36 slides from China Telecom Corp. Ltd. Class A's earnings presentation, Mar 28, 2018
Slide 1: 2017 Annual Results
2017 Annual Results China Telecom Corporation Limited 28 March 2018 | 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. Yang Jie Chairman & CEO Mr. Liu Aili President & COO Mr. Gao Tongqing Executive Vice President
Slide 4: Overview
Overview Business Review Financial Performance
Slide 5: Highlights
Highlights 1 Revenue growth continued; profitability enhanced further 2 Innovative convergence achieved prominent results; business scale expanded rapidly 3 Step-up transformation accelerated; core corporate competitiveness bolstered 4 Deepened reform and accelerated transformation; enhancing operat
Slide 6: Solid Results
Solid Results 2016 2017 Change Operating Revenue (RMB Mil) 352,534 366,229 3.9% Service Revenue (RMB Mil) 309,812 331,044 6.9% EBITDA (RMB Mil) 95,162 102,171 7.4% EBITDA Margin 30.7% 30.9% 0.2pp Net Profit (RMB Mil) 18,018 18,617 3.3% EPS (RMB) 0.223 0.230 3.3% Notes: Unless otherwise stated in thi
Slide 7: Revenue Growth Accelerated and FCF Improved
Revenue Growth Accelerated and FCF Improved Accelerated Service Revenue Service Revenue Grew Rapidly Growth Surpassed Industry FCF Turned Positive RMB Mil RMB Mil 331,044 6.9% 6.6% 7,267 5.6% 309,812 6.9% 5.5% 2016 2017 Industry China Telecom -7,648 2016 2017 2016 2017 Source: Industry growth is c
Slide 8: Rapid Expansion of Five Ecospheres
Rapid Expansion of Five Ecospheres Intelligent Connections Wireline Mobile subs 4G subs Broadband subs FTTH subs Revenue 4.7% . 249.96Mil 182.04Mil 133.53Mil 126.17Mil yoy (16.3% yoy) (49.4% yoy) (8.5% yoy) (19.0% yoy) Smart Family New ICT Application Revenue Revenue Revenue RMB6.8 Bil (42.2%
Slide 9: Raise Dividend to Reward Shareholders
Raise Dividend to Reward Shareholders Dividend per share HKD The Board of Directors recommends to the shareholders a final dividend of 0.115 HK$0.115 per share for 2017 0.105 0.01 0.095 0.01 • Proactively addressing shareholders’ demand for cash returns and with due regards to short term capital
Slide 10: Declining CAPEX with Structure Optimized Continuously
Declining CAPEX with Structure Optimized Continuously CAPEX 2017 CAPEX Structure RMB Mil 4G Network 40.6% 1.9pp 96,817 Broadband & Internet 35.8% 2.1pp Information & Application Services 9.6% 2.1pp 8.4% 88,712 IT Support 4.0% 0.1pp Infrastructure & Others 10.0% 2.0pp 15.5% 75,000 100.0% 201
Slide 11: Responding to New Speed Upgrade and Tariff Reduction
Responding to New “Speed Upgrade and Tariff Reduction” The Company will mitigate the impact with its own effort by accelerating step-up transformation, driving the convergence of information technology and government services, social administration, livelihood assurance and other areas, boosting gro
Slide 12: 5G: Planning Ahead
5G: Planning Ahead • Proactive exploration of business models led by application • Close tracking and in-depth participation of 5G standard R&D and setting • Progressive and demand-driven deployment with 4G/5G coordination • Return-focused and precision investment 2020 Scale commercial use 2019 Comm
Slide 13: Deepening Reform: Full Steam Ahead
Deepening Reform: Full Steam Ahead Break bottlenecks in systems & mechanisms Innovate operational management model Fully activate all factors Facilitate corporate step-up transformation Focus on Supply-Side Sub-dividing Structural Reform Performance Evaluation Units Organizational Structure & Op
Slide 14: Step-up Transformation Enhancing Competitiveness
