Interim Results 24 August

Transcription

1 2011 Interim Results 24 August

2 Management Present Mr. Chang Xiaobing Chairman & CEO Mr. Lu Yimin Executive Director & President Mr. Tong Jilu Executive Director & Senior VP Mr. Li Fushen Executive Director & CFO 2

3 Agenda Overview Operating Performance Financial Results 3

4 Overall Results (1) 2H2010 YoY HoH Operating Revenue (2) 82,510 88, , % 14.4% of which: Mobile 41,573 47,978 60, % 25.1% Fixed-line 39,979 39,884 40, % 2.6% Service Revenue (3) 79,982 83,836 90, % 7.8% of which: Mobile 39,111 43,266 48, % 13.2% Fixed-line 39,913 39,837 40, % 2.7% EBITDA 30,723 28,676 32, % 11.6% Net Profit (4) 2, , % 203.8% EPS (RMB) (5) % 188.9% (1) All financial data in this document exclude the effects of deferred fixed-line upfront connection fees (RMB130 mn in, 62 mn in 2H2010 and 15 mn in ), unless otherwise specified (2) Operating revenue from external customers, and not equal to the sum of mobile and fixed-line operating revenues due to non-allocated revenue (3) Service revenue is not equal to the sum of mobile and fixed-line service revenues due to non-allocated revenue (4) Net profits for, 2H2010 and would be RMB2,921 mn, 930 mn and 2,652 mn, respectively, if including deferred fixed-line upfront connection fees (5) Including deferred fixed-line upfront connection fees 4

5 Rapid Growth in Revenue & Steady Increase in Market Share Revenue Growth: Higher Than Industry Average driven by : 3G GSM Internet & Data (1) (2) Local Access ICT & Others (1) Rising Market Share (3) +1.8pp +11.5pp 9, pp +4.5pp -3.9pp 0.1pp 3,578 (3,125) 28 90, % 21.5% 79,982 (1) Including broadband, data comm. & other Internet businesses (2) Including local voice, long distance, fixed-line VAS and interconnection (3) The Company s operating revenue over the sum of operating revenues released by the three listed telcos (excluding fixed-line upfront connection fees) 5

6 More Favorable Revenue Structure Service revenue yoy up 13.0%, mobile proportion of service revenue yoy up 5.3pp to 54.2% Non-voice proportion of mobile service revenue yoy up 3.6pp to 35.7%, and non-voice proportion of fixed-line service revenue yoy up 8.5pp to 62.5% Service Revenue & Its Mix Mobile Service Revenue 79, % 90,350 Non-voice 39, % 48, % Voice (2) 67.9% 64.3% Mobile 48.9% 25.3% 54.2% Fixed-line Service Revenue Fixed-line 49.9% 2.5% 45.3% 1.2% (1) 0.5% (1) Non-voice Voice (2) 39, % 46.0% 40, % 37.5% (1) Non-allocated revenue (2) Including voice usage, monthly fee and interconnection revenues 6

7 3G Scale Development driving quality and robust growth in mobile business Quarterly 3G Subscriber Growth Continuously Rising Mobile ARPU ( 000) 7,560 2,994 (1) 21.8% 4,475 3,506 5,410 23,945 (RMB) % % H10 3Q10 4Q10 1Q11 2Q11 1H11 2H2010 Quarterly 3G Revenue Growth Further Rising 3G Contribution 3,946 13,180 3, % 4,355 (1) 5,679 7, % 10.1% 8.4% 17.7% 13.2% 26.9% 2H2010 1H10 1H11 3Q10 4Q10 1Q11 2Q11 3G share of mobile service revenue 3G share of mobile subscribers (1) Average qoq growth rate 7

8 Continued Rapid Growth in Broadband facilitating stable development in fixed-line business Rapidly Growing Broadband Users ( 000) Stable Growth in Fixed-line Service Revenue 43, % 52,322 39, % 40,903 Further Rising Broadband Revenue Share 14, % 17, % 42.0% Broadband revenue as % of fixed-line service revenue 8

