Welcome everyone to Far EasTone's 2025 Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a Q&A session. Please follow the instructions given at that time if you would like to ask questions. For your information, a webcast replay will be available within an hour after the conference is finished. Please visit www.fareastone.com.tw under the Investor Relations section. I would like to introduce Mr. Gary Lai, the IR Officer. Gary, please begin.
Thanks for having everyone, and welcome to the 2025 second quarter investor conference call. We are pleased to have you join us today. On our side, we have our President Chee Ching and CFO Sharon Lin. Both were sharing updates on our performance for the quarter this year. Before we begin, I would like to remind everyone to pay close attention to the safe harbor statement on the first page of the presentation. Thank you for all of your attention. Now, let's proceed with Chee Ching's presentation. Thank you.
Great. Okay. Hi, everyone. Welcome to our conference call. For the second quarter, we have continued YOY growth across all major lines. In particular, we've seen an improved margin percent. That is, as we continue to improve our operations efficiency and all that. However, for the total revenue, due to some ICT project delays, as you can see, in terms of the achievement rate for our board target, we fell short a little bit there. The delays affect some of the revenue recognition along the line, and those, of course, will be shifted to the second half of the year. In terms of the two quarters combined, for the first half, we are meeting all BOD targets, and also with positive YOY growth. Our EBITDA and our net income EPS also have made some records. As we turn to the next page, we'll see more there.
For our second quarter revenue, it comes to TWD 25.23 billion. It is a record high for the same period for Far EasTone. The majority of the service is still driven by mobile, and this 1.0% YOY is still driven a lot by our steady growth from our 5G customer upgrades. Our prepaid business is also doing very well. I should also add our digital services also perform better than we initially had planned for, even better than that. This is also the 19th consecutive quarter that we have the second quarter revenue that is, you know, continued to grow from YOY. As far as the EBITDA is concerned, our second quarter EBITDA comes to TWD 9.39 billion. It is an all-time high for the same second quarter. This is 5.1% YOY EBITDA. It is contributed by several factors.
First of all, of course, better revenue, better revenue margin, and also our synergy from the merger, as we have completed quite a bit of the merger activities. The network operations expenses, now we've seen, we start seeing the reduction on it and the savings. Our EBITDA is better than the year before. For the net income, it is TWD 3.37 billion, and it is an 11-year high for our Far EasTone for the same period. Our EPS would come to TWD 0.94 for this quarter, and achieving 106% of our second quarter guidance. Overall, our 8.1% YOY net income growth is leading our peers. In terms of our second quarter financial metrics, as we continue to pay down our debt, our net debt and net debt to EBITDA multiple continue to improve post-merger. Also, our free cash flow remains very strong.
Our CapEx is at TWD 3.04 billion, and that is in line with our 2025 guidance, which is TWD 8.3 billion. If we look at the first half together, it is exciting as we continue to set new financial records for Far EasTone Telecommunications Co. Our total revenue for the first half sets the record high. Our EBITDA is also a record high that comes to TWD 18.9 billion, and it is a 5.8% growth YOY. As I understand, that is also leading the industry. Because of the revenue and also the EBITDA, both are performing well. Our operating income also comes to the 11-year record high, which is TWD 8.5 billion, and that is a 16.7% growth YOY. It is also industry number one. Our net income is now TWD 6.6 billion, and it is a 9.2% YOY growth. The EPS comes to TWD 1.83. It's also ahead of all special.
In terms of our different areas, let's see. Our major revenue breakdown in terms of our services and product offerings. Of course, the mobile service and the digital essential services, kind of consumer-facing, accounts for 50% of our total revenue. We continue to see the steady growth from our mobile service. With some of our internal data that I didn't show here, we are seeing very promising kind of our MP market performance for Far EasTone. Also, our APT, that is formerly the Asia Pacific Telecom users' migration, the contract renewal continued to deliver good uplift. In this case, it's a 14% in monthly fees with a well-managed churn. Our continuous 5G upgrades resulted in a 40% uplift in our monthly fee. In terms of our digital essential services, while it only accounts for 4% of the total revenue, it has continued to do well.
This is also an area we will continue to invest in, and hopefully we will see the service area continue to expand. In particular, the insurance agency business actually has been showing very strong momentum and the growth momentum as we continue to expand our channels and also come up with innovative new features or new products. The payment, the DC, the Direct Carrier Billing, it is 4% YOY growth. The subscribers have also grown quite a bit in this area. Our friDay Video, the OTT, we have some highlights later on, but it's also showing a 5% YOY. Our fraud prevention service, that's the Guardian Network, is showing a 40% YOY in terms of the revenue. Okay. Right. On the right-hand side is our ICT and fixed business combined. As I mentioned earlier, because of some project delays, otherwise, this overall YOY would be even higher.
