Good afternoon, ladies and gentlemen. Welcome to the Taiwan Mobile's conference call, and our chairperson today is Mr. Jamie Lin. Mr. Lin, please begin the call, and I'll be standing by for the question-and-answer section.
Thank you, operator. Good afternoon, everyone, and welcome to Taiwan Mobile's fourth quarter 2023 results conference call. Before I start our presentation, let's first go over our disclaimer as per usual. Disclaimer: The information contained in this presentation, including all forward-looking information, is subject to change without notice, whether as a result of new information, future events, or otherwise. Taiwan Mobile Company Limited, or hereafter the company, undertakes no obligation to update or revise the information contained in this presentation. No representation, warranty, or undertaking expressed or implied is or will be given by the company as to adequacy, accuracy, completeness, and correctness of the information contained herein. Financial numbers in this document may include preliminary audited numbers or management accounts. All right, now let's take a look at our business overview. Please turn to page 4 for highlights of 2023.
So in 2023, our consolidated revenue rose by 6% YOY, underpinned by solid performances across our three core engines, namely 5G, e-commerce, and home broadband. Mobile service revenue growth reached 8% YOY, attributable to steady 5G conversion, improving 4G pricing environment, and robust momentum in roaming and gaming-related revenues. Meanwhile, momo continued to outperform its peers and posted a 7% YOY growth in e-commerce revenue during the year. Our home broadband subscribers went up by 4% YOY, driven by effective cross-selling toward mobile and pay-TV customers. Consolidated EBITDA rose by 4% for the year, while net income saw an 11% YOY increase thanks to strategic divestment and valuation gains, along with merger-related tax benefits. Excluding these one-off factors, net income would still see a healthy 5% YOY growth. Next, let's turn to page 5 for a closer look at our mobile business.
So throughout the year, we delivered solid results in our mobile business as we successfully implemented our Sustainable Growth Foundation strategy. As you can see from the slide, smartphone postpaid ARPU increased to over TWD 700 in 2023. Please note that this includes a one-month drag from the Taiwan Mobile from the T- Star merger, which was effective on December 1st last year. In 4Q23, mobile service revenue increased by 15% YOY, reaching TWD 14.12 billion. This was propelled by a 6% YOY growth in Taiwan Mobile's existing smartphone postpaid ARPU, along with revenue contribution from T- Star. These positive outcomes were driven by our unique bundles, effective upselling in contract renewals, as well as strong roaming and gaming revenues. Upselling and low churn are the two pillars of our SGF strategy.
We are pleased to see that the monthly fee uplift from 4G to 5G renewals increased to 48% in 4Q23, aided by iPhone 15. With no more downtrending I'm sorry, with no more downtrading in 4G to 4G renewals, overall monthly fee uplift for all renewals remained steady at 10%. On the bottom right chart, you'll see that 5G penetration in our smartphone postpaid user base was only at 36% in 4Q23, which means there's still a long runway ahead for ARPU upside, especially for TST subscribers. Adoption of our unique bundles, namely momo Mobile, Double Play, Disney+, and OP Life, have continued to grow, which bodes well for customer loyalty. Excluding one-off churn from cleaning up dormant SIMs in December, our postpaid monthly churn rate remained low at 0.71% in 4Q23.
For OTT services, we have recently kicked off a new exclusive partnership with HBO Go, offering Taiwan Mobile users a special deal with 40% savings compared with the service's standard pricing. We believe HBO Go's strong IPs will provide a tailwind to acquiring and retaining customers, which is in line with our SGF strategy. Next, let's turn to page 6 for updates on our e-commerce business. In 4Q23, we saw moderate growth in our e-commerce revenue, albeit still outperforming peers. In addition to a high base, Taiwanese customers continued to shift spending toward offline activities. That said, our e-commerce EBITDA margin remains resilient. On the logistics side, three warehouses were added during the quarter, taking the total number of distribution facilities to 59, five more than a year ago. Total warehouse space increased by 22% YOY.
The southern distribution center will be up and running in a couple of months, while the central distribution center will follow in 2023. This will expand the coverage area of our rapid delivery services and further widen our moat. As for momo Coin and its ecosystem, we continue to focus on broadening its usability. By end of 4Q23, our momo Mobile user base has continued to grow and now contributes about 13% of momo's e-commerce revenue. Next, let's take a look at our broadband business on the next page. In 4Q23, the business unit's revenue and EBITDA were both resilient as we continued to focus on growing our cable broadband footprint. Steady demand for faster home connectivity, as well as our cross-selling effort, led to a 5% YOY increase in broadband subs.
