Nov 1, 2013
Executives
Fufu Shen - Director, IR Yansong Li - Chairman Shih Mu-Piao - President Shu Yeh - CFO
Analysts
Chate Bend - Credit Suisse Sydney Zhang - Merrill Lynch Steven Liu - Standard Chartered Lucy Liu - JP Morgan Joseph Quinn - Mcquarie Securities Jack Xu - Sinopac Securities Jinjin Wang - UBS Chate Benchavitvilai - Credit Suisse Mark Ling - Taiwan Ratio
Operator
Good evening ladies and gentlemen, welcome to the Chunghwa Telecom Conference Call for the Company’s Third Quarter 2013 Operating Results. During the presentation all eyes will be in listen only mode.
When the briefing is finished, directions for submitting your questions will be given in the question-and-answer session. And 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 would like to turn it over to Fufu Shen, Director of Investor Relations. Thank you.
Mr. Shen, please go ahead.
Fufu Shen
Thank you. This is Fufu Shen, the Director of Investor Relations for Chunghwa Telecom.
Welcome to our third quarter 2013 earnings results conference call. Joining me on the call today are Dr.
Li, Chairman, Mr. Shih, President and Dr.
Yeh, CFO. During today’s call, management will first discuss business, operational and financial highlights.
Then we will move on to the Q&A session. On slide number two, please note our Safe Harbor statement.
Now I would like to turn the call over to Chairman Li.
Yansong Li
Thank you, Fufu. Hello, everyone.
This is Yen-Sung Lee. Thank you all for joining our third quarter 2013 earnings results conference call.
Before Mr. Shih leads you through the business overview, I would like to update you regarding the mobile broadband spectrum bidding result and the progress of our business operations.
On slide 3. As you are all aware, we are very excited to have won the bidding for the broadest amount of bandwidth in the Mobile Broadband Business license auction.
After almost 400 rounds of bidding, we succeeded in winning with a final price of just over NT$39 billion. Two key highlights of our win that I would like to point out include: One, is that we are the only operator acquiring the maximum amount of bandwidth with 35 MHz of spectrum which includes two slots at 1800 MHz.
This spectrum was the most sought after spectrum in the auction for two reasons -- one, its compatibility with 4G spectrum globally, and two, this is considered “ecosystem ready” and is not in use currently, meaning it will allow us for immediate network deployment and quicker service launch. Because of this, we believe that we have the potential to be the first-to-market to launch and offer high speed 4G services over LTE technology.
As you can imagine, we are very excited about this because it could provide Chunghwa a substantial early lead over the competition. The other key highlight is with winning 2 spectrum slots currently held by us for our 2G operation.
This will not only allow us to maintain our 2G services for customers, but it will also allow us to offer 4G services at the same time, helping to further maximize the usage of this spectrum. Now moving onto slide 4, for our third quarter operating results, we are proud to say that we continued to outperform our competitors in attracting mobile internet subscribers.
By the end of September, our mobile internet subscriber market share reached 34.1%, which was the highest among our peers. We will continue to support this growth momentum and market leadership in the future.
Since our broadband household penetration rate is already very high, we continue to focus on customer retention and the migration to higher speed services. We will also leverage our upload speed advantage and promote convergence trending combining fiber with WiFi, Hami+ cloud and other value-added services.
Now, President Shih would like to lead you through our business overview.
Shih Mu-Piao
Thank you, Chairman Lee. Please refer to Slide 6 for our mobile business.
For the third quarter, mobile internet subscriber grew by over 60% year-over-year to 3.57 million. Our mobile data revenue grew significantly by 37.4% year-over-year, the highest among the mobile operators.
We believe that this success is mainly due to our aggressive promotion plans, which not only attract mid-to-low tier smartphone users but also help encourage 2G subscribers to upgrade to our 3G network through attractive data plans. This year, we target to upgrade 700,000 2G subscribers to our 3G network.
From January through September, we successfully upgraded more than 500,000 subscribers to the 3G network and about 45% of them subscribed to additional data plans upon the migration. We will continue to encourage migration and upgrades going forward.
