Welcome everyone to Far EasTone's 2022 third quarter earnings conference call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question and answer session. Please follow the instructions given at that time if you would like to ask a question. For your information, this conference call, the webcast replay will be available within an hour after the conference is finished. Please visit the Investor Relations section. Now I would like to introduce Mr. Gary Lai, the IR Officer. Gary, please begin.
Good afternoon, everyone. Thank you for attending Far EasTone third quarter 2022 results conference call. As always, our President, Chee, and CFO, Sharon, both join the call with us today. Just a reminder before hand over to Chee's presentation, please pay attention to our safe harbor statement in the first page of presentation. Let me hand over to Chee. Thank you.
Okay. Thank you, Gary. Good afternoon, and happy Friday, and happy Double Eleven. Hope you have got a chance to, you know, place some orders with friDay Shopping. Okay, let me just give everyone some update on our financial performance for the third quarter, and also year to date. As you can tell, we have been doing very well, and then this Y-o-Y growth continues, and we are beating our guidance across all major performance indicators. Our revenue has grown 7% Y-o-Y, and then also you have non-operating income as a higher base. The net income difference will be 28%. However, if you exclude that one-time gain from selling the building, our net income and also the EPS actually grew 15% Y-o-Y. Okay?
For the year to date, for this first 3/4 , overall, we are also looking at a 6.1% revenue growth, and then 9.5% in the EBITDA. For the net income and also EPS, we have almost 20% increase, Y-o-Y, you know, excluding the non-operating income. In terms of achieving our board target, it's all above 100%, so we have exceeded our board target. What we have there, on the right-hand side is, for your reference, what we have for this year's forecast or budget, I should say.
TWD 2.83 is still our EPS target, although, as you can tell, we have been doing pretty well in reaching or above that target. Okay. All right, and then the next chart shows the trend on some of the key performance indicators. For the revenue, this is a by quarter kind of view. As you can see, or if you remember, last March, we already have posted positive on the mobile service revenue because of 5G uplift, and that certainly helped the total revenue growth. And of course, at the same time, our ICT is very strong, so that has been the case. We have had a good year, and more than that.
For the third quarter in particular because of the iPhone launch, the new iPhone, and usually that is the booster for our mobile service and also for the 5G upgrade. We have 7.0% Y-o-Y growth for the third quarter alone. In terms of the EBITDA, this quarter, we actually reached a record high since I joined Far EasTone in the fourth quarter of 2018. We are definitely on the right track, and then it's going up. We are happy to share that. This 7.9% Y-o-Y growth mainly attributed to just the better service revenue margins across all services that we offer. Finally, if you look at the EPS, right?
The third quarter net income, we reached TWD 2.4 billion, and then EPS is at TWD 0.74. It grew 15%, and it is highest in the industry. Some financial metrics for your reference. As you can tell that our net debt is very stable, and we continue to pay down our borrowing. The net debt to EBITDA ratio is also stable and has improved even. We also show a very strong cash flow. Of course, part of that is our CapEx. Cash CapEx has decreased, because last year it really 5G-related investment kind of peaked. This year we did scale back, so this reflects in the less cash-based CapEx spending.
On the core business, 5G continues to be the driver for our steady growth. For the third quarter, just mobile service revenue alone posted a 3.0% Y-o-Y growth. The postpaid ARPU, we continue to be the industry leader. The monthly fee for 5G renewals maintains a more than 20% uplift. Okay. That is very helpful. Our postpaid penetration percent actually has already reached 30%, which is our year-end target. Okay. The postpaid churn rate has continued to hit record low, and then we come to 0.92%. For our new economy, this growth momentum has continued.
Even though this year we still are kind of under the cloud of COVID-19, but that didn't stop us from the new economy, especially on the enterprise side, to grow really nicely. You can see up to 3/4 . For the first 3/4 , the new economy revenue already accounted for 19% of the total revenue. Our goal for this year was to have 18.9% of the total revenue for new economy. For the first 3/4 , we have already exceeded that, even though our core business is also growing, so this is good. Year-over-year, it is 22.5% growth. Okay?
The main drivers on the enterprise side is the cloud service and also our homegrown solutions for AIOT and big data and also digital transformation, all contributed to the growth on the enterprise side. For consumer, in the consumer IoT devices and our e-commerce, that's the friDay shopping, also have posted a good year-over-year growth. The media service also posted 5%. Media service is where it usually is kind of flat, but then last year, because of pandemic, we actually see really a boost in terms of using the tech kind of services. This is a big base, but then this year we still managed to have 5% of the Y-o-Y growth. Okay. All right. Just a little bit more on the ICT side.
