TWM — Interim / Quarterly Report 2019

Mar 5, 2020

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Taiwan Mobile Co., Ltd. 4Q19 Results Summary March 5, 2020

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Disclaimer

The information contained in this presentation, including all forward-looking information, is subject to change without notice, whether as a result of new information, future events or otherwise, and Taiwan Mobile Ltd. undertakes no Co., (the “Company”) obligation to update or revise the information contained in this No or either or presentation. representation warranty, expressed is in relation to the or implied, provided accuracy, completeness reliability of the information contained herein, nor is the information intended to be a complete statement of the Company, markets or developments referred to in this presentation.

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Business Overview

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4Q19 Operational Highlights

Telecom EBIT YoY Blue Ocean turned positive Initiatives

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momo continued to

widen its lead

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101% Achievement Ratio of FY19 Net Income

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Versatility

4Q19 results

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+NT$106 YoY handset bundle plan tariff of new sign-ups

+25% YoY

IoT connections

+15% YoY

Cloud service revenue

Mobile & Fiber Double Play (好速成双)	Mobile & Fiber Double Play (好速成双)	Mobile & Fiber Double Play (好速成双)	Mobile & Fiber Double Play (好速成双)
Monthly Tariff	NT$799	NT$999	NT$1,399
Mobile Data Service	Unlimited with no speed cap
Broadband Speed	60Mbps	**120Mbps **	500Mbps/1Gbps
Promotion	All plans - 1.Free myVideo subscription (first 3 months) 2.Free DTV channels $999 and higher plans - 1. Free MyMusic subscription (first 3 months) 2. Free Google Nest Mini

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Resilience in Pay-TV Business

4Q19 Basic TV Subscribers 4Q19 Penetration Rate

(‘000) Subscribers YoY(%) TFNM 554 -2.1% Kbro 1,132 -2.7% CNS 1,120 -3.1% TBC 729 -2.9% Top 4MSO 3,535 -2.8%	46.8% 50.8% 12.7% 29.4% 43.3% 43.5% 28.1% 32.5% TFNM Kbro CNS TBC DTV Broadband DTV BB

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Pre-IFRS 16 D&A EBIT
(NT$mn) (NT$mn)
300
+6% YoY
-38% YoY
508
186
479
4Q18 1Q19 2Q19 3Q19 4Q19 4Q18 1Q19 2Q19 3Q19 4Q19
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momo’s Dominance in B2C Market

E-commerce platform net income comparison (NT$mn)

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975 1~3Q18 1~3Q19
266 [1]
775 424 344 325 290
45 35 40 129
1~3Q18 1~3Q19
(160) (90)
(281)
(620)
momo EHS Books.com. KuoBrothers friday Ruten PChome PCstore
(984)
Co., Ltd.
(1,914)
Note1: one-time tax credit
Note2: 4Q19 financial statements are not yet available.
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momo’s revenue

momo’s profitability

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(NT$mn)
gross margin operating margin
B2C Others 3C(%)
40%
39%
YoY 40%
15,908 +28% 10.1%
9.6%
12,392 35%
YoY 30%
14,249 +33%
3.6% 3.3%
10,725 25%
20%
4Q18 1Q19 2Q19 3Q19 4Q19 4Q18 1Q19 2Q19 3Q19 4Q19
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Financial Overview

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Performance by Business

NT$bn	Revenue	Pre-IFRS16 EBITDA
	Telecom CATV momo Total1	Telecom CATV momo Total1
4Q19	17.26 1.48 15.91 34.11	5.86 0.69 0.62 7.27
% of total	51% 4% 47% 100%	81% 10% 8% 100%
4Q19 YoY	-1% -6% 28% 8%	-5% -11% 14% -5%
	4Q19 YoY (Reported)	8%
2019	67.38 6.09 51.83 124.42	24.05 3.02 2.01 29.48
% of total	54% 5% 42% 100%	82% 10% 7% 100%
2019 YoY	-4% -4% 23% 5%	-8% -5% 16% -7%
	2019 YoY (Reported)	5%

1. The sum of each account of telecom, CATV and momo does not equal to the consolidated total number due to other revenue and minor adjustments / eliminations.

