Good afternoon, ladies and gentlemen. Welcome to Chunghwa Telecom Conference Call for the company's Second Quarter 2022 Operating Results. During the presentation the lines will be on listen-only mode. [Operator Instructions]. For your information, this conference call is now being broadcasted live over the internet. Webcast replay will be available within an hour after the conference is finished. Please visit CHT IR website, www.cht.com.tw/ir under the IR calendar section. Now, I'd like to turn it over to Ms. Angela Tsai, the Director of Investor Relations. Ms. Tsai, please go ahead.

Thank you. This is Angela Tsai, Director of Investor Relations for Chunghwa Telecom. Welcome to our second quarter 2022 results conference call. Joining me on the call today are Harrison Kuo, our President and Vincent Chen, our Chief Financial Officer. During today's call, management will begin by providing an overview of our business in the second quarter, followed by a discussion on segment report -- segment performance and financial highlights. After, we will move on to the question and answer portion of the call. On Slide 2, please note our Safe Harbor statement. Now, I will turn the call over to President Kuo. Please go ahead President Kuo.

Thank you, Angela and hello everyone. Welcome to our second quarter results conference call. I will now provide an update on our robust performance in the second quarter. Let's begin on Slide 4 for an overview of our mobile business. In the second quarter, Taiwan mobile market concluded its momentum as the three major operators focused on 5G migration, which benefits mobile service revenue growth. Market consolidation will be fulfilled in the near future, and we remain positive to the result as it will help the market maintain steady and profitable. Under this landscape, we were pleased to report our market shares in both revenues and the subscriber number continued to increase year-over-year, reaching 39% and 36.2%, respectively. We are confident that we will continue our market leadership going forward. Our market leading position is backed by our 5G network deployment that have advanced and stayed ahead of our peers. The renowned international institute Speedtest awarded us the Fastest 5G Operator in Taiwan for the first and second quarter of 2022, recognizing our leadership of 5G coverage and quality. [Indiscernible] five years in a row to affirm our comprehensive and mobile network as number one in Taiwan. Slide 5 presents the detailed achievement of our mobile business. In the second quarter, total mobile service revenue increased by 6.1% year-over-year attributable to growing subscribers number and the 5G contribution, as well as an increase in text messaging usages due to COVID-19 related projects. In addition, as many countries relaxed their border restrictions for global business travelers and tourists. We are going to see the international revenue begin to pick up in the second quarter. As for our mobile subscriber numbers, excluding IoT SIMs, there is a 0.7% year-over-year increase. In addition, our postpaid ARPU growth rate reached 4% year-over-year, maintaining its…

Thank you, President, Kuo. Good afternoon, everyone. I will now walk you through an overview of our second quarter financial results. Let's start with Slide 13, which provides highlights from our income statement. For the second quarter of 2022, total revenues increased by 5.7% on a year-over-year basis, mainly due to more ICT project completions and higher core business revenues from mobile and broadband services. Meanwhile, operating costs and expenses increased by 5.4%, also an increase in manpower expenses and depreciation expenses on 5G network deployment. Income from operations increased by 6.6%, while net income increased by 8.1%, EPS increased by 0.01% to 1.25% compared to the prior year period. In addition, our EBITDA recorded a 5.5% increase year-over-year, while EBITDA margin remained stable in the second quarter. Please turn to Slide 15 for balance sheet highlights. Compared to December 31, 2021, total assets increased by 13.59 billion or 2.7% mainly owing to increased cash and cash equivalents, as well as the increase in negotiable certificates of deposits to prepare for the dividend payments and the issuance of sustainable bonds. Total liabilities increased by 38.78 billion or 25.3% mainly attributable to increase in dividends payable. Debt ratio was approximately 29%, and net debt over EBITDA was minus 0.26. Suggesting our balance sheet is strong and enable us to maximize shareholder interest amid economic uncertainties. Slide 16 illustrates our cash flow summary. Cash flows from operating activities for the first half of 2022 decreased by 0.9% year-over-year to 27.43 billion, mainly due to income tax payments owing to an increase of net income. In terms of capital spending, as far CAPEX peaked in 2021 with accelerated 5G construction, 5G and total mobile CAPEX for the first half of 2022 decreased year-over-year as expected. Moreover, free cash flows increased by 23.2% in the first half compared with the prior-year period. Altogether, our strong balance sheet and operating cash flows allow us to steer through economy turbulence and support business expansion. On Page 17, you may find a table that compares our financial results with forecasts. As you can see, in the second quarter of 2022, our performance measures exceeded our proposed guidance. Revenue net guidance mainly attributable to higher revenues from ICT business-related to smart energy and AIoT applications, and as well as better performance of core business resulted from growing subscription numbers and 5G migration. Operating costs and expenses were higher than our second quarter guidance due to higher project business costs. EBITDA and net income forecast due to better-than-expected ICT gross margin and performance. That concludes our financial highlights. Let's move back to our President.

