Good afternoon, ladies and gentlemen. Welcome to Chunghwa Telecom conference call for the company's third quarter 2023 operating results. During the presentation, all lines will be on listen-only mode. When the briefing is finished, directions for submitting your questions will be given in the question and answer session. For your information, this conference call is now being broadcasted live over the internet. Webcast replay will be available within an hour after the conference is finished. Please visit CHT IR website, www.cht.com.tw/ir under the IR calendar section. Now, I would like to turn it over to Miss Angela Tsai, the Director of Investor Relations. Thank you. Miss Tsai, please go ahead.
Sure. I'm Angela Tsai, Assistant Vice President of Financial Department of Chunghwa Telecom. Welcome to our third quarter 2023 results conference call. Joining me on the call today are our Chairman, Harrison Kuo, President Ivan Lin, and Vincent Chen, our Chief Financial Officer. During today's call, management will begin by providing Chairman's message, our business overview, and followed by a discussion of our segment performance and the financial results. Then we'll move on to the question and answer portion of the call. Slide two, please read the disclaimers and notes concerning forward-looking statements. Now, without further delay, I will turn the call over to our Chairman. Chairman Kuo, please go ahead.
Thank you, Angela, and hello, everyone. Welcome to our third quarter results conference call. Chunghwa Telecom has been committed to staying ahead in every aspect during the ongoing market consolidation. Before our business overview, I would like to highlight our dominant spectrum asset, one of our solid advantages to sustain our leading position and the growing momentum in post-merger landscape. Currently, we are the number one when it comes to the ownership of the mainstream sub-6 GHz spectrum. All of the 290 MHz sub-6 GHz spectrum is in use to provide fastest mobile speed for our customers, for our customers, outstanding in the industry. In addition, as we have the most base stations nationwide, we are also the operator acknowledged with the largest mobile capacity and the widest coverage in Taiwan.
On top of that, our leading capabilities have exclusively complete the two carrier aggregation of a 3.5 GHz and a 2.1 GHz, to provide 50 the 5G services, with theoretical peak speed of 2 gigabits per second, far beyond the industry standard. In terms of high band of 28 GHz, we are now with 600 MHz at hand, which is next to the unsold slot that can use for satellite services. As we are immediately ready for Low Earth Orbit satellite services, we will monitor the update of spectrum releases and, is confident to make another consecutive spectrum at 28 GHz. Contributing to the always broadband connected environment we commit to customers.
To sum up, we are confident to maintain our leadership going forward, giving our better spectrum asset and the outstanding network quality. Another unique strength of our powers and the significant highlight during the quarter was the expansion of our international footprint to Europe. We are proud to announce our strategic collaboration with EXATEL from Poland. This partnership allows us to join exploring emerging business opportunities, develop network infrastructure, and assist our clients in expanding their presence. This step marks a significant milestone, not just aligning with our strategy to replicate Taiwan's success abroad, but also solidifying our overall success and the leadership in Taiwan's telecom industry. Now, I would like to hand the call over to President Lin, the business overview in the third quarter.
Thank you, Chairman Kuo, and hello, everyone. Now, please flip to page five for the update of our performing mobile business. In the third quarter, we successfully achieved a remarkable milestone by acquiring more than 14% of the revenue share in the Taiwan mobile market and widening our lead against our peers. At the same time, our subscriber share also outperformed in the industry by increasing to 13.7%. The incremental and exit revenue share above our subscriber share reached the same percent. We are confident in accelerating our lead in the post-consolidation landscape due to our better revenue generation capability and a healthier cost structure. Let's go back and review the outperforming metrics of our mobile business.
