CHT — Interim / Quarterly Report 2016

Nov 23, 2016

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3Q 2016 Operating Results

Jefferies & BNY Mellon’s ADR Conference New York November 28-29, 2016

TSE: 2412 NYSE: CHT

Disclaimer

STATEMENT REGARDING UNAUDITED FINANCIAL INFORMATION

The unaudited financial information under T-IFRSs in this presentation is preliminary and subject to adjustments and modifications. Adjustments and modifications to the financial statements may be identified during the course of the audit /review work, which could result in significant differences from this preliminary unaudited financial information.

NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This presentation contains forward-looking statements. These statements constitute “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Statements that are not historical facts, including statements about Chunghwa’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Investors are cautioned that actual events and results could differ materially from those statements as a result of a number of factors including, but not limited to the risks outlined in Chunghwa’s filings with the U.S. Securities and Exchange Commission on Forms F-1, F-3, 6-K and 20-F, in each case as amended. The forward-looking statements in this presentation reflect the current belief of Chunghwa as of the date of this presentation and Chunghwa undertakes no obligation to update these forward-looking statements for events or circumstances that occur subsequent to such date, except as required under applicable law.

This presentation is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the issuer or selling security holder and that will contain detailed information about the company and management, as well as financial statements.

SPECIAL NOTE REGARDING NON-GAAP FINANCIAL MEASURES

A body of generally accepted accounting principles is commonly referred to as "GAAP". A non-GAAP financial measure is generally defined by the SEC as one that purports to measure historical or future financial performance, financial position or cash flows but excludes or includes amounts that would not be so adjusted in the most comparable U.S. GAAP measure. We disclose in this report certain non-GAAP financial measures, including EBITDA. EBITDA for any period is defined as consolidated net income (loss) excluding (i) depreciation and amortization, (ii) total net comprehensive financing cost (which is comprised of net interest expense, exchange gain or loss, monetary position gain or loss and other financing costs and derivative transactions), (iii) other expenses, net, (iv) income tax, (v) cumulative effect of change in accounting principle, net of tax and (vi) (income) loss from discontinued operations.

In managing our business we rely on EBITDA as a means of assessing our operating performance. We believe that EBITDA can be useful to facilitate comparisons of operating performance between periods and with other companies because it excludes the effect of (i) depreciation and amortization, which represents a non-cash charge to earnings, (ii) certain financing costs, which are significantly affected by external factors, including interest rates, foreign currency exchange rates and inflation rates, which have little or no bearing on our operating performance, (iii) income tax and tax on assets and statutory employee profit sharing, which is similar to a tax on income and (iv) other expenses or income not related to the operation of the business.

EBITDA is not a measure of financial performance under U.S. GAAP or T-IFRSs. EBITDA should not be considered as an alternate measure of net income or income from operations, as determined on a consolidated basis using amounts derived from statements of operations prepared in accordance with U.S. GAAP or T-IFRSs, as an indicator of operating performance or as cash flows from operating activity or as a measure of liquidity. EBITDA has material limitations that impair its value as a measure of a company's overall profitability since it does not address certain ongoing costs of our business that could significantly affect profitability such as financial expenses and income taxes, depreciation, pension plan reserves or capital expenditures and associated charges. These non-GAAP measures are not in accordance with or an alternative for GAAP financial data, the non-GAAP results should be reviewed together with the GAAP results and are not intended to serve as a substitute for results under GAAP, and may be different from non-GAAP measures used by other companies.

© 2016 Chunghwa Telecom 2

Committed to Improving Shareholder Value

Cash Return

NT$ bn

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2016 AGM resolved to distribute NT$42.6 billion to shareholders

• NT$5.4852 per share

• payout ratio 99.41%

Note:

1. The cash return was calculated based on cash dividend and cash return from

2. capital reduction.

3. 1 ADR = 10 common shares

4. The normal dividend has been calculated based on total share number

5. 7,757,446,545.