We did see strong ICT demand. If we compare in the first 3/4 , the total contract values that we have signed, compared to what we did last year, it shows a 40% increase Y-O-Y. That spread across several areas such as smart building, digital transformation, smart city and big data platform, and then also some smart learning areas. These are, you know, especially because the pandemic that brings some remote learning kind of needs and then demand. Okay. If we further break down, in the year to date, we look at enterprise revenue growth areas, 5G telemedicine service continues to grow very well, and it's at 87% Y-O-Y. Also we just, the latest news, we just received a National Innovation Award for our telemedicine service platform.
On the 5G private network part, we are also showing a 21% growth. In big data analytics, these are part of some like quite a bit of the digital transformation projects will require big data analytics related work or data platform related work. We also see a very nice growth year-over-year. Then the cloud service. We have a subsidiary, Nextlink, and its growth is very impressive. This continues to be one of the growth engines for our enterprise side of the new economy. Okay. Some other business I like to share with you.
For example, we are leading the telco industry and our peers in offering the free VoLTE service and also increase the connection speed for 5G users that are not on unlimited data plan. All these changes are really to consider more for the customer's sake and what will make more sense for them as a consumer. These are very welcoming for the users. This will also help us to eventually sunset the 3G. All this has a reason for it, and that also makes our customers very happy. I know our peers also followed. That was a good trend we are leading.
Then our friDay Video, we have continued to invest in the content investment and then creation, curation. We're gonna have our first movie that we co-produced with Public Television Service Taiwan that will be on the first of December, I think. Yeah, in December, it will have its debut. Okay. For our FET Mobile Circle application, that is our digital reach to more of the users. So right now it already has four million downloads. This is almost like 4x more than 6 x of where we started.
This was app that we started with, this mobile app for just mobile service related, like a billing and all that, but we expanded to a mobile circle, so where we offer many digital services and then related information. We have come from like 600,000 to 4 million downloads. That was just in less than two years. This is a very good growth. Then this will also help us to develop the member economy. Okay? All right. We also completed our first 5G Metaverse Accelerator. We kicked it off last year, December, and then we started this application process.
We announced the 20 startups that we selected in March. We worked with them for about like six months during that period. Many of them that we took them, you know, so on the enterprise side, we have various projects where they can co-create with us or actually see real problems where their technology or solution can apply. We have had quite a few successful cases, and then that amount to about $100 million worth of contract values for the startup. You know, we, as we mentioned at the beginning, so these are our candidates where we will look at some of them that we can have strategic value in and to go deeper, and then we'll invest in some of them. Okay?
We issued the second social bond for TWD 1.8 billion to finance our 5G for ESG-related development work. We have some awards and some recognition. On the top, it's like ESG-related, like we got an ISO 20400 for sustainable procurement guidance. This is the first operator in Taiwan to get this certificate. Our TV commercials that we produced in earlier years actually got YouTube Brandcast Taiwan for Outstanding Social Contribution Award.
These two in particular were about during the pandemic, how some of the soldiers that they have to do all those sprays and then just to keep people safe. At the same time, they have to be apart from their family or loved ones because of the germs and all that people are afraid of. That is when the communication service, of course, Far EasTone's communication service would help them still connect. We had a couple of them. One is from the nurses, you know, those that are working day and night during that time at a hospital. Both of these commercials got a lot of good rewards, a lot of good feedback, and also got this award from YouTube.
As we were told, this is actually the first time they were giving out this award. Last year, there was no one named after this. We are the first one to receive this award. We appreciate that. We were also named most outstanding company in Taiwan in the telecom sector this year by Asiamoney. We have a few other awards that recognize our transformation leadership and also for IDC 2022 they have some Future Enterprise Awards. We have best in Future of Operations, and myself get award recognized there as well. We have our Project Management Benchmarking Award. We also received that for our ICT project management.
Last but not least, as you may already been aware, our service, customer service, has always been recognized in many years in a row already. This time it is another 15 awards that we received from CSEA Association. This is just something we continue to do and to do better every year. Okay? All right. Finally, and you probably have seen this similar slide last time. I said, well, but then, you know, we, this is what we need to do. We just don't change it every time we have an IR call. I just modified it a little bit to be even more targeted. We will continue to sustain this momentum for the telecom core business, especially with the 5G penetration.
As you heard that we already reached our annual target for 30%, so we'll continue to grow that. Our current EMS, that's the Energy Management System, which has got us a lot of success this year in ICT projects. We are investing in it and then evolving it to account for more of the demand in the green ICT ESG solutions area. This is something we see the demand from the industry, from the enterprise. We already have a very solid EMS platform, and this is where we will do some more investment so that we will expand our solution set for the ICT for our clients.
