformation office, which have been concentrating on building those ICT solutions with the big data, artificial intelligence, machine learning and IoT type of technology, so we have more of those homegrown solutions and also some of those we co-created with our partners. So now we have very solid product per se for the ICT business. So we believe that we will continue to grow it, and also the margin, that will also get better and better.
And then in terms of the consumer, even though from the mobile service area that we see, except for the 5G uplift that we are hoping it will eventually and they will -- actually, it's not just hoping, we can see that our ARPU will eventually later this year, then we should start showing year-over-year positive. So that is certainly a good sign. But then other than now, overall, we do see the mobile service revenue because the competition and also the saturation has been declining. It's kind of the big trend.
And then so to offset that, 5G certainly helps, but then we need to -- and then the customer base is already pretty much fixed. Taiwan just has 23 million people, right? So that is fixed. So how do we grow the total customer value or contribution per user? And then -- so that is something we will work on. And we have launched mobile circle earlier this year. And then that already show active users, like more than 1 million every month. So that is our way of [ funding ] with our customers more closely, and we want more loyal customers.
And then so we will know our customer better, and then we can offer them more services as well. So then the total customer value or contributions that we can get, even from the pretty much fixed number of customers that we can grab, but then the total value will still grow. So that's how we will grow our consumer-facing business or revenue.
And then last but not least, we'll continue to control our costs and also how we can smartly capture the -- invest our capital. And this -- like for our 5G network, although we are -- we have the fastest, but then we didn't deploy as many as some of our rivalries or our peers in terms of the number of stations. But then that's really -- it's by design because we believe in -- we use the big data and the analysis, we use AI machine learning to actually see where we should deploy and how many to optimize our investment. And also, you have to know where your customers are, your existing customers and where you deploy, that will best -- or will give them the best performance.
So all those factors are considered when we determine our deployment strategy. And we have done that very well. And then that you can see, we didn't have as much bandwidth within our peers, Chunghwa, and we didn't deploy as many than our other peers. Then we were still certified by 2 dependent third-party speed test companies that we are the best when it comes to the 5G performance.
So that is to tell you we use our capital very smartly, very cautiously. Now although this year's capital plan is more, but then it should peak because we see our network deployment in terms of the 5G, the new radio, this year's deployment should be the peak, right? After that, it's like the last leg of a few more thousands. That should complete the total network.
So we really are accelerating the construction of it and probably because the government is asking us to do that. But then also, if we have to do this, we might as well just get it done sooner so more folks can see the benefit, and I can appreciate the benefit and can get on the 5G network. So that's why this year's capital investment in the 5G should peak. But then as I said, by utilizing the AI and big data, we think we are deploying very smartly.
And then because of the number of stations, the more stations that you deploy, the more utilities, the rental and all that would also come up. And then that's why it will impact that as well. But then on the other hand, there are costs that we can control and we will control. So we will continue to do that, to be slim in our spending. And so that will help improve our bottom line.
As you can see in our forecast for this year, we actually projected our EPS to be TWD 2.57, that's up -- TWD 0.01 higher than TWD 2.56 actual for last year, even though last year's forecast was TWD 2.46. We overachieved our target. This is the first year in quite a few years that we actually had our EPS target higher than before. So we want to show this is a turning point, and then things will get better from now on.
Okay. All right. So then, we'll get to the dividend. If you have already seen the distribution of the package, you will see, now we will keep our dividend at TWD 3.25 like last year. And we want to maintain a stable dividend as our commitment to our shareholders also reflect our confidence in the future in the company's business that we will continue to do better.
Okay. With that, thank you, and we will take questions.
[Operator Instructions] Our first question is coming from Peter Milliken, Deutsche Bank.
Yes, it is good to see guidance finally being positive. My question has been really on the 5G ARPU uplift of 15%. That's great to see. Can you just explain a little bit about how that occurs? Because I don't think the pricing of 5G is that much higher than 4G. Is it that a lot of users were -- had old phones and had migrated down to, say, TWD 499 plans and so -- and have been kind of waiting for a new handset when maybe a 5G or a bit of iPhone came out? Or is it something more about 5G demand in itself?
Okay. Well, first of all, let me explain. So when we talk about more than 15% uplift, we were referring to the monthly fee, not ARPU because ARPU will include other revenues such as if they have over-usage on their telephone minutes, right? So you get extra revenue and all that. So it's all included in the ARPU. But here, we are comparing apple to apples from a monthly period, monthly rates, the rate plan that they sign up.
