Welcome everyone to Far EasTone's 2026 first 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. Now I would like to introduce Mr. Gary Lai, Investor Relations Officer. Gary, you may begin.
Good afternoon, everyone, and welcome. We have with us today our President Chee Ching and CFO Sharon Lin. Both will share updates in our performance for this quarter. 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 your attention. Now let's proceed with Chee Ching's presentation. Thank you.
Thank you, Gary. Good afternoon, everyone. Thank you for joining FET's IR call. We have the 1st quarter financial performance report. We have a very solid 1st quarter, I would say. To sum it up, we continue to set some record highs in this quarter, and all of the KPIs exceeded our guidance. If you look at our revenue, it comes at TWD 27.81 billion. The YOY is 6.8%. Since we consolidate ETC in January, here is another column here, if not to confuse you. For the restated, for the TWD 26.73 billion, that is if we had ETC from January last year. Then we have the apple for apple kind of comparison.
With that, in the base, our YOY growth will be at 4%. I'd like to clarify that most of the 4%, not all of it, was really contributed by the organic FET growth, just to make that clear. For the EBITDA, it's at a 3.6%. Since last year, we already were using the equity method for the ETC. You see for the net income and the EPS, it really doesn't make any difference. Still we overachieve our goal, our board target, and come at a 14.4%. I think our initial was like at a single digit growth. This was very good. Next page, please.
For the revenue, at a TWD 27.81, that is actually our history high for the first quarter. That also marks our 22nd consecutive quarter of the revenue growth. This growth is driven by, you know, almost every area. I think all of the areas contributed. The steady 5G upgrades and the essential service expansion, you know, they all gave us like a solid growth. The handset sales, you know, for the device, the ICT deliveries. When it comes to EBITDA, we have a TWD 10.08 billion for this quarter. It is a historical high across all quarters. It's just for the quarterly result, it's the highest so far in FET's history.
This is due to all business segments have improved their margins YOY. Together, they contribute to a 6.3% EBITDA growth YOY. For net income, it's a TWD 3.71 billion, and it's a EPS 1.03. It is also the highest quarterly result in 20 years. The net income YOY growth is 14.4%, and we believe that's leading the industry. Some financial metrics for your information. First of all, our net debt and net debt to EBITDA continue to improve. Our free cash flow remains very strong. Our CapEx is in line with our 2026 guidance so far, which is TWD 9.6 billion. Some breakdown on our business performance.
If you look at, on the left-hand side, we have mobile and essential service. By the way, this view doesn't include ETC. For the mobile essential service, that accounted for 52% of our entire revenue last year this quarter. This year it has increased 2.3%, because our pie is also increased. Overall, it only accounted for 50% of the total revenue. While ICT and fixed business, it has come from 18% and it grew 12.8% to 19%, this part does include the ETC contribution. For merchandise, it has grown very well, 11%, to account for 31% of the total revenue in the first quarter this year.
For the mobile and essential services, as I mentioned in the previous slide, the steady 4G to 5G upgrades, with handset replacement, that really helped. It resulted in a 42% monthly free, monthly fees uplift for the 5G renewal for the first quarter. We have been managed the churns pretty well, continue to hit record low for the postpaid. It's now come down to the 0.68%. For consumer essential services, we have delivered strong growth, each of the major area is looking at a double-digit growth. For the fraud prevention service, it is 65% YOY, our digital entertainment is 22%, our insurance agency service has grown 11%.
For ICT and fixed business, for our homegrown products in the smart city, and smart health areas, they all show like a double-digit. Also security and cloud, they all show double-digit growth. Overall, they are like a 20% overall growth. We do have some delays in some selective SI projects, so that actually otherwise our revenue would be even higher. They were offset by ETC's consolidation. Otherwise, this revenue number would be even higher. Okay. In merchandise, we had a good spring handset launches, and that helped sustain some of the 5G upgrades and also the merchandise sale itself. Okay. All right, if we zoom into the mobile business alone.
For the first quarter, because of the, we continue to see the upgrades, and we perform very well in the MT market. The mobile service revenue up 3% in YOY in the first quarter. It is the 20th consecutive quarter of growth for the mobile service. Our ARPU remains to be number one in the industry, and so is our 5G penetration, which comes at a 48.4%. In terms of the postpaid churn, I mentioned earlier just now, it is now at a 0.068%. Okay. Some consumer service highlights.