In recent months or you may remember, one of the major focus I have said that is something we will do differently with enterprise is we have started this so-called consulting service. What we have found out is especially with new economy or digital transformation related, the client relationship is no longer a account kind of relationship. We really need a technical expertise to get the trust, the confidence from the customers. How we can engage through the IT personnel and then train consultants to engage with IT from the clients.
It's not project-based that we do the business with, but we will become their strategic partners and then help them, you know, build their roadmap to digital transformation. Because usually that would include from, like, infrastructure, you know, migration to the cloud. How do you do that? Far EasTone being a big IT company ourselves, a lot of this we have done it. We don't just talk about it, we have done it. So when we use our own expertise and experience plus the technology we use and then to try to help our clients, it is a lot more convincing. We demonstrate our results as well. We will continue to do that.
We do see that it has been proven very successful, especially in terms of our engagement with some public sector, with universities and big companies like that. We'll continue to grow our Mobile Circle and then digital services and then finding the right partners to offer the kind of services that will benefit our users and then build the kind of a membership economy. Also, we are expanding in the digital services. As you may have heard, we have joint ventures with Chinatrust, and we applied for this new insurance or the online insurance license. So far it is under review, but we are very confident it will get approved.
That will be a new kind of fintech engagement that we will start. On top of that, in the video content business that we have, we will continue to invest, and we also have formed some alliance and joint ventures as well. Okay. Of course, the merger. This is, as more folks are paying interest or attention to this matter, and then this is getting some momentum to move again. We are actually asked to present to the NCC Commissioner on 23rd. I believe that is an indication that you know this whole thing is moving again. Depends on what will be discussed or what the commissioner may have for us.
I suppose this is, this should be close to the end, in terms of when NCC will be able to grant their approvals or not. After that there will be the FTC. At least I think the good news is we are not in a kind of a suspension kind of mode, but then it is actually moving. We are optimistic about it and, as we have been doing very well this year, so far, and then we will just finish the year strong. Okay, with that, I conclude my presentation for you all. Okay. We'll welcome some questions.
Sure. Thank you, President Chee. 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 zero one on your telephone keypad and you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before it is your turn to speak, please press zero two to cancel the question. Thank you. Now, please press zero one to ask the question. Thank you. Our first question is coming from Neale Anderson of HSBC. Go ahead, please.
Good afternoon. Congratulations on hitting some of your year-end targets early. I have two questions, please. The first one is on the 5G private network. Wonder if you could give some more details here. The 21%, I assume that's revenues or not sure if that's contracts or bookings. With the 5G private network, is that exclusive to the corporate or the business that's requested that? Now are you offering any network quality guarantees within that or any additional services which aren't available, you know, in the broader 5G network? Some more detail there would be very much appreciated. The second one is more of just a reminder for me, please. Could you remind me about the 5G subsidies from the government? Is that a regular amount each quarter? When will that end?
That would be great. Thank you.
Okay. Thank you, Neale. All right. For the 5G private network. Last year, well, we started this kind of like in 2020, and it did take some time for the business to accept it. We are now seeing the momentum. I think this year, we probably have 20-some engagements, and then some contracts sealed with that. In terms of the type of service, we have different models in what type A, B, C, D. But then these usually would have their dedicated RAN, and they may ask for the MEC, the Mobile Edge Computing.
In terms of the kind of quality of service or slicing that you were looking for, that is not in one of these. In one of the public sector engagements, it's about using our macro network. Because this is like a full coverage, right? Islandwide or Nationwide. There, we will be using the slicing to guarantee some service. But then that is still in the we have done the POC. Again, for these other private network engagements, we haven't used that one, so they are dedicated to themselves. This quality of service kind of or like-slicing kind of arrangement wasn't needed. Okay? In terms of the subsidy.
The way that we do this because it's a subsidy for the equipment, right, related to hardware. And then those equipment has a year for like up to seven years kind of amortization, depreciation. That's how we would divide it. Every month, actually, not even quarter, every month we'll depreciate it accordingly, evenly. It's all together like about seven years, and then we get. We started like last year for 2021. Yeah. This is how we would do it.
Okay. Thank you. Is the amount increasing or is it fairly regular?
It should be regular, pretty regular because what we have applied for, that's a lump sum. You divide it by however many months. Yeah. It's even.
Yeah.
Pretty even, I would say.
Got it. Thank you. Just on the network slicing side, that's to come, is it, or you've launched that already? Just in the network slicing is still quite early days with a lot of other operators. Just interested in the timing on that one. [crosstalk]
Well, actually we were the first one with Ericsson that we did the first slicing application worldwide. In terms of the local implementation, we have done that with police station in Kaohsiung. It's really beyond a POC. That slicing is turned on, but that is for the Kaohsiung area, a special area. What I was saying, this is actually kind of like what we did in AT&T for FirstNet in the U.S. That is to give the first responders their, like, a guaranteed bandwidth on the mobile network. That's kind of the same concept, and I asked my team to implement with this slicing. We proved that with the police station in Kaohsiung.