We focused on upgrading existing broadband users to higher speeds, and as a result, subscribers who opted for speeds of 300 Mbps or higher rose by 55% YOY during the year I'm sorry, during the quarter. While we currently rank as the number 4 MSO player with an 11% footprint for cable TV services, we have expanded our cable broadband coverage to 85% by teaming up with most of the leading MSOs in the country via our Double Play bundles. Now, let me pass the virtual mic to our CFO, George Chang, for a financial overview.
Thank you, Jamie, and good afternoon, everyone. Let's start with the performance by business. In 2023, consolidated revenue rose by 6% to TWD 183.3 billion. That's another record high. Telecom and momo each contributed about half of that revenue growth. As for profitability, consolidated EBITDA increased by 4% to TWD 35.8 billion in 2023. On the back of further upselling, roaming recovery, gaming momentum, and T-Star's contribution, telecom business stood out and accounted for the majority of the EBITDA increase. Let's go to a results summary. With a healthy performance in our three core engines, 5G e-commerce, and home broadband, along with T-Star's contribution in December, consolidated revenue rose by 6% YOY in Q4 2023. With a 14% YOY growth in telecom service revenue, telecom EBITDA and consolidated EBITDA went up by 11% and 9% YOY, respectively, in 4Q 2023.
D&A increased quarter-over-quarter and year-over-year during the quarter, given the ongoing network consolidation amid the merger with T-Star, as well as momo's warehouse additions. Despite the YOY increase in financing costs, disposal gains from sales of our music streaming business and valuation gains from the investment led to a significant improvement in the non-operating income for both 4Q 2023 and FY 2023. Coupled with merger-related tax benefits, our 2023 EPS grew by 11% YOY to TWD 4.33, a four-year high. Let's move to a balance sheet. Starting from assets, both loan and short-term contract assets increased with higher monthly fee contribution from our mobile bundle plans and the inclusion of T-Star users. Similarly, PP&E, fixed assets, increased due to the acquisition of mobile equipment from T-Star. Concessions surged as we took on T-Star's spectrum holdings, particularly the 3.5 GHz band for the 5G services.
Right-of-use assets also grew on the back of momo's warehouse additions and the merger with T- Star. As for liabilities, long-term borrowings increased as we completed a syndicated loan by the end of 2023 to reduce the reliance on short-term borrowings. The hikes in paid-in capital and capital surplus resulted from the issuance of 204 million common shares to T- Star shareholders. Net debt to EBITDA rose to 2.23x as we took on T- Star's debt. Considering the incremental EBITDA expected from the merger, gearing ratio should stabilize before tapering off at a healthy pace. Lastly, let's look at the cash flow. Cash earnings rose 21% year-over-year in 4Q23 on the back of solid EBITDA growth in our telecom and e-commerce business, as well as positive contributions from T- Star.
Investing cash flow turned to inflow in 4Q23, mainly due to a TWD 1.7 billion cash influx resulting from the merger with T-Star, which was booked under investing cash flow. 2023 cash earnings showed steady YOY growth while operating cash flow declined, mainly owing to e-commerce-related working capital change. The drop in 2023 investing cash outflow reflected a TWD 2 billion YOY decrease in momo's CapEx payments, as well as reduction in our investments. Financing cash outflow increased YOY as we paid off more short-term borrowings. With stable telecom CapEx and much lower momo CapEx, 2023 cash CapEx fell by 16% YOY. Full-year free cash flow rose to TWD 16.43 billion, translating into an annualized free cash flow yield of 5.5%. Let me turn the presentation back to Jamie for event updates and key messages.
All right. Thank you, George. First, let's talk about 2023 earnings distribution on page 14. So on February 21st, Taiwan Mobile board approved the proposal to distribute TWD 13 billion in cash dividends, translating to approximately 4.4% yield to shareholders. Dividend per share is TWD 4.3 on 3.025 billion shares, excluding treasury shares held by 100%-owned subsidiaries. Next, let's take a look at our 2024 guidance on page 15. For the full year, we're guiding consolidated revenue growth at 12%-14% YOY, with telecom-related revenue growing at 18%-20%, aided by T-Star merger, of course. Consolidated EBITDA is expected to grow at 11%-13%, as it will take 12-14 months to complete network consolidation. The incremental EBITDA might not completely offset the additional D&A costs from the T-Star merger this year.
