You should read the following discussion of our financial condition and results of operations together with the consolidated financial statements and the notes to such statements included in this annual report. For the convenience of readers, NT dollar amounts used in this section for, and as of, the year ended December 31, 2025 have been translated into U.S. dollar amounts using US$1.00=NT$31.37, set forth in the statistical release of the Federal Reserve Board of the United States on December 31, 2025. The U.S. dollar translation appears in parentheses next to the relevant NT dollar amount. Overview A number of recent and expected future developments have had, and in the future may have, a material impact on our financial condition and results of operations. These developments include: •changes in our revenue composition and sources of revenue growth; •tariff adjustments; •capital expenditures as a result of technological advancements and changes in our business; •personnel expenses; and •taxation. Each of these developments is discussed below. Changes in our revenue composition and sources of revenue growth Our operating segments are (i) consumer business, (ii) enterprise business, (iii) international business and (iv) others. Operating segments are defined as components of an entity regarding which discrete financial information is available for regular evaluation of the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Our measure of operating segment performance is mainly based on revenues and income before income tax. The table below sets forth the revenues from our principal lines of business as a percentage of total revenues for the periods indicated. Year Ended December 31 2023 2024 2025 Revenues: Consumer Business 61.4 60.9 60.7 Enterprise Business 32.7 32.8 32.7 International Business 4.1 4.3 4.0 Others 1.8 2.0 2.6 Total 100.0 100.0 100.0 Our consumer business has been an important source of revenues over the last three years. We derive our consumer business revenues from mobile service, fixed-line service, sales and other services. Revenues from our consumer business slightly decreased as a percentage of our total revenues in 2024 and 2025, mainly due to the revenue decreases in local and long distance voice services, partially offset by the increases in mobile and fixed broadband services. Our enterprise business has also been a significant contributor to our revenues over the last three years. We derive our enterprise business revenues from mobile service, fixed-line service, ICT business and other services. Revenues from our enterprise business increased as a percentage of our total revenues in 2024, mainly due to the growth in ICT business revenues, including IDC, cloud, cybersecurity, and big data services, driven by both project-based and recurring revenues. Revenues from our enterprise business decreased as a percentage of our total revenues in 2025, mainly due to the decrease in fixed-line services and other services revenue. 42 Our international business has been another important source of revenues over the last three years. We derive our international business revenues from fixed-line service, ICT business and other services. Revenues from our international business gradually increased as a percentage of our total revenues from 2023 to 2024, mainly due to the rising demand for ICT services from global clients, particularly leased circuit, IDC, cloud, integrated ICT solutions, and roaming services. The percentage of total revenues represented by our international business revenues decreased in 2025, mainly due to the decrease in international voice service revenue. Our other revenues as a percentage of our total revenues increased from 2023 to 2024, and continued to increase in 2025. This trend was mainly due to changes in the contribution from one of our subsidiaries, CHPT, which is a semiconductor testing company. Tariff adjustments We adjust our tariffs and offer promotional packages from time to time primarily in response to market conditions. We also from time to time are required to adjust our pricing in line with domestic regulations. According to the announcement by the NCC on March 15, 2024, this round, for 2024 to 2028, of adjustments applied to the wholesale tariffs for IP peering and domestic leased line services, which was subject to an adjustment by ∆CPI 5.09%. This round of adjustments also applied to the retail fees for xDSL and FTTx services (excluding ADSL, the services with downlink speed of 12 Mbps and below, and the services with downlink speeds of 300 Mbps and over), which was subject to an adjustment by ∆CPI-3.32%. The ∆CPI for 2024 was 2.18%, that was used for the tariff reduction starting from April 1, 2025 to March 31, 2026. The ∆CPI for 2025 that was used for the tariff reduction starting from April 1, 2026 was 1.66%. We do not expect such tariff reduction to have a material adverse impact on our results of operations. The NCC issued a notice for the promulgation of the “Upper Limits on the Termination Rates for Voice Service over Fixed Network Provided by Significant Market Powers” on June 5, 2023. The interconnection fees of local telephones, domestic long-distance or international calls, and mobile-to-fixed-line calls should be decreased gradually from June 5, 2023 to December 31, 2026 in four years. The interconnection