For the mobile plans, I have challenged my team, you know, how can we kind of go beyond these 499, 599, 799, kind of like a price menu? Can we give some more like a TA-focused, target segment-focused pricing? It's really, you know, taken into account the target segment's needs or demands. Last year we have done this for a 50 plus, and this year the new newest campaign is for the youth group, and we have a youth campaign. That would attract hopefully more of the younger users and give them more flexible 5G data with plan to earn lifestyle rewards.
This is also our effort to try to kind of educate our user. You don't always have to go with the unlimited plan, right? You really can plan for your usage. Even if you exceed that, you have plenty of ways to easily get the bandwidth that you need. We also launched our 5G FWA home entertainment bundle service. This is using the 5G as the fixed wireless access, and then we combined bundle with entertainment packages. For the first month, since its launch, it actually has been received very well. We have several stores, they are out of stock, you know, on the hardware needed for it. It's looking pretty good.
We also launched a new service, and then it's called Taste Taiwan. It's a new app. It's a one-stop dining service, integrating the booking, dining, reviews, and also some, you know, like, coupons, you know, certificates that you can buy online and that get some discounts. This is the, our, plan to get more high frequency kind of, service that we can, provide and then, you know, also enrich our digital platform offering. This just launched, a month or so, and we started kind of doing more, promotion and marketing. So far we are pleased with, the reception so far. Okay.
For the insurance agency, this area continues to be doing very well, the product manager is also very aggressive. So we have not only we do continue to do well with our device insurance, we have some other insurance programs that we offered, like our travel insurance, that further enhanced covering family and statutory infectious diseases. This actually was found quite helpful. The user found that, you know, kind of peace of mind. So it actually helped lift the ARPU by 79%. Okay. Our telemarketing sales has also gone very well. Combining with our DCB, it's a direct carrier billing, which really helped conversion of these telemarketing calls.
The renewal rate has increased to 88%, and it's a record high. It actually reached a record high mobile insurance revenue. This area continues to do very well and it continues to expand. For entertainment, for our video delivers very solid growth. For in the first quarter, for the paid subscribers has gone up by 27% YOY. It's a revenue, about 22% YOY growth. The live entertainment expanded with successful concerts. We have several concerts actually planned for later year too. I'm not really into this, my team apparently knows what they are doing. All these events have been very popular, the tickets are sold quickly.
Our FET Guardian Network, it has driven 65% YOY revenue growth and also a big increase in terms of the paid subscribers that we see for the first quarter. Changing to the enterprise side, the business highlights. For the smart ICT area, the smart city, several our main homegrown products are gaining traction. For the connected traffic intersection, this is like a AIOT kind of solution, has been deployed more than 1,300 intersections in Taipei already, and then another 1,000 is already planned for the southern city. We also have air quality monitoring solution that's deployed for 3 counties or cities in the first quarter alone.
Also for the smart pole solution, that is, actually, government has a smart pole expansion initiative going on, and that's where we are kind of eyeing. Then, you know, like we are targeting that. This is a solution we co-created with a subsidiary InSynergy that we invested and acquired last year. Okay, or this year we completed.
Okay. All right. The smart energy management solution that we have deployed for 20 plus university campuses. Okay. For smart health, this we are expanding our Cloud HIS solution with the AI-enabled capabilities. This will be done through some strategic investment, and it will drive validated and scalable long-term growth. We are very excited about this. The same kind of solution can also apply to hospitals as well. This is more than the Cloud HIS area that it can be applied. Both our FET telemedicine platform and also the FET Cloud HIS solutions have received ISO 27701 and ISO 22301 certification. For the digital transformation area, our Microsoft LSP program actually doing very well.
For the first quarter, the business revenue has grown 51% YOY. It is really boosted by, I would say, first of all, the interest in AI. It was definitely there. My team's ability, you know, through this professional service to help the interested companies to really help them with the AI adoption endorsing the Microsoft solution, that definitely helped. It helped boost our Microsoft sales and at the same time also helped grow our professional service revenue as well. One of our own kind of homegrown solution using the Microsoft, you know, AOAI is the Intelligent Angel, which was also exhibited at MWC this year in February. It has received quite a bit of feedback.
