China Telecom Corp. Ltd. Class A · SSE:601728
China Telecom Corp. Ltd. Class A — H1 2010 Earnings Presentation
32 slides from China Telecom Corp. Ltd. Class A's earnings presentation, Aug 25, 2010
Slide 1: Interim Results 2010
Interim Results 2010 China Telecom Corporation Limited 25 August 2010 | 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 sta
Slide 3: Management Team
Management Team Mr. Wang Xiaochu Chairman & CEO Mr. Shang Bing President & COO Madam Wu Andi Executive Vice President & CFO 3
Slide 4: Agenda
Agenda Overview Business Review Financial Performance 4
Slide 5: Overview
Overview
Slide 6: Highlights
Highlights Effective integrated Mobile business growing operation driving rapidly with wireline remarkable earnings business structure further recovery optimized To strengthen Accelerate proactive differentiation broadband deployment to development leveraging strengthen network edge “Mobile Internet
Slide 7: Solid Results
Solid Results Adjusted Results 1H2009 1H2010 Change Operating Revenue 102,554 107,552 4.9% (RMB Mil) EBITDA 43,339 45,759 5.6% (RMB Mil) EBITDA Margin 42.3% 42.5% 0.2pp Net Profit 8,412 8,811 4.7% (RMB Mil) EPS 0.104 0.109 4.7% (RMB) Free Cash Flow (RMB Mil) 19,652 18,591 -5.4% 2009.12 2010.6 Change
Slide 8: Remarkable Earnings Recovery
Remarkable Earnings Recovery Net Profit Profitable Scale Development RMB Mil Leverage differentiated edge of integrated operation of mobile, wireline & Internet to ramp up mobile business expansion & continuous overall revenue growth Tilting resources towards high growth & 8,412 8,811 high return bu
Slide 9: Revenue Growth Drivers
Revenue Growth Drivers Overall -7.9pp +3.8pp +0.1pp +4.9pp +4.8pp -0.8pp Revenue +4.9% RMB Mil 4,905 -864 107,552 102,554 -8,145 5,051 3,947 104 1H2009 Wireline Wireline Wireline Mobile Mobile Mobile 1H2010 Voice Data Others Voice Data Others 9
Slide 10: Rapid Mobile Expansion with Robust Quality
Rapid Mobile Expansion with Robust Quality Service Revenue Highlights RMB Mil 22,770 17,189 Mobile sub base expanding rapidly: 1H2010 net add 18.43 mil 12,814 Revenue & sub base growing in tandem with relatively stable ARPU: 1H2010 RMB58.1 vs FY2009 RMB59.5 Mobile Data growing rapidly: 1H2009 2H2009
Slide 11: Optimizing Wireline Business Structure to Proactively Alleviate Risk
Optimizing Wireline Business Structure to Proactively Alleviate Risk Optimized Wireline Business Structure Proactively Alleviating Risk RMB Mil PAS Revenue -56.5% 6,567 60.1% RMB Mil 52.6% 2,859 86,552 82,458 1H2009 1H2010 Inter-district 8.9% 45,492 Call Revenue -24.9% 49,543 RMB Mil 3,384 2,541 -19
Slide 12: Accelerate Proactive Broadband Deployment to Strengthen Network Edge
Accelerate Proactive Broadband Deployment to Strengthen Network Edge Speed Up Broadband Enhance Core CAPEX Development Competence RMB Mil Adjusted 2010 extra CAPEX: RMB5 bil 2010 Budget 2011 extra CAPEX: ~RMB10 bil (Adjusted 2011 provisional CAPEX budget (≈ RMB50 bil) to be determined in early 2011
Slide 13: Full Services Integrated Operation Gaining Momentum & Edge
Full Services Integrated Operation Gaining Momentum & Edge Differentiated & integrated operation driving corporate & customers’ customers’ value Converged platforms, products, services & channels > 58 mil wireline to facilitate integrated broadband subs operation Mobile subs bundling penetration: Se
Slide 14: Differentiated Operation Enhancing Core Competence
Differentiated Operation Enhancing Core Competence 3rd party apps Leveraging mobile internet via extensive Enhancing Core Competence development to accelerate Self- transformation & developed cooperation innovation to capture seeded apps future growth opportunities Providing superior infrastructure
Slide 15: Business Review
P ther CHINA TELECOM Business Review
Slide 16: Revenue Breakdown
Revenue Breakdown RMB Mil 1H2009 1H2010 Change Wireline 86,552 82,458 -4.7% Voice 1 41,060 32,915 -19.8% Data 42,567 46,514 9.3% Internet Access 23,181 26,739 15.3% VAS & Integrated Information Services 13,859 13,713 -1.1% Managed Data & Leased Line 5,527 6,062 9.7% Others 2,925 3,029 3.6% Mobile 16
Slide 17: Full Service Revenue Structure
Full Service Revenue Structure 1H2010 Revenue Structure Revenue Structure Further Optimized RMB Mil Others 9.3% Data ( 10.6pp) 34.5% Mobile revenue as growth driver ( 11pp) Mobile revenue/Total revenue: Voice 23.3% ( 7.7pp yoy) 56.2% ( 0.4pp) Mobile revenue 56.8% yoy Mobile 25,094 Further optimized
Slide 18: Wireline Voice Services
