32 slides from China Telecom Corp. Ltd. Class A's earnings presentation, Aug 19, 2015
Slide 1: 2015 Interim Results
2015 Interim Results China Telecom Corporation Limited 19 Aug 2015 | www.chinatelecom-h.com
Slide 2: Forward-looking Statements
Forward-looking Statements Certain statements contained in this document may be viewed as “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933 (as amended) and Section 21E of the U.S. Securities Exchange Act of 1934 (as amended). Such forward-looking stat
Slide 3: Presented by
Presented by Mr. Wang Xiaochu Chairman & CEO Mr. Yang Jie President & COO Mr. Ke Ruiwen Executive Vice President 3 | 2015 Interim Results
Slide 4: Overview, Business Review, Financial Performance
1. Overview 2. Business Review 3. Financial Performance 4 | 2015 Interim Results
Slide 5: Highlights
Highlights Fundamentals remained solid despite tax impact of VAT Reform; 1 revenue outperformed industry average 2 4G gaining edges & momentum fast Tower sharing enabled quick & effective 4G network roll-out to 3 capture window of opportunity; also expected to enhance long-term value for the Company
Slide 6: Solid Fundamentals
Solid Fundamentals … maintained stable operating performance despite additional 5 months yoy tax impact of VAT Reform 1H2014 1H2015 Change Operating Revenue (RMB Mil) 165,973 164,953 -0.6% Service Revenue (RMB Mil) 146,965 147,022 0.0% EBITDA (RMB Mil) 50,538 50,739 0.4% EBITDA Margin 34.4% 34.5% 0.
Slide 7: Maintained Double-digit Earnings Growth Excluding Tax Impact of VAT Reform
Maintained Double-digit Earnings Growth Excluding Tax Impact of VAT Reform Pro forma Adjustments to Eliminate Tax Impact Pro forma 3.5% yoy RMB Mil 1H2015 of VAT Reform 1H2015 Of which, Service Reported Operating Revenue Revenue 164,953 +8,288 173,241 (Net of Tax) 4.7% yoy Less: Operating Expens
Slide 8: Revenue Outperformed Industry Average
Revenue Outperformed Industry Average … fueled by fast growing emerging business Service revenue growth of China Telecom in 1H2015 +0.04% > -4.09% Telecommunications industry revenue growth in 1H2015* Emerging Business Revenue Data Traffic Operation, ICT & RMB Mil Internet Applications Revenue RMB M
Slide 9: 4G Gaining Edges & Momentum Fast
4G Gaining Edges & Momentum Fast Leverage LTE FDD licensing & tower sharing to accelerate growth Network Advantages Terminal Advantages Leverage global mainstream 4G technology & Enriched selection with attractive prices: spectrum advantages to build 4G network fast 160 models (now) → 300 models
Slide 10: Tower Sharing Expected to Enhance Long-term Value
Tower Sharing Expected to Enhance Long-term Value Value Drivers Potential Value to China Telecom Tower Sharing Quick & effective 4G network Synergy roll-out to enhance time-to- market & CAPEX saving Gain on tower asset disposal; Scale unit rental to reduce as tenancy Benefits ratio progressively
Slide 11: Focused Investment in 4G & Fibre Broadband
Focused Investment in 4G & Fibre Broadband … to strengthen network advantage Tower sharing effectively alleviates prime sites CAPEX shortage, driving fast & effective 4G network RMB Mil roll-out Maintained 107,800 ≈70% of 60k towers provided by 79,992 80,300 2015E CAPEX budget TowerCo for use in 1
Slide 12: Speed Upgrade & Tariff Reduction
Speed Upgrade & Tariff Reduction … to closely follow up & strive to accommodate regulatory requirements for achieving win-win Launched various measures in May in active response to government policy, leading to pressure on revenue & profit Encouraged customers to increase usage & bandwidth upon
Slide 13: Firmly leverage the Opportunities of "Internet+"
Firmly leverage the Opportunities of “Internet+” … to accelerate comprehensive transformation & enhance value Opportunities … “Made-in-China 2025” “Internet+” Family “Internet+” Internet Big Data Applications Industrial Cloud Internet Internet Computing Finance Mobile Internet of Internet Things Sca
Slide 14: Overview, Business Review, Financial Performance
1. Overview 2. Business Review 3. Financial Performance 14 | 2015 Interim Results
Slide 15: Revenue Breakdown
Revenue Breakdown … steady revenue despite tax impact of VAT Reform & change in sales model RMB Mil 1H2014 1H2015 Change Mobile 78,590 78,307 -0.4% Service Revenue 61,979 62,346 0.6% Incl.: Voice 30,148 24,889 -17.4% Data 31,831 37,410 17.5% Sales of Terminals 16,611 15,961 -3.9% Wireline 87,383 86,
Slide 16: 4G Gaining Momentum Fast
4G Gaining Momentum Fast 4G Terminal Users Mil LTE FDD licensing accelerated 29 4G & mobile business growth 17 4G terminal users: 29 mil (22 mil vs 2014.12) 4G ARPU: ≈RMB86 (vs Mobile ARPU: RMB55.1) 7 2 4G terminal user monthly average data traffic ≈700MB (vs 3G/4G: 311MB) 2014.9 2014.12 2015.3 2
Slide 17: Sustained Rapid Mobile Data Growth
Sustained Rapid Mobile Data Growth Leverage 4G to boost business scale Mobile Data Revenue 3G/4G Handset Data Traffic RMB Mil 37,410 31,831 212 KTB 22,461 15,748 120 KTB 311 MB 218 MB 1H2014 1H2015 1H2014 1H2015 Handset Internet Access Revenue Other Mobile Data Revenue 3G/ 4G Handset Sub Monthly Ave