On slide 7, our successful promotional initiatives targeting mid-to-low tier smartphone users helped boost our smartphone penetration over 50% as of the end of September. Thus, we increased our year-end expected smartphone penetration rate from 49% to 53%.
As mentioned earlier, total mobile internet subscribers has already reached 3.57 million, surpassing our original year-end target, therefore we also revised the target up to 3.78 million subscribers? Slide 8 shows the results for our broadband business.
During the quarter, we continue to see a steady migration of subscribers to higher speed fiber services. We experienced over 32.8% year-over-year growth in the number of subscribers opting for connection speeds of 60Mbps and higher, reaching more than 1.09 million by the end of the third quarter.
Overall, even though total broadband subscriber numbers remained flat for the past several quarters, we continued to encourage our subscribers to migrate to higher speed fiber offerings by offering attractive promotional plans that combine our fiber solution with WiFi, Hami+ cloud and other value-added services. Recently, we began offering promotional plans for 60Mbps and 100Mbps services.
In order to facilitate greater migration, we are also targeting SMEs and machine-to-machine applications to stimulate further broadband usage. On slide 9 for the first nine months of 2013, our IPTV revenue increased year-over-year by over 13.1% and our advertising revenue grew by 34.2%.
We expect the advertising revenue to continue to grow throughout the remainder of this year. In addition, the household using TV rate continued to increase in the past quarters, which demonstrates our success in generating greater customer stickiness on our platform.
To further stimulate subscriber growth, we will continue offering convergence plans to cross-sell our MOD and other broadband services. Please see slide 10 for an update on our ICT and cloud initiatives.
In the third quarter of this year, our cloud business revenues doubled year-over-year and Personal Cloud subscribers reached $1.12 million. Also, we won several significant ICT projects with contracts totaling NT$3.3 billion.
Some of our projects include network construction for China Trust lottery, monitoring, recording system projects for police departments under two local governments and other government IDC projects. We will continue to leverage our core telecom infrastructure and services to expand our ICT and cloud businesses.
Slide 12 provides an update on the regulatory front. Our chairman have mentioned earlier about the broadband spectrum auction result completed on October 30th.
As for the Telecom Act Amendment, the Executive Yuan returned the amendment proposal to the NCC again on July 16 and decided that the NCC should submit the Digital Convergence Regulation draft in February 2014 instead. Now, I would like to hand it over to Dr.
Yeh to go through our financial results.
Dr. Yeh
Thank you, President Shih and good day everyone. Thanks for joining us today.
I will review our financial results in detail, beginning with Slide 13. On slide 14 are our income statement highlights.
Total revenues for the third quarter grew by 2.6%, and operating costs and expenses increased by 3.5% year over year. Our income from operations and net income decreased by 0.4% and 0.5%, respectively.
In addition, the EBITDA margin decreased from 37.50% to 36.40% in the third quarter, as compared to the same period in 2012. Please refer to slide 15 for an update on our business segment revenue.
Our total revenue increase was driven by 37.4% year over year growth in mobile VAS revenue and 24.8% growth in handset sales, as well as an increase in ICT revenue. The strong growth of mobile VAS revenue was mainly driven by an increase in mobile internet subscribers.
Local voice service revenue decreased by 8.0%, mainly due to mobile and VoIP substitution. The 7.3% revenue decline in the DLD business was primarily due to mobile substitution.
Broadband revenue decreased by 0.8%, mainly attributable to the NCC tariff reduction for both ADSL and fiber service tariffs. The ADSL revenue decline offset the fiber revenue growth.
Mobile voice revenue decreased by 6.6% due to promotional package and mandatory tariff reductions. Moving on to Slide 16, you can see that our operating costs and expenses increased by 3.5% year-over-year.
The increase in operating costs was mainly due to the rising cost of handsets sold, resulting from strong mobile internet and handset sales growth during the quarter. As shown on slide 17, cash flow from operating activities increased to NT$17.1 billion during the third quarter.
This was mainly due to the decrease in payment to equipment contractors this year and less mobile deposits last year due to favorable offering for VIP subscribers. We maintained a strong cash position with cash and cash equivalents amounting to NT$34.8 billion as of September 30, 2013.
