## International fixed communications 

Our international fixed communications revenues decreased by 4.3% from NT$15.9 billion in 2008 to NT$15.2 billion in 2009. This decrease was mainly due to the decrease in revenues from international long distance telephone calls as a result of the adverse economic conditions, which offset increases in revenues from international leased line services and international data services. 

International long distance telephone services. Our international long distance telephone revenues decreased by 8.0% from NT$14.0 billion in 2008 to NT$12.9 billion in 2009. Revenues from our international long distance telephone service decreased in 2009 primary due to a 16.1% decrease in international direct dialing revenues as a result of more customers using VoIP and other cost-saving services in place of international direct dialing calls. Despite a 12% increase in wholesale international long distance business from 2008 to 2009, overall international long distance revenues still decreased by 8.0%. This decrease was mainly due to (i) an overall decrease in international direct dial services due to the deteriorating global economy and (ii) competition from other service providers in the market for prepaid phone cards targeted towards foreign workers which caused a reduction in unit price by 14.8%. Our international settlement revenues decreased by 5.4% from NT$3.7 billion in 2008 to NT$3.5 billion in 2009. This decrease was primarily due to the 4.3% decrease in incoming traffic volume. 

## Operating Costs and Expenses 

Our operating costs and expenses decreased by 0.8% from NT$143.1 billion in 2008 to NT$142.0 billion in 2009. This decrease was primarily due to decreases in operating costs and marketing expenses. As a percentage of revenues, operating costs and expenses increased from 71.0% in 2008 to 71.5% in 2009. 

## Operating Costs 

Operating costs include personnel expenses, international settlement costs, spectrum usage and license fees, costs of materials and maintenance and interconnection fees among mobile operators. 

Our operating costs decreased by 0.7% from NT$113.5 billion in 2008 to NT$112.7 billion in 2009. This decrease was principally a result of a decrease of NT$1.8 billion related to depreciation and amortization and a NT$0.6 billion decrease in taxes, partially offset by a NT$2.0 billion increase in ICT costs, MOD related costs and government service costs due to the increase in revenue. 

## Marketing 

Our marketing expenses, which include personnel expenses, provisions for bad debt and expenses relating to advertising and other marketing-related activities, decreased by 1.9% from NT$22.7 billion in 2008 to NT$22.3 billion in 2009. This decrease was principally a result of a NT$0.3 billion decrease in promotional expenses. 

## General and administrative 

Our general and administrative expenses increased by 2.3% from NT$3.7 billion in 2008 to NT$3.8 billion in 2009. This increase was principally a result of a NT$0.1 billion increase due to the consolidation of our subsidiaries. 

## Research and development 

Our research and development expenses remained flat at NT$3.2 billion between 2008 and 2009. Our research and development expenses increased as a percentage of our revenues from 1.56% in 2008 to 1.60% in 2009. This increase was principally a result of a NT$0.1 billion increase in personnel expenses. 