For broader application that we haven't really engaged for the, because that you have to go through the central and all the local police and all that. This is definitely a proven technology as far as Far EasTone is concerned, because we have done it. Then even with Ericsson's, we have done that earlier too. If you ask the other telcos, this is probably still early for them, but we have done it.
Got it. That's very helpful. Thank you.
Okay.
Thank you. Next question is from Sara Wang of UBS. Go ahead, please.
Thank you, and congratulations on the solid results. I have two questions. First is mainly on CapEx. Maybe, say for next year or even next three years, do you see any change in the CapEx structure? Meaning it seems like large scale 5G spending is already peaked. Going forward, do we have any plan to develop in-house capability, for example, SaaS or cloud or anything besides 5G? My second question is, what are the key topics to cover for the presentation to NCC on November 23rd? Do you see any key hurdle to overcome in order to get the approval from NCC? Thank you.
Okay. In terms of the CapEx structure, I would still say, network CapEx usually is the biggest item, right? Overall, last year our CapEx peaked, right? Because of the 5G construction. Now, assuming this merger will get approved, as we have presented before, we will have a lot of synergy because of the merger, so that includes CapEx and OpEx savings. That itself wouldn't increase the CapEx. On the other hand, right, we have the 2600 spectrum. If we are ready, if we see the need to increase our capacity on 5G, to use the 2600 band, then we may invest, you know, some in that area.
Other than that for the 5G 3.5G spectrum, you know, investment, I think we are pretty happy about where we are. Of course later on we will have the core network migration, and then we will have some transport network migration as well. But then those kind of a CapEx is still, I wouldn't say it's significant, especially compared to what we would have to spend for 5G. Those are all manageable. I think the CapEx structure wouldn't change much, but definitely lower. Okay.
On the second question for NCC, well, I was asking the same question because for what we can say, we have said it many times now through different presentations, through different, you know, through different forums. I think the most sticking point is, if you haven't heard, it's about the spectrum over the one-third limit. That in particular is for our peers in their case, because the one-third ceiling is especially very important for the sub-1G spectrum, and that's where they have exceeded by a lot, 20%. Then, you know, depending on how you interpret the regulation, right?
For us, for Chunghwa and for Far EasTone, if we really have to delay, you know, the change on the regulation and all that, then, you know, they say we exceeded too. Even if that's the case, what we have exceeded is really compared to what Taiwan Mobile has exceeded. That is like a non-issue. We have already stated if that had to be the case, and we can return as needed, so that's no issue for us. I think the other our peer has different opinion. They definitely are exceeding no matter how you interpret the regulation.
The question is, would they be willing to return it or what would be the conditions in return, or for the NCC to grant them the approval? I think that is indeed a sticking point. We are just like, okay, we are impacted as well, but then, certainly the major impact would be for the other party. What we too have in common is we both have to deal with the employees, right? That is just for any merger, you have to consider the company that is going to be acquired and what are the employees going to do. The employee arrangement plan is what would be an issue.
We have had some reasonable conversations, open communications with the labor union of APT. So far I think that is progressing well or reasonably well, so we don't think that should be an issue. Anyway, that should not be the focus of National Communications Commission anyway. I think they were still gonna ask us, "So how are you doing with your employee arrangement plan?" I would guess they will have to talk about this possible resolution or different option to resolve this spectrum ceiling issue. Then we'll see what they offer and then see how we will respond and what are acceptable, what maybe not. I think that is the kind of issue that will be discussed.
Of course they asked about, you know, the rate plans and all that. That is really business as usual. We have, you know, indicated from the day we submit our application to, you know, even FTC and then through, you know, any kind of meeting they ask for, we talk about those. So I said probably at least five times already. So really nothing new. But the more recent issue that came up is the ceiling issue for the spectrum, especially for our peer. Okay.
Got it. [crosstalk]
Did that answer your question, Sara?
Yes. Yes, definitely. Thank you.
Okay.
Thank you. We're now in question and answer session. If you would like to ask the question, please press zero one on your telephone keypad. Thank you. As a reminder, please press zero one on your keypad if you would like to ask the question. Thank you.
Okay. If no more questions, I'll just wish everybody have a great weekend. Enjoy your shopping.
Thank you, President Chee. Ladies and gentlemen, we thank you for your participation in Far EasTone's conference. There will be a webcast replay within an hour. Please visit www.fareastone.com.tw under the Investor Relations section. You may now disconnect. Goodbye.
Thank you.
Bye-bye.