So for those customers that renew in the -- since we launched the iPhone in July. So we take all the renewal customers, right, what the rate plans they were on before and then after they renew to the new one in 5G. So you take the average, the difference, right? And then if you look at each month, actually, we see the uplift continue to increase. And then that's why the figure is even bigger for this last month or so. So that's how we calculate it.
And then if you look at the average rate plan for those early adopters, right, for the 5G, they are actually already on the higher rate plan. So they are now the TWD 499 group. They are not -- those TWD 499s are a very small number, if any, in our early adopters. So our early adopters are already on the higher plans, like maybe they're the TWD 999 or TWD 799 kind of the rate plan. But then because we have priced our 5G rate plan so that the higher rates are more encouraging, are more attractive than the lower rates, so like -- so that's why we said the double take kind of icing on the cake kind of strategy.
So if they sign up with TWD 999 and then they -- even they use up their data usage, when they drop to the 4G, we still give them a very good kind of speed. But then if you go with the lower plan and then now when you drop through the 4G plan after you -- over your data coverage -- your data limit, your speed is slower. So we kind of differentiate our offer so that the upper level ones become more attractive.
And then so I would consider as our strategy worked, our pricing strategy worked as -- I don't know if you know, but then when we announced our pricing because we are the third, we -- Chunghwa and Taiwan Mobile, they did on, what, June 30, right? And we came out on the 3rd. So as soon as we announced our pricing plan, my peers -- our peers actually changed theirs like in a day or within a week. So I think our pricing strategy worked pretty well, and then that definitely contribute to what we are seeing right now. I hope that helps.
And the next question is coming from Sara Wang from Morgan Stanley.
I have 2 questions. So first one is still on that new economy business. So say, for 2020, how much revenue does it contribute to the overall revenue as a percentage? And also, do we expect, say, ICT margin will expand going into 2021?
And then my second question is on the guidance for next year. So first of all, we guided growth in overall revenue, but EBITDA remains flat. So may I ask, what is the major cost item that increased for next year?
And also, regarding your flat -- largely flat EBITDA trend. So -- and at the same time, there are the incremental 5G monetization costs. So -- but still, like we guided net profit to be stable. So is there anything else that offset the increase in the, like, 5G spectrum costs?
Okay. So the first -- let me answer your first question, that's more straightforward. So the new economy, last year, we ended -- it is like 15%. It accounts for 15% of our total revenue, which was TWD 79.5 million, right? So 15% of that. It is TWD 11.8 million -- TWD 11.9 million -- TWD 11.899 million, yes, to be exact. So it's 15%, okay?
And then we expect it to be 16% this year, okay? You probably don't recall this, but then in 2019, we had it for 13%, and then we projected for 2020 will be 15%. So we have kind of bigger delta. And this year, we are more conservative because there is a lag in terms of the ICT revenue realization. So you need to get the projects, the contracts and all that, and it takes some time, some months to delay -- to deliver.
And then with this -- with 2020, the pandemic impact, we do see even government or some companies that they were retracting their capital spending or they were slowing down on that. So that does affect the number of contracts that we would otherwise get. So that would have a delayed effect in terms of the revenue. That's why we are not as aggressive as we have been in the last few years when it comes to ICT growth. And we're just kind of sit out to be more realistic. But still, we are happy with the 2 digits growth that we expect to get from the ICT. Okay?
And your second question is our revenue is about 3.5% growth, but then our EBITDA is flat or even a little bit less, right, like 0.4%, and what was the major reason. It's really because of the deployment, the rollout of the 5G. First of all, this is about the OpEx, right? So the OpEx, like I mentioned, as we add each of these radios to -- even to those existing stations we already have out there the same location, the base station's location, but then the landlord will charge us more just for their rentals, right? So that is the monthly kind of thing. And also more utility, more power consumption.
So all those -- and we have a pretty aggressive rollout plan this year. So that's why we anticipated the OpEx will go up. But then on the other hand, like I said, there are some OpEx that maybe in the back office or in some nonconstruction related, and we will see how we can scrutinize it more, and then we'll continue to control our costs. And hopefully, eventually, we should see or have a good, positive or at least flat and not negative in terms of the EBITDA growth.
Okay. And then you have third part of your question, Sara, about some 5G. Can you repeat that for me, if you remember?