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Results Summar y

NT$bn	4Q19	4Q19	4Q19	2019	2019	2019
	Amount	YoY	% of 4Q guidance	Amount	YoY	% of full year guidance
Revenues 34.11 8% 100% 124.42 5% 100%
Operating Costs (25.75) 11% 102% (91.61) 9% 101%
Operating Expenses (4.00) -3% 94% (15.62) -4% 93%
Operating Income 4.36 2% 95% 17.19 -5% 101%
Non-op. Income (Exp.) (0.35) 236% 153% (0.61) 29% 86%
Pre-tax Income 4.02 -4% 92% 16.58 -6% 102%
Net Income 2.95 -5% 91% 12.48 -9% 101%
EPS1 (NT$) 1.05 -7% 89% 4.51 -10% 100%
EBITDA 8.25 8% 96% 33.39 5% 100%
EBITDA Pre-IFRS 16 7.27 -5% 29.48 -7%

1. EPS is based on share count of 2.807bn in 4Q19, and 2.768bn in 2019.

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Balance Sheet Analysis

NT$bn 4Q19 3Q19 4Q18	NT$bn 4Q19 3Q19 4Q18	NT$bn 4Q19 3Q19 4Q18	NT$bn 4Q19 3Q19 4Q18	NT$bn 4Q19 3Q19 4Q18	NT$bn 4Q19 3Q19 4Q18	NT$bn 4Q19 3Q19 4Q18	NT$bn 4Q19 3Q19 4Q18
Total Assets	153.92	158.83	147.67	Liabilities	79.74	89.43	79.67
Current Assets	29.91	34.23	29.07	Current Liabilities	44.52	52.66	41.88
- Cash & Cash Equivalents	8.66	13.02	7.50	- ST Debts	18.47	21.67	18.57
- Receivable & Contract Assets	14.07	14.80	15.21	- Accounts & Notes Payable	7.80	12.08	6.94
- Inventories	5.67	4.71	3.95	- Current Lease Liabilities1	3.53	3.53	0.00
- Other Current Assets	1.50	1.69	2.42	- Other Current Liabilities	14.72	15.38	16.38
Non-current Assets	124.01	124.60	118.60	Non-current Liabilities	35.22	36.77	37.79
- Long-term Investment	6.72	6.43	6.20	- Long-term Borrowings	24.49	25.85	33.31
- Property and Equipment	39.17	39.97	41.86	- Non-current Lease Liabilities1	6.12	6.37	0.00
- Right-of-use Assets1	9.66	9.93	0.00	- Other Non-current Liabilities	4.61	4.54	4.48
- Concession	37.71	38.41	40.53	Shareholders' Equity	74.18	69.40	67.99
- Other Non-current & Contract Assets	30.76	29.86	30.01
				Paid-in Capital	35.09	34.96	34.24
4Q19 3Q19 4Q18
				Capital Surplus	20.27	19.11	12.58
Current Ratio	67%	65%	69%	Legal Reserve	28.92	28.92	27.56
Net Debt to Equity	46%	50%	65%	Treasury Shares	(29.72)	(29.72)	(29.72)
Net Debt to Pre-IFRS 16 EBITDA (x)	1.16	1.16	1.40	Un-appropriated Earnings	0.49	0.49	3.39
				Non-controlling Interest	6.16	6.01	6.11
ROE2 (annualized) 18% 18% 20%
				Retained Earnings & Others3	12.95	9.63	13.83

1. New items included in accordance with IFRS 16 accounting treatment of leases 3. Including accumulated profits and other equity items. 2. ROE = Accumulated Net Income (Annualized) /Average Shareholders' Equity

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Cash Flow Analysis

NT$bn 4Q19 3Q19 4Q18	NT$bn 4Q19 3Q19 4Q18	NT$bn 4Q19 3Q19 4Q18	NT$bn 4Q19 3Q19 4Q18	2019 2018	2019 2018
Operating	2.88	11.83	7.31	30.22	29.78
Investing	(2.88)	(2.03)	(2.01)	(8.37)	(5.53)
Financing	(4.36)	(3.54)	(3.74)	(20.67)	(23.38)
NT$bn 4Q19 3Q19 4Q18				2019 2018
Pre-IFRS 16 Operating1	1.90	10.83	7.31	26.33	29.78
Cash CAPEX2	(1.62)	(2.12)	(1.87)	(7.14)	(8.49)
Free Cash Flow2	0.28	8.71	5.44	19.19	21.28

1. “Lease expenses” previously under operating activities was reclassified into financing cash flow and investing cash flow (to a lesser extent) in accordance with IFRS 16 in 2019.