Step-up Transformation Enhancing Competitiveness Building Building first- Building Opportunities Cyberpower class enterprise better lives • Supply-Side Structural Innovation Harmonization Green Openness Sharing Reform Strengthen Information Deepen Enhance Total Factor • Cyberpower Infrastructure App
Slide 15: Excellence in Corporate Governance Well-Recognized
Excellence in Corporate Governance Well-Recognized “Platinum Award – “No. 1 Excellence in Best Managed Company Environmental, in Asia” Social and Corporate Governance” “The Best of Asia – “Asia’s Icon on Most Honored Company” Corporate Governance” We are grateful for the long-time support from capit
Slide 16: Business Review
Overview Business Review Financial Performance
Slide 17: Revenue Breakdown
Revenue Breakdown RMB Mil 2016 2017 Change Mobile 172,298 180,535 4.8% Service Revenue 137,686 153,776 11.7% Incl.: Voice 44,197 39,415 -10.8% Data 93,374 114,258 22.4% Incl.: Handset Internet Access 68,263 90,865 33.1% Sales of Terminals 34,612 26,759 -22.7% Wireline 180,236 185,694 3.0% Service Re
Slide 18: Enriching Convergence Offerings to Accelerate Scale Expansion
Enriching Convergence Offerings to Accelerate Scale Expansion Mobile net add Wireline broadband net add e-Surfing HD (IPTV) net add Scale expansion accelerated 34.96Mil 10.41Mil 24.43Mil (2016: 17.10Mil) (2016: 10.06Mil) (2016: 20.95Mil) Increasing convergence rate e-Surfing HD 4K HD Flexible conver
Slide 19: Accelerating Mobile Scale Expansion
Accelerating Mobile Scale Expansion Mobile Service Revenue Subs Market Share RMB Mil 153,776 Mobile ARPU 18.1% RMB 17.6% 137,686 10.5% 11.7% 55.1 16.0% 16.2% 4G ARPU RMB 2016 2017 65.5 4G Mobile yoy growth 2016.12 2017.12 Handset Internet Access Revenue RMB Mil 90,865 Strengthening content Handset
Slide 20: Fibre Edge Expediting Wireline Growth
Fibre Edge Expediting Wireline Growth Wireline Service Revenue Wireline Broadband Access Revenue RMB Mil RMB Mil 172,126 177,268 76,805 76,744 Wireline Broadband 3.0% ARPU 1.9% RMB 49.8 2016 2017 2016 2017 yoy growth Subs Bandwidth e-Surfing HD (IPTV) Revenue RMB Mil 6,431 % of >100Mbps subs 49.2% 4
Slide 21: Emerging Business Growing Rapidly
Emerging Business Growing Rapidly Revenue Family Cloud subs 20% yoy >10Mil IDC revenue Cloud revenue Big Data revenue (1st year of debut) 19.9% yoy 61.5% yoy 87.6% yoy Flourishing product portfolio Actively developing DICT Smart Home Networking, Family Cloud, Webcam Surveillance, Focus on de
Slide 22: Superior Networks Forging Core Competitive Edge
Superior Networks Forging Core Competitive Edge The world’s largest FTTH network The first nationwide full coverage LTE-FDD 4G network • Basic full coverage in residential • Basically completed 800MHz refarm areas in cities, towns and villages; FTTH home pass coverage 96% • 4G BTS reached 1.17 mil •
Slide 23: Well-defined Initiatives for Further Scale Development
Well-defined Initiatives for Further Scale Development Mobile / 4G Wireline Broadband • Further promote large • Promote 6-mode • Focus on quality, 200/100 • Enhance “Same-day data traffic package plans handsets and seize 2nd Mbps fibre broadband as installation and SIM opportunities core service; la
Slide 24: 2018 Key Targets
2018 Key Targets Subs scale Mobile 40Mil 4G 60 Mil Net add targets Wireline broadband 10 Mil e-Surfing HD 20 Mil IoT connected devices 60 Mil Value Growth Service revenue to maintain healthy growth Revenue contribution of Smart Family, New ICT Application, Internet Finance, IoT ecospheres continue t
Slide 25: Financial Performance
Overview Business Review Financial Performance
Slide 26: Key Financial Information