The EBITDA margin decrease was primarily due to tariff cuts and higher handset sales, leading to a lower EBITDA margin than our traditional telecom services. Slide 18 shows our 2013 third quarter results as compared to our guidance for the quarter.
Our revenue, operating income, net income and EBITDA all exceeded our third quarter guidance, mostly due to higher handset sales and mobile VAS revenues. However, EBITDA margin was lower than expected due to the lower margins for handsets.
Currently, we expect our full year operating result to remain in line with our earlier guidance. Lastly, on slide 19.
Our capital expenditure will continue to focus on broadband and mobile network construction, and cloud deployment including data center construction. We will review our CapEx budget and execution plan on a regular basis, and focus on making the most cost-effective spending decisions possible.
Thank you for your attention and now we would like to open up for questions.
Operator
Thank you. We will now begin our question-and-answer session.
(Operator Instructions) The first question is coming from Chate Bend from Credit Suisse. Go ahead please.
Chate Bend - Credit Suisse
First of all congratulation on your 4G spectrum result. I have a couple of questions around that.
The first question is I understand that Chunghwa is aiming to launch 4G services in the second half of 2014. That however is quite in line with what your peers are currently guiding as well.
So I just would like to understand that when you say you would have an advantage, is that you believe that your peers might be launching much towards the end of 2014 and that you will launch early in the second half or you just comment on the perspective of having a better a quarter selling 1,800 megahertz and also view that your peers might not be able to launch the service in that 1,800 megahertz? The second question is in light of the 4G investment; in terms of the CapEx budget for 2014 I understand that you would still be working on it.
But as far as the bigger picture concern, should we expect it to at least remain the same level as what we’ve seen in 2013, which is around $37 billion or should we expect it to down or go up? The third question is regarding your broadband operation.
I understand that the upgrade from the lower speed to higher speed is going really well. However we are not seeing that coming through in revenue both quite yet probably because the timing speculations and also the ADSR is still coming down.
We expect this year to be kind of bottom in term of the revenue performance and that would be similar from that software upgrade allowing to actually grow the broadband revenue finally into FY14? And last question just very housekeeping the TV advertising revenue would you be able to share with us how much are you generating from TV advertising in dollar terms?
Thank you.
Yen-Sung Lee
Because the 1,800 in 1,500 megahertz continuously. So the iPhone 5 and 5S already ready.
So I think as the ecosystem is quite mature. So we plan to launch the LTE in the second half of next year because we have the advantage of the competitors.
We have very high end users we think we can secure our those kind of users. Also we can attract the users from our competitors, so that’s our advantage so far.
We will speed up our conversion process, then we can reach this kind of goal. And the second question is our CapEx.
We already have increased less than 40 billion next year, a little bit higher than this year. So we will balance the CapEx between the 4G and the 3G.
So, so far, we can say the CapEx for actually our EBITDA, the peak and again going down later. Okay, so the third question is related to the open subscriber upgrade.
Because of the upgrade the open subscribers to higher speed is going well and also because the high speed broadband subscribers’ the ARPU is higher than the lower scale. So even the subscriber is not achieve the guideline but at the end of this year revenue the total revenue of both fixed net broadband will be expecting each of the achieved and in the next year 2014 we see it also as the since duration revenue will also go slightly.
Thank you.
Operator
The next question is coming from Vicky Lin, Merrill Lynch. Go ahead please.
Sydney Zhang - Merrill Lynch
Thanks for the opportunity to ask question. This is Sydney Zhang from Merrill Lynch, I have two questions.
The first question is really, so again pushed, on the C5 the size gets so high and you guys, as a largest operator you get this and also the government have ownership in your company. Would you think that this will lead to a temporary regulatory environment towards you, because you won the best spectrum and then you’re going to win the competition?
So can you share with us comments on that? Second question is related to, for you guys to, you must have done the 4G business case internally and given this higher CapEx and also higher spectrum cost and in light of the future you’re going to go on this tiered pricing.
