Good afternoon, ladies and gentlemen. Welcome to Chunghwa Telecom conference call for the company's third quarter 2026 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 the CHT IR website, www.cht.com.tw/ir, under the IR calendar section. Now, I would like to turn it over to Ms. Angela Tsai, the Vice President of Finance. Thank you. Ms. Tsai, please go ahead.
Thank you. I am Angela Tsai, Vice President of Finance at Chunghwa Telecom. Welcome to our third quarter 2026 earnings conference call. Joining me today are Chunghwa's President, Rong-Shy Lin, and our Chief Financial Officer, Audrey Hsu. During today's call, management will begin by sharing our recent strategic achievements and providing an overview of our third quarter business results. This will be followed by a discussion of our segment performance and financial highlights. We will then open the floor for questions and answers. Please turn to slide two to review our disclaimers on forward-looking statement disclosures. Now, I will turn the call over to our President. President Lin, please go ahead.
Thank you, Angela, and hello, everyone. Welcome to our third quarter 2026 results conference call. To begin with, we are proud to report excellent performance in the third quarter. Our revenue, operation income, net income, EBITDA, and EPS all beat the upper ends of our guidance and hit their highest level for any third quarter since 2009. We are satisfied with our continuous leadership in Taiwan's mobile and fixed broadband markets, and even more pleased to highlight that our ICT revenue alone reached its highest third quarter level since 2021. Our asset revitalization efforts has also paid off, contributing a one-off gain in the third quarter and validating the soundness of our policy. With all these achievements, we are quite confident that we will exceed our full year's forecast. While delivering solid third quarter performance, we also continue to lay the foundation for the future growth.
For standalone 5G network deployment, we continue to upgrade our base station with population coverage expected to exceed 50% by the end of 2026, primarily in metropolitan areas and along high-speed rail routes, with nationwide coverage to follow in 2027. Consumers are expected to experience network slicing functionality in 2027. In addition, we sustained our continuous AI-related deployment across all fronts of our business. Early today, we announced an extended collaboration with Google to broaden our AI-enabled services and accelerate consumer AI adoption, which we expect to enhance the digital services we offer to customers and strengthen our long-term growth positioning. On the enterprise front, in addition to our existing AI PC service, we are also expanding our AI-related business through new ventures. Chunghwa Telecom's CHT InventAI, which we spun off years ago, is already gaining traction with its GenAI governance and AgentHub services.
We have seen increasing demand from the financial and public sectors and have begun to generate revenue. Following this success, we took another step forward in AI by establishing Chunghwa Telecom's Intelligent Vision Intelligence and HAI Technologies. These strategic moves lay the foundation for our future growth in the AI area. Finally, we are delighted to report our ESG-related achievement. First, we became one of the first companies worldwide to obtain BSI's AI Mark of Trust, validating our AI governance against international standards, and strengthen stakeholder trust. We were also recognized globally for our leadership in sustainability, telecommunication services, and 5G innovation by TIME Magazine as a frontrunner. Domestically, we are again named among the Taiwan Top 100 Companies Preferred by Foreign Institutional Investors and received multiple honors for digital transformation from Harvard Business Review. These achievements reflect our continued progress and leadership across key areas.
Now, let's move on to our third quarter of 2026 results. Please turn to page five for our success in Taiwan's mobile market. In the third quarter, our market share continued to outperform peers across all metrics. Our mobile revenue market share climbed to a record high of 41.2%, while our subscriber market share rose to 39.9%, according to our telecom regulator. Particularly, our revenue share continued to exceed our subscriber share, reflecting the premium quality of our subscriber base in the industry. Our 5G performance was equally impressive. In the third quarter, our 5G market share in Taiwan reached 39.4%, maintaining number one status. In addition, our 5G penetration rate among smartphone users increased to 49.6% as of September, and we anticipate it will surpass 50% by year-end.
The average monthly fee uplift from 5G migration remained stable at 40%, and our postpaid churn rate stayed at a low level of 0.41%, reflecting strong customer loyalty. As a result, we are glad to see a nearly 3% year-over-year revenue increase in our mobile service in the third quarter due to the growth in 5G adoption, mostly driven by the high-end smartphone sales and the increase in roaming revenue, which delivered an 18% increase year-over-year in the third quarter. Meanwhile, postpaid ARPU increased by 2% of TWD 11, sustaining the growth trajectory. Let's move on to slide six for our fixed broadband business update. In the third quarter, our fixed broadband revenue and subscriber number increased by 3% and 0.7%, respectively, driven by our success in promoting speed upgrades.
