Welcome everyone to Far EasTone's 2025 Fourth 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, the webcast replay will be available when we're 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.
Good afternoon, everyone, welcome to Far EasTone 2025 fourth quarter investor conference call. We have with us today our President, Chee, and CFO, Sharon. Both will share updates on and 2026 guidance. Before we begin, I would like to remind everyone to pay close attention to safe harbor statement on the first page of the presentation. Thank you for your attention, now let's proceed with Chee's presentation. Thank you.
Okay. Thank you, Gary. Good afternoon, everyone, and Happy Chinese New Year to everyone again. All right. We would like to report to you our fourth quarter performance and the entire year of 2025. Actually, we have had a good year, and we delivered good results. For the fourth quarter, we have some new record highs. If you look at on the left-hand side, the fourth quarter, our revenue comes to TWD 32.68 billion, and that actually is also the highest quarterly revenue that we have ever scored. In terms of the YoY, it's more than a 12% rise. It's also 8% more than our targeted revenue.
If you look down, all the way down to the EPS, the fourth quarter is pretty impressive. If we look at the full year, we have achieved 5.5% YoY, even though our BOD was 3.5, we overachieved by about 2%. EBITDA is, the YoY is four point above our target. The net income here shows 6.9%, and what didn't show here is that our operating income that actually scored almost 12% YoY increase. Our EPS, we have done better than we originally forecast, and that is. We have now TWD 3.81 EPS, relatively to our original target that was set at TWD 3.63.
Our achievement rate is also 5% better. Okay, continue. This chart shows our kind of quarterly trend. As you see, we're definitely moving in the right direction, with the fourth quarter last year, that really has hit a record high, except for the net income, that is the 20 years high. Last time I was told that the higher number was in 2006, so it's a 20 years high record for the fourth quarter. Okay? All right. Some other financial metrics for your information. Our debt has come down to TWD 36.03 billion, and our net debt to EBITDA ratio has come down to less than one. It's at 0.9.
Free cash flow, it remains really strong. You look at it, at TWD 25.91 as of the fourth quarter, 2025. Our cash-based CapEx, that is TWD 701. We understand that what we original budgeted for, and but that is just due to some cost efficiency savings on the network side and also some deferred payment in spending, which will be realized in this year. Okay. This is another record. Okay, this is for the whole year. All right. Similar chart, but this is a yearly chart, annual chart. Like I said, 2025, you know, we just set new record highs again for EBITDA, and it's looking good. All right.
Break it down to mobile business, which is still account for our majority, about 50% or so. In terms of the growth, given the market is really pretty much saturated, we still show a strong, solid YoY growth. From our net portability, mutual portability market, still, we are looking at an MP numbers that is encouraging. We've been kind of tracking that. I'm seeing the solid growth, even though it's a very oversaturated market. If you look at postpaid 5G penetration, that we ended the year at 47.5%.
This year, for sure, we're going to cross that 50% line, and then, you know, we will have more 5G users, more users on the 5G than on 4G. Okay? The mobile, postpaid, ARPU has come to TWD 719. It's about TWD 14 higher than the year before, although it is still less than what we before the merger. We still have room, you know, we'll continue to grow, to improve, but then we continue to be ahead of our peers in the industry. The postpaid churn rate, that is something we continue to work it down. Also, the market is not as active as before, I think in terms of all the churns, which is a good thing.
We also worked really hard to improve our customer loyalty and all that. We come to a record low, 0.79%, for churn rate. Okay? A couple of things to mention that we have, because last year, in the last year is the official date that we have committed to the Fair Trade Commission that we will honor, you know, those old. We are really coming to close that pretty soon. There are still some lingering numbers of APT customers, and we are in the final process of wrapping them up. It is delivering a good, almost 20% of renewal ARPU uptake. At the same time, we manage the churns very well.