Yes. So I will assume that in 2020, there was only the half year -- or less than half year impact from like 5G spectrum amortization costs. So for this year, it will be a full year impact. So given our guidance on EBITDA is to be flat, so while our net income is also flat, say, assuming like 5G spectrum amortization cost will be higher this year.
Right. Yes, you're definitely right about the 5G amortization being higher. And luckily, for -- when it comes to the 3G and 4G depreciation, actually, they helped us because it has come down. And then so that helped offset the amortization that we see the increase for 5G. And also, we have building that we are planning to sell, and that will definitely help some with the bottom line as well.
Got it. Like, is there any like government subsidy that we have [indiscernible] like taken into account for the guidance?
Very, very conservatively because right now, it is still being discussed. And so it's nothing finalized. So we are hopeful it will come out. I mean, right now, we have some consideration for that, but very conservatively, not significant.
[Operator Instructions] Now we'll have Billy Lee of Crédit Suisse for questions.
I have 2 simple questions. Can you remind us what is the 5G base station do you have now? And what's the current 5G penetration? That's the first question.
And the second question is also a follow-up to the previous question on the net profit. I just got the understanding like the 3G and 4G depreciation is coming down, so we are seeing a flat net profit. But it looks like -- does that mean that the 3G and 4G depreciation is coming down quite a lot? Because if you think about it, we have like almost TWD 40 billion spectrum payment and 20 years of amortization. That means like TWD 2 billion of amortization each year. And I'm just a little bit surprised by the extent of that [ shop ], offset by the 3G and 4G. Could you elaborate a little bit on that? It would be very helpful.
Okay. All right. So to answer your first question, we now have 4,600 of stations or close to 4,700 already deployed as we speak. And then that covers 61% of the population passed island-wide.
Okay? All right. And...
How about the 5G subscriber penetration?
Okay. Well -- so I think you're talking about like a percentage. And we are shy of 0.5 million subscribers. But then we're still looking at 25% to 30% before the end of the year.
Okay. Got it. And then the -- how about the [indiscernible] question?
Yes. So yes, so for the 3G and 4G depreciation definitely has come down a lot. We also write off -- wrote off some of the 3G equipment. So that helped with the reduction on the depreciation as well. So, so far, we do see that helps a lot in terms of offset our 5G amortization. And the depreciation is really just starting. But then on the other hand, as I mentioned, we have one building. We -- actually, altogether, FET has like 3 buildings in the Neihu area.
And we have been doing some agile project, the renovation of the headquarters and the other buildings. So we are able to get our teams close together for collaboration. And then so as a result, we actually see the opportunity to activate our assets a little more. So there's one building where our enterprise unit is occupying right now can be emptied. And then so we plan to sell that. And then the proceeds will be helping with net income this year as well.
And the next question is coming from Danny Chu of Bank of America.
Just 2 quick questions. The first is actually about the CapEx budget. I noticed that the company budget, roughly about TWD 15 billion for CapEx for the coming year. I assume not all of those TWD 15 billion will be spent on the radio access network. Would you provide us with a little bit more details what are the major items in terms of that TWD 15 billion CapEx budget? That's my first question.
And my second question is I assume at the moment, most of our company's 5G service revenue is from the consumers. But if you have to make a projection, say, by end of, let's say, 2022 next year, roughly how much percentage of our 5G service revenue will be coming from, say, enterprise or industrial customers?
Okay. All right. So to answer your third question about the capital, and you're right, even when it's network capital, we have more work than deploying the radio stations for [indiscernible] this year if you ask my network team. So for the core network, we are also working on the new 5GC, right? And also, if you look at VoLTE, we are looking at upgrading our VoLTE facility as well. And also, we are planning to sunset our 3G. And then so that's why we need to have a plan how to deal with our voice traffic.
So all those are part of the capital spending plan, although, of course, a big part of it has to do with the 5G rollout. And then some of that would be the software capitalization, right, because more and more that my team is doing the solution, right, for enterprise and also for consumers. So like our video, our digital technology, they are all internal. So there is some capitalization there as well. Okay?
And then we are done with our TPKC, the telecom park, right? So that construction capital was already all closed, right? Yes. So still, a big part of the capital plan is for the network, and then a big part of the network capital is about 5G rollout. But then we do have work on the core network and also our VoLTE upgrades and also sunset the 3G and then for its replacement.