9 Improving Net Profit and Rising Cash Flow Improvement in Quarterly Net Profit Continuous Growth in Cash Flow from Operations 2,791 2,637 2,483 31, % 34,352 1,657 1,134 1,294 (426) 154 1H10 1H11 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 9

10 Further Enhanced Network Capabilities Continue to build 3G network : further enhanced network capabilities No. of BTS No. of Carrier Sectors 203k 614k Launched HSPA+ in 56 key cities +32.8% +39.0% 2H2011: continue to enhance network buildup Expand overall coverage YE Target: cover economically developed towns and key transport lines Improve indoor coverage YE Target: cover nationwide key buildings Optimize & improve GSM network No. of BTS No. of Carrier Sectors 348k 1,714k +13.7% +12.2% Continue to improve overall coverage to provide coverage support to 3G network Push forward construction of optical fiber network No. of BB Access Ports Of which % of FTTx Ports mn +26.9% 76% +4pp Accelerate the construction of optical fiber network to raise broadband speed YE Target: over 40 million families with 20Mbps+ broadband access capabilities 10

11 2H2011 Outlook realize breakthrough in scale development and further increase market share accelerate business development to achieve higher revenue growth focus on key markets to rapidly expand subscriber base increase operational efficiency to ensure continuous improvement in profitability enhance customer service to improve customer perception continue to promote innovation to enhance corporate dynamics and competitiveness Innovation & Service Leader for Information Life 11

12 Agenda Overview Operating Performance Financial Results 12

13 Overall Operating Performance YoY Subscribers ( 000) 181, , % Service Revenue of which: GSM 157, , % Mobile 3G 23,945 7, % ARPU (RMB) % 79, % 90,350 Fixedline Local Access of which: GSM % 3G % Subscribers ( 000) 95, , % of which: Fixed-line 84,986 84, % PHS 10,472 16, % ARPU (RMB) % Mobile Fixed-line 39, % 2.5% 48,998 39,913 40,903 Fixedline Broadband Subscribers ( 000) 52,322 43, % ARPU (RMB) % (1) (1) (1) Non-allocated revenue 13

14 Mobile Business rapidly growing revenue with more favorable structure Mobile Service Revenue & Its Mix Mobile Subscribers ( 000) 156, % 181, % 48,998 39,111 Mobile ARPU & MOU 35, % , % % ARPU (RM B) MOU (minutes) 3,946 GSM 234.0% 3G 13,180 (Million MB) Mobile Data Traffic 6, % 37,105 14

15 Mobile Business GSM business maintained stable Service Revenue 1.9% 35,165 35,818 10,022 10, % 24,835 24, % Others Voice VAS Voice Usage & MOU % -0.3% Voice Usage (bn minutes) MOU (minutes) 2H2011 Strategy Transform GSM sales and marketing model to improve growth quality and sales and marketing efficiency Subscribers & ARPU 149, % -3.8% 157, Subs ('000) ARPU (RM B) (Million MB) GSM Data Traffic 2, % 7,330 Differentiate products and tariff plans Raise customer loyalty to reduce churn rate 15

16 Mobile Business seize opportunities to realize breakthrough in 3G scale development 3G Growth Strategy in 2011 further expand targeted customer segments launch more differentiated products with WCDMA advantages utilize resources more efficiently and raise the share of contracted subscribers push forward win-win cooperation and increase incentives of third-party distribution channels leverage strong eco-system to introduce more diversified smartphones to meet needs of different customer segments Seize Opportunities to Realize Breakthrough in 3G Scale Development 16

17 Mobile Business rapid growth in 3G business Revenue Growth & Mix MOU 3,946 13, % 51.2% (Minutes) 3.5% % Voice Non-voice 2H2010 ARPU Proportion of Contracted Users (RMB) % (as % of total 3G subscribers) 15.7% 21.0% 24.1% -2.0% 2H2010 End of 2010 End of Mar 2011 End of Jun

18 Mobile Business 3G data traffic continued to rise significantly 3G Data Traffic Prosperous Mobile Internet Eco-system (Million MB) 602.2% 29,775 Self-developed applications Third-party applications 4,240 12, % 2H2011 (MB) Avg. 3G Data Usage/User/Month 86.0% % 266 2H2010 More and more mainstream Internet applications go mobile Mobile Internet applications are emerging rapidly Weibo subscribers exceed 200 mn in China 18

