34 slides from China Telecom Corp. Ltd. Class A's earnings presentation, Aug 28, 2008
Slide 1: 2008 Interim Results
China Telecom Corporation Limited 28 August 2008 www.chinatelecom-h.com Business 2008 INTERIM R E S U L T S
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 Deepened strategic Pro-actively managed transformation challenges to to optimize maintain profitable revenue mix development Commenced CDMA business acquisition Optimized CAPEX and prepared in structure to enhance advance for competitive edges full services offering 6
Slide 7: Solid Results (Excl. Connection Fees)
Solid Results (Excl. Connection Fees) 2007.12 2008.6* Growth Access Lines in Services (Mil) 220.33 214.89 -2.5% Broadband Subs (Mil) 35.65 39.95 12.1% 1H2007 1H2008 Growth Normalized*** Operating Revenue (RMB Mil) 88,091 89,406 1.5% 1H2008 Growth EBITDA (RMB Mil) 45,108 44,268 -1.9% 45,968 1.9% EBIT
Slide 8: IFRS-based Results (Incl. Connection Fees)
IFRS-based Results (Incl. Connection Fees) 1H2007 1H2008 Operating Revenue (RMB Mil) 89,757 90,434 EBITDA (RMB Mil) 46,774 45,296 EBITDA Margin 52.1% 50.1% Net Profit* (RMB Mil) 13,756 12,634 EPS (RMB) 0.170 0.156 Note: * Unless otherwise stated, net profit used in this presentation represents profi
Slide 9: Snowstorm & Earthquake Impact in 1H2008
Snowstorm & Earthquake Impact in 1H2008 Asset write-off: RMB370 Mil 1H2008 Impact Snowstorm Maintenance Cost: RMB200 Mil EBITDA: CAPEX : RMB960 Mil RMB1,700 Mil Net Profit: RMB1,281 Mil Asset write-off: RMB1,000 Mil CAPEX plan: Earthquake Maintenance Cost: RMB130 Mil RMB2,200 Mil CAPEX : RMB1,240 Mi
Slide 10: Revenue Growth Drivers
Revenue Growth Drivers -7.7pp +6.0pp +3.3pp -0.1pp 1.5% Contribution RMB Mil +1.5% -6,732 2,880 -89 5,256 Fixed-line Internet & VAS & Others Voice Data Integrated Business* Business** Information Services*** 88,091 89,406 1H2007 1H2008 Notes: * Fixed-line Voice Business Revenue includes Monthly Fees
Slide 11: Strategic Transformation Gathering Pace
Strategic Transformation Gathering Pace Steady Aggregate Revenue Internet & Data Business RMB Mil +27.3% 24,534 Non-Voice Revenue RMB Mil Voice Revenue 19,278 +1.5% 27.4% 88,091 89,406 21.9% 30,849 +26.1% 38,896 1H2007 1H2008 As a % of Operating Revenue VAS & Integrated Information Services RMB Mil
Slide 12: Customer-focused Operation to Enhance Value
Customer-focused Operation to Enhance Value Government & Enterprise Customer Government & Enterprise Revenue Differentiated services for further +13.5% Growth refined customer segments 37.1% Enriching “BizNavigator” brand content and customer perception with 33.3% convergent services & industry appl
Slide 13: CAPEX
CAPEX Strictly controlling CAPEX to enhance CAPEX return; optimizing structure to promote development RMB Mil Extra RMB2,200 Mil CAPEX due to earthquake & snowstorm Aligning investment strategies with business development; strictly controlling investment in traditional 46,345 47,093 2,200 business t
Slide 14: Near Term Focus
Near Term Focus To launch mobile business after attaining relevant approval for CDMA business acquisition CDMA Business Acquisition Mobile Preparations • Take-over of CDMA business • Network transition & optimization • Relatively complete customer • IT system establishment & service system enhanceme
Slide 15: Full Services Offering to Enhance Value
Full Services Offering to Enhance Value Enrich customer experience Realize significant synergies Integrated Information Services Provider Enhance core competitiveness Create shareholder value Mobile Operations • Focus on mid-to-high end Full customers • Offer differentiated Services services • Reali
Slide 16: Business Review
Business REVIEW
Slide 17: Revenue Breakdown
Revenue Breakdown Share of 1H2007 1H2008 Operating Growth （RMB Mil） （RMB Mil） Revenue Fixed-line Voice 57,242 50,510 -11.8% 56.5% Upfront Installation Fees 1,415 1,291 -8.8% 1.4% Monthly Fees 13,326 10,965 -17.7% 12.3% Local Usage Fees 21,614 19,040 -11.9% 21.3% Sub-total 36,355 31,296 -13.9% 35.0%
Slide 18: Local Voice Business
Local Voice Business Local Voice Business Voice Usage Revenue Pulses Mil -6.3% RMB Mil -13.9% Major Initiatives 202,520 36,355 189,712 31,296 41.3% Strengthen bundling and integration 35.0% with non-voice businesses with targeted marketing to Government & 1H2007 1H2008 1H2007 1H2008 Enterprise and H
Slide 19: Long Distance Business
Long Distance Business Domestic Long Distance Minutes Usage RMB Revenue Mil +3.5% Mil -8.9% 49,864 48,193 12,440 Major Initiatives 11,331 38.6% 30.3% 14.1% 12.7% Enhancing tariff packages and sales 1H2007 1H2008 1H2007 1H2008 model to stimulate customers’ consumption and usage amid International Lon
