Welcome everyone to Far EasTone's 2022 First 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 the question. For your information, the webcast replay will be available within an hour after the conference is finished. Please visit www.fareastone.com.tw under the Investor Relations section. Now I would like to introduce Mr. Gary Lai, the IR officer. Gary, please begin.
Thank you. Good afternoon, everyone who attends Far EasTone First Quarter 2022 Results Conference Call. Our President, Chee, and CFO, Sharon, both join the call with us today. Before Chee's presentation, please pay attention to the first page safe harbor statement in our case. Let me pass to Chee. Thank you.
Thank you, Gary. Hi, good afternoon, everyone. Thank you for attending our IR call. I'll give you a brief update or a sum up of what we have done and how we have done for the first quarter. The first slide talks about our financial performance. As you can see, what's on the board that across the major KPI guidance that we are beating all the guidance across all KPIs. Not only that, for the YOY, we also posted positive and good growth, including the revenue for 5.1%. We also show the guidance for the annual.
You could see for this year, 2022, we are looking at TWD 88.789 billion of revenue, and then that is about 4.1% YOY compared to last year's actual. In this quarter, we already posted 5.1% YOY. For the EBITDA, it's 11.3%. And also for the net income and EPS, it's a pretty impressive 28.4%, so I cannot complain. All right. Next slide, please. All right. On the revenue side, since we have launched 5G in 2020, you could see that very, very soon we led our industry in showing the positive trend on the revenue. It has been six quarters in a row now.
The total revenue has turned YOY positive. Then on the EBITDA side, we have posted 11.3% YOY growth, and that is the record high since the fourth quarter 2018. As you can see from the chart, in terms of the growth percent, this quarter has posted the highest. Of course, this is taking out last year the third quarter, right? For the third quarter, where we had a one-time building sale, so excluded that, and then this is the highest 11.3%. That was on the EPS side. Okay. Yeah.
For the net income, that is also. I think it dates all the way back to 2018 third quarter as well, and it is the highest. What I was referring to, the third quarter 2021, that we have that one-time sale. If we excluded that, it's equivalent to TWD 0.64 for that quarter. With that, and then this TWD 0.71 is so far the best record in a while. Okay. Great. Yeah, in terms of the debt, so you can see that we continue to pay down our borrowing. The net debt has decreased to TWD 52.5 billion or so. Net debt to EBITDA multiple has come down to 1.82x as well.
We continue to have a very healthy cash flow at TWD 55.1 billion or so. The CapEx for this year, our CapEx guidance is about TWD 11.1 billion, of which TWD 2 billion is carried over from last year. So far, we have spent TWD 2.3 billion or so. It is in line with our guidance. Okay. Yeah. What has contributed to our very good first record result from the core business, that is our mobile service. We see very favorable mobile service trend, and that's reflected in our pool, the post-paid RP pool in particular. You see we continue to grow our pool. Of course, 5G is a big contributor there.
The monthly fee for 5G renewal, we continue to see greater than 20% uplift. On the mobile service revenue part, it is also a 2.3% YOY. This may not seem a lot because the single-digit 2.3%, but as you all might be aware, right? For years, the mobile service revenue in the industry has been declining. We are happy to see the upturn since we launched the 5G, and the trend continues. In terms of the 5G post-paid penetration, we now have more than 25% penetration, and it has been steady. We are happy with what we see.
In terms of the post-paid churn rate, even though with the two merger announcements, so the market gets a little bit more exciting than usual, but still we keep the churn rate at a relatively low level. Of course, our main goal is to continue to work it down. Okay. On the new economy side, which we have always think of it as our growth engine, and it does show its strength. For this first quarter, the new economy, it grew like 27.2% year-over-year. Just from the amount-wise, so the new economy revenue accounts for 18.4% of our total revenue received in the first quarter.
That is double-digit YOY growth and then, you know, almost 30%. That was very strong. On the enterprise side, it accounts for 55%. That is more than half of the new economy revenue came from the enterprise side. The major drivers there are from the ICT revenue, of which we can break it down to the cloud service, and that has shown 66% YOY growth. For the IoT solutions that are used in smart city, it shows 84% YOY growth as well. On the consumer side, out of all the digital services, the two upfront that are driving more of the growth are in the e-commerce and also our consumer IoT also did very well in the first quarter. Okay?