ICT revenue grew 8% YOY, but then, of course, according to our own board target, it could have been higher, but for some of the delays. We will have it caught up. We continue to see, because of the resilience, kind of infrastructure resilience requirements. We actually continue to see this area, the strong demand, and that kind of boosted our contracts in this area as well. Merchandise kind of stays flat. This - 1% is mainly due to our EC, e-commerce performance. Also, for the device sales, I would say it's kind of flat. Everyone knows, like for Apple, the supply hasn't been that abundant, so that certainly has some impact. Basically, we manage it to still have the margins sustained. All right. Some highlights in terms of our mobile business growth. If you can see, the revenue-wise, it is a 2% YOY increase.
Our pool continues, you know, Far EasTone maintains the lead in this area. It comes to 716 now post-merger. Also, for the post-pay 5G penetration, we already have surpassed 45%. My understanding is it's also number one for the telco industry. In terms of some highlights for the enterprise ICT, as I mentioned earlier, we do see strong demand that is driven by the infrastructure resilience kind of request. Both government and the private sector all kind of call for that. It boosted our new contracts. We see an overall 126% YOY increase. In smart city alone for projects that fall under the smart city area, it is a 157% YOY growth. All these contracts will, of course, fill into the later revenue for the end of the year and the next year.
This is kind of an indicator that we project how we will be doing in the later year. The year next. Also, we have some key projects awarded. As you can tell, some of them came from the government sector. We manage not to, we have some of the department's names disclosed here, but I won't read it one by one, but you can get a feel for it. We definitely are continuing to do very well in the government sector and grab the opportunities as we can. As we deepen our own product in the smart ICT solutions area, that also helps us to improve the margin while we do the business. In terms of the digital service, we have some highlights there. Our friDay Video continues to be the local number one OTT in Taiwan. Our exclusive Korean content definitely serves well as a niche for us.
We are seeing a 20% monthly increase in paid users. We have reset our viewership record three times already in six months. This area is very exciting. For the Guardian Network, I mentioned earlier, this is an AI-empowered feature. We want to help our customers protect them from these fraud. It really comes everywhere. This one, we actually hit the new record with now 437,000 paid subscribers. This is up 40% compared to last year. It is with a 60% trial before you pay kind of conversion rate. Compared with other different kinds of service conversions, this is very high, the highest. For the payment business, I kind of already touched on previously, this Direct Carrier Billing and also the Insurance Agency. Both areas, we call it mobile financial service, are growing steadily, especially with the Insurance Agency area.
We continue to have innovative features, products, and also expanding our channels. This is showing a lot of growth potential. We have made some strategic investments so far this year. Previously, we have announced that we are investing in Synergy in order to, and we see the synergy between Synergy with our focus on the smart city area, especially in the ESG solutions. Previously, we have invested 30%, and we'll continue to invest more to get a major shareholder here. In terms of the digital service that is consumer-facing, we are expanding our Mobile Circle to have a bigger footprint for the users, you know, like a daily life, on the needs. We have invested in Pro360. I think in a matter of a few days, this Pro360 service will be available through Mobile Circle. The users, Far EasTone users, will be easily getting access to it.
We have made some other content investments. As we believe, no matter how the global economy situation is, entertainment seems to be doing well anyway. You continue to advance in this entertainment area. Started with our friDay Video, but then we started also investing in the content business. With alliance with some of the domestic and also international partners, in particular, we actually have just created an entertainment fund, and that will help us develop quality local content. We wanted to have a better and global reach. We have this IP from CJ ENM for this Our Blues. That was a Korean entertainment drama, I think, right? We are going to make the Chinese version, and we just started filming. This is after very rigorous production design and all that. We are looking forward to the completion of it, probably sometime next year. This is what we release next year.
This has started another chapter for Far EasTone entertainment area. Last but not least, it is LiTV, which has been our partner for quite some time, and it continues to do very well. It is our strategic partner as we continue to expand our involvement and engagement in the entertainment area. With LiTV's technical capabilities in the digital ads area, their proprietary, very advanced technology, we are going to deepen this area's collaboration with LiTV. We just made that investment recently, or I should say more investment in LiTV. We have several targets that are in progress, and that will be announced later as each of them gets approved. We will announce them in due time. This is an area we see, we are just based on mobile service, which is really saturated. We continue to manage to have the steady growth.
We are also looking for the second and third growth curve. This digital service, while it is only 4% of our total revenue, we believe that this area we can see more, we can grow more. This is also one area you will see us invest in more. We did receive some major recognitions, and I listed here, I won't repeat every one of them. The first one on the top, that is from the Ministry of Economics. It is the NICE National Innovation Award that we got this award for our engagement and our development in the telemedicine area, 5G telemedicine.