Slide 20: Broadband Business
Broadband Business Broadband Access Revenue Major Initiatives RMB Mil +31.3% 19,279 14,687 Broadband Roaming: 85 79 Launching broadband account operation with nationwide WIFI 1H2007 1H2008 roaming services (>15,000 WIFI Broadband ARPU (RMB) hotspots) via “e8-2” package Subscribers Driving Access wit
Slide 21: VAS & Integrated Information Services
VAS & Integrated Information Services Revenue RMB Mil +31.6% Major Initiatives 11,987 9,107 13.4% Promoting scale & diversified 10.3% development Leveraging professional and 1H2007 1H2008 centralized operation and As a % of Operating Revenue emphasizing co-operation along value chain to accelerate t
Slide 22: Fast Growing Businesses
Fast Growing Businesses Best Tone Best Tone Revenue +56.7% Enriching information content and RMB Mil 2,106 enhancing brand awareness 0.9pp contribution to 1,344 overall revenue growth Advancing co-operation to enhance commerce & travel servicing capability IT Services & Applications* + Video 1H2007
Slide 23: Customer-focused Differentiated Operation
Customer-focused Differentiated Operation Leveraging Leveraging premier premier customer customer brands brands to to Innovative Innovative mobile mobile communications communications promote promote mobile mobile service service penetration penetration and and in in the the Internet Internet era er
Slide 24: Financial Performance
Financial Performance
Slide 25: Key Financial Information
Key Financial Information 1H2007 1H2008 Growth （RMB Mil） （RMB Mil） Operating Revenue 88,091 89,406 1.5% Operating Expenses Depreciation & Amortization 26,089 26,544 1.7% Network Operations & Support 14,725 16,670 13.2% Personnel 13,667 13,857 1.4% SG&A 11,157 11,103 -0.5% Interconnection & Others 3,
Slide 26: Cost Structure
Cost Structure Operating Expenses as a % of Operating Revenue Operating Expenses Operating Expenses was 78.4% 80.2% 78.3% of Operating Revenue Network Operations & excluding impact 16.7% 18.7% Support of snowstorm & earthquake 29.6% Depreciation & 29.7% Amortization 15.5% Personnel 15.5% 12.7% SG&A
Slide 27: Optimized Resource Allocation to Sustain Development
Optimized Resource Allocation to Sustain Development Cost Initiatives 1H2008 Results z Depreciation & z Depreciation & Amortization Amortization Strengthened asset precision RMB26,544 Mil (maintained stable as management to enhance resources a % of operating revenue) utilization z Network Operations
Slide 28: Enhanced CAPEX Structure
Enhanced CAPEX Structure CAPEX Structure Enhanced CAPEX structure to support strategic transformation RMB Mil z Internet & Data 27.3% yoy 20,745 18,783 z IT & Support 7.6% yoy z Fixed Line Switches 38.7% yoy Internet & Data z Local Transmission & Access 43.7% yoy 39.2% z PAS 88.4% yoy 55.1% IT & Sup
Slide 29: Solid Capital Structure & Financial Strength
Solid Capital Structure & Financial Strength Total Debt / Total Capitalization Free Cash Flow RMB Mil -3.9pp +11.3% 33.4% 21,669 29.5% 19,465 2007.6 2008.6 1H2007 1H2008 Solid financial fundamental and strong free cash flow proactively equip the Company to capture future growth opportunities 29
Slide 30: Innovative Measures to Support Full Services Offering
Innovative Measures to Support Full Services Offering Precision resource allocation by tilting resource toward high value customers and key businesses to support transformation Deepening Strengthening centralized financial management value leveraging corporate structure reform to improve treasury ma
Slide 31: Thank You
Thank YOU www.chinatelecom-h.com 31
Slide 32: Appendix 1: Income Statement
Extracted from unaudited income statement Appendix 1 for the 6 months ended 30 June 2008 (incl. upfront connection fees) RMB Mil Unaudited Unaudited 1H2007 1H2008 (Restated)* Operating Revenue 89,757 90,434 Upfront Connection Fees 1,666 1,028 Operating Expenses (69,072) (71,682) Net Finance Costs (2
Slide 33: Appendix 2: Balance Sheet
Extracted from unaudited balance sheet as at 30 June 2008 Appendix 2 (incl. upfront connection fees) RMB Mil Unaudited Unaudited 31.12.2007 30.6.2008 (Restated)* Current Assets 44,110 53,208 Non-current Assets 369,221 358,885 Total Assets 413,331 412,093 Current Liabilities 140,245 130,020 Non-curre
Slide 34: Appendix 3: Detailed Operating Revenue Breakdown
Detailed operating revenue breakdown Appendix 3 for the 6 months ended 30 June 2008 (incl. upfront connection fees) RMB Mil Unaudited Unaudited 1H2007 1H2008 (Restated)* Upfront Connection Fees 1,666 1,028 Local Voice Business 36,355 31,296 Upfront Installation Fees 1,415 1,291 Monthly Fees 13,326 1