19 Mobile Business more diversified 3G handsets to drive subscriber growth Launched additional 30+ strategic 3G handsets to meet needs of different customer segments First RMB1,000 wide-screen smartphone launched this June has been well received by the market, and has become an important force to drive 3G growth in mass market screen 3.5 inches capacitive touch screen WO 3G RMB1,000 Smartphone CPU 600MHz price RMB1,000 Daily Sales of First RMB1,000 Smartphone V880 As of 15 August, total sales of V880 > 350,000 Highest sales in a single day > 10,000 Total contracted subscribers acquired > 260,000 6,669 8,258 4,551 5,183 6,042 3,250 3, ,045 ZTE V880 Lenovo A60 Coolpad W706 First Half June Second Half June Average daily sales First Half July Second Half July First Half August Average daily additions of 3G contracted subscribers 19

20 Mobile Business enhanced sales capabilities of distribution channels New Breakthrough in Third-party Channels By cooperating with more and more national and regional chain stores, the number of strategic chain stores has reached 6,809 Proportion of 3G subscribers acquired by third-party channels reached 51% in, yoy up 16pp Signed in Suning, Telephone World, Five Star Appliance, 360buy Rapidly Rising Number of Strategic Chain Stores Signed in Guomei Signed in 5 regional chain store firms in Guangdong Signed in FunTalk, HiSap 6,809 2H2011 Strategy Push forward cellbased all-channel all-service sales and marketing practices Fully promote the transformation of sales outlets as well as experiential marketing practices ,512 2,172 2,388 5,088 Signed in 75 regional chain store firms Jan 2011 Mar 2011 Apr 2011 Jun 2011 Jul 2011 Further expand regional third-party channels and enhance cooperation with third-party channels 20

21 Fixed-line Business rapid growth in broadband offset the decline in fixed-line voice Service Revenue & Its Mix Broadband Subscribers & ARPU 39, % 40,903 43, % 52, % 14,471 17, Subs ('000) ARPU (RM B) -15.0% 20,788 17,663 Local Access Subscribers & ARPU ,234 5,263 Broadband 91.7% Local Access 24.3% (1) (1) Including local voice, long distance, fixed-line VAS and interconnection ICT Data Comm. & Others 100, % 95, Subs ('000) ARPU (RM B) 21

22 Business Integration steadily rising penetration of WO Family and WO Business WO Family : Rising Penetration WO Business : Gaining Momentum Subscribers: 3.70 mn Gaining influence in the following sectors/segments: Penetration rate among BB residential subscribers: 8.7% banking securities insurance 2H2011: realize scale development Enhance sales capability Enrich product offerings Improve customer perception Promote convergence of 3 networks Capturing leading positions in the following industry applications, which helped develop more than 3 million subscribers in Mobile OA automotive Govt. enforcement aviation Monitoring & surveillance central govt.- owned companies Automotive Stock information trading 22

23 Business Integration introducing WO Pai brand in 2H to expand into youth market 提升客户感知, 重塑品牌形象 Increase Expansion Efforts on Youth Market Highlight WCDMA advantages Rich 3G handset offerings and attractive tariffs and subsidies Free assigned data package to promote data consumption Example WO Pai RMB36 Package 60 minutes voice (local & long distance integrated) minutes voice (to 3 assigned Unicom phone numbers) SMS + 60MB + 500MB (for assigned data applications) Assigned data applications: WO YOU, mobile music, mobile reading, video sharing 15 handsets offered for WO Pai 3G packages Promote business integration Promote information applications Optimize sales & marketing system Increase WLAN coverage, and promote cross-sales of broadband and 2G/3G products Such as campus VPN, integrated campus information platform Accelerate buildup of distribution channels, and enhance promotion of relevant products via e-channels Increase sales and customer service capabilities of distribution channels 23