The committee, the judges, their comment is this is not only a transformation for Far EasTone ourselves, because from telco to kind of getting into the healthcare, you know, medical area, but then also through our 5G telemedicine solution, the platform, we are reshaping and transforming the healthcare industry in Taiwan. We are very encouraged by this recognition. This is also one area we will continue to grow and then also looking for targets in this area and a native target for this area. We received the best customer service in Taiwan, that is 14 years in a row. This award actually is only 14 years' history. We have gotten it from the very beginning. We are also the only company, you know, for this award that we have been getting this 14 years in a row. This is a record that will not be beaten.
We got recognized in our ESG performance. For our corporate governance, our executive team performance, we also get recognition from Excel, which is formerly the Institutional Investor. For those of you who voted for us, maybe, and thank you for your support. We are, you know, consistently ranked in the top 5% of public listed companies for our corporate governance and for 11 years. That is by the Taiwan Stock Exchange. For our second half priority, now it's already August. This is already kind of work in progress. This is the year that we have promised Fairtrade Committee that we will wait until the end of the year to migrate the Asia Pacific Telecom customers. That is a big task for us. We already are ongoing, but it is a few hundreds of thousands of users that will need to be migrated. It is quite some task.
We will launch some new offerings in the mobile area. We are expanding as we speak our digital essential service offerings. You will hear more in the later half of the year. We are looking to monetize the Mobile Circle. This platform economy will continue to develop and grow. For the smart ICT business, as I mentioned earlier, we continue to innovate and go deeper through these mergers or synergies with the subsidiaries, the companies that we have invested to strengthen our solutions and then focus the solutions that we can, as we offer these ICT solutions, and that we can at the same time improve our margins and also expand the areas where our solutions will apply. With the prevalence of AI these days, a lot of these solutions, we see the opportunity and started already doing the AI-enabled enhancements as we speak.
We continue to increase our employees' AI tool adoption. So far, I'm very pleased to see the various scenarios, examples by all the departments, even in the back office, how they are benefiting from using these AI tools to improve their productivity and most importantly, their work-life balance. It is definitely a good thing that is happening with these AI-enabled tools. With that, I conclude my presentation and wait for your questions. Thank you.
Let's start, ladies and gentlemen. [crosstalk]. Gary, go ahead, please.
Now you can make your announcement for Q&A. Thank you.
Thank you, Gary. Ladies and gentlemen, we will begin our Q&A session. If you have any questions for any of today's speakers, please press the star key and one on your telephone keypad to enter the queue. After your name is announced, please ask your question. If you find that your questions have been answered before it is your turn to speak, please press the star key and two to cancel the question. Thank you. Now, please press the star key and 1 on your keypad. Thank you. The first one to ask questions, Xia Chu from J.P. Morgan. Go ahead, please.
Hi, thank you management for the presentation and the opportunity to ask questions. I have two questions. Maybe let me just take them one by one. Firstly, may I ask if the management can quantify this quarter's EBITDA benefits from merger synergy? Also, how much more synergy is yet to be realized? Can we quantify that in dollar terms, please? Thank you.
Okay. For the EBITDA YOY, there is definitely the expense savings because last year, the first half of last year, we were aggressively, you know, closing down those Asia Pacific Telecom radio stations and all that. There is a lot of network activities and the operations expenses that were spent that were incurred for that reason. Now those have been completed, right? From the expense side, that is definitely a saving. Also, as we continue to grow our Asia Pacific Telecom customer when they do the migration, we have the uplift, and that continues. That builds up our revenue along the way and then also the EBITDA. Exact quantification, I don't have it offhand, and I don't think we, you know, get that deeper into it. We definitely see that's the two major contributors. That will, from the expense side, of course, if it's the next year, right?
The base will be about the same in terms of the savings from the network consolidation. The synergy in terms of the migration, the uplift, those will continue. Also, the 5G upgrades, you know, as we will, you know, more and more users will go from 4G to 5G.
Got it. Thank you. My next question is, management, could you share how do you plan to use the excess cash that Far EasTone is generating?
We are making quite a bit of investment. That's why we actually are very actively looking at different investment targets. Those are, of course, strategic investments. We are not looking for financial investment targets. Rather, the companies that have the kind of technical expertise that will help us grow our smart ICT solutions or the variety of solutions or deepen our solution depth, those are definitely like an incentive. Also, as I was saying, we will continue to build our strengths and engagement in the telemedicine smart health area. Some of the companies in this healthcare area are also among the targets that we are looking at. In terms of expanding the digital services, widening our footprint in the consumer services, we are also looking for some of these new services that will have different TAs, and that will appeal to more users. I keep my investment team very busy.