We have launched this TA-focused service. Instead service plan, instead of looking at, okay, it is TWD 1,399 or TWD 999, TWD 699, TWD 799. We wanted to have a different TA. Sometimes it's more for the 50+ kind of people. Since its launch in September, we are actually seeing a good traction that the service is getting, especially online. Actually, quite a bit of them applied online. For the fraud prevention service, that is something we see the definitely the right feature for this difficult time, you know, lots of fraud, you know, costs and all that, and then also the links. This service is continuing, actually has a 49% YoY growth.
Some highlights for our consumer essential services highlights. First of all, this Mobile Circle application, it's our app. We launched it in late 2020. I think the official launch is 2021. The idea to have this, it's really serve as a digital platform that we want to increase FET footprint in the consumer service that will go beyond, right? We wanted to, you know, not only offer what we already have, like our video, our shopping, our insurance, you know, all those digital services, but we want to find very good partners that we can offer more services through this platform. At the same time, this platform is accumulating very good traffic, and which becomes our base for the monetization, for the platform economy. Right now, it has already.
Eight million downloads for this app, and then the monthly active users is more than two million. It is looking good. For the direct carrier billing, this is always something that we are ahead of our peers. Also last year, it hit the record high transaction. It's a 14% YoY. Also the team has been very innovative and very aggressive in, you know, kind of going out of box. Solution is already approved for life insurance payment through CCB. Once this is done, it is really done for the industry. It's, we are the pioneer there, but then it benefits the whole industry. Okay?
For the mobile insurance, that we started with the handset insurance, and then the market share is already number one for many years. We continue to do well there. Also we have increased the telemarketing sales, and then direct EBITDA also has a very impressive YoY increase for 107%. Also for the travel insurance, alone, that's also a 266% YoY. Of course, this is launched like a later in 2024, about just half year base. There's some, there's some difference there too. Still, for 266%, that is still quite impressive, I have to say.
Okay, we also have the friDay Video, which is still ranked number one local paid OTT, the number of paid subscribers has increased for 18% compared to last year. Also we have expanded our entertainment business, you know, more than the OTT video. We have been doing some content production and then also hosted and invested in some popular concerts and musicals events. That is also another way of kind of increasing our FET's brand in a consumer business. We have a couple of good cultural content related funds that we invested. Combined is about TWD 1.6 billion, and, you know, for one of them, you know, half of the funding would come from the TAICCA.
That is actually giving us the extra funding to do, you know, more business with the entertainment area supporting the local content. Okay. For the enterprise business, last year, we actually have very good Smart ICT business. The Smart ICT alone, we see a 28% YoY increase for the revenue, it remains our growth. It accounted for, combined with the fixed service, it accounted for 19% of our total revenue. For, we have used, like, a four Dragons to characterize our, you know, Smart ICT type of project. The number 1 is the telecom-based SI.
That is using our telecom infra and also our expertise in this area, in a related project. That actually is showing a 64% YoY growth. Also we see now with the GenAI, the adoption and the anxiety and all the interest that come from the enterprise or small and medium business, definitely it has fueled the demand for digital transformation type of professional services. It also helped us in this Microsoft Azure and Copilot program because we are the LSP for Microsoft, and with this wave of GenAI, we definitely see the wave that is pushing it forward even more. Just Azure and Copilot-related contract values alone, it has increased 94% compared to a year before.
FET's own FET Intelligent Angel, that's the platform we have debuted last year, it initially it's for internal use, and we also monetize it for enterprise clients since the second quarter, and it has gained very strong traction, we already have built a pipeline for it. Okay? For our homegrown solutions, that is in the smart city solutions, green and smart city solutions, a lot of that is built around this energy management, right? The various applications. That alone, the contract values has grown 48% YoY. These are the different areas where we have a project that we committed, and also successfully got a contract. On the right-hand side is the smart health solutions area.