A lot of telcos visited the booth at Microsoft. They were impressed because they say they heard a lot about AI for the telco, they only have heard it, now they actually seen it because we had a very detailed deck and explained what we have done and how we did it. They found it very helpful. With the similar kind of technology or approach, we have, you know, this Intelligent Angel used in the IT area. We have also received a lot of interest and also the pipeline for the first quarter is already built, is already full. Okay.
For the telecom-based SI area, we have secured several large-scale contracts during the first quarter, and it's really strengthened what we have, you know, for the midterm to long-term kind of revenue momentum. Also it really re-emphasize or reassure our strategic position in the digital transformation value chain. This is not only for the enterprise, but also for government. Especially government is very into these, the government resilience for their infrastructure and also a lot of these smart building for the ESG and all that. Kind of ride on that trend, it's also helping a lot with our telecom-based areas growth. All together, our first quarter total awarded ICT contract value grew actually 84% YOY. Okay. Okay.
We have received some major honors and recognitions that I would like to share. First of all, for the DJSI, now it's called DJ BIC, we are ranked number 1 again among global telecom peers. This is actually the 3rd year that we have received this honor. S&P Global, the Sustainability Yearbook, 2025, actually, it should be 2025, is we also ranked in the top 1% for global telecom companies, and it is also number 1 worldwide with a CSA score of 96. Okay. For the CDP climate change, we also earned this Leadership A-List recognition. Okay. Domestically in Taiwan, we ranked in the top 5% by the Taiwan Stock Exchange among all the listed companies for corporate governance.
It is 12 years in a row among altogether there were seven companies who were able to achieve this 12 years. That's a long time. For our product, as the ISO certification I mentioned already. On the side, we also have invested in the movie Bedford Park, which actually received the Sundance Jury Award, and we believe it's the first Taiwanese-backed film to achieve this honor. For FET's priorities, my IR used to ask me like every quarter, and I said, "You don't change your priority every quarter." That's why I take out the quarter, and it is just our strategic priorities for the year. We don't have to see a change every time I have IR call.
We will continue to maximize our investment and subsidiary synergy. For the ESG solution penetration especially with the acquisition of InSynergy. We do see a lot of synergy there with the product, with a big, a very deep product line that they have in the ESG area. Our smart health. We definitely are making investment and making strategic investment here. In the cloud HIS area and also how to make the smart hospital. This is definitely one area we are excited, we will accelerate the scaling up. For the ICT and also cloud business, we already are expanding in the overseas area in Southeast Asia.
In particular, just in April, on April 1st, we actually completed the transaction with consolidating Renova for our subsidiary, Nextlink. This is one area how we can kind of use the synergy we have in the Southeast Asia through various subsidiaries and then how to maximize the synergy among them. You know, also export our smart city, smart health solutions. We see a lot of going on there that we can really pursue. Okay. We will expand the consumer service ecosystem via FET Mobile Circle. This Taste Taiwan initiative that we just launched, the app, you will probably see more of it in the weeks to come.
Also for the Mobile Circle platform, you know, we continue to do more to monetize the platform. Then just two days ago, we launched Edjoy, you know, service. That is a gaming platform. Then, you know, we help attract our users, and then for the users download the game, and then we get, you know, a share of our profit. That's, you know, for the first three days, I'm amazed to see how many people actually like to play games. So I'm pleased with the results. Then it's a platform, it's really kind of realizing what we have always aimed for, this platform economy. I think it's really getting there. Okay. Then also for AI, right?
We want to not only use AI internally, where we see a lot of productivity improvement, and we also want to continue to monetize these AI solutions, because not only we have used it internally and we can help our partners with it. Because this year we actually quite a bit of CapEx in the network area, as you have seen in my budget when we discussed it in February IR call, to advance our 5G SA network build-out is definitely one major focus for this year, and my network team will be very busy. At the same time, we are also planning for the LEO satellite services. Okay. Finally, a reminder for everyone, May 20th is our FET annual shareholders meeting. Okay.
With that, I conclude my presentation, and we welcome your questions.
Yes. Ladies and gentlemen, we will begin the Q&A session. If you have questions for any of today's speakers, please press star key and one on your telephone keypad to enter the queue. After your name is announced, please ask your question. If you would like to cancel your questions, please press star key and two. Thank you. Now please press star key and one if you would like to ask questions. Thank you. The first one to ask questions, Charlie Wise from HSBC. Go ahead.