In the third quarter, our mobile service revenue delivered about 7% year-over-year increase, maintaining its growth for 13 consecutive months, owing to the upsell results from the 5G migration, international roaming recovered and the increase of the postpaid subscriber numbers. In addition, the postpaid ARPU report, on the 5.1% year-over-year increase, continuing its consecutive and growth for the 10th quarter. For customers who migration from our 4G to the 5G, we observed an average of 4% and 14.4% uplift in the layer month mobile monthly fee, maintaining and in springing up trajectory. Let's move on to slide six for an update of our fixed broadband business.
In the third quarter, we are great to see the positive performance, performance in the fixed broadband sector. It's the revenue and ARPU increased by 2% and 1%, respective and on year-over-year basis, mainly and attribute to the increase of the higher speed service adoption. In the third quarter, and signs up for our service of the, 300 Mbps or higher, which is, currently the mainstream among all speed mix, and maintaining its high growth rate of the 41.1% year-over-year. In addition to, stable growth of the high speed service adoption, we asked to set up, the speed upgrade of the lower service subscription to optimize our service profile.
We roll out attractive incentive during the quarter and successfully encourage customers with the speed below the 100 Mbps to transition to the higher speed above the 100 Mbps. As a result, we achieved an 11% year-over-year increase in subscriber speed for service at 100 Mbps or higher. Now, let's move on to the performance of our Customer Business Group. Slide eight presents the performance of our CBG group. In the third quarter, the total CBG revenue increased steadily by 2.8% year-over-year. The mobile service revenue grows by 6.8% year-over-year, propelled by stable 5G migration and the increase of the postpaid subscription numbers. In particular, international roaming revenue continuing to recover and bring in contributions.
Fixed line service revenue decreased 0.7% due to the voice decline. While in the fixed broadband revenue growth by 2.7% year-over-year, thanks to effective promotion. In addition, by the end of the third quarter, the popular iPhone 15 series demonstrated 27% increase in sales volume compared with that of iPhone 14 series. And the CBG's and the sales revenue in the third quarter increased by 3% year-over-year. Despite CBG revenue, the increase about 3% year-over-year, its income before tax keep flat because of the higher base of the recognition of the government and the subsidies in the same period last year. as well as the increase of the manpower and electricity expenses and purchase the renewable energy.
Slide 9 further present our consumer business to the highlight. In the third quarter, our multiple product package continued to be well received. The subscriber number of the mobile 5G broadband and Wi-Fi service altogether demonstrated a 16.4% quarter-over-quarter growth. Home Wi-Fi subscription numbers increased by 13.4% year-over-year, along with the fixed broadband promotion package roll out during the quarter. In addition, our video subscription boost and delivered on a 5.58% year-over-year increase, mainly due to broadcasting of the Asian Games on both MOD and Hami Video, which also brought in revenue injection.
As Harrison said, we will continue to invest in the producing and quality content, and teams up with the local content industry and the major international production and companies with the goal to strengthening our content asset, expand our video platform, and prepare Taiwan's content industry onto the global stage. Moreover, we also invest in the KKCompany Technologies for innovative business models and service to further expand the digital ecosystem. Please turn to slide 10 for an overview of our enterprise business performance.
In the third quarter, EBG reported 11.8% year-over-year decrease of its income before tax , mainly due to fixed voice decline of the enterprise cost and clients, and a higher base result from the recognition of the government's subsidies at the same period of the last year. Those factor also result in a 4.4% year-over-year decrease of the total revenue of the EBG. In spite of ICT revenues and other revenue decrease in the third quarter, because of higher base of the recognition of the largest smart energy project, mobile service revenue continue increase attributable to the 5G upselling and the recovery of the international roaming and revenue. Fixed line and revenue and slightly decrease year-over-year, mainly due to the voice decline, as I mentioned above.
Where data communication revenue and broadband revenue continued to growth as expected. Despite above decrease this quarter, we maintain and carefully the optimistic outlook on our enterprise business performance throughout 2023. Slide 11 present our an enterprise business highlights. In the third quarter, our IDC and cybersecurity business still demonstrate robust growth. Where the total ICT enterprise business revenue of our major application decreased by 6.8% year-over-year due to higher basis the relative to smart energy and smart health project revenue recognition last year. In terms of the details, IDC business, in particular, achieved a 13.7% growth, owing to growth growing project numbers and long-term and recurring revenue injection.