All right. The major milestones we have achieved year-to-date that included we have issued the first social bonds in Taiwan telecom industry for TWD 2.7 billion for financing 5G on the ESG development. We have started a 5G Metaverse accelerator in December. After several months of working with the teams and assessment and evaluation and all that, we have now selected 20 of them to continue to work with us to co-create and co-develop some go-to-market business applications, of course, with the focus on FET users and also the enterprise clients as well. In September, we'll have a demo of the joint efforts results that we have from these 20 teams. We are invited by Ericsson to join their global startup 5G program.
This is a program where they connected those startups globally, where they have focused on 5G related applications. As people are saying, "What is the 5G killer application?" Certainly, you know, there is a community working on that. Ericsson is trying to bring them together and also invite telcos to join. We are the first one so far joined from East Asia. This program will also help the startups that we have selected to work with us through our accelerator. We can expose them to this global community as well for more collaboration opportunities. We are happy to see this development as well.
Finally, although this is not, you know, FET's part, but then still it's very relevant because, in light of the merger plan, we are happy to see that APT, the shareholders have approved this FET and APT merger proposal, which is a big thing that happened on April 15. Okay. All right. We have a few more awards and recognition that we received year-to-date. The top three are for the ESG related efforts, and the bottom two are more innovation and our solution, you know, oriented, especially in our IoT and using AI enabled quality engine system.
Not only we continue to work on our ESG related efforts, and then also we are very keen on promoting our homegrown solutions, as we go deeper in these newer technologies. Receiving these awards are very positive confirmation of the direction and also of our efforts. We are happy about that and to share that with you. Okay. Finally, I think this is my final slide, and this time we kind of changed a little bit. We want to make it more like a crisp and, you know, spare you with a lot of charts and then make it a little bit cleaner and shorter. Just to recap, for FET's 2022 priorities, we will continue to strengthen and grow core business.
You know, as we said, even though telecom or people may think of it as the legacy, but then with the 5G, we certainly see a lot of the trends are showing positive signs, we will continue to grow our core business. On the other hand, our new growth areas in the new economy, they are very much related to the technology strength that we have. We have combined our transformation office with our IT department to form Information and Digital Transformation Technology Division. I recruited this AI and cloud leader from Microsoft, Peter Wu. We have scaled up our technical forces.
Now we have dedicated team to help to support our enterprise solutions as well as our digital services. Now we can drive more new growth. Okay. We have always considered, you know, our customers, what are the values that we can provide to our customers and what is the differentiator we can provide. We'll continue to grow our customer relationships and then provide more value to FET customers. I always emphasize that with my team that, you know, if we can save $1 , it is like we are making $10 worth of this to ourselves. This is important that we need to continue to drive down our operational costs and expenses using automation, using more process improvement. We'll continue to do that.
Last but not least, because of the merger, this is, you know, new or additional effort and definitely our priority that we need to pursue these regulatory approvals for FET and APT merger. Okay. Also in June, on June 14th, we will have our FET annual shareholders meeting held on that day. Okay. With that concluded my presentation for you all, and we are happy to take questions.
Yes. Thank you, President Ch. 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 0 1 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 0 2 to cancel the question. Thank you. Now please press 0 1 to ask the question. Thank you. Our first question is coming from Peter Milliken of Deutsche Bank. Go ahead, please.
Good afternoon, and thanks for the call and congratulations on the great results. My question is perhaps, you know, a little bit mathematical, but what it is 5G ARPU is up 20% or more on the migration. If I look at how 5G users have trended right up to 25% of the user base now, then, you know, I can basically estimate that the first quarter, maybe on a weighted average basis, 5G users were at least 20% of the user base. If I multiply 20% ARPU increase by 20% of the user base on average, then I would come to a 4% increase in postpaid ARPU. Actually since 5G has been launched, the increase is a little bit less than 2%.
That would suggest to me that maybe the non-5G users are spending less. Would that be the correct interpretation or is there something else that I'm missing out on?
Okay. You have, let me see. You have used several numbers together to derive your final question. You said the 4G have spent less. Is that what you're saying?