Slide 18: Bandwidth Upgrade Shaped Solid Wireline Broadband Growth
Bandwidth Upgrade Shaped Solid Wireline Broadband Growth Wireline Broadband Revenue RMB Mil 37,561 Healthy subscriber growth effectively drove 36,404 revenue growth 59.4 57.8 Capitalize on the network edges established over the years to accelerate comprehensive end-to-end upgrade & promote 50/ 1
Slide 19: Comprehensive Development of Wireline VAS & Integrated Information Services
Comprehensive Development of Wireline VAS & Integrated Information Services Revenue RMB Mil IDC/ Cloud/ Big Data: Construct the largest 20,923 19,873 “8+2+X”* Cloud resources deployment in China with over 100k cabinets in operation; forge leading Cloud computing & Big Data service capabilities i
Slide 20: Accelerate Innovation
Accelerate Innovation … to strengthen differentiated edges & create new sources of revenue & profit Actively Explore Build Fast “Internet+”: Target 4 key strategic areas & 10 Expand Scale major projects to “e-Surfing security”: promote upgrade of “Cloud, pipe & device” traditional industries compreh
Slide 21: Near-term Priorities
Near-term Priorities Strengthen Comprehensive In-depth Reform Further Fundamental Business: reinforce “sub- promote dividing” performance evaluation innovation & units with performance contract & entrepreneur “top-down” service support system Scale Development Attain vibrancy Emerging Business:
Slide 22: Overview, Business Review, Financial Performance
1. Overview 2. Business Review 3. Financial Performance 22 | 2015 Interim Results
Slide 23: Key Financial Information
Key Financial Information RMB Mil 1H2014 1H2015 Change Operating Revenue 165,973 164,953 -0.6% Operating Expenses 148,211 147,799 -0.3% Depreciation & Amortization 32,776 33,585 2.5% Network Operations & Support 29,332 37,224 26.9% Personnel 24,642 28,079 13.9% SG&A 36,943 25,062 -32.2% Incl.: Mobil
Slide 24: Optimized Resources Deployment to Sustain Growth
Optimized Resources Deployment to Sustain Growth 1H2014 1H2015 Change Operating Expenses as % of 89.3% 89.6% 0.3pp Operating Revenue Mainly due to higher CAPEX, esp. 4G Depreciation & Amortization 19.7% 20.4% 0.7pp investment Mainly due to network maintenance quality Network Operations & enhanceme
Slide 25: Highly Effective Investment to Strengthen Network Edges & Return
Highly Effective Investment to Strengthen Network Edges & Return CAPEX Structure Investment tilted toward high-growth & high-return businesses & areas Mobile Network 1H2015 37.8% 4G network 49.9% CAPEX (RMB) 17.8 bil # of base stations 320k (140k) Broadband & Internet 38.3% Broadband & Internet
Slide 26: VAT Reform: Short-term Pain, Long-term Gain
VAT Reform: Short-term Pain, Long-term Gain Moderating monthly average pro forma impact on net profit of VAT Reform: Monthly average for Jun – Dec 2014: ≈RMB540 mil Monthly average for Jan – Jun 2015: ≈RMB460 mil Remark: Refer to slide 7 for the calculation explanation & assumptions of the above
Slide 27: Healthy Financial Strength
Healthy Financial Strength … strong financial position to support sustainable scale development Total Debt/ Total Capitalization Net Debt/ Simplified Annualized EBITDA 25.8% 0.79 0.66 23.5% 2014.6 2015.6 1H2014 1H2015 27 | 2015 Interim Results
Slide 28: Deepen Financial Reform to Strengthen Value Management
Deepen Financial Reform to Strengthen Value Management Further optimize the Continue the “three-in-one” establishment of management mechanism nationwide centralized – budgeting, resources MSS to drive allocation & performance management reform & evaluation enhance efficiency Fully excel financial St
Slide 29: Thank You!
Thank You! “No. 1 Overall Best “No. 1 Asia’s “No. 1 Asia’s Most Managed Company Best Managed Honored in Asia 2014” Company 2014” Company 2014” For further information & enquiries, please contact our Investor Relations Department at 29 | 2015 Interim Results ir@chinatelecom-h.com or visit www.chinate
Slide 30: Appendix - Extracted from unaudited consolidated statement of comprehensive income
Appendix 1 - Extracted from unaudited consolidated statement of comprehensive income for period ended 30 Jun 2015 RMB Mil 1H2014 1H2015 Operating Revenue 165,973 164,953 Operating Expenses (148,211) (147,799) Net Finance Costs (2,736) (2,160) Investment Income, Share of Profit/ (Loss) of Associates
Slide 31: Appendix - Extracted from unaudited consolidated statement of financial position
Appendix 2 - Extracted from unaudited consolidated statement of financial position as at 30 Jun 2015 RMB Mil 2014.12.31 2015.6.30 Current Assets 59,543 68,804 Non-current Assets 501,731 504,151 Total Assets 561,274 572,955 Current Liabilities 206,325 212,025 Non-current Liabilities 64,841 65,139 Tot
Slide 32: Appendix - Selected Operating Metrics for 1H2015
Appendix 3 - Selected Operating Metrics for 1H2015 Subscriber (Mil) 2014.12 2015.6 Change Mobile 185.62 191.44 5.82 Incl: 3G/4G 118.63 131.00 12.37 Wireline Broadband 106.95 109.56 2.61 Access Lines in Services 143.56 139.35 -4.21 Incl: Household 90.87 87.77 -3.10 Government & Enterprise 40.88 40.90