rate between fixed-line customers and other fixed-line customers is reduced from NT$0.30 to NT$0.24 per minute during peak times and from NT$0.09 to NT$0.08 per minute during off-peak times. The interconnection rate for fixed line customers to domestic long distance or international is reduced from NT$0.31 to NT$0.27 per minute. The interconnection rate for calls initiated by mobile customers to fixed-line customers is reduced from NT$0.3943 to NT$0.2939 per minute during peak times and from NT$0.1883 to NT$0.1440 per minute during off-peak times. Besides the mandatory tariff reduction mentioned above, we, from time to time, voluntarily implemented tariff adjustments in our broadband and mobile businesses in the past few years to consolidate our market share. Capital expenditures as a result of technological advancements and changes in our business In recent years, we have focused on modernizing and upgrading our mobile services network and on developing our FTTx network, which enables high-speed information transmission over optical fiber. Constructing the fiber network in new buildings and areas with 300 Mbps (or above, up to 2 Gbps) for households and 10 Gbps for enterprises is our immediate task. Our ultimate goal is to optimize our capital expenditures by investing in infrastructures as well as supporting innovative and well-returned services/products. We evaluate our investment opportunities by benchmarking them against internal return requirements. 43 Personnel expenses Personnel expenses constitute a significant portion of our operating costs and expenses. In 2023, 2024 and 2025, personnel expenses represented 26.2%, 26.7% and 27.4% of our total operating costs and expenses, respectively. The table below sets forth information regarding our personnel expenses and as a percentage of our total operating costs and expenses for the periods indicated. Year Ended December 31 2023 2024 2025 (in billions of NT$, except percentages) Total personnel expenses 46.2 26.2 % 48.9 26.7 % 51.4 27.4 % Total operating costs and expenses 176.2 100.0 % 183.2 100.0 % 187.4 100.0 % At the time of our privatization, we settled all of our then existing defined benefit pension obligations in full. After completing our privatization on August 12, 2005, all of our continuing employees were deemed to have commenced employment as of August 12, 2005 for seniority purposes under our pension plans in effect after privatization. Under applicable ROC regulations, upon our privatization, the MOTC assumed the obligation to make annuity payments to all of our employees that retired before our privatization. Taxation The income tax rate for profit-seeking enterprises is 20% in the ROC. We benefit from tax incentives, including tax credits of up to 15% of some of our research and development expenses in accordance with the Statute for Innovating Industries. In addition, after-tax earnings not distributed to stockholders as dividends in the following year were assessed with a 5% unappropriated earnings tax. Under IFRSs, the 5% tax on unappropriated earnings is accrued during the year the earnings arise and adjusted to the extent that distributions are approved by the stockholders in the following year. A. Operating Results The following table sets forth our revenues, operating costs and expenses, income from operations and other financial data for the periods indicated. Year Ended December 31 2023 2024 2025 NT$ NT$ NT$ US$ (in billions) Revenues: Consumer Business 137.1 140.0 143.4 4.6 Enterprise Business 73.0 75.4 77.2 2.5 International Business 9.2 9.9 9.5 0.3 Others 3.9 4.7 6.0 0.1 Total revenues 223.2 230.0 236.1 7.5 Operating costs 141.8 146.6 149.1 4.7 Operating expenses: Marketing 23.5 25.1 26.0 0.9 General and administrative 6.8 7.2 7.7 0.3 Research and development 3.9 4.1 4.4 0.1 Expected credit loss 0.2 0.2 0.2 — Total operating expenses 34.4 36.6 38.3 1.3 Other income and expenses (0.6 ) 0.1 (0.1 ) — Income from operations 46.4 46.9 48.6 1.5 Non-operating income and expenses 0.6 0.9 1.7 0.1 Income before income tax 47.0 47.8 50.3 1.6 Income tax expense 8.9 9.3 9.8 0.3 Consolidated net income 38.1 38.5 40.5 1.3 Attributable to: Stockholders of the parent 37.0 37.2 38.7 1.2 Noncontrolling interests 1.1 1.3 1.8 0.1 44 The following table sets forth our revenues, operating costs and expenses, income from operations and other financial data as a percentage of our total revenues for the periods indicated. Year Ended December 31 2023 2024 2025 (as percentages of total revenues) Revenues: Consumer Business 61.4 60.9 60.7 Enterprise Business 32.7 32.8 32.7 International Business 4.1 4.3 4.0 Others 1.8 2.0 2.6 Total revenues 100.0 100.0 100.0 Operating costs 63.5 63.7 63.2 Operating expenses: Marketing 10.6 10.9 11.0 General and administrative 3.0 3.1 3.3 Research and development 1.7 1.8 1.8 Expected credit loss 0.1 0.1 0.1 Total operating expenses 15.4 15.9 16.2 Other income and expenses (0.3 ) — — Income from operations 20.8 20.4 20.6 Non-operating income and expenses 0.3 0.4 0.7 Income before income tax 21.1 20.8 21.3 Income tax expense 4.0 4.1 4.2 Consolidated net income 17.1 16.7 17.1 Attributable to: Stockholders of the parent 16.6 16.1 16.3 Noncontrolling interests 0.5 0.6 0.8 Each of our operating segments is managed separately due to the fact that each represents a strategic business unit