2. Excluding 4G License Fees

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2020 Guidance & Event Updates

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2020 Guidance

NT$bn	2020F	2019A	YoY
Revenues	134.53	124.42	8%
EBITDA	31.67	33.39	-5%
D&A	(15.89)	(16.20)	-2%
Operating Income	15.78	17.19	-8%
Non-op. (Expense)	(0.98)	(0.61)	61%
Pre-tax Income	14.79	16.58	-11%
Net Income	11.17	12.48	-11%
EPS1 (NT$)	3.96	4.51	-12%
NT$bn	2020F	2019A	YoY
Total Capex	14.5	7.1	103%
-Telecom	12.8	6.2	107%
-Cable	0.8	0.6	37%
-momo & others	0.9	0.4	127%

1. EPS is based on the share counts of 2.820bn in 2020 and 2.768bn in 2019.

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Event Updates

5G Spectrum Auction Results

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The 5G spectrum auction was completed on Feb 21st, with TWM obtaining 60MHz in the 3.5GHz frequency band and 200MHz in the 28GHz frequency band. Total spectrum cost came to NT$30.66bn.

The 5G spectrum auction was completed on Feb 21 st, with TWM obtaining 60MHz in the 3.5GHz frequency band and 200MHz in the 28GHz frequency band. Total spectrum cost came to NT$30.66bn.	The 5G spectrum auction was completed on Feb 21 st, with TWM obtaining 60MHz in the 3.5GHz frequency band and 200MHz in the 28GHz frequency band. Total spectrum cost came to NT$30.66bn.
3500MHz TDD ~2040 28000MHz TDD FET CHT APT NT$0.41bn 400MHz NT$0.21bn 200MHz TWM unsold 900MHz NT$0.62bn 600MHz NT$0.41bn 400MHz TWM 5G spectrum auction completed in 2020 F1 ~ F4 F5 ~ F12 F13 ~ F21 F22 ~ F27 NT$19.71bn 40MHz NT$42.63bn 80MHz NT$47.76bn 90MHz NT$30.45bn 60MHz FET T Star CHT
28000MHz TDD	900MH
	z
~2040	5G spectrum auction completed in 2020
G1 ~ G9 G16 ~ G19 G10 ~ G15 G20 ~ G23 G24 ~ G25

Straight Bond Issuance

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Following Board’s resolution on Jan 21st, TWM will issue its 6th unsecured corporate straight bond with total amount of NT$20bn by end of March.

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Awards and Recognition

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Won ten awards at the 2019 Taiwan Corporate Sustainability Awards, and was the only five-time winner to receive the “The Most Prestigious Sustainability Awards-Top Ten Domestic Corporates” among telecom firms in Taiwan.

Recognized for the “Best Customer Service Team” and “Best Telemarketing Team” of the CSEA (Customer Service Excellence Awards) by Taiwan Contact Center Development Association in 2019.

Won the second prize and special award for “2019 Buying Power –The new product and service of social innovation Purchase Reward Program” by SME Administration, Ministry of Economic Affairs.

Received the internationally renowned Swiss SGS QualiCert certification for its direct stores channel (myfone) and customer service for the eighth consecutive year. Won 2019 Water Saving Award in non-industrial sector by Water Resources Agency, Ministry of Economic Affairs.

Honored with two outstanding store managers and eight excellent store managers in 2019 by Taiwan Chain Stores and Franchise Association, ranking No.1 among telecom firms in Taiwan.

Won 2019 Voluntary Energy Saving Award by Bureau of Energy, Ministry of Economic 16 Affairs.

Key Message

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Taiwan Mobile will be the only telco among the big three in Taiwan to be able to have partnerships on 5G network/spectrum sharing and create incremental benefits. 60MHz of spectrum in the 3.5GHz frequency band is sufficient for Taiwan Mobile’s 5G business in the next ten years. In due course, we won’t have capex inefficiency issues that others may encounter.

We believe we have a sensible 5G winning strategy in view that our total 5G spectrum and capex spend in the 20-year spectrum concession period may be the least among the big three without sacrificing 5G network quality. Progressing on the 5G journey, our overarching goal is to maximize related investment returns.

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Q & A

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