Chunghwa Telecom Reports Operating Results for the Second Quarter and First Half of

Dr. Shyue-Ching Lu, Chairman of Chunghwa Telecom, said, "I am pleased to report another quarter of solid results, boosted by the continuing economic recovery and the execution of our marketing initiatives. Despite the mandated National Communications Commission ("NCC") tariff reduction effective April 1 this year, consolidated revenue increased 3.3% to NT$49.7 billion during the second quarter of 2010, mainly due to higher handset sales and increased revenue from both mobile value-added services ("VAS") and Internet services. Our prudent cost management initiatives enabled us to deliver stable operating income, and the income tax reduction from 25% to 17% starting from 2010 resulted in a 12.7% year-over-year rise in net income to NT$12.9 billion."

(Comparisons, unless otherwise stated, are to the prior year period) Financial Highlights for the Second Quarter of 2010: -- Total consolidated revenue increased by 3.3% to NT$49.7 billion -- Mobile communications business revenue increased by 6.5% to NT$22.1 billion; mobile value added revenue increased by 31.4% to NT$2.7 billion -- Internet business revenue increased by 7.0% to NT$6.0 billion -- Domestic fixed communications business revenue decreased by 1.1% to NT$17.3 billion; broadband access revenue increased by 1.9% to NT$5.0 billion -- International fixed communications business revenue decreased by 2.3% to NT$3.7 billion -- Total operating costs and expenses increased by 4.9% to NT$34.8 billion -- Net income totaled NT$12.9 billion, representing an increase of 12.7% -- Basic earnings per share (EPS) increased by 12.7% to NT$1.34 Financial Highlights for the First Half of 2010: -- Total consolidated revenue increased by 2.2% to NT$99.3 billion -- Mobile communications business revenue increased by 4.2% to NT$44.3 billion -- Internet business revenue increased by 4.5% to NT$11.9 billion -- Domestic fixed communications business revenue decreased by 2.0% to NT$34.5 billion; broadband access revenue increased by 1.5% to NT$10.1 billion -- International fixed communications business revenue increased by 3.4% to NT$7.7billion -- Total operating costs and expenses increased by 2.0% to NT$69.5 billion -- Net income totaled NT$25.0 billion, representing an increase of 12.3% -- Basic EPS increased by 12.3% to NT$2.58

Chunghwa's total consolidated revenue for the second quarter of 2010 increased by 3.3% year-over-year to NT$49.7 billion, of which 34.9% was from its domestic fixed business, 44.5% was from its mobile business, 12.2% was from its Internet business, 7.5% was from its international fixed business and the remainder was from other business segments. The primary reasons for the year-over-year increase were the economic recovery and the Company's marketing efforts.

Domestic fixed line business revenue totaled NT$17.3 billion, representing a decrease of 1.1% year-over-year. Of this, local revenues decreased by 2.2% year over year to NT$8.1billion, mainly due to mobile and Voice over Internet Protocol (VOIP) substitution. The 12.6% decline in domestic long-distance revenues to NT$1.7 billion was also due to mobile and VOIP substitution, and the interconnection fee adjustment at the end of 2009.

Broadband access revenue, including ADSL and FTTx, increased by 1.9% year over year to NT$5.0 billion. Although ADSL access revenue decreased as more ADSL subscribers migrated to fiber solutions, the decrease was fully offset by growth in FTTx access revenue. Chunghwa believes that this migration will continue as customers continue to demand increased bandwidth, and that broadband revenue will therefore increase over time.

Mobile revenue increased by 6.5% year over year to NT$22.1 billion, mainly due to growth in handset sales and mobile VAS revenue related to our smartphone promotion.

Internet revenue increased by 7.0% to NT$6.0 billion, mainly attributable to Internet services growth, which was driven by the increase in broadband subscribers and the migration of ADSL subscribers to fiber solutions.

International fixed line revenue decreased by 2.3% to NT$3.7 billion, mainly due to VOIP substitution and market competition that was partially offset by growth in leased line revenue.

The first half of 2010

For the first half of 2010, total revenue was NT$99.3 billion, a 2.2% increase from the same period last year. Of this amount, the domestic fixed business 34.8%, the mobile business contributed 44.7%, the internet business 12.0%, the international fixed business 7.7%, and the remainder was from others.

Total capex for the second quarter of 2010 amounted to NT$5.2 billion, representing a decrease of 7.8% year-over-year. Of the NT$5.2 billion in capex, 63.1% was spent on the domestic fixed communications business, 23.1% on the mobile communications business, 6.8% on the Internet business, 4.8% on the international fixed communications business and the remainder was used for other purposes.

Businesses Performance Highlights: Domestic Fixed/Broadband/HiNet Business -- As of the end of June 2010, the Company maintained its leading fixed-line market position, with fixed-line subscribers totaling 12.4 million. -- Total broadband subscribers amounted to 4.3 million as of June 30, 2010, accounting for 82.2% of market share. Chunghwa continued its efforts to migrate ADSL subscribers to FTTx solutions. By the end of the second quarter of 2010, there were 1.85 million FTTx subscribers, accounting for 42.8% of Chunghwa's total broadband subscriber base. By the end of the second quarter of 2010, the number of ADSL and FTTx subscribers with a service speed greater than 8 Mbps reached 2.2 million, representing 50.9% of total broadband subscribers, compared to 48.8% at the end of the first quarter of 2010. -- HiNet subscribers totaled 4.07 million at the end of the second quarter of 2010. -- MOD subscriber number is over 720 thousand up to now. Mobile Business -- As of June 30, 2010, Chunghwa had 9.4 million mobile subscribers, an increase of 4.5% compared to 9.0 million at the end of the first half of 2009. -- Chunghwa had 5.1 million 3G subscribers at the end of June 2010, accounting for 53.9% of its total subscriber base. -- Mobile VAS revenue for the first half of 2010 increased 27.6% year-over-year to NT$5.2 billion; Short Message Service revenue rose 6.9% year-over-year and mobile Internet revenue increased 78% year-over-year. -- Smartphone subscription accounted for 17% of total handsets offered by the Company during the first half of 2010. Smartphone Average Revenue per User ("ARPU") was 132% higher than blended ARPU for the same period.

Chunghwa Telecom (TAIEX 2412, NYSE: CHT) is Taiwan's leading telecom service provider. It provides fixed-line, mobile and Internet services to residential and business customers in Taiwan.