Chunghwa Telecom Reports Operating Results for 2005.

TAIPEI, Taiwan -- Chunghwa Telecom Co., Ltd (TAIEX:2412, NYSE:CHT) ("Chunghwa" or "the Company"), today announced its un-audited operating results for the fourth quarter of 2005 and audited operating results for the full year of 2005. All figures were prepared in accordance with US GAAP unless otherwise stated.

Net income figures according to US GAAP were affected by the employee stock subscription that was granted as a part of the Company's privatization in August 2005. According to US GAAP, the discounts provided to employees for the shares to which they subscribed are considered compensation and need to be accounted for as an operating expense. In the third quarter of 2005, Chunghwa recognized NT$1.7 billion. However, upon further research during the fourth quarter, it was determined that Chunghwa's employee stock subscription program was not the same as typical stock option programs that are offered at other companies. The main difference was that there was no obligation for employees participating in the program to stay with the Company during the lock-up period; therefore, the Company should recognize the total compensation cost of NT$12.8 billion as a one-time charge. This charge will not affect the Company's cash position. Additionally, the dividend payout will be based on ROC GAAP financials and will be unaffected by the US accounting treatment of the employee stock subscription.

Operating Results for 2005 and the Fourth Quarter of 2005

US GAAP                    ROC GAAP
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               Amount(NT$bn)     YoY     Amount(NT$bn)       YoY
     2005                       Change                      Change
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Revenue               184.7        (0.3%)        183.4            0.4%
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Net income             33.3       (34.6%)         47.7          (4.4%)
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Fully diluted
 EPS(NT$)              3.45       (34.6%)         4.94          (4.4%)
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    4Q 2005    Amount(NT$bn)     QoQ     Amount(NT$bn)       QoQ
                               Change                      Change
----------------------------------------------------------------------
Revenue                46.2        (3.1%)         46.5          (1.6%)
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Net income            (2.63)     (123.7%)          9.5         (31.4%)
----------------------------------------------------------------------
Fully diluted
 EPS(NT$)             (0.27)     (123.7%)         0.98         (31.4%)
----------------------------------------------------------------------
(Note) The dividend payout will be based on ROC GAAP financials.

Financial Summary

Revenue

On a segmental basis, total Internet and data service revenue for 2005 increased 7.2% year-over-year (YoY). Of this, Internet service revenue increased 8.6% due to strong broadband subscriber growth while data revenue increased 3.0%. Mobile revenue increased 3.9% as a result of solid subscriber growth and higher value-added services revenue. Fixed-line revenue for 2005 decreased 8.0%. Local service revenue decreased 9.3% due to mobile and ADSL substitution. Domestic long distance revenue decreased 8.3%. This drop was mainly due to mobile substitution and a decrease in transit revenue as alternative operators built and used their own circuits instead of our own. International long distance revenue decreased 4.1% due to stiff competition and the impact from VOIP.

On a quarter-over-quarter (QoQ) basis, total Internet and data revenues increased 3.4%. Mobile services reported a decline in revenue of 3.1% due to seasonal effects. In the fixed-line business, local revenues decreased by 9.3%. This was mainly due to a modification of the amortization schedule of connection fees that are recognized as deferred revenue. Under the modified schedule, the expected patronage life of a customer has been increased, and the result is that we now recognize a lower periodic amount of deferred revenue. Domestic long distance revenue decreased 4.8%, due to typical seasonal effects. International long distance revenue increased by 1.6% compared to 3Q05.

Operating costs and expenses

For year 2005, operating costs and expenses increased 13% on a year-over-year basis to NT$141.6bn. This was mainly due to the NT$12.5bn increase related to the employee stock purchases mentioned above, an increase in performance-based bonuses of 1,348 million and an increase in handset subsidies of NT$939 million. On a sequential basis, operating costs and expenses increased by 37.5% to NT$46.1 billion. This was due again to the employee stock subscription and performance-based bonus.

EBITDA and net income

EBITDA for year 2005 decreased 16.2% to NT$84.3bn, representing a margin of 45.6%. This compares to 54.3% for the same period in 2004. EBITDA for the fourth quarter of 2005 decreased to NT$10.50bn, representing a margin of 22.7%.

Net income for year 2005 decreased 34.6% to NT$33.3bn, representing a net margin of 18.0%, compared to 27.5% for the same period in 2004. The net loss for the fourth quarter was NT$2.6bn, representing a decline of 123.7% over the third quarter. This represents a net margin of -5.7% for the period compared to 23.2% in the third quarter.

The decline in net income for year 2005 and the fourth quarter was mainly due to the previously mentioned employee stock purchase plan and performance-based bonus.