Thank you, Yu-Shen. In the second quarter, we became the first and the only company among Taiwanese operators to adopt Internal Carbon Fees to help reduce carbon emissions and achieve our GHG reduction targets. We have also invested in an ESG Venture Capital Fund targeting a clean energy and related projects, including cloud AI, 5G satellite, and EDGE Computing Application Services and the digital transformation in healthcare. We also received multiple recognitions from several stock exchange companies for our corporate governance. We believe these new developments are key to our success in the long-term growth, and we will continue to focus on ESG development going forward. Thank you for your attention. Now I would like to open the floor for questions.

Thank you. [Operator Instructions]. Our first question is coming from as HSBC, Neale Anderson. Go ahead please.

Thank you, good afternoon. I have two questions, please. The first relates to the normal recovery that you reported in the second quarter. Are you able to quantify how much of mobile service revenues that is and how much more could it grow by if it returns to levels prior to COVID, that's the first question? The second one relates to the slide on that enterprise applications, the emerging applications. So you're reporting strong percentage growth. And I guess that's partly because these are still starting from a low base. But which one of those do you see as having the greatest potential, which could be the largest in a year or two? Thank you.

To answer your question, the contribution from the recovery to the second quarter, the major mobile business growth is not due to COVID-19, and its major -- from our customer migration and our customer base increase.

So if I may, let me answer it. So if you look at the factsheet provided by us, so for the postpaid subscribers, so we have a growth momentum. So the number -- what we find is postpaid subscriber increase 18 months in a row. And also, if you look at the postpaid ARPU, actually our postpaid ARPU actually has received 13 months high, and the ARPU has increased 15 months in a row Y-o-Y. So altogether, it actually shows there is a strong growth momentum in our mobile business. And perhaps, we cannot deny that the COVID may contribute to our mobile business. It accounts for a very small portion. So that's for your first question.

And to answer your -- and the second question, our Consumer and the Enterprise and the International Business Group, all of them have the great potential in the future in the one or two years, yes, because there are many smart solutions applications were deployed in the next quarter or the next half. And we have seen that mainly our successful applications from our Consumer and the Enterprise and the International field. So there are many opportunities, business opportunities in all of our business segments.

Understood, thank you very much.

Thank you. [Operator Instructions]. The next question is coming from UBS, Sara Wang.

So just wondering how the margin profile of the enterprise business segment. So we noticed that there are certain cloud data center, as well as the business growth is quite rapid. So what's the profile -- margin profile of these new initiatives? And what's your view on overall EBITDA margin, say, in mid to long-term?

So for the gross margin for our enterprise segment, it's about 25% and it's quite stable. Yes, we think with the new application like AIoT, 5G private network, we think the growth will be moderate, will be increasing. We will ramp up, in fact. But it's hard to say at this point, what kind of growth is going to be in the long-term to intermediate term.

(Operator Instructions) If there are no further questions, I will turn it back over to President Kuo. Please, go ahead.

Thank you all for your participation. Bye.

Thank you, President Kuo. Thank you for your participation in Chunghwa Telecom's conference. There will be a webcast replay within an hour. Please visit www.cht.com.tw/ir under the IR calendar section. You may now disconnect. Goodbye.