In the third quarter, sign-up of 300 Mbps and above maintained double-digit growth at 14.4% year-over-year, while sign-ups of 1 Gbps and above increased by 42% year-over-year. Accordingly, sign-ups of 300 Mbps and above reached 43% of our total fixed broadband customer base, serving as a strong driver to spearhead fixed broadband business. As a result, our fixed broadband revenue posted a 3% increase year-over-year in the third quarter, while the ARPU rose by 1.6% of TWD 12 year-over-year. We expect the growth dynamics to continue alongside the ongoing digital demand. Page seven highlights the performance of our million-subscriber customer services. In the third quarter, sign-ups of our multiple play offering, which integrate our mobile fixed broadband and Wi-Fi services, continued their upward trend and grew 13% year-over-year, driving up our overall telecom revenue growth.
Notably, our Wi-Fi penetration among fixed broadband subscribers reached 58%, accelerating the popularity of the smart home environment for customers. For our video business in the third quarter, thanks to the broadcast of FIFA World Cup in June and the Asian Games in September, our video subscriber number steadily maintained above 3 million, serving as one of the key revenue contributors in our consumer business. Our success in content investment came not only from sports, but also from dramas. For the upcoming 63rd Golden Horse Awards in Taiwan, we have received the largest number of nominations in the telecom industry this year, recognizing the quality of our content selection. We are happy to provide appealing content to our customers and look forward to related returns in the future. Meanwhile, our digital services continue to expand.
Our consumer cybersecurity service maintained over 1 million subscribers and delivered 12% year-over-year growth, supported by rising demand for digital security. The number of transaction users of our direct carrier billing, or DCB, increased by 5% year-over-year. We are also seeing DCB used for a broader range of purposes beyond gaming, including AI tool and social media, which we believe will help diversify our revenue stream and support future growth. Slide eight illustrates the key development in our enterprise ICT business. With the group collaboration, our ICT revenue in the third quarter increased 19% year-over-year, driven by continued expansion of emerging services. The group recurring ICT revenue also rose by 19% year-over-year, demonstrating strong momentum across major service lines such as IDC, cybersecurity, and cloud services. In particular, we saw AI-related subscription make a positive contribution to our international public cloud service revenue in the third quarter.
Among our core ICT service pillars, cloud, IDC, cybersecurity, and AIoT service delivered a strong year-over-year growth of 45%, 26%, 22%, and 14% respectively. In the third quarter, cloud and cybersecurity revenue growth was primarily driven by transportation and financial projects, while IDC revenue achieved its 10th consecutive quarters of year-over-year growth, supported by installation projects for high-tech company. Additionally, AIoT revenue grew steadily on the back of increased delivery of smart city and smart building project. We are particularly excited to share that our cumulative ICT order intake by September had already surpassed 1.4x the full year 2025 level, with the third quarter order intake up 84% year-over-year, mainly driven by large government-related projects as well as IDC installation for enterprise customer. Taking a close look, during the quarter, we secured several smart surveillance and smart transportation project thanks to our outstanding self-developed AI-driven image recognition technology.
Also, we leverage our decentralized identity and blockchain technology to help build a government-led digital wallet platform, which enables user to integrate multiple digital credentials on smartphone while also demonstrating cross-border interoperability identity verification, such as for international driving license. We look forward to related opportunity ahead. Slide nine highlights the excellent performance of our international subsidiaries and the continued progress in global expansion. In the third quarter, our international subsidiaries delivered an 8% year-over-year revenue increase. The U.S. market surged 27%, fueled by the completion of AI supply chain equipment deployment in California. Meanwhile, Southeast Asia revenue rose 3%, supported by ongoing construction project in Vietnam. Alongside the solid growth of our overseas ICT business, our network resilience business continue its upward trajectory. A 9.8% year-over-year lift in the satellite-related revenue highlight this expansion, fueled by emerging demand for secure and diversified connectivity.
Furthermore, by September, our cumulative satellite-related wins from the government joint procurement system has reached over NT$250 million, paving the way for upcoming revenue contribution. Another key growth delivered for the network resilience business was the International Private Leased Circuit, or IPLC. IPLC revenue grew 33% year-over-year, and the SJC2 and Apricot submarine cable system steadily generated a recurring revenue stream. Additionally, our new branch in Guatemala officially launched in October to serve as a regional base for ICT service expansion across Central and South America. Building on this momentum, we secured a data center construction project from Guatemala government, marking a meaningful milestone in our regional growth roadmap.