that serves different types of customers. We measure our segment performances mainly based on revenues and income before income tax. The year ended December 31, 2025 compared with the year ended December 31, 2024 Revenues Our revenues increased to NT$236.1 billion (US$7.5 billion) in 2025 as compared to NT$230.0 billion in 2024, mainly due to an increase in revenues generated from consumer business, enterprise business and others. The details of which are as follows: Consumer Business Our consumer business revenues include mobile service revenues, fixed-line service revenues, sales revenues and other revenues. Consumer business revenues accounted for 60.9% and 60.7% of our revenues in 2024 and 2025, respectively. Our consumer business revenues increased by 2.4% from NT$140.0 billion in 2024 to NT$143.4 billion (US$4.6 billion) in 2025, mainly due to increases of mobile service revenues attributed to 5G mobile migration, sales revenues, and fixed broadband revenues, partially offset by a decrease of fixed voice revenues. Mobile services. Our mobile service revenues increased by 3.2% from NT$57.1 billion in 2024 to NT$58.9 billion (US$1.9 billion) in 2025, due to an increase of postpaid subscriber numbers and steady 5G migration. Fixed-line services. Our fixed-line service revenues slightly increased by 0.5% from NT$42.9 billion in 2024 to NT$43.1 billion (US$1.4 billion) in 2025. This increase was due to the increase of data communication and broadband access revenues driven by the successful upsell propelled by the HiNet Higher-Speed promotion plan, partially offset by the decreased voice revenues. Sales. Revenues generated from sales increased by 3.4% from NT$37.2 billion in 2024 to NT$38.5 billion (US$1.2 billion) in 2025, due to the stabilized smartphones supply. 45 Others. Our other revenues slightly increased by 1.9% from NT$2.8 billion in 2024 to NT$2.9 billion (US$0.1 billion) in 2025. Enterprise Business Our enterprise business revenues include mobile service revenues, fixed-line service revenues, ICT revenues and other revenues. Revenues from our enterprise business accounted for 32.8% and 32.7% of our revenues in 2024 and 2025, respectively. Revenues from our enterprise business increased by 2.5% from NT$75.4 billion in 2024 to NT$77.2 billion (US$2.5 billion) in 2025, due to the strong growth of ICT business revenue. Mobile services. Our mobile service revenues increased by 4.1% from NT$9.2 billion in 2024 to NT$9.5 billion (US$0.3 billion) in 2025, due to 5G mobile migration. Fixed-line services. Our fixed-line service revenues slightly decreased by 0.5% from NT$33.8 billion in 2024 to NT$33.6 billion (US$1.1 billion) in 2025, due to the decreased voice revenues, partially offset by the increase of data communication and broadband access revenues driven by the speed upgrade. ICT Business. Revenues from our ICT business increased by 9.2% from NT$27.8 billion in 2024 to NT$30.4 billion (US$1.0 billion) in 2025, due to the growth of projects and recurring revenues for IDC, cloud, cybersecurity, and big data related services. Others. Our other revenues decreased by 19.0% from NT$4.6 billion in 2024 to NT$3.8 billion (US$0.1 billion) in 2025. International Business Revenues from international business accounted for 4.3% and 4.0% of our revenues in 2024 and 2025, respectively. Revenues from our international business decreased by 4.1% from NT$9.9 billion in 2024 to NT$9.5 billion (US$0.3 billion) in 2025, due to a decrease of fixed voice revenues, partially offset by the rising demand for leased line, IDC, cloud, and integrated ICT solutions. Fixed-line Services. Revenues from our fixed-line services decreased by 6.0% from NT$5.1 billion in 2024 to NT$4.8 billion (US$0.2 billion) in 2025, due to the strategic withdraw of international voice services. ICT Business. Revenues from our ICT business increased by 2.2% from NT$4.0 billion in 2024 to NT$4.1 billion (US$0.1 billion) in 2025, due to the rising demand for IDC, cloud, and integrated ICT solutions from global clients. Others. Our other revenues decreased by 22.9% from NT$0.8 billion in 2024 to NT$0.6 billion (US$0.02 billion) in 2025, due to a decrease in mobile service revenue. Others Other revenues accounted for 2.0% and 2.6% of our revenues in 2024 and 2025, respectively. Our other revenues increased from NT$4.7 billion in 2024 to NT$6.0 billion (US$0.1 billion) in 2025. The increase was due to higher revenues derived from CHPT. Operating Costs and Expenses Our operating costs and expenses include depreciation and amortization expenses, personnel expenses, cost of goods sold, interconnection and service costs, marketing expenses, costs of materials and maintenance, as well as spectrum usage fees. Operating costs and expenses increased by 2.3% from NT$183.2 billion in 2024 to NT$187.4 billion (US$6.0 billion) in 2025. This increase was due to increases in personnel expenses, ICT project costs, and utilities expenses. 