Hello. This is Charlie from HSBC. Congratulations to your very good results for the 1st quarter. I have 2 questions. My 1st question is about the ICT segment. I saw very strong growth for your contract value in the 1st quarter. I know there are a few segments, but may I know what was the most important driver here? Will you mind sharing more color in term of the profitability level or accounts receivable management, et cetera? Thank you.
This is for the ICT contract, it is across public sector as well as the industry. The public sector also has a higher percentage. It is driven a lot by this resilience. There are quite a bit of projects kind of centered around this resilience topic. Even with the enterprises or industry, we see the need for, you know, like a moving to the cloud or the build the resilience to their current IT infra. Many of them are in the telecom-based SI and also the smart city area. That probably covers it at least 80%. That is about it.
You were asking in terms of the margin. I think it is nothing special or different than what we typically have. We're still talking about 20% or around 20%. Yeah. Of course, those estimates are based on, you know, when you have the case, and then later on after the actual execution, it fluctuates. We always have this like a risk kind of we set aside some money for the risk management. Those, of course, if you manage it well, those will come back and help even improve the margin more. Those, I don't have a 1 number for you. Did that answer all your question, or is there anything I missed?
Please go on. Thank you. Is our sounds all good? Maybe I proceed to the second question. My second question about the EBITDA margin because I knew that the global energy price has been rising. I wonder if it has any impact on your first quarter EBITDA margin, and how do you project the trend in the second quarter?
Not really in terms of the energy itself. We do see the hardware, the servers, the price increase because of the AI, the, you know, the memories and all that. It did have some impact on some of the projects, that, you know, for the POs, you know, you need to place, now it takes longer, and we have to renegotiate some of the prices. I think it will have more impact on the project that we, before we commit because, in some of the cases, like, we may have clients, including the government, they have, you know, started engaging, you know, about some project, never really signed off on it. When you're not signed off on it, the costs have gone up.
They kind of have to, you know, go around and then again and then talk about what the estimate should be. We have a little bit with this like that. In terms of the first quarter, there was no impact as far as I know.
Got you. Very clear. Thank you very much.
Sure. Thank you, Charlie.
Next one to ask questions, Ranjan Sharma from JP Morgan. Go ahead, please.
Hi. Good afternoon, and thank you for the opportunity. Two questions from my side. On the 5G standalone network build-out, what is the incremental revenue opportunity that you see, and what's the value that you're bringing to your customers? Second is again on the LEO satellites. What's the use case that you see with LEO? What's the service that might look like for consumers? Thank you.
Okay. For the 5G SA build-out, part of it is the network evolution, and then from 5G to 6G, the next generation. This SA from NSA to SA is one of the step you have to go through. On the other hand, right, the SA actually provides additional kind of a differentiated network, differentiated access. There are more versatile features that we can offer to the users. Of course, they are not gonna be free. That's also an opportunity for the telcos to actually monetize our network a little bit more.
Until it is fully deployed, I don't see the return right away, we may have some services that could be offered to pockets of the network or some special venue. In terms of the LEO services, that's also, you know, from a communications company per se. You know, having these different technology, especially when they are kind of all converged, eventually. You know, just like from the 6G to LEO. There's definitely something that we don't want to miss out. Also satellite service would provide another option for resilience, right? Another, like a backup from the data service per se. Also it contributes to the infra resilience.
Actually, last year when we had a typhoon one after another, our southern Taiwan is really very badly damaged when we lost the power and then, you know, and we lost quite a bit of our radio stations. Satellite definitely played a very critical role in restoring these communication, you know, capabilities, which now people know you don't take them for granted. When in these disaster kind of condition, it is very important and critical to stay connected. Satellite service definitely provide big help there. We will also use it to cover anywhere that is, you know, that we wouldn't be able to, you know, cover 100%, you know, of the area.
This is definitely something that will improve or further increase our coverage and then also resilience for the Taiwan consumers and enterprises.
Thank you.
Sure. Thank you, Ranjan.
Ladies and gentlemen, we are now in Q&A session. Please press star key and one if you would like to ask questions. Thank you. As a reminder, please press star key and one if you would like to ask questions. Thank you.
If you have any questions that you think of, later on, you can always call, you know, Gary and Amy. They'll be able to help you.
I'll pass it over to Gary Lai. Gary, please proceed.
Okay. Thank you everyone to attend our first quarter 2026 investor conference. See you next quarter. Thank you.
Yes. Thank you all. Goodbye.
Yes. 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 relation section. You may now disconnect. Thank you and goodbye.