24 Agenda Overview Operating Performance Financial Results 24

25 Revenue and Its Composition Mobile Revenue YoY Fixed-line Revenue YoY Operating Revenue (1) 60, % Operating Revenue (1) 40, % Service Revenue 48, % of which: Voice & Monthly Fee 26, % Interconnection 5, % VAS 17, % Service Revenue 40, % of which: Voice 12, % Interconnection 2, % VAS 2, % Internet & Data 22, % VAS Composition 35.3% 31.3% 7.1% 8.4% 9.4% 14.8% Others Mobile Data Broadband Service Revenue 14, % 18.7% 17, % 10.4% SMS 8.7% 4.4% 3.4% Voice VAS (1) Revenue from external customers, excluding inter-segment revenue as % of fixed-line service revenue 25

26 Costs & Expenses and Their Structure YoY YoY% Operating expenses 97, , % Operating Expenses Structure (as % of operating revenue) Interconnection charges 7,763 +1, % Depreciation & amortization 28,351 +1, % 95.1% 96.4% 7.9% 7.7% Interconnection charges Networks, operations & support 14,034 +1, % Employee benefit 12, % 32.3% 28.0% Depreciation & amortization Adjusted selling & (1) marketing 16,653 +4, % G&A and others 7, % 15.5% 13.8% 12.3% Networks, operations & support Employee benefit Adjusted cost of telecom (1) products sold 11,236 +8, % Net finance costs % Net other income % Total costs & expenses 97,891 19, % 14.0% 14.3% 7.9% 3.2% 16.4% 7.1% 11.1% Adjusted selling & marketing G&A and others Adjusted cost of telecom products sold (1) In, 3G handset subsidy of RMB3.06 billion was recognized as the loss of telecom products sold (Sales of Telecom Products minus Cost of Telecom Products Sold). For analysis purpose, the above subsidy expense was deducted from Cost of Telecom Products Sold and added to Selling & Marketing Expense. 26

27 Analysis of Major Expenses (1) Depreciation & Amortization Networks, Operations & Support 26, % 28,351 12, % 14, % 28.0% 15.5% 13.8% as % of operating revenue Continuous expansion of 3G and broadband networks led to rising depreciation. In, depreciation & amortization yoy up RMB1.71 billion, or 6.4%. Due to expanded networks and rising energy and rental prices, networks, operations & support expense yoy up RMB1.28 billion, or 10.0% in. 27

28 Analysis of Major Expenses (2) Total S&M + 3G Subsidy Fixed-line S&M Expenses 40.8% 16,653 3,057 4, % 4,734 11, , % 13, % 11.2% 11.6% as % of operating revenue as % of fixed-line service revenue GSM S&M Expenses 5, % 4.3% 5, % as % of GSM service revenue 3G handset subsidy S&M expenses 3G S&M + 3G Subsidy 40.9% 1, , % 61.3% 4,685 2,681 2, % 45.1% 5,935 3,057 2,878 2H2010 as % of 3G service revenue 28

29 EBITDA and Net Profit 1H EBITDA yoy up 4.2% Net Profit of RMB 2.64 billion, yoy down 5.5% but improved HoH EBITDA & EBITDA Margin Net Profit 30, % 28,676 32,017 2, % 2, % 32.4% 31.6% 868 2H2010 2H

30 Cash Flow and CAPEX CAPEX Cash Flow from Operations (1) 2011 Budget 31, % 34,352 Mobile Network 7,928 22,880 of which: 3G 6,320 19,470 GSM 1,608 3,410 Free Cash Flow (2) Broadband & Data 10,943 18,750 8,384 Infrastructure & Transport Networks (1) 5,537 19, bn IT Systems & Others (1) 1,560 12,690-2,227 Total CAPEX 25,968 73,800 (1) Including IT systems, VAS platforms, fixed-line (2) Cash flow from operations minus CAPEX 30

31 Solid Balance Sheet Balance sheet remained solid, with liabilities-to-assets ratio down 0.4pp in Total interest-bearing debt of RMB 95.9 billion, and debt-to-capitalization ratio down 0.3pp in Liabilities-to-Assets Ratio 53.4% 53.0% Interest-bearing Debt & Debt-to-Cap Ratio 97,042 95, % 31.7% 31 Dec June Dec Jun 2011 Debt-to-cap ratio 31

