Annual Results China Telecom Corporation Limited 22 March 2011

Transcription

1 Annual Results 2010 China Telecom Corporation Limited 22 March

2 Forward-Looking Statements Certain statements contained in this document may be viewed as forwardlooking 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 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 China Telecom Corporation Limited (the Company ) to be materially different from any future performance, financial condition or results of operations implied by such forward-looking statements. In addition, we do not intend to update these forward-looking statements. Further information regarding these risks, uncertainties and other factors is included in the Company s most recent Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission (the SEC ) and in the Company s other filings with the SEC. 2

3 Presentation by Chairman & CEO President & COO Executive Vice President & CFO Executive Vice President 3

4 Agenda 1 Overview 2 Business Review 3 Financial Performance 4

5 Overview

6 Highlights Effective integrated operation driving remarkable earnings recovery Rapid mobile growth with scale benefits emerging Accelerate strategic broadband deployment to enhance sustainable core competence To strengthen differentiation development leveraging Mobile Internet to create more value 6

7 Solid Results Adjusted Results Change Operating Revenue (RMB Mil) 208, , % EBITDA (RMB Mil) 82,133 88, % EBITDA Margin 39.4% 40.3% 0.9pp Net Profit (RMB Mil) 13,271 15, % EPS (RMB) % Free Cash Flow (RMB Mil) 31,159 27, % Change Access Lines in Services (Mil) Mobile Subs (Mil) Including: 3G Subs (Mil) Wireline Broadband Subs (Mil) Notes: Unless otherwise stated in this presentation 1. All financial data were adjusted to exclude Upfront Connection Fees 2. EBITDA was calculated before CDMA Network Leasing Fees (2009: RMB8,383 mil; 2010: RMB13,320 mil) to enhance comparability 3. Net Profit represented profit attributable to equity holders of the Company 4. Free Cash Flow = EBITDA CDMA Network Leasing Fees CAPEX Income Tax Expenses 7

8 Revenue Growth Drivers RMB Mil -7.6pp +4.2pp +4.3pp +4.5pp 208,219-15,934 8,749 8,879 9, ,367 Overall Revenue +5.4% 2009 Wireline Wineline Voice Data & Others Mobile Voice Mobile Data & Others

9 Strategic Transformation Optimizing Revenue Structure Revenue Structure Mobile business as a key growth driver: Revenue 51.5% yoy 7.5% 9.6% Mobile Data & Others Mobile Voice 11.4% 13.2% Revenue/total revenue: 24.6% ( 7.5pp yoy) Robust growth across strategic businesses (mobile, wireline data & others): 45.2% Wireline Data & Others 46.9% Revenue 20.9% yoy Revenue/total revenue: 71.5% ( 9.2pp yoy) Wireline operating risk further alleviated: 37.7% Wireline Voice 28.5% Wireline voice revenue as a % of total revenue lowered to 28.5% PAS revenue only 2.1% of total revenue

10 Rapid Mobile Expansion with Robust Quality Service Revenue RMB Mil 47,722 Mobile subs base expanding rapidly 30, subs net add: mil Subs base >90mil & market share >10% 3G subs base: mil (13.6% of subs base) 2009 Subscribers 2010 Revenue & subs base growing in tandem (mobile ARPU of RMB54.2) Invigorated value chain Mil % % % CDMA terminals: ~800 models 3G terminals: ~300 models ( 200 yoy) 3G terminals ASP 50% yoy Open channel terminal sales: 61% ( 9pp yoy) Open channel point-of-sales: ~580k ( 40k yoy) Mobile Subs Market Share 3G Subs 10

11 Accelerate Strategic Fibre & Broadband Deployment CAPEX RMB Mil Foster broadband business development Enhance core competence 38,042 43,037 50,000 Commencing Broadband China, Fibre Cities project By 2013 full coverage with 20M in cities To build intelligent pipeline & integrated platforms to provide customers with innovative applications leveraging cloud computing & Internet of Things 2011 budgeted CAPEX RMB50 bil: Wireline broadband net adds: 12 mil Customer access bandwidth capability Coverage in cities with 20M: >70% ( 12pp yoy) E Mobile CAPEX plan by parent company in 2011: RMB23 bil mainly for network optimization (vs 2010: RMB27 bil & 2009: RMB54 bil) 11