46 Personnel expenses increased due to adjustments of employee benefit policies, leading to higher salaries, bonuses, and welfare costs. ICT project costs were mainly driven by the growth of ICT business. The increase in utilities expenses was primarily due to the adjustment in electricity prices. Operating Costs and Expenses by Business Segment Consumer Business Our consumer business costs and expenses increased by 1.6% from NT$112.7 billion in 2024 to NT$114.5 billion (US$3.7 billion) in 2025, primarily due to (i) increases in personnel expenses due to adjustments to employee benefit policies, and (ii) increases in utilities expenses resulting from electricity rate adjustments. Enterprise Business Our enterprise business operating costs and expenses increased by 3.4% from NT$63.6 billion in 2024 to NT$65.8 billion (US$2.1 billion) in 2025. This increase was due to (i) increases in personnel expenses due to adjustments to employee benefit policies, and (ii) increases in ICT project costs, primarily driven by the robust growth of our ICT business. International Business Our international business operating costs and expenses decreased by 3.9% from NT$9.0 billion in 2024 to NT$8.7 billion (US$0.3 billion) in 2025, due to decreases in service-related costs resulting from our strategic withdrawal of international voice services, partially offset by increases in personnel expenses due to the adjustments to employee benefit policies. Others The costs and expenses from our other business increased by 24.0% from NT$3.0 billion in 2024 to NT$3.7 billion (US$0.1 billion) in 2025, due to operating growth derived from CHPT. Other Income and Expenses We recorded net other income of NT$0.1 billion in 2024 and net other expenses of NT$0.1 billion (US$3.6 million) in 2025, respectively. The differences between 2024 and 2025 were due to the recognition of impairment loss on property, plant and equipment in 2025. Income from Operations and Operating Margin As a result of the foregoing, our income from operations increased by 3.6% from NT$46.9 billion in 2024 to NT$48.6 billion (US$1.5 billion) in 2025. Our operating margin slightly increased from 20.4% in 2024 to 20.6% in 2025. Non-operating Income and Expenses Our non-operating income increased from NT$0.9 billion in 2024 to NT$1.7 billion (US$54.8 million) in 2025. The increase was due to an increase in gain on disposal of investments accounted for using equity method. Income before Income Tax As a result of the foregoing, segment income before tax for our consumer business increased by 5.2% from NT$29.7 billion in 2024 to NT$31.4 billion (US$1.0 billion) in 2025; segment income before tax for our enterprise business decreased by 2.9% from NT$12.9 billion in 2024 to NT$12.5 billion (US$0.4 billion) in 2025; segment income before tax for our international business decreased by 6.9% from NT$2.4 billion in 2024 to NT$2.2 billion (US$0.1 billion) in 2025; and segment income before tax for our other business increased by 50.9% from NT$2.8 billion in 2024 to NT$4.2 billion (US$134.9 million) in 2025. 47 Income Tax Our income tax was NT$9.3 billion and NT$9.8 billion (US$0.3 billion) in 2024 and 2025, respectively. Our effective tax rate decreased slightly from 19.5% in 2024 to 19.4% in 2025. Net Income As a result of the foregoing, our net income attributable to stockholders of the parent was NT$37.2 billion and NT$38.7 billion (US$1.2 billion) in 2024 and 2025, respectively. Our net margin increased from 16.1% in 2024 to 16.3% in 2025. The year ended December 31, 2024 compared with the year ended December 31, 2023 Revenues Our revenues increased to NT$230.0 billion in 2024 as compared to NT$223.2 billion in 2023, mainly due to an increase in revenues generated from consumer business, enterprise business and international business. The details of which are as follows: Consumer Business Our consumer business revenues include mobile service revenues, fixed-line service revenues, sales revenues and other revenues. Consumer business revenues accounted for 61.4% and 60.9% of our revenues in 2023 and 2024, respectively. Our consumer business revenues increased by 2.1% from NT$137.1 billion in 2023 to NT$140.0 billion in 2024, mainly due to increases of mobile service revenues attributed to 5G mobile migration, sales revenues, and fixed broadband revenues, partially offset by a decrease of fixed voice revenues. Mobile services. Our mobile service revenues increased by 3.5% from NT$55.1 billion in 2023 to NT$57.1 billion in 2024 due to an increase of postpaid subscriber numbers, steady 5G migration and roaming service recovery. Fixed-line services. Our fixed-line service revenues slightly increased by 0.7% from NT$42.6 billion in 2023 to NT$42.9 billion in 2024. This increase was due to the increase of data communication and broadband access revenues driven by the successful upsell propelled by the HiNet Higher-Speed promotion plan, partially offset by the decreased voice revenues. Sales. Revenues generated from sales increased by 1.1% from NT$36.8 billion in 2023 to NT$37.2 billion in 2024, due to the stabilized smartphones supply and increased terminal sales. Others. Our other revenues increased by 9.7% from NT$2.6 billion in 2023 to NT$2.8 billion in 2024. This was due to an increase in ICT business revenues. Enterprise Business Our enterprise business revenues include mobile service revenues, fixed-line service revenues, ICT revenues and other revenues. Revenues from our enterprise business accounted for 32.7% and 32.8% of our revenues in 2023 and 2024, respectively. Revenues from our enterprise business increased by 3.3% from NT$73.0 billion in 2023 to NT$75.4 billion in 2024 due to the strong growth of ICT business revenue. Mobile services. Our mobile service revenues increased by 0.4% from NT$9.1 billion in 2023 to NT$9.2 billion in 2024 due to 5G mobile migration. Fixed-line services. Our fixed-line service revenues slightly decreased by 0.6% from NT$34.0 billion in 2023 to NT$33.8 billion in 2024 due to the decreased voice revenues, partially offset by the increase of data communication and broadband access revenues driven by the speed upgrade. 