© 2015 Chunghwa Telecom 3

Business Overview

Chunghwa Telecom Overview

Strong Market Position[(a)]

Mobile Performance

Domestic Fixed

– #1 Local

• 93.6% share by subs (11.00mn subs)

• 85.2% share by minutes

Accumulating 6.2 million 4G subscribers by the end of September 2016

– #1 DLD

• 82.8% share by minutes

– #1 Broadband access

• 74.5% share by subs[(b)(c) ] (4.49 mn subs)

• Mobile

• 1 Mobile subscribers

• 37.3% market share[(d)] (10.82mn subs)

• 1 Mobile revenue

• 37.1% market share[(d)(e)]

Internet

– #1 ISP

• 68.5% share by subs (4.19 mn subs)

• International Fixed

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• 1 ILD

  • 56.2% share by minutes

• Source: Company data, MOTC, and NCC statistics a) Market share as of September 2016

• b) CHT access circuits were not included c) Excluding PWLAN subscriber numbers d) Includes 2G, 3G and 4G

• e) Revenues are based on T-IFRSs .

Postpaid subscriber net additions turned positive in September

Total subscriber loss declined significantly in Q3 2016

Total Subs Market Share

Others

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11.5%
CHT
37.3%
25.4%
25.8%
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11.5%
37.3%
25.4%
25.8%
TWM
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FET

© 2016 Chunghwa Telecom 5

Number One Mobile Services Provider

Mobile Internet Adoption

Strategy

Mobile Internet Subs as % of Postpaid Subs

Note : Subscribers with mobile internet plan subscription.

Rolling out 2.6G service in March to offer best QoE to 4G customers Raising threshold for unlimited data plans to shepherd the market in the direction of adopting tier-pricing and fair usage policies

Highest Subs & Lowest Churn

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Thousand
12,000 2.0%
1.8%
10,000 1.6%
1.4%
8,000
1.2%
6,000 1.0%
0.8%
4,000 0.6%
0.4%
2,000
0.2%
0 0.0%
A-16 M-16 J-16 J-16 A-16 S-16
CHT TWM FET CHT TWM FET
Subscribers
Churn rate for postpaid
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Promoting VAS and new applications Strengthening subscriber acquisition and retention initiatives

Note : Churn rate for postpaid subscribers

© 2016Chunghwa Telecom 6

Fixed Broadband and Internet Services

Performance

Strategy

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Broadband Access Revenue
NT$ mn 714 721 720 712 716 ARPU NT$
5,000 4,194 4,289 4,277 4,210 4,278 600
400
2,500
616 581 553 494 473 200
0 0
Q3 15 Q4 15 Q1 16 Q2 16 Q3 16
ADSL Fiber
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Note1 : Broadband ARPU is calculated as access plus ISP Note2 : Revenue is calculated based on T-IFRSs

Leveraging network capability to offer highspeed upload service Leveraging Big Data capability for precision marketing and precision network construction Leveraging mobile, broadband and Wi-Fi capabilities to offer seamless internet services Expediting CDN construction and OTT promotion to enhance digital convergence product competitiveness

Internet Revenue

Fixed Broadband Subs

NT$ mn

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8,400
6,600
4,800 6,551 6,957 6,697 6,828 6,962
3,000
Q3 15 Q4 15 Q1 16 Q2 16 Q3 16
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Note : Revenue is calculated based on T-IFRSs

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Thousand
4,505 4,496 4,491 4,484 4,489
5,000
4,000 1,020 1,054 1,082 1,120 1,144
3,000
2,000 2,282 2,304 2,324 2,316 2,326
1,000
1,203 1,138 1,085 1,048 1,019
0
Sep 15 Dec 15 Mar 16 Jun 16 Sep 16
ADSL Fiber (<100M) Fiber ( ≧ 100M)
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© 2016Chunghwa Telecom 7

MOD/ IPTV Service

Performance

Subscriber market share (CATV+IPTV) YoY remained at around 20.4% in Q2 2016

Household TV Usage rate increased to 71.8% from 67.8% YoY for Q3 2016

thousand

MOD subscribers

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103.0% 104.0% 104.5% 103.1%
101.5%
1,300 1.1
1.0
1,200
0.9
1,293 1,298 1,311 1,317 1,327
0.8
1,100
0.7
1,000 0.6
Sep 15 Dec 15 Mar 16 Jun 16 Sep 16
Total Subscribers Average Package Subcription per MOD subscriber
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Strategy

Continuing to enrich content, including movies, drama, TV series for SVOD

Enhancing both MOD and OTT user interfaces Leveraging the existing broadband and 4G mobile subscriber base to grow MOD and OTT subscribers