Revenue from the cybersecurity also achieved the 7.4% growth due to increase in the demand from our enterprise client. Furthermore, despite our cloud service revenue decrease on a year-over-year basis due to one-time smart health project recognition last year, we are great to see that our recurring revenue from the international public health service continued to grow strongly by about 20%, with increasing demand from clients. As we continue to invest in developing the 5G private network, we acquire national cultural project to expand the AR/VR technology in immersing performers and expand opportunities in offshore wind power field construction and application.
In addition, we continue to expand our IDC with the high quality to cater to increase the demand, which further drive up the recurring revenue contribution to reflect our leading ICT capability. On slide 12, present our international business performance. In the third quarter, income before tax of IBG decreased by 3.6% year-over-year, owing to the non-operating expenses, such as the foreign currency variation loss and the increase of utility expenses. Excluding the impact, IBG continuing to experience positive year-over-year growth in the profit. Total revenue of the IBG increased by about 13% year-on-year, mainly driven by the growth in the emerging business, including IDC and cloud service from global clients and recovery in roaming revenues.
For the international business highlight, we are delighted to share our footprint expansion in Europe and Thailand in July. We signed an MoU with EXATEL from Poland. The collaboration will be focused on emerging business, including 5G and private networks and the smart city solutions. In September, we also signed an MoU with the Overbrook Hospital in Thailand for the cooperation of the telemedicine. We expect our service offering in the overseas market include the U.S., Japan, Southeast Asia, and Europe, and continue to spread. Now, I would like to turn the call to Vincent for our financial highlights.
Thank you, President Ivan. Good afternoon, everyone. I will now provide a financial summary of our third quarter results. Let's begin with slide 14, income statement highlights. During the third quarter, total revenues increased mildly compared to the same quarter last year. The main reason is growing mobile service revenues offset decreased voice revenue and the recognition of a one-time government grant income from same period last year. Income from operations and net income decreased by 5.9% and 2.9% year-on-year respectively, mainly due to an increase in electricity expenses and manpower costs. Overall, for the first nine months of the year, total revenues increased by 2.6% year-over-year, primarily fueled by strong growth of our mobile, ICT and broadband services, which offset declining voice revenue and the recognition of a one-time government grant income.
Net income grew by 2.1% on year, mainly due to our growing ICT business. EPS rose by what? 2.1% on year to TWD 3.69. The growth of EBITDA remained in positive trajectory, and EBITDA margin remained at about 40%. Now move on to page 15 for balance sheet highlights. As of September 30, 2023, total assets compared to the end of 2022 decreased by 2.1%, mainly due to the decrease in current assets, PPE and intangible assets, which offset the increase in other financial assets. Total liabilities decreased by 2.7%, primarily attributable to the decrease in accounts payable. Additionally, debt ratio decreased slightly and net debt over EBITDA remains zero. Taken together, these debt-related ratios demonstrate the robustness of our balance sheet. Page 16 provide a summary of our cash flows.
Our cash flows from operating activities remain robust, which increased by 5.7% on year. Capital expenditures decreased by 6.6% compared to the same period last year, of which mobile-related CapEx model was reduced by 28.4%, whereas non-mobile CapEx increased by 12.9%. The latter was primarily attributable to greater IDC investments. On top of that, free cash flows was up by 14.9% on year. Collectively, our strong operating cash flows, along with the robust balance sheet, enable us to be future ready and create sustainable and long-term value for our shareholders. On slide 17, the table presents financial results against management guidance.