Do you think this 4G can really make money? Thank you.
Yen-Sung Lee
Okay, the T5 is, -- nobody using for the mobile. So we think, there is mostly important for Chunghwa to lead in the competitors.
For the regulatory environment, we think the NCC will give us green light to speed up the deployment process. As I think, it's also are waiting for our NCC regulator to have the 4G as soon as possible.
So the second question is the tier pricing. It is very important policy for the 4G strategy that we need to have different limits for the packet and also give the different price.
So, we think, we can make money of course but take our good policy, how we differentiated with 3G, we think that is already has a consensus among the community or the industry that in 4G era, we cannot use the same policy as 3G because the tariff grow, that’s higher than 3G. So for the healthy operation, we think the tier pricing is must.
Sydney Zhang - Merrill Lynch
Okay. Can I ask one additional question?
Should we really be reasonable to assume that the competition on the 4G will be more severe than the 3G? Because in the 3G, every three operators have the same technology, same amount of spectrum bands to use, basically it's a very benign environment.
But now, coming to the 4G, then you all have a different frequency band and different speed. So that will lead to the competition of building out best network and trying to win on speed and price.
Is that going to make the competition more complicated?
Shih Mu-Piao
Yes, of course because we have new player like FirstCom [ph] is really aggressive in the 4G area, but because the technology not really matured so far for 700 megahertz and also the voice is still very important even if you go to the 4G era. So, we have a very strong infrastructure for 2G, 3G in the future.
For 4G, we have - we call a voice fallback in the initial stage of the 4G provider. So yes the 4G competition is more complicated because there is a lot of new players that have different strategy to compete in the market, but somehow we will transit how we can leverage our advantages on the 3G and 2G, even 2G.
The voice is best, thank you.
Operator
(Operator instructions) Next question is coming from the Steven Liu, Standard Chartered. Go ahead Steve.
Steven Liu - Standard Chartered
First regarding your mobile Internet, the subscribers increased substantially in the third quarter but -- while Kemp [ph] is saying it wasn’t the main driver for the increase in the mobile Internet? And also, what's the average data usage for the mobile Internet user or the smartphone user?
And how about the data usage and also ARPU for the mobile Internet? It's the first question maybe first.
Shih Mu-Piao
Great, so we have a very successful promotion on the data subscribers, with not only the smartphone but also the iPad and the other Android pads. Currently, our mobile subscriber data is around 2.6 gigabytes per month, roughly, 2.6 to 3 megabytes per user per month, okay, the ARPU growth.
Steven Liu - Standard Chartered
Yes. And the third question, what's the postpaid subscriber ratio, total number?
How many is postpaid percentage, how much?
Shih Mu-Piao
I think 98% of the subscriber is postpaid. So total subscriber is around $10.5 million.
So 90% of it is postpaid.
Steven Liu - Standard Chartered Bank
Okay. Thank you.
The third question regarding your -- I note in the third quarter your tier, top tier, smartphone sales accounted for only 24%, compared with preceding two quarters' average over 50%. Can you explain the main reason you are mostly into the low-end customers or launching low-end smartphones?
Shih Mu-Piao
Yes the high end - the high tier to mid tier to low tier ratio is 30% and 40% but the mid we already encourage the mid tier to low tier users especially for no users. So it's good and affordable, it's very good promotion package.
Steven Liu - Standard Chartered Bank
Okay, thank you. And maybe the last question regarding who will be your supplier for 4G network.
Have you made a selection?
Shih Mu-Piao
We will have some competition from the suppliers; necessarily as our 3G supplier today we expect part of the equipments will come from the NSN, and others we will select from the potential suppliers, including NSN, [indiscernible] and Accenture.
Steven Liu - Standard Chartered Bank
Yes. And could you just give any restriction on your -- to use the Chinese for the key telecom equipment?
Or just a restriction, a co-network. Can you buy the equipment in a base station access network?
Shih Mu-Piao
This is a very tough question, because the government is encouraging not to use the equipment from Chinese vendors.
Steven Liu - Standard Chartered Bank
Even the -- I mean the co -- the access network. Previously I noticed only restriction on the co-network.