And then also, there is some -- actually this part relates to the next question you have. As we are rolling out our 5G private network, there is some investment in the private network equipment as well. So there, we have projected some money, some capital for it. And also we have a subsidiary which is a green energy company. So they build on the solar -- the roof, right? So there is some capital required there as well. So that is pretty much [indiscernible] the total capital that we need for this year.
Okay. So for the second question you have, and you're right, because for the 5G service, as you know, each consumer that we cover to 5G, they use the 5G service plan. It's very straightforward. So that revenue counts towards 5G, even though the 5G network is constructed on top of 4G. So there is still part of it when it's now 5G is on 4G.
But then still, we kind of -- from the -- for our own analysis purpose, you can easily identify how many 5G subscribers versus 4G subscribers. But when it comes to enterprise, 5G connectivity or whatever G that is, the connectivity, usually, when it comes to the enterprise, is really just the enabler, right? This is not like -- if you're talking about, this is still the old telecom. So we can tell you we have our enterprise mobile customers that's using 5G. But then when we gave you the number about the total subscribers and all that, we count that together because they are still consumers after all, even though those are through the enterprise account.
But then if you were asking how much revenue we were able to use with the enterprise, especially in the ICT area, right, so not in the traditional telecom SIM, then that is trickier because, usually, the connectivity is only the lowest layer and it's an enabler. But then on top of it, you have other layers like the layer of IT, the application. And of course, you have some devices that you need.
So when it comes to ICT, it's a big kind of composite kind of solution. And then the connectivity usually is only one layer of it. So do you count all that as the 5G revenue or you want to only take out, okay, how much do you charge them. And usually, for this part, you charge them monthly. And then even with that, there is some managed aspect of it. So it's not still just purely the connectivity.
So we actually right now don't have a plan and then -- to track that separately, but we can certainly look into that for you. But then we don't really have a target set for now. We do look at -- yes, we need to grow our private network business and then 5G private network. So we can probably report next year this time how many private network we deployed and then the size of the business, we can do that.
But then 5G can be used in other IoT, just like I said, the telemedicine, right? But then that is not the core of the telemedicine. There is the application that we built. And then -- so the connectivity, the 5G part is only at the beginning, the construction. And then we have a monthly recurring charge. It is a many different piece parts. Okay, Danny? Did I answer your question?
Yes, yes. Like -- I mean, this is the first place, the reason why I asked that is because given that before 5G was launched, a lot of people were talking about that is eventually, 70% of 5G will be used by enterprise, software, industrial customers. So eventually, I'm sure investors as well as analysts, they want to keep track are we targeting, on track of that or at the end of the day, 5G is still all about consumers. Yes.
I see. Yes. I definitely see where you're coming from. And then if this is in the States, in the United States, I would say that's probably even more so the case. But then in Taiwan, we are upgrading our consumers to the more advanced technology because Taiwan is small and we are able to -- and with several telcos, we are able to give a very good coverage. So for consumer, we can really get among 5G end-to-end, right?
So still, 5G, the consumer product is still a big part of their revenue. But then on top of it, there will be more enterprise benefit from 5G other than from the pure telecom sense. But then because of the new smart solutions that could use the benefits of 5G, so you will see more of that. But then I think in Taiwan's case, consumer is still big, but then all those -- the additional smart solutions that you can do with enterprise, they're a bonus, and then the more, the better.
But I doubt it will be bigger than the consumer, at least for the time being. I don't see that. In the States probably because they just don't have full coverage to afford -- that they can afford to provide the consumers. And then the consumers will be less willing to upgrade to 5G because the coverage is spotty. But they can certainly do that for enterprise use, right, with private network for concentrated coverage. It will be a different case.
The next question is coming from Sara Wang of Morgan Stanley.
Just a quick follow-up on the enterprise ICT revenue. So for example, in 2020, how much of the revenue comes from, say, pure connectivity or [ web ] procurement? And how much does it come from, say, solution or more like [indiscernible]? And for next year, so it seems we are still targeting double-digit growth in this space. So like, is there a rough idea like how much is driven by expanding to new customers? Or how much is driven by more, say, [indiscernible] to, say, existing customers?
Okay. On the enterprise side, right, Sara, you are asking? Okay. So I think...
Yes, on the enterprise ICT revenue side.
Right. So I think you're asking how much of the ICT revenue is from the equipment versus the solution of software. Is that what you're asking?