48 ICT Business. Revenues from our ICT business increased by 12.5% from NT$24.7 billion in 2023 to NT$27.8 billion in 2024, due to the growth of projects and recurring revenues for IDC, cloud, cybersecurity, 5G+AIoT and big data related services. Others. Our other revenues decreased by 11.2% from NT$5.2 billion in 2023 to NT$4.6 billion in 2024. This decrease was due to a decrease in the satellite government subsidies. International Business Revenues from international business accounted for 4.1% and 4.3% of our revenues in 2023 and 2024, respectively. Revenues from our international business increased by 7.9% from NT$9.2 billion in 2023 to NT$9.9 billion in 2024, due to the rising demand for leased circuit, IDC, cloud, and integrated ICT solutions. Fixed-line Services. Revenues from our fixed-line services decreased by 5.6% from NT$5.4 billion in 2023 to NT$5.1 billion in 2024, due to the strategic withdraw of international voice services. ICT Business. Revenues from our ICT business increased by 41.4% from NT$2.8 billion in 2023 to NT$4.0 billion in 2024, due to the rising demand for IDC, cloud, and integrated ICT solutions from global clients. Others. Our other revenues decreased by 14.8% from NT$1.0 billion in 2023 to NT$0.8 billion in 2024, due to a decrease from government subsidies for satellites construction. Others Other revenues accounted for 1.8% and 2.0% of our revenues in 2023 and 2024, respectively. Our other revenues increased from NT$3.9 billion in 2023 to NT$4.7 billion in 2024. The increase was due to higher revenues derived from CHPT. Operating Costs and Expenses Our operating costs and expenses include depreciation and amortization expenses, personnel expenses, cost of goods sold, interconnection and service costs, marketing expenses, costs of materials and maintenance, as well as spectrum usage fees. Operating costs and expenses increased by 4.0% from NT$176.2 billion in 2023 to NT$183.2 billion in 2024. This increase was due to increases in personnel expenses, ICT project costs, and utilities expenses. Personnel expenses increased due to adjustments of employee benefit policies, leading to higher salaries, bonuses, and welfare costs. ICT project costs were mainly driven by the growth of ICT business. The increase in utilities expenses was primarily due to the adjustment in electricity prices. Operating Costs and Expenses by Business Segment Consumer Business Our consumer business costs and expenses increased by 2.1% from NT$110.3 billion in 2023 to NT$112.7 billion in 2024, primarily due to (i) adjustments in employee benefit policies, and (ii) increases in maintenance costs, mainly driven by the growth of our core business. Enterprise Business Our enterprise business operating costs and expenses increased by 6.6% from NT$59.7 billion in 2023 to NT$63.6 billion in 2024. This increase was due to an increase in ICT project costs, primarily driven by the robust growth of our ICT business. 49 International Business Our international business operating costs and expenses increased by 7.3% from NT$8.4 billion in 2023 to NT$9.0 billion in 2024, due to the increase in ICT-related costs, which is in turn driven by the growth of our public cloud and ICT business. Others The costs and expenses from our other business increased by 5.9% from NT$2.8 billion in 2023 to NT$3.0 billion in 2024, due to operating growth derived from CHPT. Other Income and Expenses We recorded net other expenses of NT$0.6 billion in 2023 and net other income of NT$0.1 billion in 2024, respectively. The differences between 2023 and 2024 were due to the impairment loss on investment properties and property, plant and equipment in 2023. Income from Operations and Operating Margin As a result of the foregoing, our income from operations increased by 1.1% from NT$46.4 billion in 2023 to NT$46.9 billion in 2024. Our operating margin slightly decreased from 20.8% in 2023 to 20.4% in 2024. Non-operating Income and Expenses Our non-operating income increased from NT$0.6 billion in 2023 to NT$0.9 billion in 2024. The increase was due to an increase in interest income, driven by the increase in acquisition of time deposits and negotiable certificates of deposit. Income before Income Tax As a result of the foregoing, segment income before tax for our consumer business increased by 3.0% from NT$28.9 billion in 2023 to NT$29.7 billion in 2024; segment income before tax for our enterprise business decreased by 10.3% from NT$14.4 billion in 2023 to NT$12.9 billion in 2024; segment income before tax for our international business increased by 11.3% from NT$2.1 billion in 2023 to NT$2.4 billion in 2024; and segment income before tax for our other business increased by 75.7% from NT$1.6 billion in 2023 to NT$2.8 billion in 2024. Income Tax Our income tax was NT$8.9 billion and NT$9.3 billion in 2023 and 2024, respectively. Our effective tax rate increased slightly from 19.0% in 2023 to 19.5% in 2024. Net Income As a result of the foregoing, our net income attributable to stockholders of the parent was NT$37.0 billion and NT$37.2 billion in 2023 and 2024, respectively. Our net margin decreased from 16.6% in 2023 to 16.1% in 2024. 