At the same time, we continue to deepen our relationship with Taiwanese enterprise expanding overseas, securing follow-on ICT opportunities in Japan and the U.S., as well as capturing ICT projects from sports tech companies in Thailand in the third quarter. This encouraging win and the strong performance conclude a productive third quarter for our global business development. Now, let's move on to page 10 for the financial performance of our three business group. In the third quarter, our core telecom business remained strong. Growth in the mobile services, fixed broadband, and handset sales drove Consumer Business Group revenue up 6.3% year-over-year, while income before tax increased by 1.4%, partially offset by higher cost from sports broadcasting rights. Enterprise Business Group revenue increased 8.2% year-over-year, supported by robust ICT performance and the continued growth in mobile and fixed broadband services.
However, income before tax declined slightly due to the group higher cost associated with the strong ICT revenue growth, plus the increased seasonal personnel-related expense, alongside continued investment in talent retention. In terms of our International Business Group, its revenue increased by a solid 6.6%, while income before tax grew by 12.2% year-over-year, despite a decline in ICT revenue due to a high comparison base resulting from a one-off project recognized last year. Strong contribution from IPLC continued to drive IBG's revenue and profitability growth. That concludes the business Loverview for the third quarter. Now, I would like to hand the call over to Audrey for financial updates.
Thank you, President, and good afternoon, everyone. I'm pleased to walk you through our financial results for the third quarter of 2026. Now, please turn to slide 12. We delivered strong results in the third quarter. Consolidated revenue reached NT$67.59 billion, up 16.7% year-over-year. Income from operations rose 27.1%, and net income grew 29.5%, bringing EPS to NT$1.57. Both revenue and EPS were the highest we have ever recorded for a third quarter. Let me highlight the three key drivers behind our revenue growth. First, we recognized a one-time contribution from our subsidiaries' asset revitalization project. Second, product sales grew strongly. This was driven by higher handset average selling price and volumes, increased sales of 3C products and accessories, and solid contribution from Chunghwa Precision Test on the back of robust AI-related demand.
Third, our core telecom business continued to grow steadily, and ICT service maintained strong momentum, as the President highlighted earlier. Now, turn to profitability. You will note that income from operations grew faster than revenue. This reflected three things: the one-time contribution, stronger earnings at Chunghwa Precision Test, and the continued resilience of our core telecom operations. EBITDA increased 16.1% to TWD 25.66 billion, representing an EBITDA margin of 37.97%. Let me now turn to our year-to-date performance. For the first nine months, revenue increased 10.8% year-over-year to TWD 188.95 billion. Income from operations rose 12.3% to TWD 41.74 billion, and net income grew 12.1% to TWD 32.97 billion. EPS was TWD 4.25, compared with TWD 3.79 a year ago. EBITDA increased 7.8% to TWD 72.48 billion. Overall, the results reflect solid execution across our business.
They reinforce our confidence in meeting and potentially exceeding our full-year guidance. Please turn to slide 13 for an overview of our balance sheet. As of September 30, 2026, total assets stood at TWD 527 billion, down 1.7% from the end of 2025. This was primarily because depreciation exceeding capital expenditures, as well as the continual amortization of our 4G and 5G spectrum license. On the liability side, total liability decreased by 1.7% from year-end 2025. This decrease primarily reflected the repayment of maturing debt during the period. Our debt ratio remains stable at 25.19%. Our balance sheet remains sound. The current ratio stood at 135.78%, and our net debt to EBITDA ratio was zero. This provides us with ample financial flexibility to support future growth. Please turn to slide 14 for our cash flow summary for the first nine months of 2026.
Net cash provided by operating activities increased 9.6% year-over-year to TWD 49.84 billion, primarily reflecting improved profitability during the period. Capital expenditure totaled TWD 16.17 billion, down 6.5% year-over-year. Mobile CapEx decreased 4.5%, mainly reflecting the timing of network investments, while non-mobile CapEx declined 7.4%, primarily due to higher comparison base last year. Free cash flow increased 19.6% year-over-year to TWD 33.67 billion. This provides us with financial flexibility to support continued network investment, business growth, and shareholder returns. Finally, please turn to slide 15 for our performance highlights and guidance. We delivered strong third quarter results, with revenue exceeding our expectations. This performance was supported by steady growth in our core telecom business, continued momentum in ICT service, stronger-than-expected product sales, and a one-time contribution from our subsidiary's asset revitalization project.