During the third quarter, revenues slightly fell short of our expectation due to declining ICT business revenues, while net income and EPS meet our expectations. mainly driven by strong performance of mobile and broadband services. For the first nine months of 2023, all revenue and profit measures beat our forecasts as a result of outperforming core and emerging businesses. That concludes the overview of our Q3 financial results. Let me turn the call over to Chairman Harrison.
Thank you, Vincent. On slide 18 is our awards and ESG recognitions received in the third quarter. In October, The Asset, a widely recognized business news and research organization, announced that we won the Jade Award, the highest level of The Asset ESG Corporate Awards for the third consecutive year. We are the only company in Taiwan to stand out from the cross-industry and cross-country selections for our extraordinary ESG efforts. Moreover, we are glad to share that our efforts in ESG are widely recognized and received by investors, as we are the only telco included as one of the top ten constituents by FTSE4Good TIP Taiwan ESG Index.
Meanwhile, we were honored as the most outstanding company in Taiwan within the communication services sector by Asiamoney, reflecting our high quality telecommunication services, excellent governance, and the great ESG initiatives acknowledged by global investors. This concludes our prepared remarks. Thank you for your attention. At this time, I would like to open our conference call for questions.
Thank you, Chairman Kuo. Ladies and gentlemen, we will now begin our question and answer session. If you have a question for any of today's speakers, please press star one on your telephone keypad and you will enter the queue. After you are announced, please ask your question, and when you are speaking, please be louder or closer to the microphone. If you find that your question has been answered before it is your turn to speak, please press star two to cancel the question. You are also welcome to send questions via chat box on the webcast page. We will begin with the questions from telephone line and then move to the queries from the webpage. Thank you. Now, please press star one on your telephone keypad to ask the question. Thank you. Our first question will be Neale Anderson of HSBC. Go ahead, please, Neale.
Thank you. Good afternoon. I have a question relating to the government subsidies in the third quarter of last year. Is it possible to give the amounts that were booked? It looks like they were booked in both the consumer business group and the enterprise business group. I'm just trying to work out the pressure on profit from that, because you also mentioned some other cost increases, electricity, et cetera. Thank you.
Okay. So regarding the government grant income, that's because of the satellite subsidy, so the amount is about $0.4 billion. So, for this quarter, actually, the last year, same quarter, because we record this amount, so that will affect our income, our bottom line for this quarter, yeah, because of the higher base.
Thank you. That's split between the consumer and the enterprise business group. Is that correct? Are you able to give any detail on the split?
Yes, because the customer is mainly for the enterprise customer, so it affects heavily on the EPG performance. And this is a one-time effect. Yeah.
Great. Okay. Thank you. If I could follow up, though, so in the press release, and also in your presentation, you mentioned in the enterprise business group, there was a decrease of fixed voice after the pandemic. So could you give a little bit more detail on that? What's happening there? Are people moving to IP-based services or businesses, I should say, moving to IP-based services, and that's resulting in lower revenue?
Basically, during the pandemic period, so the people stay home, so they use more voice call to connect with their relatives or their customers. But in the post-pandemic period, so people return to work and they are out of their home, and so they use more on the wireless or the broadband. Yeah. So during the pandemic period, so at that time, the voice revenue actually is still declining, but the rate actually is lower. It's about, like, 5%. But now in the post-pandemic, actually, the declining rate is greater, so revenue and also our income. Yeah.
Got it. Thank you. Perhaps just finally on the deal with the Polish operator, I think EXATEL. Is that to support Taiwanese businesses in Europe? Could you give a little bit more detail about how large or the geographic scope for that business? Is it Poland specifically, or is that, and you're aiming to service this business more broadly?
Okay. We are still in talks with our counterpart, our partners, and we may collaborate in various areas. Yeah. It's not only in the ICT or maybe extend to other areas. We don't rule out the possibility to extending the collaborations to other regional partners in Europe, and we will keep you posted once we have more details and when the deal is more confirmed.
Understood. Thanks very much for your help. Thank you.
Thank you.