Of course, we started with the telemedicine, right? That has then evolved into the emergency system for the ambulance. Last year, we dived into the Cloud HIS area. This is one that where the Ministry of Health and Welfare, that they are looking at how we get the clinic onto the cloud, so their HIS. Otherwise, it's more like a siloed island. This is the one big push from the government, and we are aligned with that policy. We got into this Cloud HIS business because a lot of the features they ask for is what we already have, and then that came from our telemedicine platform. We definitely see the synergy there.
We are also collaborating with some HIS vendor or companies that are already in this area. We are looking to some good growth this year in this area. We already have more than 500 home care clinics that have already adopted our solution for the telemedicine. For the Cloud HIS last year, even though we only launched it, kind of like a friendly launch in the fourth quarter, we have more than 100 clinics in pharmaceutical pharmacies that already, you know, adopted. It's showing good progress. Okay? We have received some, you know, major honors and recognitions.
I won't just, you know, count them through, but then the one that is the most recent is that we again, you know, is the number one for the DJSI, Dow Jones Sustainability Index. We ranked number 1 again, and this is the third time in a row for the telecom industry. That is quite a recognition. Even our board today, you know, acknowledged us for that. Okay. I, the others, I think I just won't go through them in detail. All right. Thank you. Okay, now the dividend.
Since we have hit the record high in TWD 3.81, we have proposed that we will just keep it at TWD 3.81 with a 100% payout, and this is a 7% increase from the year before. You can also see the trend that below there, right? We are seeing a healthy, steady, going upward, you know, just like how we are doing with our, you know, bottom line and top line. All right. For our 2026 priorities, we have had some made some investment last year, keep my investment team very busy. You know, lots of good companies that they evaluated and also went for.
Each and every one of them took some time, but then we actually have had some good MMAs or small MMAs. You know, that in particular, they in particular will help us in the smart city and the smart health area. Every time we invest in some companies, we look at the synergies. It's not purely for the financial investment, but then also how they can work with what we already have and expand it, and it's good for both. We are looking at this year, we want to do everything we can to really maximize and realize the synergies from these recent investments, okay, in both the smart city and the smart health area.
Also one thing to mention, one of our, one of our new subsidiary is ETC, that's something you may not be, you are not unfamiliar with, because we have had, close to 40% of the shareholder, shares. Just starting this year, the revenue will combine into ours. There will be some revenue boost there. All the costs and then their demands on the CapEx that will be reflected in our forecast as well. Okay. ETC, it has a subsidiary that is also working on both consumer-facing, you know, because they have all the, ETC, the tag, you know, so and then the parking.
Also they are doing a lot of business in the Southeast Asia, for the ETC, the toll, the electronic, toll, that they are doing that business. This year they should see some, already some, results with Thailand, and there are several countries already in the pipeline. The second is to unlock the value from digital platform, that's what I was referring to. The FET Mobile Circle has accumulated 8 million downloads more than 2 million active users every month.
We want to, you know, merge the online and the offline kind of a business that, you know, where we can give the our customers more, more values, and at the same time, that can also help us increase our pool, you know, for the integrated or overall kind of services that we are able to offer to our users, the consumers. We will continue to promote more TA-focused, integrated mobile service products with our alliance. We will also launch new essential services this year with alliance. We actually have one major service that will be coming soon. Okay. We will accelerate our return on AI.
Last year, I personally was pretty impressed with what my team was able to do across all the divisions, especially in the network technology, NT area, and also IT. What they were able to do to adopt the AI and blend this AI technology into their operations and the SOP. Also we have adopted this error-free, you know, principles, how they do the check and balance, you know, the early detection of any issues, double-checking on the change request before they hit the network and all that. You know, also, not to mention the productivity increase, right? For our workforce. I'm really looking forward to, you know, more of that return can be quantified, more can be realized this year.
We are basically already kind of like in a hiring freeze because of all these efficiency and productivity increase. I'm already seeing the return. Okay, furthermore, you know, for what we have done well, and we always like to, you know, share that, monetize it, you know, commercialize it. Just like I mentioned, Intelligent Angel was already debuted for our enterprise business, and we will have more solutions that we have homegrown solutions that will be AI-empowered or-enhanced. We are looking to do more there. Okay.