Revenue growth outpaced the increase in operating costs and expenses, which strengthened our profitability. As a result, all of our major financial metrics exceeded the upper end of our third quarter guidance. These include revenue, income from operations, net income, EPS, and EBITDA. This concludes our financial review. We will now be happy to take your questions.
Yes, thank you. Ladies and gentlemen, we will now begin the question-and-answer session. If you have a question for any of today's speakers, please press star key and number one on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. 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 key and number 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. We have our first question, Ranjan Sharma of JPMorgan. Go ahead, please.
Hi, good afternoon, and thank you for the presentation. Two questions, please. Firstly, on the 19% year-on-year growth in your ICT business, can you please help us understand how much of the growth is from recurring revenues and how much is from revenues recorded at a point in time, and the sources of those revenues? The second is on the asset revitalization initiative. If you can help us understand what are the key strategies that you have and how much revenue should we expect from these initiatives over the next year or so? Thank you.
Hello, Ranjan. According to our ICT revenue, we do not disclose the breakdown for the how much percentage for the recurring revenue and how much percentage for the one-time. But actually, I can say that for the absolute number, the projects, the one-time project revenue is still larger than the recurring revenue. That is because sometimes we will receive a pretty large project, which contributes a lot of revenue. But we continue to see the recurring revenue continue to increase year over year. That is a good part, the good thing for our ICT business. Yeah.
Hi, Ranjan. Let me add some to the asset revitalization. This quarter, we did have a one-time recognition from the asset revitalization from our subsidiary. Our subsidiary, Light Era Development Co., Ltd., built a residential project in Taoyuan. Usually, as you know, under IFRS 15, revenue from residential project is usually recognized when units are delivered to buyers. Most of the contribution will be recognized in the third quarter. Asset revitalization is an ongoing effort, but the timing and size of each project are very hard to predict. We should say that we do not expect a contribution of similar size in the near term.
Thank you. Can I have a quick follow-up, please? On the ICT business, the project-based revenues that you are seeing growth in, is it coming from IDC, cyber, or cloud, please?
Yeah, it mainly come from IDC services and cloud. Cloud, particularly, we see the growth from the international public cloud, okay? The cybersecurity, because we also provide subscription-based cybersecurity services, it also contribute the recurring revenue. Yeah.
Okay. Thank you very much.
Thank you. If you would like to ask a question, please press star key and number one on your telephone keypad. Thank you.
Okay. We received one question from our internet platform. That is, why the decrease of the income before tax of the EBG, and how is the future outlook?
Thank you for the question. The slight decline in profits in Enterprise Business Group segment was mainly due to two factors. First, our full-year earnings are tracking above expectation, so we accrue higher performance bonus in the third quarter, including a catch-up adjustment. This is the timing effect, not a structural change. Second, our ICT business grew strongly, and ICT project generally, as you know, they carry lower margin than telecom service because they include equipment and construction costs. This just reflect a change in revenue mix. Going forward, we will focus on improving project margins and as recurring revenue continuing to grow, we expect our ICT margin to improve.
Ladies and gentlemen, we are now in question and answer session. If you would like to ask a question, please press star one on your telephone keypad. Thank you. Next one, Sigrid Chu of JPMorgan. Go ahead, please.
Hi. Thank you, management. Thank you very much for the presentation and the opportunity for question. I just want to dive a little bit deeper on your ICT side. For current our ICT revenue, could you kindly provide the percentage of hardware sales versus service revenue within our enterprise and international ICT segment? Secondly, is it possible for management to give us a breakdown of different project types? For example, out of our total ICT contract value, how much percentage come from cloud, IDC, cybersecurity, and AIoT? Thank you.
Hi, Sigrid. Thank you for your questions. For your first question, it is about the hardware. How much our ICT revenues from the hardware sales and how much for the service revenue? Currently, we do not disclose this kind of segment, but going forward, we will try to give you more colors. But actually, I can explain that when we do the project, most of the time, the project may comprise two revenue streams, including the hardware sales and including the service. That is why we try to gain the pilot contracts, okay, from the industry leader. Because if we gain the pilot contracts, then we can do the add-on or the follow-up services, and maybe this kind of services is on recurring basis, just like the servicing revenue. So, we do not disclose the breakdown, but I think we can try to give you more colors later.