So they don't encourage any equipment from the Chinese vendors?
Shih Mu-Piao
Because the special position of Chunghwa Telecom, we need to concern about the so called national security.
Operator
Next question is coming from Lucy Liu, JP Morgan. Go ahead please and ask your question.
Lucy Liu - JP Morgan
I have three questions. One regards the follow up on tier pricing.
I just wonder, there were some -- there's some saying that in order to do tier pricing, that operators might need to also cut down the monthly charge, monthly fee, so that make the wholesalers more affordable. I just want to hear your thoughts.
Do you think that will be the case? And then secondly also on the new entrant risk, so I was just wondering, how do you view the strategy from Whole House (Ph) or Beijing (Ph) and it seems that they're now getting less popular.
Do you see [indiscernible]for anyone to buy a small operator, like Vibo to turn around the 3G business first before going to 4G? I just want to hear your thoughts.
And lastly is on dividends and again you need to pay the special (Ph) fee later on this year or next year. Are we expecting the stable payout ratio as in the last year?
What will be the general guidance there? Thank you.
Yen-Sung Lee
Yes the pricing is -- we have many tiers, we have a very low entrant for loss ratio for example, according to our government officials we [indiscernible] that maybe from 200 to 2,000 had to have different tier, for different suppliers. So yes it's true.
The new entrant, we don't have -- no comment on the new player because we only know that somehow we can do much better than the new entrants, because the Taiwanese market is not so big, it's really too many operators, it's not good for the industry. So far we don't have any plan to acquire the competitors.
Shih Mu-Piao
We have sufficient cash on hand and some other financial assets including corporate bonds and the debenture moving NT$50 billion by the end of October. And we are basically debt free, so there is room to raise loan without hurting our rating status.
But however the dividend will be decided by Board. Each year when our operating results are known, so this is staged here, we already know what will happen.
Thank you.
Lucy Liu - JP Morgan
Thank you. May I follow up with two small questions, also on tier pricing??
So I think because you want to change to tier pricing with 3G, i.e., that customer can still enjoy a limited pricing on 3G, so do you think this will prohibit customers from migration from 3G to 4G? Do you know the strategy about there?
And also, secondly, I know that the per-unit cost for 4G should be lower than 3G, so should we expect that the per-unit price you charge for 4G would be also lower? Third question, what kind of the margin of 4G you can gain versus 3G?
Thank you.
Shu Yeh
Because the range for the months recharge were the bigger than 3G as I mentioned in the first question that’s the regulator just encourages that operator should provide from low to high package. So it’s not a formal decision.
We study the possibility to have a different tariff packages. So the price is not decided yet.
So the tier price in the customer who migrate to 4G if we can offer differentiation quality on the speed compared to 3G I think the customer will accept the new tariff package.
Lucy Liu - JPMorgan
Sure, thank you. Sorry, last question.
So in order to provide a satisfactory user experience for 4G, so how many base stations do you think you will need to roll out for 4G or upgraded to 4G, please? Thanks.
Shu Yeh
The regulatory say you can launch service and we’ll have plenty in the 50 base station but we think it’s not good enough so by the next five years we will deploy more than 7,000 base stations from face-to-face.
Lucy Liu - JPMorgan
Okay, thank you very much.
Operator
Next question at this time, coming from Joseph Quinn from Mcquarie. Go ahead please.
Joseph Quinn - Mcquarie Securities
Congratulations again on your results. I just have one follow-up question coming from the comment around dividends.
As you mentioned, your cash balance is quite good, but, clearly, this large tailwind for 4G will impact. Can you go through a little bit more detail in regards to your indications that you may need to go to the debt market?
Is that something that you might have to explore next year if dividend policies remain high? And, if so, what is the Company's thinking around that as well?
Thank you.
Shu Yeh
This small month we don’t have to go through the 10 market also I indicated that we have cash and some other financial investments more than 50 billion and we have to pay the fee and the 39 billion within 30 days. So it’s more than enough to cover that.
Thank you.