Thank you. If you would like to ask the question, please press star one on your telephone keypad. Thank you. If you would like to ask the question, please press star one on your telephone keypad. Thank you. If there's no further questions at the moment, then I will hand the call over to the management team to take the questions from the webcast page line. Thank you.
Okay, now we've received a question from the webcast. It's about the Chunghwa, you know, latest developments of their Low Earth Orbit satellite services. Is there any cooperation plan with specific operator? Thank you.
Yeah. Thank you for the website questions. The deployment of Low Orbit satellites primarily complements ground communication networks, aiming to expand overall communication network coverage and enhance network resilience. We adopt an open approach, actively exploring cooperation opportunities with multiple international Low Orbit satellite operators, and we're willing to participate in domestic proof of concept projects. However, due to non-disclosure agreement, space-specific details of the collaboration cannot be disclosed at this moment. We have obtained licenses for geosynchronous orbit satellites this year. One for Medium Earth Orbit and one for Low Earth Orbit.
In addition to ongoing negotiations with satellite system operators, we are actively preparing for applying commercial frequency license, network set up, and et cetera. In accordance with regulatory regions, our goal is to introduce commercial services for Low Earth Orbit satellites in Taiwan as soon as possible. For OneWeb, we have an NDA. There is not much to share for now. We will do announcements as the agreement is finalized.
Ladies and gentlemen, we are now in question and answer session. If you would like to ask the question, please press star one on your telephone keypad. Thank you. And you also could submit your questions via the chat box on the webcast page. Thank you. And on the call, we have the next question. It's from Rajesh Panjwani, J.P. Morgan. Go ahead, please.
Hi, thank you for this opportunity to ask this question. I think you an- when Neale asked this question, I think you answered it, but I couldn't properly get the figures. So can you the government subsidies project because of which the revenues were lower this quarter versus last quarter, can you just repeat? How much was the amount impact on both revenues and operating profit because of that?
Yeah, the amount is $0.4 billion, and it's about $0.4 billion.
Okay. And this is a revenue impact?
Yes. Yeah.
Okay, and [crosstalk]-
Because it, it's a subsidy. Yeah. So basically, the revenue is-
Okay.
Mostly the, is the all the profits.
Okay, got it. Got it. Thanks. And the second question is, in general, like, you know, there is further consolidation going on in the industry, but do you expect that your competitors will become relatively stronger, going forward, as they, you know, add to more base stations, more spectrum? Are you concerned about that going forward?
Yeah. We recognize NCC's conditional approval of the mergers among our peers, as the resulting change is expecting to be positive to the overall mobile market development in Taiwan. We welcome the regulators' decision to require our peers to dispose the excess bandwidth acquired with the mergers, which upholds a fair market competition and in line with the original policies and the rules made during the course of the spectrum auction. Our goal and the position are not only to shape ourselves as the enablers to perform and expand digital ecosystem, but also to expand overall value for customers, shareholders in the ecosystem and us. For example, to upgrade and migrate our customers' services to higher speed bandwidth services. As mentioned, as I mentioned earlier, we have the most base stations nationwide in Taiwan. So, we have confidence to have to lead in the Taiwan's telecom industry. Yeah.
If I may add, let me provide some financial numbers to show, you know, we are quite confident that we will still remain our lead in the post-merger market. If we look at the mobile markets, right? For the mobile service revenue, our annual growth is around 6%-7%, yeah, in the past nine months. But if you look at our peers, their growth rate is about 3%-5%. So it kind of shows, you know, our strategy is quite correct, so that we can remain to acquire clients, and also we can grow our mobile service revenues.
For our broadband services, so if you look at, after we roll out this up-speed upgrade promotion, so our broadband service revenue also maintain a very healthy growth trajectory. So for the year, so our broadband service revenue, the growth rate is about 2%-3%. And actually, our the subscriber has been increasing. And if you look at our ICT business, so for example, our emerging application services, so if you look at the IDC cybersecurity and also have been doing very well. Also for the 5G network, the AIoT, and for the and other emerging applications, they have been done very well. And most importantly, if we look at the ICT profit margin, actually, it has been steady goes up. So we think these are the good signs.