32 Thank you! China Unicom (Hong Kong) Limited 24 August

33 Appendix I: Income Statement Revenue: Including:Selling & Marketing (13,596) (11,340) Service Revenue 90,365 80,112 Cost of Products Sold (14,293) (3,102) Sales of Telecom Products 11,035 2,528 Total Operating Expenses (97,719) (78,428) Total Operating Revenue 101,400 82,640 Operating Profit: 3,681 4,212 Operating Expenses: Finance Cost (893) (864) Interconnection Charges (7,763) (6,479) Interest Income Depreciation & Amortization (28,351) (26,641) Net Other Income (Expenses) Networks, Operations & Support (14,034) (12,759) Profit Before Tax 3,509 3,796 Employee Benefit (12,520) (11,572) Taxation (857) (874) SG&A and Others (35,051) (20,977) Net Profit 2,652 2,922 33

34 Appendix II: Balance Sheet (selected) 30 Jun Dec Jun Dec 2010 Non-current Assets: Non-current Liabilities: PPE, net 363, ,060 Long-term Bank Loans 1,449 1,462 Leasing Prepayments 7,566 7,607 Bonds & Convertible Bonds 33,356 33,558 Deferred Tax Assets 5,617 4,840 Total Non-current Liabilities: 37,111 37,375 Available-for-sale Financial Assets 9,989 6,214 Current Liabilities: Other Assets 11,894 11,753 Accounts Payable 92,650 97,659 Total Non-current Assets: 401, ,245 Taxes Payable 1,593 1,484 Current Assets: Short-term Bonds 24,000 23,000 Inventories 4,089 3,728 Short-term Loans 34,856 36,727 Accounts Receivable, net 10,435 9,286 Advances from Customers 32,860 28,906 Prepayments & Others 4,794 5,115 Total Current Liabilities: 195, ,237 Cash and Cash Equivalent 18,042 22,495 Total Liabilities 232, ,612 Total Current Assets 38,904 42,208 Shareholders Equity 206, ,841 Total Assets 439, ,453 Total Liabilities and Equity 439, ,453 34

35 Appendix III: Key Operating Metrics GSM Business 3G Business Fixed-line Local Access Fixed-line Broadband Subscribers ( 000) ARPU (RMB) Handset sub MOU (minutes) of which:fixed lines PHS 23, Subscribers ( 000) 157, ,402 ARPU (RMB) (1) MOU (minutes) (1) Voice revenue per minute (RMB) , Subscribers ( 000) 95, ,852 of which:fixed lines 84,986 84,606 PHS 10,472 16,246 ARPU (RMB) (1) Local voice usage (million pulses) (excluding Internet dial-up usage) 65,191 80,747 Long distance usage (million minutes) 11,205 13,730 Subscribers ( 000) 52,322 43,759 ARPU (RMB) (1) (1) Average number of subscribers for a period = sum of all monthly average number of subscribers in the period divided by total number of months in the period; average number of subscribers for a given month = (the number of subscribers at the end of previous month + the number of subscribers at the end of the given month) / 2 35

36 Forward-looking Statements Certain statements contained in this announcement 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 forwardlooking statements are subject to known and unknown risks, uncertainties and other factors, which may cause the actual performance, financial condition or results of operations of the Company to be materially different from any future performance, financial condition or results of operations implied by such forward-looking statements. These risks, uncertainties and other factors include: the uncertainties in the development of telecommunication industry and technology in the PRC; future growth of the market demand for telecommunication services; changes in the competitive environment, regulatory environment and the PRC government s regulatory and/or industry policy, the effects of tariff reduction initiatives; the availability, terms and deployment of capital; changes in assumptions upon which the Company has prepared its projected financial information and capital expenditure plans; the effect of the Company s proposed adjustment in its business strategies relating to the PHS business; changes in political, economic, legal and social conditions in the PRC; the potential continued slowdown of economic activities at home and abroad, and other factors that will affect the execution of our business plans and strategies as well as our business condition and financial results. 36