strong momentum and demand for high quality, high-end smartphones. We also believe that significant demand exists for quality, mid- to low- level smartphones at reasonable prices, and we are well positioned in this segment, with many products on offer that provide a high level of functionality and good value. We believe this focus on both the high and middle-to-low markets will allow us to drive further smartphone penetration among our mobile subscribers, building on our leading position and ultimately helping to enhance our mobile ARPU. 

## ● Broadband 

The key underlying trend driving our Broadband business in 2011 was the deployment and promotion of higher speed offerings. In order to migrate customers to higher speed broadband, especially Fiber-to the-x (FTTx) service, we reduced our broadband tariffs in mid 2011, driving a significant subscriber growth for 50Mbps and even higher speed FTTx services. In addition to the ongoing upgrade of Asymmetric Digital Subscriber Line (ADSL) customers to fiber solutions, we also encourage dial-up customers to migrate to broadband service in order to broaden our broadband subscriber base. Our new higher speed offerings were very well received by the market, with our total FTTx and 50Mbps customer base reaching 2.4 million and 434,000 respectively for the year. Total broadband subscribers increased to around 4.5 million by the end of 2011 and we target to have 5 million by the end of 2012. Moreover, we will further launch the 100Mbps FTTx service and the trial for 1G Mbps in 2012 to satisfy customers’ demand for even higher speed services. We believe our ability to provide reliable, high-speed solutions at attractive prices constitutes a key point of differentiation between us and our competitors, and provides us with a solid foundation for the continued growth of our fixed-line business and our mobile operations. 

## ● IPTV/MOD 

Leveraging our high speed fiber platform, we continued to gain significant momentum with our broadband services, namely IPTV/MOD. Our MOD subscriber base reached 1.06 million in 2011, with many customers drawn by our rich content base and extensive line-up of 133 channels, including 42 High Definition (HD) channels, up from 16 HD channels in the prior year. Our extensive IPTV HD offering is the richest HD content service in Taiwan. Our package services, which contain relatively abundant HD contents, attracted subscription by 75% of our total MOD subscribers. Our MOD channels comprise a broad spectrum of unique viewing options, including news channels, sports channels, music, dramas as well as variety shows. In addition, there are on-demand services such as English language courses and e-government service, providing much broader and deeper offering compared to cable operators. Finally, we expect to launch our second MOD platform in the second quarter of 2012, a highly integrated offering leveraging the idea of a “one-cloud, multi-screen” service, with a new user interface for our customers. We believe that the launch of this second platform and the co-promotion with our broadband service will support greater adoption of our MOD service in the year ahead. With the aforementioned high quality contents and even user-friendly interface, we anticipate to accumulate 1.5 million MOD subscribers by the end of 2012. 

## ● Fixed Line 

Although local revenue increased year-over-year as a result of the pricing right shift for fixed to mobile calls, the fixed- line voice service remains challenging due to mobile and VOIP substitution. However, by the end of 2011, our market share for local service subscriber was 95.3%, for domestic long distance service traffic was 74.1%, for international long distance service traffic was 54.9%. Chunghwa Telecom still maintains its leading position in all its fixed line segments. 

## Building the Most Advanced, Intelligent Network for Growth Opportunities 

Chunghwa Telecom has built the most powerful and capable network in Taiwan with seamless domestic wireless coverage and the broadest fixed-network. Our network, predicated on the core principals of speed, access and reliability, provides the backbone of our operation and underpins the myriad services and solutions we provide to our consumer and corporate customers. Our underlying goal is to provide our customers with the tools and capabilities needed to succeed in today’s rapidly evolving digital world, whether at work, at home or in their leisure time. We have invested over NT$5 billion annually to expand our 3G network and upgrade to HSPA+ technology while also commencing testing of LTE network 