Wireline Voice Services Access Lines in Services Major Initiatives Mil 2009.6 2009.12 2010.6 To stabilize voice Household 114.8 112.2 111.1 consumption and enhance Government & Enterprise 30.8 32.1 33.6 customer stickiness & value by promoting package deals Public Telephone 15.3 15.1 14.8 & enrichin
Slide 19: Accelerating Wireline Broadband Development
Accelerating Wireline Broadband Development Broadband Access Revenue MajorInitiatives Major Initiatives RMB Mil 15.6% 26,302 22,745 81.2 To expand customer base & sustain leading 78.4 market position Accelerate fiber access network deployment & bandwidth upgrade 1H2009 1H2010 Broadband ARPU (RMB) En
Slide 20: Wireline VAS & Integrated Information Services
Wireline VAS & Integrated Information Services Revenue Major Initiatives RMB Mil 13,859 13,713 To capture growing demand for 7.0% informatization by enriching content of 12,879 12,031 VAS & integrated information services To expand services usage & 1H2009 1H2010 penetration by follow-on targeted Ex-
Slide 21: Mobile Services Gaining Traction
Mobile Services Gaining Traction Mobile KPIs Trending Upward Mobile Data Service 331 2009.12 2010.6 Change MOU 311 Min 22,770 “189 mailbox” subs (Mil) 14.06 28.56 1x 77.7% Mobile Service “eSurfing Live” subs (Mil) 4.31 9.84 1x Revenue 12,814 RMB Mil “eSurfing” Video subs (Mil) 0.1 0.5 4x 8,668 Mobil
Slide 22: Solid Execution Driving to Success
Solid Execution Driving to Success Product R&D Network • Excel in-house development to • Promote broadband drive high-value traffic network upgrade to • Open platform to proliferate third- support high bandwidth party products business development • Optimize EVDO network to strengthen wireline- wire
Slide 23: Financial Performance
P taer CHINA TELECOM ay Financial Performance
Slide 24: Key Financial Information
Key Financial Information RMB Mil 1H2009 1H2010 Change Operating Revenue 102,554 107,552 4.9% Operating Expenses 88,827 93,997 5.8% Depreciation & Amortization 26,029 25,839 -0.7% Network Operations & Support 20,133 22,812 13.3% Incl: Mobile Network Leasing 3,583 6,365 77.6% Personnel 16,351 17,196
Slide 25: Optimized Cost Structure
Optimized Cost Structure Operating Expenses Optimized Cost Structure as a % of Operating Revenue Depreciation & Amortization: 1.4pp via stringent CAPEX control in prior years 86.6% 87.4% Cash operating expenses: 2.2pp to strengthen full services operation SG&A： 1.2pp mainly due to 25.4% 24.0% measur
Slide 26: Proactive Cost Strategy to Support Full Services Development
Proactive Cost Strategy to Support Full Services Development Increase marketing & servicing initiatives, tilting towards high growth & high 1 • return businesses SG&A • Implement stringent handset subsidy policy, reducing subsidy-to-mobile service revenue % gradually • Compress G&A expenses, strictl
Slide 27: Rationalized CAPEX Structure
Rationalized CAPEX Structure Accelerate broadband access network CAPEX Structure construction & optimization to enhance capability for servicing bandwidth- intensive business & consolidate leading edge for sustainable development 8.7 mil broadband access capacity in 1H2010 Customer access bandwidth
Slide 28: Solid Financial Strength
Solid Financial Strength Total Debt/Total Capitalization Net Debt/EBITDA* 32.0% 0.97 -4.5pp -0.31x 0.66 27.5% 1H2009 1H2010 1H2009 1H2010 Solid financial strength, strong free cash flow & robust repayment capability well support sustainable development Note: * Net Debt/Simple Annualized 1H2010 EBITD
Slide 29: Promoting Coordinated Sustainable Development via Financial Management Transformation
Promoting Coordinated Sustainable Development via Financial Management Transformation To reinforce financial To accelerate financial decision support & value structure optimization management capability with to promote change of strategy focused & value corporate development management oriented mode
Slide 30: Thank You
Thank You For further information & enquiries, please contact our Investor Relations Department at ir@chinatelecom-h.com www.chinatelecom-h.com30
Slide 31: Appendix 1
Appendix 1 Extracted from unaudited consolidated statement of comprehensive income for the 6 months ended 30 June 2010 (incl. upfront connection fees) RMB Mil 1H2009 1H2010 Operating Revenue 103,146 107,817 Upfront Connection Fees 592 265 Operating Expenses (88,827) (93,997) Net Finance Costs (2,268
Slide 32: Appendix 2
Appendix 2 Extracted from unaudited consolidated statement of financial position as at 30 June 2010 (incl. upfront connection fees) RMB Mil 31.12.2009 30.6.2010 Current Assets 60,936 56,325 Non-current Assets 365,584 355,271 Total Assets 426,520 411,596 Current Liabilities 143,481 136,616 Non-curren