The number of investment cases they are evaluating only in the first half is already double the ones that they looked at last year. They were saying they need more people. We definitely have many areas where we can spend the cash. Also, our dividend, right? That dividend, we always put out very, I would say, more than, our dividend has, I wouldn't call this necessarily like a generous, but definitely, it's a very steady, steady dividend policy. As we continue to do well and what we want to return to our shareholders, that is definitely a big area where we'll spend our cash.
Got it. Thank you so much. I'll go back to the queue.
Thank you.
We are in Q&A session. If you would like to ask questions, please press the star key and one on your keypad. Thank you.
There's a question asking about our remaining percent of our Asia Pacific Telecom customers. I could share some of the information with you. For example, in terms of our target for our VIP customers, the team in terms of the target achievement now is like 132%. For those that are for the middle and higher rate plan customers, we are almost 100% meeting our schedule for migration. It is progressing very well. This is a long process because it is still a large number of users. We don't want them to be all processed in one month because that wouldn't be possible in terms of my stores, my customer care, and all that capacity. This needs to be spread till the end of the year. We have a migration schedule and how many we want to achieve each month and month over month.
So far, the team is progressing very well and ahead of schedule. In terms of the AI, I can tell you, we have this LSP business with Microsoft. That one, we have seen a big growth. I would say a big factor is because of the GenAI. Microsoft has adopted OpenAI into their copilot product. That copilot series suits a lot of the companies that already are using Microsoft products. They all look for how they can quickly adopt the AI tool. If you want to do more than just the user using copilot, there are a lot of productivity automation kind of work that can be done. In this case, my solution sales team actually is taking on this opportunity. They have a lot of increase in the customers in their pipeline that wanted to do this kind of work, so it keeps our professional service team very busy.
I definitely see this is triggered or because of the GenAI's wave, and I believe that will continue. I don't have an exact number there offhand, but this is definitely kind of like a premium we see on top of the LSP contracts. In addition to the license they need to buy, they also need professional service to start from helping them do the adoption plan, and also having their IT, the OA kind of setup, and then also build up using this OpenAI, the Azure, how they can build these productivity automation kind of projects within. This is definitely a growing area. A lot of actual, not just interest, a lot of demands. My professional service team is very, very busy with that demand. That comes with all these LSP kind of licenses as well. It helps boost the growth in the LSP program.
Next one to ask a question, Xia Chu from J.P. Morgan.
Hi. Thank you again. I realize there's no one else on the queue, so I'll just jump back and log with some questions. I noticed Far EasTone has industry-leading mobile postpaid ARPU. I'm wondering if the management is possible to share what is the main reason behind the industry-leading mobile postpaid ARPU. Also, during the presentation, you shared that in the second half, there will be new offerings to be launched to grow mobile base and revenue. Do you mind just explain more specifically what are these new offerings? Thank you.
Okay. In terms of the how, why, and by app we've hired than the others, given I know I have my peers represented on the call, I'm not sure I want to share that. That's like a secret thought. I think that has something to do with the portfolio of your user base, right? And then also the added value features that, you know, in addition to the base package that you are able to bundle. I think we have very effective channel, my stores personnel. It's a lot of factors. I really cannot pinpoint one or two or three things that made it happen. This is not like a first time. Actually, it has been the case for quite some years, almost as long as I've been here, right? It is definitely a cumulative kind of effect.
The other question is about, yeah, we have some feature service that are being developed and then ready. I think when we have our next conference call, you should be able to hear more. For now, I would like to just keep it just like that. We will be able to tell you more in the third quarter conference call.
Sure. Understood. Thank you.
Even when we launch a new service, you know, that is, I would say, definitely, you know, it is giving us more attraction and in the new TA area. In terms of, you know, turning that into revenue increase right away, it definitely takes some time. It is the beginning of new services and new revenues.
Ladies and gentlemen, we are still in Q&A session. If you would like to ask questions, please press the star key and number one on your keypad. Thank you.
Some of the numbers that were asked, we don't have it right here, but you can always contact Amy and Gary for more information. If you don't have any questions now, you can always come up with something, and then please feel free to contact them. Keep them busy.
Okay.
Ladies and gentlemen, there are currently no further questions. I'll pass the call to Mr. Gary. Gary, please proceed.
Thank you everyone for attending our second quarter 2025 conference call. See you next quarter.
Thank you.
Thank you.
See you next time.
Yes. Thank you, ladies and gentlemen, for your participation in Far EasTone Telecommunications Co.'s conference call. There will be a webcast replay within an hour. Please visit www.fareastone.com.tw under the investor relations section. You may now disconnect. Thank you and goodbye.