Yeah, that's right. I mean, like basically to put it another way, if I was to extrapolate out to when you have all your users on 5G, should I be expecting something near a 20% ARPU uplift or would it be a lower number? Because it seems like that's not coming through in your postpaid ARPUs on the run rate basis. If it's too difficult a question to answer now, I understand. I just thought I would, you know, check with you guys to see if there was any simple answer to that one, because it's something I'm a little bit confused about when I do my calculations and try to trend ARPU assumptions going forward.
I wonder, should it be? Should I assume TWD 1-TWD 2 ARPU increase per quarter, like in recent quarters, or should it be a more rapid increase reflecting the 20% lift on?
Excuse me, Peter. The line of our moderator just disconnected. We'll wait for a while, please. Thank you.
Okay. Thank you.
Okay. Hi.
Yes.
Hi. Sorry about that. My CFO hit the wrong button, so that disconnected us. Okay. All right. To answer your question, I think your observation was basically correct. Okay? If we look at when we calculate the renewal uplift, we are only speaking to those that we convert. Then at the same time, we also could have some growth adds that wasn't with us, right? To us, those are not calculated in this uplift space. Okay? There is a difference there, you know, for your information. Then also, you are also right for the ones that are still stay on 4G, right? Because our initial strategy, we convert those already on a higher rate plan because they are more like a adaptive.
They are new early adopters, right? We go for those. Then as you know, they're already on the higher rate plan. In terms of the uplift, actually that will be relatively smaller. Ironically. If I were able to convert someone with TWD 499 or TWD 599 to a TWD 1,399 5G program or TWD 1,199 for the 5G program, that the uplift will be bigger. It is also more challenging to convince those that are currently at a mid-rate or the lower rate plan. It is a mixed kind of a juggle. Overall, this uplift of the 5G is able to contribute is definitely a very positive thing.
I say thanks for helping me solve that mystery, if that make sense.
No problem. You already have seen a lot more details of actual to actual. I didn't mix all these numbers together, but then you are right on target. Yeah.
Got it. Thank you.
Okay, sure.
Thank you. Next we'll have Neale Anderson of HSBC for questions. Go ahead, please.
Thank you. Good afternoon.
Good afternoon.
Two questions on costs, please, and relates to your last slide in terms of driving down operational costs and expenses. It looks like-
Okay.
-in the first quarter you have potentially some pretty good operating leverage in the core telecom business. My question on that part is what additional costs can you take out? You mentioned automation, et cetera. I'm wondering in which specific cost areas do you see the most opportunity? The second part of the question relates to the cost trend in the new economy business and how you see that panning out. Do you think costs can flatten or decline, or do you expect them to grow in line with revenues in this early stage of that business? Thank you.
Okay. So I think when I joined, Far EasTone, so that was 2018, we actually had an early retirement kind of a program that we encouraged, you know, some of the employees to take early retirement and all that. In other words, that was trimming down our workforce. It has been three, four years now, and then I have some employees asking, "Can we have some program like that?" I think sooner or later, and also in anticipation of, this merger, right? I think it is, actually a good time for us to look further in terms of if we have, the right size for where we want to be, and also if we have the right talent at the right post. This is more of a overall kind of from an HR perspective.
I think there's definitely more cleaning that we can do. Although I certainly don't want to publicize this to get any of my employees nervous, it is so in addition to OpEx in terms of entertainment, travel, those kind of miscellaneous kind of things, but it is also in the non-media spending area, that is where I can see there's some area we can have more scrubbing. I'll just be very candid. I think, you know, from time to time, it is only healthy for the organization to let's look at the company size and the company structure, especially we are going to have a merger.
I wouldn't be surprised, but I see areas where we can prune ourselves a little bit more. Okay. I think that's your first question. The second question is about in the new business area, do I see how I would cut the cost there? Well, in the new growth area, as you, as I mentioned, we really take pride in developing and promoting our homegrown solutions. A big driver for the homegrown is to improve our margins, right? Especially on the software area, and then if those are reusable, and then so the same solution like energy management systems, for example, or the telemedicine or some smart city, you know, smart tracking, you know, monitoring kind of capabilities, those can be reused.
We use the IOP platform, so not everything needs to start from scratch. The more cases or the more projects or deals that we are able to make in this area, these software are just reusable. My margins will only improve. I do see just like that, you know, the relative average cost will go down, and then that will improve our margin as well.