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Leveraging the existing media content position in VOD to acquire OTT contents with all rights across three platforms

Becoming the leading multi-screen service provider via a robust network infrastructure

thousand SVOD Subscribers

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800
700
667
700
606
600
515
500
400
1Q 16 2Q 16 3Q16 2016 ( E )
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SVOD ： Subscription Video on Demand

© 2016 Chunghwa Telecom 8

Enterprise ICT Initiatives

Performance

Information security and cloud service revenue increased 67% YoY for the first 9 months of 2016

Personal Cloud (Hami[+] ) subscribers was 3.3 million till September 2016 IoT service revenue totaled NT$3.8 bn for the first 9 months of 2016, a 119% increase YoY

Acquired several significant ICT projects for the first 9 months of 2016 with contract amount totaling NT$16.2bn

Strategy

Leveraging our advantage on network infrastructure, IDC, CDN, etc. to expand ICT business

Launching highest-rated cloud IDC to further explore business opportunities in finance and ICP/OTT industries

Offering ICT total solutions by integrating our capabilities on cloud, information security, IoT and customization

Developing in-house big data capability for future commercialization

Cooperating with partners to develop an ecosystem to provide IoT services across various industries

.

© 2016 Chunghwa Telecom 9

Financials Overview

Financials: Income Statement Highlights

Consolidated	Consolidated	Consolidated	Consolidated	Consolidated	Consolidated	Consolidated
(NT$bn)	Q3 2016	Q3 2015	Growth %	Jan-Sep 2016	Jan-Sep 2015	Growth %
Revenues	58.52	56.18	4.2	171.66	169.57	1.2
Operating Costs and Expenses	47.02	42.10	11.7	133.48	130.47	2.3
Income from Operations	11.49	14.04	(18.1)	38.15	39.02	(2.2)
Net Income2	9.58	11.80	(18.9)	32.31	33.35	(3.1)
Net Income Margin3 (%)	16.95	21.30	-	19.33	19.99	-
EPS	1.23	1.52	(19.1)	4.16	4.30	(3.2)
EBITDA	19.59	22.30	(12.2)	62.49	64.24	(2.7)
EBITDA Margin (%)	33.47	39.70	-	36.40	37.88	-

Note:

1. Financials are prepared in accordance with T-IFRSs. Figures for Q3 2016 are reviewed.

2. Net income attributable to owners of the parent.

3. Net income margin is based on consolidated net income (including net income attributable to NCI)

4. The calculation of growth rates is based on NT$mn.

© 2016 Chunghwa Telecom 11

Financials: Business Segment Revenues

(NT$bn)	Q3 2016	Q3 2015	Growth %	**Jan-Sep 2016 **	Jan-Sep 2015	Growth %
Domestic Fixed	18.81	17.91	5.0	55.03	53.21	3.4
Local	7.94	8.50	(6.5)	23.91	25.35	(5.7)
DLD	0.73	0.80	(9.0)	2.18	2.36	(7.9)
Broadband Access	4.75	4.81	(1.2)	14.29	14.47	(1.3)
MOD	0.59	0.53	11.7	1.75	1.92	(8.9)
Mobile	27.80	27.29	1.9	82.43	83.80	(1.6)
Mobile Voice	9.31	10.50	(11.3)	28.40	31.13	(8.8)
Mobile VAS	10.37	10.03	3.4	31.03	29.46	5.3
Sales of Mobile Handsets, Tablets and Data Cards	7.81	6.52	19.8	22.13	22.60	(2.1)
Internet	6.96	6.55	6.3	20.49	19.42	5.5
Data Communications	5.25	5.09	3.2	15.66	15.23	2.8
Application VAS	1.17	0.96	21.6	3.31	2.77	19.7
International Fixed	3.55	3.52	0.9	7.04	7.40	(5.0)
ILD	2.37	2.45	(3.2)	6.76	7.37	(8.2)
Leased line	0.48	0.41	16.9	1.40	1.24	12.6
Others	1.00	0.75	32.6	2.73	2.07	32.0
Total	58.52	56.18	4.2	171.66	169.57	1.2

Note:

1. Financials are prepared in accordance with T-IFRSs. Figures for Q2 2016 are reviewed.

2. The calculation of growth rates is based on NT$ mn.

3. Businesses shown under each segment are highlighted; therefore, sum of the highlighted revenues is not equal to the total.