Key Financial Information RMB Mil 2016 2017 Change Operating Revenue 352,534 366,229 3.9% Operating Expenses 325,314 339,009 4.2% Depreciation & Amortization 67,942 74,951 10.3% Network Operations & Support 94,156 103,969 10.4% Personnel 54,504 56,043 2.8% SG&A 56,426 58,434 3.6% Incl.: Mobile Hands
Slide 27: Optimizing Cost Structure
Optimizing Cost Structure 2016 2017 Change Operating Expenses as a % of 92.3% 92.6% 0.3pp Operating Revenue Mainly due to changes of the accounting depreciable lives of certain fixed assets leading to increase in Depreciation & Amortization 19.3% 20.5% 1.2pp depreciation expenses by RMB4 bil, and
Slide 28: Enhancing Resource Utilization for Scale Development
Enhancing Resource Utilization for Scale Development Network Operations & Support Selling Expense RMB Mil RMB Mil 103,969 50,345 47,824 5.3% 94,156 15,389 11,657 7.4% 15.6% 10.4% 2016 2017 2016 2017 Tower leasing fee yoy growth Note: Selling expense = SG&A – G&A Expense growth Selling expense gr
Slide 29: Increasing Tower Efficiency to Strengthen Competitive Edge
Increasing Tower Efficiency to Strengthen Competitive Edge No. of towers leased Sharing ratio 660k Add 800MHz LTE Overall Newly leased 2017.12 equipment to fully utilize leased towers (50k vs 2016.12) Precise deployment to 70% 91% enhance network quality ~730k and capacity, maintaining 2018.12E app
Slide 30: Healthy Financial Strength
Healthy Financial Strength Total Debt Total Debt / Total Capitalization Net Debt / EBITDA RMB Mil 112,528 26.3% 0.89x 7.2% 104,377 2.0pp 24.3% 0.09x 0.80x 2016.12 2017.12 2016.12 2017.12 2016 2017 Efficiently-centralized capital management lowered the size of interest-bearing debt Healthy
Slide 31: IFRS 15: New Revenue Accounting Standard
IFRS 15: New Revenue Accounting Standard Effective date 1 Jan 2018 Impact • Service revenue and handset subsidy to be reduced 减少服务收入和手机补贴 摊销佣金 • Agency commission to be amortized 对服务收入和净利润带来冲击 Service revenue and net profit to be impacted due to the new accounting standard Proactively adapt to the n
Slide 32: Refining Corporate Core to Enhance Operational Management Efficiency
Refining Corporate Core to Enhance Operational Management Efficiency Big Data-backed Traditional service all-channel precision Precision transforming towards Precision sales & marketing sales & smart service service marketing Promote application of Big Data to drive intellectual operation Precision
Slide 33: Thank You!
Thank You! For further information & enquiries, please contact our Investor Relations Department at ir@chinatelecom-h.com or visit www.chinatelecom-h.com
Slide 34: Appendix 1: Statement of Comprehensive Income
Appendix 1 Extracted from Audited Consolidated Statement of Comprehensive Income for the Year Ended 31 Dec 2017 2016 RMB Mil 2017 (Restated) Operating Revenue 352,534 366,229 Operating Expenses (325,314) (339,009) Net Finance Costs (3,235) (3,291) Investment Income, Share of Profit of Associates 131
Slide 35: Appendix 2: Statement of Financial Position
Appendix 2 Extracted from Audited Consolidated Statement of Financial Position as at 31 Dec 2017 2016.12 RMB Mil 2017.12 (Restated) Current Assets 74,134 71,550 Non-current Assets 578,424 589,644 Total Assets 652,558 661,194 Current Liabilities 319,133 275,408 Non-current Liabilities 17,077 59,089 T
Slide 36: Appendix 3: Selected Operating Metrics
Appendix 3 Selected Operating Metrics for the Year Ended 31 Dec 2017 Subscriber (Mil) 2016.12 2017.12 Change Mobile 215.00 249.96 +34.96 Incl.: 4G 121.87 182.04 +60.17 Wireline Broadband 123.12 133.53 +10.41 Incl.: FTTH 105.99 126.17 +20.18 Access Lines in Service 126.86 121.80 -5.06 e-Surfing HD 61