50 B. Liquidity and Capital Resources Liquidity The following table sets forth the summary of our cash flows for the periods indicated: Year Ended December 31 2023 2024 2025 NT$ NT$ NT$ US$ (in billions) Net cash provided by operating activities 74.6 79.2 77.5 2.5 Net cash used in investing activities (50.2 ) (35.3 ) (28.3 ) (0.9 ) Net cash used in financing activities (40.7 ) (41.5 ) (48.5 ) (1.6 ) Effect of exchange rate changes 0.0 0.0 0.0 0.0 Net increase (decrease) in cash and cash equivalents (16.4 ) 2.4 0.7 0.0 Cash and cash equivalents at end of year 33.8 36.2 36.9 1.2 Our primary source of liquidity is cash flow from operations, which represents operating profit adjusted for non-cash items, primarily depreciation and amortization and changes in current assets and liabilities. Notes 23, 24 and 25 to our consolidated financial statements, included elsewhere in this annual report, provide additional details as to our bank loans and bonds payable. We believe that our working capital is sufficient to meet our present cash flow requirements. In 2025, we generated NT$77.5 billion (US$2.5 billion) in net cash from operating activities as compared to NT$79.2 billion in 2024. The decrease was primarily due to a decrease in trade notes and accounts payable and an increase in inventories. In 2024, we generated NT$79.2 billion in net cash from operating activities as compared to NT$74.6 billion in 2023. The increase was primarily due to an increase in income before income tax arising from our operating performance, an increase in contract liabilities from advance receipts of project business, and an increase in trade notes and accounts payable. In 2023, we generated NT$74.6 billion in net cash from operating activities as compared to NT$76.0 billion in 2022. The decrease was primarily due to a decrease in income before income tax arising from our operating performance, an increase in income tax payment and a decrease in trade notes and accounts payable. Historically, our net cash from operating activities has been sufficient to cover our capital expenditures, including ongoing expansion and modernization of our networks. In 2025, our net cash used in investing activities was NT$28.3 billion (US$0.9 billion), a decrease from NT$35.3 billion in 2024. The decrease was primarily due to an increase in proceeds from time deposits and negotiable certificates of deposit with maturities of more than three months partially offset by an increase in financial assets at FVOCI. In 2024, our net cash used in investing activities was NT$35.3 billion, a decrease from NT$50.2 billion in 2023. The decrease was primarily due to an increase in proceeds from time deposits and negotiable certificates of deposit with maturities of more than three months. In 2023, our net cash used in investing activities was NT$50.2 billion, an increase from NT$30.8 billion in 2022. The increase was primarily due to an increase in acquisition and disposal of time deposits and negotiable certificates of deposit with maturities of more than three months. In 2025, our net cash used in financing activities totaled NT$48.5 billion (US$1.6 billion), which mainly reflected NT$38.8 billion in dividends being paid. In 2024, our net cash used in financing activities totaled NT$41.5 billion, which mainly reflected NT$36.9 billion in dividends being paid. 51 In 2023, our net cash used in financing activities totaled NT$40.7 billion, which mainly reflected NT$36.5 billion in dividends being paid. Capital Resources We have historically financed our capital expenditure requirements through operating cash flows and corporate bonds. In future years, the expansion and upgrade of our infrastructures, such as 5G mobile broadband, FTTx, international submarine cables, multi-orbit network, and IDC, introducing AI/automation technology to BSS/OSS, developing innovative solutions, and implementing ESG will be the focus of our capital expenditures. In the meantime, we also expect to make dividend payments on an ongoing basis. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information.” Furthermore, we may require working capital from time to time to finance purchases of materials for our maintenance and other overhead expenses. Over the next twelve months, we expect to implement our strategies about capital expenditures, dividend payments, debt repayments and other commitments by primarily relying on cash generated from operations, corporate bonds and loans from commercial banks. As of December 31, 2025, our primary source of liquidity was NT$36.9 billion (US$1.2 billion) in cash and cash equivalents. In addition, the unused line of credit for unsecured bank loans and secured bank loans amounted to NT$27.0 billion (US$0.9 billion) and NT$15.0 million (US$0.5 million), respectively, as of December 31, 2025. As of December 31, 2025, we had bonds payable in the amount of NT$25.2 billion (US$0.8 billion) at interest rates ranging from 0.42% to 1.73%. As of December 31, 2025, our subsidiary, Senao International Co., Ltd. had short-term unsecured loans of NT$0.3 billion (US$10.8 million) at