Capex

Capital expenditures totaled NT$22.9bn for year 2005, which was similar to 2004.

Cash Flows

Cash flow from operations remained strong, reaching NT$86.2bn for year 2005 compared to NT$91.6bn for the same period in 2004. As of December 31, 2005, our cash and cash equivalents totaled NT$41.9bn and we had only NT$0.5bn of total debt outstanding.

Businesses Performance Highlights

Internet and Data Services

--Internet and data revenue for year 2005 increased by 7.2% YoY to approximately NT$42.1bn. Revenue in the fourth quarter of 2005 was NT$11.1bn, a 3.4% QoQ increase. This was primarily driven by a continued increase in broadband subscriber numbers.

--The total number of Internet subscribers was about 4.1mn as of December 31, 2005, a 7.6% YoY increase. In the fourth quarter of 2005, we added 54,000 subscribers.

--ADSL subscribers totaled 3.65mn as of December 31, 2005, a 19.0% YoY increase. We continued our growth in this business by adding 116,000 ADSL subscribers in the fourth quarter of 2005.

--Data revenue increased 3% in 2005 due to a 13.1% increase in managed data services.

--IPTV service was first offered in the Taipei metropolitan area in March 2004, and by the end of 2005, Chunhgwa accumulated around 100 thousand subscribers. The company expanded the service island-wide in August, and it now covers 75% of the island's population. Currently, there are 33 broadcasting channels and approximately 1,600 on-demand programs. Chunghwa also launched home banking and karaoke as a part of IPTV value-added services in August 2005.

Mobile Service

--Mobile revenue for 2005 increased by 3.9% YoY to NT$73.0bn due to an increase in postpaid customers and increased VAS revenue. For the fourth quarter of 2005, mobile revenue decreased by 3.1%. This was due to typical seasonal weakness.

--At the end of 2005, the total number of mobile subscribers was 8.16mn. The 0.4% YoY decrease was primarily due to our clean-up of inactive prepaid subscribers.

--Our blended Average Revenue per User (ARPU) was NT$744 in 2005, an increase of 4.5% from NT$712 in 2004. ARPU for the fourth quarter of 2005 was NT$755.

--We rolled out our 3G service on July 26, 2005. By the end of December, we had around 296 thousand 3G subscribers and 86% of them were 2G subscribers who migrated without changing their phone number. As of the end of 2005, 25% of our 3G subscribers chose packages with monthly fees higher than NT$900, whereas only 4.1% of customers paid fees that were this high for 2G and 2.5G subscribers.

--Mobile Number Portability became effective on October 13, 2005. According to DGT statistics, till the end of 2005, Chunghwa turns out to be the beneficiary.

--Mobile VAS revenue was NT$3.2 billion in 2005, representing a 39% YoY increase. It now represents 4.39% of total mobile revenue compared to 3.28% in 2004.

Fixed Line Services

--Total fixed line revenues for 2005 declined by 8.0% to NT$66.3bn, mainly due to mobile substitution and a continuous migration of dial-up subscribers to ADSL broadband services and market competition. Fixed-line revenue for the fourth quarter of 2005 was NT$15.9bn, a decrease of 6.2% QoQ.

--Chunghwa's total fixed line subscriber base stood at approximately 13.3mn as of December 31, 2005, a 0.1% YoY increase.

Webcast

www.cht.com.tw/ir/

Financial Statements

Financial statements and additional operating data can be found on our website at www.cht.com.tw/ir/filedownload.

About Chunghwa Telecom

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

Note Concerning Forward-looking Statements

Except for statements in respect of historical matters, the statements made in this presentation contain "forward-looking statements" within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual performance, financial condition or results of operations of Chunghwa Telecom to be materially different from what may be implied by such forward-looking statements. Investors are cautioned that actual events and results could differ materially from those statements as a result of a number of factors including, among other things: extensive regulation of telecom industry; the intensely competitive telecom industry; our relationship with our labor union; general economic and political conditions, including those related to the telecom industry; possible disruptions in commercial activities caused by natural and human induced events and disasters, including terrorist activity, armed conflict and highly contagious diseases, such as SARS; and those risks identified in the section entitled "Risk Factors" in Chunghwa Telecom's Form F-1 and F-3 filed with the U.S. Securities and Exchange Commission in connection with our ADR public offering.

The financial statements included in this presentation were audited, and prepared and published in accordance with US GAAP. Investors are cautioned that there are many differences between US GAAP and ROC GAAP. As a result, our results under U.S. GAAP and ROC GAAP may in many events be substantially different.

The forward-looking statements in this presentation reflect the current belief of Chunghwa Telecom as of the date of this presentation and we undertake no obligation to update these forward-looking statements for events or circumstances that occur subsequent to such date.