Joseph Quinn - Mcquarie Securities
Yes, sorry, I was more referring to as we go into 2014 and you have your -- as you mentioned, about 40 billion in CapEx cost next year and, obviously, you'll have a significant cost going through from dividends as well. Given those two items, do you expect that you would need to go to the debt market in that scenario?
Shu Yeh
We might need to have some very short term borrowing next year but it’s just that two months and with the small amount because we will still have cash flow coming to every fund. So basically we don’t have to issue debt.
Joseph Quinn - Mcquarie Securities
Okay, so just a short term borrowing issue. Okay, thank you.
Operator
Next question goes to Jack Xu, Sinopac Securities. Go ahead please.
Jack Xu - Sinopac Securities
Thank you. Congratulations to get the best spectrum on the 4G competition and my question firstly is what's your strategy for increasing ARPU after you get the 4G spectrum?
And the second, when will the deployment will really start in the 2014? And my third question is what's our target what our business, and we can to increase after we get the 4G spectrum?
Thank you.
Shu Yeh
The strategy for Wholehouse (Ph) is to deploy the major six bigger cities, in the industrial park and then the freeway. So we expect the next half year we can have some coverage specially in the 680, so the strategy is to speed up the deployed so we can offer them as soon as possible, we will deploy the staff again from end of this year, so we are complete with our speed because we will take advantage of C5 because we can launch, we can deploy from day one, the business we can increase the business [indiscernible] we expected to satisfy our customer with value added services.
We have many applications like HD, this HD video, so there are a lot of opportunity for Chunghwa to develop and to give the subscriber more satisfactory service.
Unidentified analyst
And one more question one more final on prices. If we started over deployment of what the effect especially for the other deployment like fiber, cash, costs or a CapEx is restricted, we just can do the 4G at one time.
But others about the 3G and the fiber, possible company strategy. Thank you.
Shih Mu-Piao
The fiber is a very key, very important for the 4G launch, we already have a PT in packets, packet transport network, we are ready for the high speed back up not only used for Chunghwa Mobile but also from our competitors or the new entrants so fiber with 4G [indiscernible] we think of this as should we put together and consider how we can provide the back up for the high speed at the base stations.
Operator
We are now in question and answer session (Operator Instructions), the next question is coming from Jinjin Wang of UBS, go ahead please.
Jinjin Wang - UBS
I just have one question regarding your strategy on your mobile voice (Ph). Because mobile voice revenue still accounts for a big portion of your total mobile revenue and currently there has been speculation talking about a new entrants by launch (Ph), even free voice or unlimited voice packages.
I'm just wondering how you see that possibility and how you are going to react. Because my view, I think, in general, the voice tariff per minute in Taiwan is very high, in the region, and [indiscernible] particularly low.
Do you think if you lower voice tariff, you are able to pick up [indiscernible] price strategy (Ph)? Thank you.
Yen-Sung Lee
Well the new entrant is still not very clear how they can compete with the incumbent because voice capability is a limitation for the new players, so the tariff, the [indiscernible] say the voice will be free, the SMS will be free, but he didn't say how much they will charge to customers on the data package, so I think the in the future one of our tariff packages will be [indiscernible] limited amount, limited money but we can offer almost voice free packages so we still, too early to say how what is the tariff so far but we will go very detail survey and the study what is appropriate for the long term operation of 4G network.
Jinjin Wang - UBS
I see. So you are implying, you are considering maybe change your current voice tariff plan to something like you charge a certain amount of fee, probably it's similar or even higher than current voice ARPU that also almost unlimited voice traffic.
Am I right?
Shih Mu-Piao
You know Simon Jones is our Minister without a portfolio he mentioned that the direction is, you can provide from $200-2000 million, that means you can charge higher monthly charge but maybe include everything so that's one of the things.
Operator
Next question from Chate Benchavitvilai - Credit Suisse, go ahead please.
Chate Benchavitvilai - Credit Suisse
Just one follow up, really housekeeping questions. I understand that you report year-on-year data revenue on the mobile side of 37%.
That, I understand, includes the impact of the discount last year, as well. So if we remove that impact from the expiration of the discount, what would be a comparable year-over-year goal in [indiscernible]?