That said, the D&A has little impact on our cash flow and our ability to maintain consistent dividend payouts. We're also confident that our greater scale and additional cost savings from healthier industry dynamics will pave the road for more growth in the years ahead. For 2024 CapEx budget, a total of TWD 8.55 billion was approved by the board. This is a 45% YOY reduction in board-approved CapEx plans. Both telecom and momo's CapEx budget went down YOY, as 2023 was the high base, given the CapEx for T-Star merger network integration and momo's central distribution center. Cable TV's investment for broadband growth will continue at steady pace. Next, I'm pleased to share our ESG achievements this quarter on page 16.
We're honored to be selected for the Dow Jones Sustainability World Index for the seventh consecutive year, ranking in the top three global telcos, and included in the DJSI Emerging Markets Index for the twelfth consecutive year. Furthermore, we also received the SGS Carbon Management Award and the National Sustainability Development Award, showcasing our dedication to environmental stewardship. Alongside these achievements, we continue to receive acknowledgments for our long-term commitment to sports sponsorships. Finally, on page 17, to wrap up our presentation for today, here's the key message we would like for you to take away with. Key message: Taiwan Mobile delivered strong top-line and EBITDA growth in our core telecom business throughout 2023, underscored by the successful completion of the T-Star merger. Now, as the clear number two player with a robust 10 million user base, we are poised to maximize shareholder value.
Our strategic focus centers on: number one, synergy capture, vigorously realizing the full potential of our merger. Number two, accelerated growth, propelling our SGF flywheel by fully leveraging our expanded scale. Number three, business expansion, capitalizing on our telco-plus-tech capabilities to serve our larger customer base and seizing new business opportunities in AI and ESG. We're confident that this strategy will power the next wave of Taiwan Mobile's growth and value creation. All right. With that, let's open the floor for questions. If you're participating online, you're welcome to send your questions via the chat box. We will begin by addressing the telephone-line questions before moving on to the web. So, operator, please go ahead.
Thank you. Ladies and gentlemen, the question and answer session will now begin. If anyone wishes to ask a question, please press star one on your telephone keypad. Our first question has come from Neale Anderson with HSBC and Neil, please . Go ahead.
Thank you. Good afternoon. Two questions, please. First one is on EBITDA relating to the T- Star merger. So you said the incremental EBITDA may not offset the higher D&A this year. Can I ask if you're still aiming at TWD 18 billion in incremental EBITDA from the merger over three years? Obviously, that was set two years ago, so I understand quite a lot has changed then, but I'd be interested to get your view on that. That's the first question. The second one relates to CapEx. So there's a decline in telecom CapEx, but one thing you mentioned last year, I think, was that there would be additional capital costs relating to the dismantling of the T- Star base stations. And I think you got approval from the board for higher CapEx. So what has changed there, if that understanding is correct? Thank you.
Hi Neil. This is George. Maybe let me take on the first question. Yes, we did give that guidance a couple of years ago when we first announced the deal. You're right. A lot of things have changed over the past two years. Throughout the past two years, we have also mentioned that even there has been a delay by regulatory, we were confident that we should still be able to realize the EBITDA synergies. Today, I think we can share with you that we are still confident of saying that. Please do bear in mind that the number is spread over three years. At this moment, I cannot tell you how much will be recognized this year or over the next year or the year after.
But yes, we are pretty confident that if you look on a 3-year basis or even 2-year basis, the numbers are largely on par with what we stated 2 years ago. So the answer is yes.
Then in terms of the CapEx for integration, I think largely the CapEx needed for integration was approved last year. So this year, CapEx that we sort of asked the board to approve are for ongoing network maintenance and improvement needs, mostly.
Got it. Okay. Thanks very much.
Thank you, Neil.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone keypad. Once again, if you wish to ask a question, please press star one on your telephone touchpad. Sorry, Mr. Lin. We don't have questions from the audio side at this point of time.
Well, let's look at the chat box really quick. Give us one second.
All right. So let's move on to the chat box. There's a question from Money DJ , Rob Lo . It says, "Hi Jamie. George, I'm quite interested to know more about Taiwan Mobile's cooperation with Disney+ and HBO Go, which are both gigantic online media streaming services. Wouldn't that undermine your cooperation with the other? How is Taiwan Mobile playing out if playing out from here, how could we expect the inward revenue changes after Taiwan Mobile added HBO Go into your service pack? Will this get reflected on our ARPU?" Thanks, Rob. Thank you, Rob, for the question. So yes, both are sort of international media giants, and we're really honored and really pleased to be working with both of them sort of on a pretty exclusive manner. And truth be told, we did a study on our user base.
