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Consistent with our strategic objectives, we have developed the following business strategies: 

## Focus on our core strengths while expanding our scope of services to capture new growth opportunities 

Our core strengths are the management of telecommunication networks and the provision of services over these networks. We currently operate several networks linked by a core backbone infrastructure consisting of public switched telephone, cellular, ADSL, FTTx and internet protocol networks. Our strategy for each network differs depending on the market dynamics and future growth prospects of services delivered over these networks. In general, we endeavor to maintain our strong market position in each of our business lines and seek to expand the scope of our business beyond network services by offering value-added services to generate growth and new opportunities. 

Fixed communications : Our strategy is to maintain our position as the market leader in domestic fixed communications. In addition to our Public Switched Telephone Network, or PSTN, customer retention program, we are working on NGN projects to facilitate network migration into IP Multimedia Subsystem, or IMS. The first stage of our IMS network was completed in March 2009. This is the largest ever NGN deployment that has been constructed in Taiwan, with more than 500,000 subscriber facilities. To enhance business efficiency and reduce operational expenditures, we constructed a new Multi-Protocol Label Switching-, or MPLS-, based IP backbone to consolidate existing IP networks in September 2008. Based on these facilities, we will collaborate with the third parties to develop new integrated services to retain our customers and generate new revenue streams. For provision of new services, we launched our multimedia value-added services in October 2010. These services include provision of home-based surveillance cameras and daily life information, entertainment and phone services. 

Broadband services: We also plan to continue to build on the success of our broadband access services. 

• We provided ADSL and FTTx services to 4.4 million customers, which represented more than 80.5% of Taiwan’s fixed line broadband customers by the end of 2010. We have successfully migrated many of our customers from low-speed to higher-speed internet access services and upgraded ADSL subscribers to FTTx, which offers an even higher speeds by using fiber optic technology. Approximately 84% of our broadband customers subscribe for downlink speeds of over 2 Mbps, and 46.7% were with FTTx as of December 31, 2010. 

• We are continuing the build-out of our FTTx infrastructure. Because we typically realize higher average revenue per user for our FTTx internet services, we plan to continue offering various incentives for our ADSL and other internet customers to switch to our FTTx services. In 2010, FTTx revenue has reached 58.3% of our total broadband revenue. 

Mobile Communications : We offer our mobile services via both 2G and 3G networks. For 2G, we are using standard of Global System for Mobile Communications or GSM while for 3G, wideband code division multiple access, or WCDMA is adopted. In order to meet the demand from our customers for high-speed wireless data access, we upgraded our 3G mobile service to High-Speed Packet Access, or HSPA technology on September 12, 2006 and to HSPA+ services in 2010, and are continuing to develop next generation mobile technologies. Our strategy for mobile service includes the following initiatives: 

• Focusing on maintaining our average revenue per user by promoting increased use of wireless value- added services, such as our “emome” service, Hami services, Java games, ring-back tone services, video streaming, e-books, and online shopping. 

• Encouraging our customers to use our 3G and HSPA/HSPA+ services by offering customized mobile handsets combined with attractive value-added services and product packages; 

• Expanding our HSPA+ coverage and enhancing the data rate up to 21 Mbps to attract more mobile internet customers; and 

• Catering for the high bandwidth usage of smart phone and Tablet PCs, we have constructed more than 10,000 Wi-Fi Hotspot in 2010 to share some of the data traffic from the mobile network. We will continue to expand another 10,000 hotspots using Wi-Fi solutions in 2011. 