Thank you.
Yen-Sung Lee
We think it's 20% off, the percentage was 29.16 quarter three, yearly from -- the third quarter the percentage was 31.01% compared to the 38.25, let me summarize. In quarter three the revenue growth is 37.4, if we take 20% off it will be 29.16%.
Thank you.
Operator
Next question from Mark Ling, Taiwan Ratio. Go ahead please.
Mark Ling - Taiwan Ratio
I have one question about the dividend policy. Because FET and the China mobile, they maintain the payout ratio about 100%.
Do we also follow that dividend policy?
Yen-Sung Lee
As I explained many times the dividend policies the right or power of the Board, and they haven't made any decision. So we don't know what they would decide.
Thank you.
Operator
Next question from Steven Liu, Standard Chartered Bank. Go ahead please.
Steven Liu - Standard Chartered Bank
Three more questions. What is the handset subsidy spending in third quarter, compared -- and also compared with last year?
And the second, regarding your ICT revenue, can you disclose what the total amount of revenue in the third quarter, and on a year-on-year basis, -- they increased? Thank you.
Yen-Sung Lee
We don't disclose the details of the handset subsidy.
Steven Liu - Standard Chartered Bank
How about ICT revenue? Can you disclose that?
Yen-Sung Lee
I am sorry we don't give absolute figure for the ICT line.
Steven Liu - Standard Chartered Bank
Maybe last question on your fiber network. Globally we are seeing the new technology like 100G or 400G.
Instead of 100G, 40G is still very popular and increasingly important for the transmission and the backbone. What level -- your fiber transmission networks on 20G, 40G or 20G, can you give me some idea about that?
Yen-Sung Lee
The fiber network is [indiscernible] we provide with 100 megabit plus platform, 100 gigabit. So for the PlayStation for 3G and 4G will provide the package transport network.
The thing is very important is IP based transmission network.
Steven Liu - Standard Chartered Bank
So you have already…
Yen-Sung Lee
So last question ICT business [indiscernible] is a compound annual growth rate is 20%.
Steven Liu - Standard Chartered Bank
20% for past how many years, the compound?
Yen-Sung Lee
Three years.
Operator
Next question is from Vicky, Merrill Lynch. Go ahead please.
Sydney Zhang - Merrill Lynch
Hi this is Sydney joining again. Just one technical question.
So for your 4G networks, do you plan to deploy voice over LTE any time soon? And then if the new entrants also deploy that, I think they would have the voice capability.
Then the final question is also, as you migrate customers more to the 4G, when do you think the 2G, you can exit 2G networks? Thanks.
Yen-Sung Lee
The technical question for 4G is very important, the voice over LTE. We have already discussed with the vendors, we will offer the capability by the middle next year.
But the important is you need to have good enough coverage otherwise the handover will be a problem. So in the initial stage we offer the switch pull back than final day [indiscernible].
So [indiscernible] is evolving technology we were introducing as soon as possible but practically is need [indiscernible] on the good coverage for the 4G. So when we make with 40 the existing 4G subscriber will be we were encouraged the subscriber is to operate to 3G or to 4G.
For the 2G subscriber is most of the senior people maybe is two last year who upgrade to 4G we have a good strategy to up to the subscribe they can chose either to directly to 4G or to 3G first. And the 2G coexist for certain period.
Thank you.
Sydney Zhang - Merrill Lynch
So would that be VOLT (Ph) deploying this because they need good coverage? But that means you will deploy 4G massively next year?
Shu Yeh
So we will focus on the Taipei, Taichung, Kaohsiung and Kaohsiung and [Taoyuan] and Kaohsiung and [indiscernible] metro project we know that six biggest cities including the [indiscernible].
Sydney Zhang - Merrill Lynch
Okay, thank you.
Operator
If there are no more question I will turn it back over to Chairman Lee.
Lee Yen-Sung
Thank you all of you who participated in this third quarter earnings result. Thank you very much.
Thank you all.
Operator
Thank you Chairman Lee. Thank you for your participation in Chunghwa Telecom’s conference.