Got it. Thank you. On the first part, the cost in the core business, can I ask how much is retail and distribution? There's one thing in Hong Kong we've noticed since or during COVID is that the operators have pulled back quite a bit and saved quite a bit of cost, by reducing their store footprint, switching more to digital marketing. I was wondering if that is feasible for Far EasTone as well.
Right. That certainly, you know, like, we call it our, you know, kind of channel 2.0. That is the, you know, towards more digital, is a goal that, but it hasn't been a priority in the past. Through this pandemic impact, we definitely see, the digital channel in Taiwan, even with Taiwan's local culture, people just like to go to the, you know, the real source. I think with the pandemic, that is also changing. That helps us to have a different, channel strategy or more aggressive in terms of the digital, using the digital channel. We have been in planning and looking at how we scale down on the number of our retail stores, whether it's franchise or our direct retail stores. That is in the works.
Got it. Thank you very much.
Sure.
Thank you. We are now in question and answer session. If you would like to ask the question, please press 0 1 on your telephone keypad. Thank you. The next question is coming from Sara Wang of UBS. Go ahead, please.
Hi, thank you for the opportunity to ask questions. I have two questions. First is regarding the new economy business. May I ask how's the margin profile so far? It seems the growth is very solid for the past few quarters. Do you see increasing or how's the competition landscape going forward, given we are not only competing with telcos but also other tech firms? The second question is regarding the timeline of APT merger. It seems the shareholder meeting on file is only in June. When do we expect the regulatory approval, like you said this year, fourth quarter, et cetera? Thank you.
Okay. Hi, Sara. For the first question, yes. For ICT, you know, it depends on project to project and then also the size of the project. The margin varies. On the average, you would see between 15%-20%. That's the gross margin we see with ICT. In terms of the competition, I think certainly it is not better than two years ago. The difference is we are stronger, and we are more mature in this area as opposed to two years ago, we kind of just started in this area. In two years we have built a lot of experience and have delivered a lot of good projects.
That is like give us a very positive energy and then the feedback and all that. Even though the market is still just as competitive, but then we are more competitive ourselves. I think it works out fine. In terms of our ability to win projects and that is also improving. I'm pleased with what I see now. The trends also on the private network, we see quite a bit of demand is coming.
This takes a little bit, you know, since we launched 5G, we already were talking about private networks, but it did need some time to click, to kind of educate or make the enterprise more comfortable or get them more acquainted with this technology and with what the 5G private network can do for them. With some, you know, cases that we had deployed, I think the stories got told more and people hear them more. We actually have seen quite a bit of a demand in this area. We had quite a few contracts signed in the first quarter as well. I see this ICT will continue to grow. Okay, your second question about APT.
In terms of a timeframe, it's really well, I can at least tell you there was hope that maybe it can get approved by NCC in July, August timeframe, just because the committee members, like four of the committee members of the NCC will change shift. Their term expires, so the new members will be inaugurated in August. You would think with that changeover, either you finish this before then or you wait until the new members to join to finish. That is the key factor to see if there's a chance to get approved by NCC before end of July. You know, FTC would usually follow after that. But then, you know, we don't know at this time for sure.
Even if it would happen in July, that probably will be a record speed, because usually it would take longer. We're still hoping we will be able to complete this merger by the end of the year. I think that is still, so far, still a reasonable target. Between July and September, hopefully we will see the approvals. We'll receive the approvals. That's kind of the timeframe we are hoping for. It's, as these are all government-related agencies, we really don't have influence on how fast they will work it. We are collaborating with them and, every time they ask for information, we will get back to them promptly.
That's the kind of things that we can do and then to help accelerate. Really they are the ones that determine how fast and how soon.
Got it. Thank you.
Sure.
Thank you. As a reminder, please press 0 1 on your keypad if you would like to ask the question. Thank you. We are now in question and answer session. If you would like to ask the question, please press 0 1 on your telephone keypad. Thank you.
Okay. If you come up with some questions after the call, Amy and Gary are always available, and then we can help answer it afterwards.
Of course. Thank you, President Chee. There are currently no questions at this point. I'll pass the call back to Mr. Gary Lai. Gary, please proceed. Thank you.
Thank you again to join our first quarter 2022 conference call. See you next quarter.
Thank you all.
Thank you. Bye-bye.
Thank you. 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.