interest rates ranging from 2.05% to 2.08%. As of December 31, 2025, our subsidiary, Light Era Development Co., Ltd. had long-term secured loans of NT$1.6 billion (US$51.0 million) at interest rates of 2.10%. As part of the government’s effort to upgrade the existing telecommunications infrastructure, we and other public utility companies were required by the ROC government to contribute a certain amount of money to a Piping Fund, administered by the Taipei City Government. A total of NT$1.0 billion was contributed by us on August 15, 1996. This fund is used to finance various telecommunications infrastructure projects. We accounted for the contribution as other financial assets on our consolidated balance sheets. Note 41 to our consolidated financial statements included elsewhere in this annual report provides a description of the assets that are pledged as collaterals for bank loans, custom duties of the imported materials and warranties of contract performance, the trust account the Company entrusts to Land Bank of Taiwan for fund control and property rights management. Capital Expenditures Our capital expenditures in 2023, 2024 and 2025 were mainly to support operations. We have financed our capital expenditures using cash flows operations and corporate bonds. The following table sets forth a summary of our capital expenditures for the periods indicated. Year Ended December 31 2023 2024 2025 (in billions of NT$, except percentages) Capital Expenditures: Mobile communications business 11.1 36 % 9.7 34 % 8.2 30 % Others 19.6 64 % 19.1 64 % 19.5 70 % Total capital expenditures 30.7 100 % 28.8 100 % 27.7 100 % 52 The following table sets forth a summary of our planned capital expenditures for the year ending December 31, 2026. Year Ending December 31, 2026 (in billions of NT$, except percentages) Capital Expenditures: Mobile communications business 7.7 24 % Others 24.2 76 % Total capital expenditures 31.9 100 % We expect our total capital expenditures to be approximately NT$31.9 billion in 2026. Our capital expenditures for 2026 are planned to be allocated to new construction of domestic and international submarine cable, the deployment of multi-orbit satellite networks, the expansion of cloud AI internet data center, the investments in maintaining a competitive edge of mobile and fix broadband business, the enhancement regarding the resilience of power and air conditioning equipment, as well as information security and cybersecurity infrastructure. We expect to finance these capital expenditures with our cash flows from operations. 53 Contractual Obligations Set forth below are our total contractual obligations as of December 31, 2025. Payments Due by Period Total Less than 1 Year 1-3 years 3-5 years More than 5 years (in billions of NT$) Contractual Obligations(1) Short-term loans 0.3 0.3 — — — Long-term loans 1.6 — 1.6 — — Bonds payable 25.8 2.2 15.3 7.3 1.0 Lease liabilities(2) 11.2 3.9 5.4 1.7 0.2 Total 38.9 6.4 22.3 9.0 1.2 (1)Unfunded defined benefit obligation is not included as the schedule of payments is difficult to determine. We made pension contributions of approximately NT$1.1 billion (US$35.6 million) in 2025 and expected to make pension contributions of approximately NT$1.1 billion (US$34.9 million) in 2026. See Note 29 to our consolidated financial statements for additional details regarding our pension plan. (2)Operating lease obligations are described in Note 38 to our consolidated financial statements included elsewhere in the annual report. As of December 31, 2025, we had remaining commitments under non-cancelable contracts with various parties, including the acquisition of property, plant and equipment of NT$21.7 billion (US$0.7 billion) and acquisition of telecommunications-related inventory of NT$8.0 billion (US$0.3 billion). We committed that when our ownership interest in NCB is greater than 25% and NCB encounters financial difficulty or capital adequacy ratio of NCB cannot meet the related regulation requirements, we will provide financial support to assist NCB to maintain in healthy financial condition. We entered into long term energy purchase contracts with the suppliers, under which the contract terms specify the performance periods, quantities and prices that we are required to fulfill. Inflation We do not believe that inflation in Taiwan has had a material impact on our results of operations in 2023, 2024 and 2025. Recent Accounting Pronouncements Major differences between IFRSs and Taiwan IFRSs While we have adopted Taiwan IFRSs for ROC reporting purposes, we adopt IFRSs for certain filings with the SEC, including our annual reports on Form 20-F for the year ended December 31, 2013 and thereafter. Taiwan IFRSs differs from IFRSs in certain significant respects, including to the extent that any new or amended standards or interpretations applicable under IFRSs may not be timely endorsed by the FSC. Therefore, these pronouncements will not be applicable to Taiwan IFRSs until endorsed by the FSC. Some of the major differences between IFRSs and Taiwan IFRSs that are relevant to us as of the date of this annual report are set forth below. •the “income taxes on unappropriated earnings” should be recognized at the year of earnings under IFRSs, while it should be recognized at the year of distribution under Taiwan IFRSs. •prior to incorporation, according