© 2016 Chunghwa Telecom 12

Financials: Costs & Expenses

Consolidated	Consolidated	Consolidated	Consolidated	Consolidated	Consolidated
(NT$bn) Q3 2016	Q3 2015	Growth %	Jan-Sep 2016	Jan-Sep 2015	Growth %
Operating Costs 38.52	33.90	13.6	108.87	106.30	2.4
Operating Expenses 8.50	8.20	3.6	24.61	24.17	1.8
Marketing 6.45	6.18	4.3	18.46	18.19	1.5
General and Administrative 1.11	1.10	0.4	3.36	3.36	0.2
R&D Expense 0.94	0.92	3.0	2.79	2.62	6.6
Total 47.02	42.10	11.7	133.48	130.47	2.3

Note:

1. Financials are prepared in accordance with T-IFRSs. Figures for Q3 2016 are reviewed.

2. The calculation of growth rates is based on NT$ mn.

© 2016 Chunghwa Telecom 13

Cash Flow & EBITDA Margin

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Consolidated
Growth Jan-Sep Jan-Sep Growth
(NT$bn) Q3 2016 Q3 2015
% 2016 2015 %
Net Cash Flow from
13.38 17.42 (23.2) 33.28 47.33 (29.7)
Operating Activities
CapEx 5.49 5.15 6.6 12.31 15.47 (20.4)
Free Cash Flow 7.89 12.27 (35.7) 20.97 31.86 (34.2)
Cash and Cash Equivalents
10.84 20.61 (47.4) 10.84 20.61 (47.4)
at the end of period
- -
EBITDA Margin(%) 33.47 39.70 36.40 37.88
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Note:

1. Financials are prepared in accordance with T-IFRSs. Figures for Q3 2016 are reviewed.

2. The calculation of growth rates is based on NT$ mn.

3. Free cash flow is calculated by subtracting CapEx from Net Cash Flows from Operating Activities.

© 2016 Chunghwa Telecom 14

Operating Results vs. Forecast

Consolidated	Consolidated	Consolidated	Consolidated	Consolidated	Consolidated
(NT$bn) Q3 2016 (A)	Q3 2016 （E）	Achieving %	Jan-Sep 2016 (A)	Jan-Sep 2016 (E)	Achieving %
Revenues 58.52	58.04	100.8	171.66	170.75	100.5
Operating Costs and Expenses 47.02	45.13	104.2	133.48	134.04	99.6
Income from Operations 11.49	12.89	89.2	38.15	36.69	104.0
Net Income2 9.58	10.73	89.3	32.31	30.84	104.8
EPS 1.23	1.38	89.3	4.16	3.98	104.8
EBITDA 19.59	21.48	91.2	64.49	62.33	100.3
EBITDA Margin (%) 33.47	37.01	-	36.40	36.50	-

Note:

1. Financials are prepared in accordance with T-IFRSs. Figures for Q3 2016 are reviewed.

2. Net income attributable to owners of the parent.

© 2016 Chunghwa Telecom 15

Effective and Efficient Capital Expenditure

Capital Expenditure

NT$ bn

Budgeted capex for 2016: NT$30.6 bn

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50
20%
45 16.0%
14.4%
13.1%
10.8%
40 36.4 9.1%
7.2% 10%
35 0.6 1.6 32.6 30.6
4.6 0.9 0.8
1.5 0%
30
4.4 25.0 2.2
25 9.2 0.5 5.6
0.9
-10%
20 9.6 4.8 15.5
9.4 0.3
15 8.6 2.3 0.6 12.30.4 -20%
0.5
10 20.4 5.4 1.9
16.2 4.7 -30%
12.6
5 10.2
6.8
4.8
0 -40%
2013 2014 2015 2016 (E) Jan-Sep Jan-Sep
2015 2016
Domestic Fixed Mobile Internet International Fixed Others
Capex
Capex as % of Revenue
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Continue to focus on core businesses for future investments

– 4G

• FTTx

• Service Platforms

• IDC/ Cloud

Note: Capital expenditure here are cash-based.

© 2016 Chunghwa Telecom 16

Q&A