05.10.2001
New orders for Tecom won't save it from a mediocre year

• Tecom (2321 'Dong Xun') achieved 22% of its full-year target of NT$10.7b in 1Q01. With the Chunghwa Telecom (2412 'Zhong Hua Dian') emergency ADSL contract stretching into May, we expect revenue to come in at around NT$0.7b-0.8b this month.

• Tecom recently obtained orders for switch products and wireless telephone systems from Nortel, Advanced American Technologies and Comdial with a total value of NT$720m. Gross profit margin for these products is expected to be around 20%.. Shipment is expected to start in May or June.

• VB Primasia Investment Opinion: We do not expect Tecom's share price to respond much to these orders, however, as 60% of Tecom's revenue comes from handset sales. We also do not expect much from the upgrading of handsets this year, which was expected to be a main driver in 2001. Even with the launch of GPRS handsets some time around 2H01, the company is not optimistic on prospects for this product. We also gather from the company that gross profit margin on existing handsets can go as low as 5%. We are NEUTRAL on Tecom pending further developments.

BennyLo@Primasia.com +886-[0]2-2547-8869