Last but not least, part of the reason that you will see our CapEx this year will go up a little bit, that is because we're going to have some major network to go for capacity for 5G SA and LEO service, we have some network and operations work there lined up for them. This is our consolidated financial forecast for next year. We are looking at, for the total revenue, it's going to be TWD 117.48 billion, and that is a 6.5% increase. for the EBITDA, it's TWD 39.83 billion, and it's a 4.6% year-over-year.
Operating income is TWD 19 billion, it's close to 10% YoY, our net income is TWD 14.17, it's a 3.2% increase. Our EPS is 3.93, I know I would have liked my team to give me a 4.0 number, but I did tell them if they hit 4, I'll give them more raise next year. 3.93 is what we proposed as our target for the guidance, for 2026 guidance. Okay? For the CapEx, it's going to be the cash CapEx is forecast at TWD 9.6 billion. It's up by TWD 1.3 billion from what we have projected for 2025. As I mentioned earlier, we underspend our 2025 CapEx, some of that is going to defer to 2026. Really, the net increase or increment for 2026 is that TWD 1.3 billion.
Mainly, in several things. One is, because we have, we actually have more subsidiaries now, they all have some CapEx demand already forecast there. Also our RAN network upgrade for capacity and for the 5G SA. It's really more than RAN. There's a core network as well, related. These are the two major things that are driving this TWD 1.3 billion additional CapEx that we need for this year. Okay? No worries, because our CapEx to sales level remains very healthy at about 8%. With that, okay, I concluded my presentation for you all, and then we welcome your questions.
Yes, ladies and gentlemen, we are now in Q&A session. If you have questions for any of today's speakers, please press star key and one on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. If you would like to cancel your question, just press star key and two to cancel your question. Thank you. Now please press star key and one on your telephone keypad to ask questions. Thank you.
I'm reading the questions. Okay.
We have HSBC on call for the question. We go that first.
Oh, that's the first one? Okay.
Yeah. On the phone.
On the phone.
Yep. Okay. The first one to ask questions, Charlie Bai from HSBC. Go ahead, please.
Hi, this is Charlie from HSBC.
Hi.
Congratulations to you all. Very strong results. This is very impressive. I have two questions. The first one is about your CapEx guidance. I noticed that additional TWD 1.2 billion because of the two reasons you mentioned. May I have more color regarding the subsidiary demands, why this could drive so much additional CapEx? I also noticed that your actual 2024-2025 CapEx is meaningfully below your budget. Can I assume your 2026 budget is also very conservative budget, and you have a large room to maneuver, and probably the actual will also be lower than the forecast? This is my first question. Thank you.
Yeah, that's pretty much. I think so. Yeah, I would think so too.
Oh, okay. Got you. My next question is about your 2026 guidance. I look at your guidance, seems to me that your forecast higher revenue growth and then net income growth. Why is that the case? It seems to me revenue growth guidance is higher than EBITDA growth, and EBITDA growth is higher than net income. If there are some areas that cause some margin pressure, and could you please give me more color on this?
Okay. Thank you, Charlie. Let me explain. As I mentioned, ETC, right? Which, we already have 40% of the shares. By having it come into our P&L, so that does help with the YoY. The 6.5, if without ETC, which would have about TWD 3 billion, I think that is roughly TWD 3 billion on the level. Without that piece, the YoY will be about 3.5. That will be just like what we set out for 2025 forecast last year.
With the increase from ETC, then that gave us the extra 3%. You're looking at a 6.5% because of that. Now, if you look at now, why isn't it accordingly, you know, increasing up in the other lines? That is because before we have, you know, realized its revenue in our booking, we already are taking, you know, its, 40% of its, net income and all that. Those already accounted for in our past P&L.
Got you. Yes. Thank you, Sharon. That is very helpful. Congratulations again to your great result. Thank you.