For the contract value breakdown of different project types, okay, how much from cloud? Just like we do not disclose this kind of breakdown, but I can say, we can see that for the cloud services, now we see a lot of enterprises, they will use the We have our own cloud brand. It is called hicloud. It is mainly for the SME companies. But for the large companies, we see a lot of more in adoption of international public cloud. So you can see from the presentation for this quarter, our cloud revenue increased like 45%, right? That is part of the results. So, I am not sure if it is helpful. Thank you.
No, sure. Thank you very much. That is very helpful. Maybe let me just follow up on the margin profile for our ICT business. Is it possible for you to comment on the margin profile of different project types? If you cannot disclose absolute number, that is fine. Maybe just a pecking order of which type of project actually contribute to higher ICT margin. Then in terms of the overall ICT margin trajectory going forward, I want to understand a bit more on management's thoughts on how to improve the ICT margin going forward. Thank you.
Okay. Sigrid, thank you for your question. I think that I understand your interest in a more detailed breakdown about the individual element. But first of all, I just want to share more about the underlying behind the ICT in our company. The main reason is that most of our business is delivered as a total solution. So in many cases, a single project usually includes several elements at the same time, such as hardware, software, system integration, cloud, cybersecurity, and IDC service. So, for example, when we have a government agency or a high-tech company build a new platform, we may provide the equipment, the cloud infrastructure, or their cybersecurity protection, and also the ongoing maintenance and operation service, all under one contract. So our customers value us as a one-stop partner that can take the responsibility for this entire solution, not just the individual component.
This is actually one of our key competitive advantage, because few players in Taiwan can combine network, data center, cloud, cybersecurity capabilities the way we can. It also mean that splitting the revenue into separate categories will not fully reflect how the business work. I think that this is quite crucial for you to understand that the total solutions business model behind our ICT. The margin. IDC and cybersecurity are two of our most profitable ICT service. They are mainly both are mainly recurring service. Many customers, they resign long-term contracts, so they give us stable and predictable revenue. In IDC, as you know, we basically have a very strong market leadership in Taiwan, and this give us a good niche in the margin. In cybersecurity, our value also come from our own expertise and experience, not just from reselling the hardware.
The margin are also quite solid.
Great. Thank you.
Thank you. To ask a question, you may press star one on your telephone keypad. Thank you.
Okay, we have one more question from our internet platform that is about contract liability.
The contract liability in the balance sheet usually represents the prepaid revenue from the customers. It usually represents the future revenue and also the secure revenue. As our President Lin mentioned earlier, you can see we already secure a huge amount of the order intake. Some of them have been reflected in the contract liability.
Okay. In terms of the AIDC contribution, I think, there will be more and more recurring revenue coming from our AIDC as we roll out more capacity and the occupancy rate will increase from our AIDC. One more question is about the GPU, it is about 100 or 200. Actually, Chunghwa Telecom, we have our GPU resources, and if our clients want to rent GPU resource from us, it is okay. But most of the time, our clients, they can also use their GPU resources in the AIDC.
Okay. I think that the question is also very interesting in the contract liability. Thank you for this question. Most of our contract liability, as I just mentioned, let me emphasize again, they are related to ICT projects. Going forward, we expect recurring revenue to play a larger role, especially as our Lunping and AIDC came online. This AIDC will serve confirmed customers under long-term contracts, which will bring stable recurring revenue. As for leasing, computing, power, our current focus is on AIDC infrastructure service. We will continue to evaluate other business model based on market demand.
Ladies and gentlemen, we are now in question and answer session. If you would like to ask a question, please press star key and number one on your keypad. Thank you. You may press star one on your telephone keypad if you would like to ask a question. Thank you.
Oh. Thank you for the question. Now there is another question. Do you have plan to help enterprise customer deploy AI models such as Gemini in their own data center? How is the level of interest from Taiwanese enterprises? Thank you for the question from Kevin. We are seeing strong interest from Taiwanese enterprise, especially in the financial and public sectors. Many of them want to use advanced AI model, but they also need to keep sensitive data with their own environment or within Taiwan. This is where we can help. We can combine our AIDC and IDC facilities, private cloud, and network capability to host AI models in a secure local environment. Our subsidiary, CHT InventAI, also provides AI governance and an AgentHub service to help enterprise deploy and manage AI safely.
Building on our expanding collaboration with Google, we will continue to explore more ways to bring advanced AI models to our enterprise customers.
If you would like to ask a question, you may press star key and number one on your keypad. Thank you. If there are no further questions, I will turn it back over to President Lin. Thank you.
Okay. Thank you very much for your participation. Bye-bye.
Thank you, President Lin. 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 again. Goodbye.