Yes. Yes.
I don't actually have that breakdown. I have the breakdown of the ICT business into different kinds of product line. For example, the CIoT or cloud or it is IoT-related solutions or it is energy or security. So I have that. But then in terms of the further breakdown between the software versus the equipment, that will need more work. I don't have that handy to provide.
And the second question I think you're asking, to grow our ICT business, do I see that it's going to be more clients or more with the existing customers? Is that your question?
Yes.
Okay. I think it will be both because we do see a lot of company or a lot of our clients, they are seeing the value for digital transformation. So when they do that, they have needs for the IoT or the cloud kind of solutions and then build on top of the -- in the IoT connectivity or 5G. So that's where we can provide solutions for. So those are on the existing customers.
And then on the other hand, because in the last 2 years, we actually have built quite a few advanced ICT solutions that we are privatizing. So those we can sell beyond our existing customers, which is also part of our focus this year with my enterprise team. So we need to do a double-pronged approach. So as a result, you will see newer customers, more newer customers and also with the growth on our existing customers. So it will be both.
Got it. And then in terms of the full product line, so, say, from the perspective of a combination of both revenue contribution as well as growth rate, so which segment do you think is the most promising one in, say, this year or next 2 or 4 years?
You're talking about in terms of the industry verticals, which ones I think is most promising? Is that your question?
In terms of top line, say, cloud sales, IoT, security, so -- presented in the slides.
Okay. I see, I see. Okay. Well, I think because IoT is more like broad, right? So if you look at this as a broad category, and I could say, well, this one will become bigger. So for example, like our project with Taoyuan City where we deploy 80,000 smart streetlights, that's a big -- like a TWD 2.4 billion kind of project. And then that counts as IoT. So if you look at those projects like that, then IoT will be the category.
Now security, the IT security is something like a solution or software-based, and then it tends not to be big dollars, but then you see more needs. Okay. Well, now they need the IT security. But then the amount itself per project is not big. So they do not add up as big as the IoT category just because it has a big variety. And depending on the smart city or smart manufacturing, so it can vary. But then if you must have an answer, I'll tell you that's IoT.
Got it. Got it. And then just a quick follow-up. So as you mentioned previously, how about the verticals -- industry verticals? So it seems like initial stage, the projects will monthly come from public sectors or something else?
Okay. Well, I wasn't offering that. But then, sure, just for my two cents. From what we've seen, right -- I cannot -- I have to say, with -- one of our peers is kind of an incumbent in the government sector because of the history, because they are halfway or mostly government owned. So they do have advantage with the government sector. But then I do see the growth in government because a lot of these smart projects are really driven by the government, local government as well, right? So the smart city. That's why I said the smart city continues to be a big area that we will invest in.
And then whether we have done some really good jobs, so once we were given the opportunity to show that we can compete, we do have some good wins over our peers. So -- and then actually, among telcos, I think Chunghwa and ourselves, we probably are doing the best in the government area. But then there is a lot more room for us to do more. So I definitely see government as one area.
Now as far as the private sector, I think manufacturing will be one. And then because of this industry 4.0 and also quite a few companies coming back right on overseas. They invest in Taiwan, they build their factory. So we see the opportunities with smart factories. And then -- but then this is not to say with those other traditional industries that you don't have opportunities. Actually, it's the opposite. They see the need for digital transformation, especially with the pandemic. They see how critical it is to have the digitalization or digital -- or go digital kind of a capability.
So there is definitely a surge in the need for cloud. And then that is across many different verticals. So we like to kind of focus on the type of solutions we have, and then we target to whichever industry that could benefit from these solutions. So we see quite a few of them, yes.
And retailing, that's another area. Certainly health care, like what we are doing with telemedicine. But then back to this, the government thing, telemedicine has a lot to do with our current regulation. So government definitely plays a key role there as to how much road that we think we will be able to move this forward. But then I'm glad to say that right now, from all those progress that have been made in the regulation in terms of opening up for more patients qualified to be reimbursed for their insurance coverage, for telemedicine, that is opening up. So we definitely see more opportunities there for growth as well.
Ladies and gentlemen, there are currently no questions. I'll pass the call back to Mr. Gary Lai. And Gary, please proceed. Thank you.
Thank you, everyone, to attend our fourth quarter 2020 conference call. See you next quarter. Thank you very much.
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