Looking forward, because we see, you know, the market has turned positive, and the macro condition is getting better and better, and we also know that digital demand has been growing dramatically, so we believe our ICT business has a good potential to grow. Yeah. This is what we see. Because we have a very good network, and we provide very good quality to customers in a consistent manner, so we are quite confident that our customers will stay with us. Actually from the churn rate, we are the lowest among our peers, and it's as low as 0.4%. We are quite comfortable about this number, and we believe we can further improve it. We also have a research lab with a team of 1,000 staff engineers. They actually provide excellent research and support. So that's why we can, as I just mentioned before, that's why we can support our expansion in our ICT business, because we can focus on high value added application services. So that's the supplementary information provided from me.
That is very helpful. Can I ask one more question on your overseas foray? You're doing this in Poland. Now, will this focus primarily be on ICT and enterprise services, or would you also look at investing in the networks? And would you be open to taking stakes in telcos outside Taiwan?
Okay. So basically, for now, we, as we just mentioned, we collaborate with our Polish partner in various aspects. So ICT enterprise are the main business collaboration we are talking about now, and we may collaborate in other dimensions. But for details, we will reveal as soon as the things is getting clear.
Thank you very much.
Thank you.
Thank you.
Okay, now we have three questions. Yeah.
Go ahead, please.
Now we have three questions from the webcast. The first is, will EBG revenue decline again, year-over-year, decline again in the fourth quarter?
For the EBG revenue, basically it's affected by the decline of the voice revenue. Because of in the post-pandemic period, the people's behavior and the customer behavior has changed back to normal, so they use less voice services. And the other key reason is the one-time government grant income. So as I mentioned, because last year, during the same period, we recorded $0.4 billion in revenue, also profit. So that heavily affects our revenue and our bottom line. And on top of that, also the electricity expense, because at the early this year, because there's a electricity, there's a rate raise in electricity, so that also affect our income. So these are the pretty the reasons that mainly affect the revenues and the income in the EBG segment. But as I just mentioned before, for in terms of the business outlook and current undertaking we have, so basically, we are still very confident that the EBG performance will perform in line with our expectation. Thank you.
Okay. The second question is: What is the 5G penetration rate now?
So currently, for the 5G plan, so for the 5G subscribers, so now, it's over 3,000,000 subscribers. And actually, the growth rate has been quite steady.
The next question is: Is there a 5G penetration target for this year?
Actually, for the 5G penetration, as I just mentioned, actually, the growth rate is quite steady, and we are quite comfortable with the number. And in terms of the 5G, the migration, the uplift is over 40%, so we think the growth pattern is good, it's healthy, and that's what we are care about, and in line with our expectation.
Ladies and gentlemen, we are now in question and answer session. You can, you can press star one on your telephone keypad to ask the question on the call, or you may submit your questions via the chat box on the web page. Thank you.
Now we have another question from the webcast. The question is that, what percentage of EBG revenue is from voice?
For the voice revenue, it accounts for about 20% of the revenues in the EBG performance, or of the fixed voice, fixed line. Yeah, for the fixed line revenue, for the voice, it accounts for 20% in EBG.
We're now in question and answer session. If you would like to ask a question, you may press star one on your telephone keypad, or you may submit your questions via the chat box on the web page. Thank you. Okay, if there are no further questions at this point, then I'll turn the call back over to the Chairman Kuo. Thank you.
Thank you for your past participation. Goodbye.
Thank you, Chairman Kuo. Ladies and gentlemen, we thank you for your participation in Chunghwa Telecom's conference. There will be a webcast replay within an hour. Please visit www.cht.com.tw/ir under the IR calendar section. You may now disconnect. Thank you and goodbye.