Yes, there are some overlaps between customers that are using these services, but largely, people have different preferences. Some people would like to watch more Mickey Mouse and Marvel. Some people would like to watch more Game of Thrones and DC. So because after the T- Star merger, we're now serving a gigantic 10 million subscriber user base. So we'd like to give our customers options. And so if they do prefer Disney+, we want them to be able to get it at a reasonable price through our programs. And some of the others prefer HBO Go. I want them to shop with us to get it. So yes, these two services are going to be sort of accretive to our revenues, and they'll also be positive to our pool.
Based on our study, I think they're also going to be helping to lower our churn rate and increase our customer loyalty. Above all, really, we want our 10 million customers to be as happy as they can be with us. So hope that answers your question. We have another one from Yuanta Securities , Bruce Lu . "How should we look at dividend payout ratio in two coming years as we are on the way to unlock business synergy?
Well, Bruce, this is George. I cannot speak for the board, but as said, I think Neil was asking what's our EBITDA accretion over the next few years. We also made it clear that it's still pretty much on par with what we announced. And as you can imagine, EBITDA does translate to cash flow, i.e., cash payment ability. And I think Jamie earlier also said that despite the increased D&A cost, that doesn't really affect our cash payment or dividend payment ability. So ideally, we can see an increase as synergies materialize. But at this moment, I cannot speak for the board. Again, for this year, we maintained the TWD 4.3. But if you look at the total payment because of more shares being issued, the total payment or total amount is actually about almost 10% well, actually, no, 6% more than last year already.
All right. Bruce Lu , hope that answered your question. I guess that's all for online questions. Operator, do we have more questions from the telephone line?
Yes, we do have questions. The questions have come from Neil with HSBC. Neil, please go ahead.
Thanks for the opportunity to ask another. I have another two, please. The first one is on the non-operating income and expenses. As you said, you had a positive in the fourth quarter, and it was flattish year-over-year. I wonder if you have any view on that line for 2024. And the other one, again, relates to the T-Star merger. Are you able to update on when you might be able to refinance the T-Star borrowing and what impact that might have, and also any outlook on tax given the use of tax loss carried forward? Thank you.
Okay. Neil, let me take that one too. For the non-operating, yes, you were correct. In 2023, one of the big non-operating items was the disposal gain from our music business that we sold to KK Company. So this year, again, that's why it's off a high base, and we're not going to see that this year. Another big swing in 2023 was the rising interest rate, which resulted in higher interest payments. And we probably have seen the worst of the interest rate hike. Let me say this way. So even if there's an increase on the apple-to-apple basis, the magnitude is probably not going to be as bad as last year. But of course, since we're adding new debt from T-Star, so interest expense was still seeing an increase in absolute dollar term this year, and that's given. But that somehow ties to our next question.
Are we doing any refinancing on T- Star? Yes, of course. Since you mentioned the synergy part from two years ago, I'm sure you also remember that two years ago, when we talked about synergies, we did make it clear that some of the synergies will be coming from the refinancing. That's exactly what we have been doing, and we are working hard on that. We have seen some good results so far.
Great. Thank you. And the tax outlook?
Sure. Let me just add more on the financing part. If you remember, last year, I think it was the third quarter, we issued a corporate bond for TWD 6.5 billion, and our rate was like 1.56%, which is really, really low in today's environment. So that's all kind of things that we're doing right now to help achieve a more manageable interest payment. Regarding loss carried forward tax benefits, yes, we recognize some in 2023 as well. So in terms of P&L impact, it will be much less this year. So you are not going to see much of a loss carried forward tax benefit in 2024. And that's also one of the reasons that when we talk about net income YOY, that's a little bit distortion on a year-over-year basis with a high base.
In terms of non-op income, I think we cannot rule out the possibility to have other non-op income this year. It's nothing that we're managing toward.
Yeah, definitely. I mean, on the investment front, we constantly review our portfolios. So we will look for divestiture or exit opportunities when suitable.
Thank you. That extra detail is very helpful. Thanks.
Thank you, Neil.
Thank you. Sorry, Mr. Lin, we don't have a question at this point of time.
Great. If that's the case, let's wrap up today's session. Happy New Year, everyone. Hope to see you guys in three months.
Thank you.
Thank you, Operator.
Yeah, thank you. Thank you. The conference call has been concluded. Thank you for your participation.