Thank you very much, Charlie.
Please press star key and one if you would like to ask questions. Thank you. We are in Q&A session. If you would like to ask questions, please press star key and one. Thank you.
If there is no questions on the phone, maybe we can start with the questions online.
Yeah.
Let me read it, and we can answer it later.
Oh, for the AI? The first one?
Yes.
Okay.
With AI, are there initiatives that you can undertake to reduce cost or even downsize, take on over time?
I actually wrote in a magazine, the Business Weekly magazine. I wrote in a column about how to adopt AI. It is my humble opinion, right? I, you know, I think that it's good for companies to really focus on getting the return and not the results and not necessarily the return, because it's the employees that need to really adopt them, and it's the employees that need to be willing to push forward with it. If we now do, you know, so many headcounts, you can bet nobody is going to want to do this seriously. That's really not my original purpose for doing this, just because it is the technology evolution, AI is for everyone to really learn, right?
We already have a not very good work-life balance, I wanted to solve, you know, to help resolve that problem for my employees. They will see the benefit and then how AI help them with a lot of their pain points. Self-motivated, they are encouraged to do whatever they can to really utilize AI and then to learn AI. Once they do that, as I mentioned earlier, we already are basically, like, doing a hiring freeze. I'm not adding headcount, because of all these efficiency, every department already is realizing. They don't come to me for the, for more headcount. Also, every year we have this performance evaluation.
For those underperformed, if it's not satisfactory or need improvement in those bottom two categories, so some of them are shown in the past, and then the managers will come to us, "Now I need to backfill." Now they don't do that because they know, you know, some of the work that the low performers have left behind are easily picked up because, you know, now with the AI assistance and all that, you know, the workflow is very different than before. I believe, you know, there's more value out of this. It's not like they are gonna be like idle, but then rather now they don't have to deal with very trivial kind of a task, but then they really can spend more time on more, you know, the higher quality and then the more insightful type business even more.
While we are growing our business, as you see, then I don't need to add more headcount. I can, you know, keep the revenue growing, but I don't need to keep my expense growing. That is how I look at it. I don't know, I don't have a specific initiative that I said I will reduce cost because of AI, but it is happening, and I like to keep it that way and then so the employees are self-motivated to do this. The ones that resist or the ones just can't keep up with it, and they will be, you know, left at that bottom two, you know, categories. Eventually, over time, if they don't improve, they can't improve, then they will leave the company.
Okay. Thank you, Chee. Next questions. Congratulations on the strong results and very solid guidance. Can we have some breakdown on how we can achieve the 6.5% revenue growth rate, the guidance? Also want to understand a bit more about the profitability on the enterprise business, and do we expect it to continue improving on year-on-year basis? Thanks.
Yeah. I think part of the question about the 6.5, I already explained because of ETCP. Without that, it's back to kind of like 3.5%, like what we projected for last year. You know, for the enterprise, that is our driving engine, so it will continue to move the needle a little bit further. On the other hand, our device and also the mobile service, they will continue to, you know, shoulder their share. The, you know, the portfolio in terms of the contribution, doesn't change much, if at all, from last year, as far as I can tell.
It will still be because we have a large base for the mobile service, you know, so, you know, a couple % of a growth there, plus the device, and we have some, a few, probably less than 10% or so increase. For the fixed service and also this year, we're gonna, we have more focus on the fixed service as well. Not only just the Smart ICT, we will see some focus on the fixed service as well.
Next question. Given that debt has come down to less than 1x net debt
There's another piece about the profitability.
Okay. Okay.
Yes. You know, with more solutions that are homegrown, I do see. You know, that is part of the reason we do these synergies, that will improve the profitability even more. Okay?
Okay, next question again. Given that debt has come down to less than one time net debt to EBITDA and our free cash flow generation is substantially higher than our net income, is there a possibility for above 100% next year?