to the laws and regulations applicable to state-owned enterprises in Taiwan, we recorded revenues from fixed-line service at the time the connection service was performed or the prepaid card was sold. Upon incorporation, net assets greater than capital stock was credited as additional paid-in capital. Part of our additional paid-in capital was from unearned revenues from fixed-line services as of that date. Under IFRSs, following the revenues recognition guidance, the above service revenues should be treated as deferred income and recognized over the time when the service is continuously provided or as consumed. Therefore, upon our first adoption of IFRSs, we should retrospectively decrease additional paid-in capital while increasing unappropriated earnings on the transition date of January 1, 2012. There is no difference in recognition of unearned revenues or 54 deferred income between IFRSs and Taiwan IFRSs. However, according to the guidance released by the TWSE in March 2012, which is a part of Taiwan IFRSs, the additional paid-in capital under ROC GAAP that is not specifically promulgated under Taiwan IFRSs should not be adjusted on the transition date of January 1, 2012. Therefore, we retain such additional paid-in capital under Taiwan IFRSs. It is difficult for us to determine the differences between Taiwan IFRSs and IFRSs on our financial statements as any new or amended standards or interpretations applicable under IFRSs may not be timely endorsed by the FSC. Other recent accounting pronouncements under IFRSs For a summary of new standards, amendments and interpretations issued under IFRSs but not effective for 2025 and which have not been adopted early by us, see Note 5 to our consolidated financial statements included elsewhere in this annual report. C. Research and Development, Patents and Licenses Our research and development priorities for 2025 included innovative Information and Communication Technology (ICT) services, advanced cloud-network integration technologies, and energy-saving technologies. Key research and development achievements and projects are described as follows: 1.Innovative Information and Communication Technology (ICT) services •AIoT: AI-optimized intersection traffic signal adaptive control using connected-vehicle data and edge computing, AI-powered traffic incident decision support based on video analytics and deep learning, technology-enabled traffic and environmental enforcement using multi-sensor monitoring and image recognition, smart inspection using unmanned vehicles with high-resolution imaging and automated route planning, and smart port and harbor leveraging IoT sensing and digital twin technologies, etc. •Smart life: metaverse platform, metaverse virtual exhibitions, live holographic performance, product recommendation chatbot, AI-powered SMS fraud prevention, monitoring system for home-based hospitalization, etc. •Artificial intelligence: speech recognition and generation, text analysis and generation, customer service chatbots, AI Platform-as-a-Service (AI PaaS), human activity recognition, facial recognition access control, domain-specific large language models, multimodal-content generation, etc. •Cybersecurity: Post-Quantum Cryptography (PQC) certificates, AI fraud prevention, Fast Identity Online (FIDO), mobile authentication, blockchain and smart contracts, zero trust security, cybersecurity for vehicle-to-everything (V2X), etc. 2.Advanced cloud-network integration technologies •Network communication: open all-photonic network (Open APN), Wi-Fi 7 wireless network, 5G/5G-Advanced SA network, 5G edge computing, 5G private network, 5G Network Open API, multi-orbit satellite network, network functions virtualization/cloudification, ultra-high-speed access network, etc. •Network operation, maintenance and management: autonomous network management, network digital twin, mobile customer experience analysis, mobile base station energy saving, telco cloud management, smart home network management, etc. •Cloud computing: multi-cloud management platform, Data-Centric Infrastructure (DCI) architecture, Remote Direct Memory Access (RDMA) accelerator, cloud Data Processing Unit (DPU) computing technology, edge computing platform, Model Context Protocol (MCP), etc. 3.Energy-saving technologies •energy-saving solutions for data centers and networks, immersion rack performance verification technology, low-carbon power supply dispatch technology, etc. 55 In 2025, we applied for a total of 161 patents and obtained 148 patents. We also received 25 major awards in Taiwan and internationally. D. Trend Information See “—Overview” for a discussion of the most significant recent trends that have had, and in the future may have, a material impact on our results of operations, financial condition and capital expenditures. In addition, see discussions included in this Item for a discussion of known trends, uncertainties, demands, commitments or events that we believe are reasonably likely to have a material effect on our net operating revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition. E. Critical Accounting Estimates Information about critical accounting judgments and key sources of estimation uncertainty and assumption, please refer to Note 4 to our consolidated financial statements included in this annual report for details.