There's always a possibility. You never say never. I guess we will do this year by year. To be honest, even last year, when we look at our improved EPS, our board has different opinion. We have to convince them to keep it at 100%. This year they agree with us, with 100%. I guess we have to work a lot more. If this is the case that we don't do as well, in the past, we paid more than our EPS. Now I think we are in a healthier kind of condition in terms of the payout. We will grow it, together as we really grow our bottom line. Now so, and we have a, you know, healthy cash flow, yes. Given the global economy and all this uncertainty, I think it's good that we leave our, ourselves some buffer. I never say never.
Okay, next question is in Chinese. Let me translate to English first. Five ARPU is the highest among the industry, and I think the competition is still quite severe. Can we expect the, you know, telecom, core telecom business continue to grow? What, in what kind of a strategy, and what kind of expectation on the profitability growth?
Sure.
Corporate
Okay. For the first part, for the ARPU, right? Even though the saturated is very competitive, and that's why we are saying, you know, based on our Mobile Circle as the digital platform, we want to offer a variety of services that are of value to our users, so they will be willing to pay for them. How to pick the right services, of course, we need to understand our customer's needs, we need to pick the right service, and also, in some cases, we need to create such new service. That's where I call it, like, essential services. You know, that is actually something we are currently working on.
I do see there's still room, quite a bit of room for us to grow in the consumer area. The telecom piece may be saturated, I think the users' demands are always there, we definitely haven't done enough in there. Okay? Just our pool, if you take into account all those additional essential services we will be able to offer, and they will continue to grow. In terms of the enterprise profit, like I said, the homegrown solutions will be the key, right? You know, with our own homegrown solutions, I can actually control the margin. That's why we believe, you know, as we develop, our end homegrown solutions are essential for us. Okay.
Will 2026 CapEx guidance be a base for future CapEx spending?
I wouldn't say so, because like I said, well, until then, until then, I think, you know, for 2026, we actually. Part of these are like, if you spend it now or you want to break it down to 3 years, and then what are the terms and all that? We have all that taken into account. I believe a lot of, quite a bit of that is gonna be realized this year. I don't think next year will be at the same level. It should come down. This year is actually higher. Have we answered all of them? Yes. I think so. Okay. Questions?
If there is, more questions, please, you can ask online or on the phone, please.
Yes, ladies and gentlemen, we are still in Q&A session, and if you would like to ask questions, please press star key and one on your telephone keypad. Thank you.
In any case, I'd like to take the time, the opportunity to thank the investors and analysts, right? We have had got good results from the reviews and from the surveys and all that, and we get some good awards. Thank you very much for your support. Our stock price has been good. Not today, in particular, but yeah, we cannot complain. Thank you. If you have any more questions, you can always find Amy and Gary to follow up.
Okay, we have the next questions. May I kindly check how much of our mobile revenue is device related and how much is purely service?
Break it down. We actually, the mobile service without the device part is about 50%. 50% of our 45% of our total revenue, and the device is 31, right? Last year, I think the device and merchandise revenue is down. If you're thinking about the bundle, not bundle, that's a very different math. That I don't have it here. Okay. Yeah, 31 and 50. 50, including the essential services. Yeah. 45% for the mobile service alone, not including the digital services, and 31% for the device and merchandise.
For dialing participants, if you would like to ask questions, please press star key and one. Thank you.
We believe there is no more questions.
There are quite a bit of a question.
It's already quite a lot.
It's time.
Yeah, it's time. That.
Okay.
If we have any further questions.
Yeah, it's gonna be a long break again, right? On weekend.
Yes. There are currently no questions. I'm going to hand the call over to Mr. Gary Lai. Gary, please go ahead.
Thank you again, everyone. See you next quarter.
Yeah, thank you all.
Yeah. Thank you, ladies and gentlemen, for your participation in Far EasTone's conference. There will be a webcast replay. Visit www.fareastone.com.tw under the Investor Relations section. You may now disconnect. Thank you again, and goodbye.