12 Stable Dividend HKD Dividend Per Share The Board of Directors recommends to the shareholders a final dividend of HKD0.085 per share for The Company is actively preparing & accumulating funds for the planned acquisition of mobile network from parent company in 2012 With due regards to shareholders cash return demand as well, a stable dividend is recommended 12

13 Superior Strengths Ready to Profit from Explosive Data Growth To promote profitable & scale development of 3G / wireless & wireline broadband operation Extensive & in-depth partnership with CP/SP/AP Open platforms China V-net Fast growing app store estore ( 2010: 10,000 apps) Mobile Data Traffic Management Superior ICT service strength Innovative integrated applications for industries & businesses All-round & close Government & Enterprise customer relations Leading Internet data centre services Rapidly proliferating smart devices 3G Handsets: 300 models Smartphones: 70 models Tablets Highly integrated intelligent networks Most comprehensive & in-depth nationwide high speed 3G network Superior nationwide WiFi networks ( 100,000 hotspots with 300,000 APs) Fully IP-based fibre core network Highly integrated intelligent networks to carry data traffic in the most effective & profitable way (high volume traffic via WiFi & wireline broadband, mid-to-low volume traffic via 3G network) 13

14 To Enhance Value with Transformation & Innovation Leader of Intelligent Pipeline Strengthen implementation of Customer-focused Innovative Informatization Strategy Provider of Integrated Platforms Participant of Content & Application Development Shareholders Value Customers Value Corporate Value Pipeline strengths: enable customers identification, business classification, traffic control, network management Provide customized & tiered service experience Standardize, unify & open-up service platform capability Provide development testing, authentication, billing & coordination services Deep co-operation to jointly develop operatorcentric applications Extensive co-operation to draw data-intensive applications onto the integrated open platforms Scale Development To achieve mobile scale expansion To sustain broadband market leading position Innovation Breakthrough To enhance data traffic management To accelerate new technology development Win-win Cooperation To strengthen open platforms capability To appeal & invigorate value chain partners 14

15 Business Review

16 Revenue Breakdown RMB Mil Change Mobile 35,620 53, % Voice 20,027 28, % Data 9,976 18, % Others 5,617 6, % Wireline 172, , % Voice 78,432 62, % Data 87,282 95, % Internet Access 47,807 54, % VAS & Integrated Information Service 27,983 28, % Managed Data & Leased Line 11,492 12, % Others 6,885 7, % Total 208, , % Note: Wireline Voice Revenue included RMB37,466 mil from local voice, RMB14,672 mil from DLD, RMB1,915 mil from ILD and RMB8,445 mil from interconnections 2. Mobile Others mainly included revenue from sales of terminals 16

17 Mobile Business Gaining Scale & Momentum Service Revenue & Subs Change Service Revenue (RMB Mil) 30,003 47, % Subs (Mil) Including: 3G subs (Mil) Data Service (Mil) Change 189 mailbox subs x esurfing Live subs x esurfing Video subs x Mobile Best Tone Usage x 3G edge To demonstrate differentiated competitive edge leveraging 3G features To target & tilt resources towards high value customers Fast expanding terminal supply To motivate value chain via subsidies & flattened distribution channels To grow high-end subs base via smartphones Proliferating compelling applications To focus on key industry-specific applications with rapid replication & standardized promotion To offer integrated total solutions via customized applications Targeted marketing 2011 Initiatives Industry-specific markets, cluster markets Household bundled customers, high-end businessmen, trendy youngsters 17

18 Alleviating Wireline Risk Revenue Wireline Subscribers RMB Mil Access Lines in Services (Mil) Household ,599 11, % 165,414 4,575 Government & Enterprise Public Telephone PAS Total , % 160,839 Broadband Subs (Mil) Voice Usage Local Usage (Pulses Mil) 320, , Ex-PAS Wireline Revenue 2010 PAS Revenue DLD Usage (Minutes Mil) 83,882 68,544 ILD Usage (Minutes Mil) 1,221 1,207 18

19 Fast-growing Wireline Broadband Development Broadband Access Revenue 2011 Initiatives RMB Mil 47, % 54,127 To accelerate scale development and consolidate market leading position 12 mil net add in 2011 To compete via customer segmentation, differentiated products & services to satisfy customers demand Market share grasping for low-end (<2Mbps) Subscribers Bandwidth up-sell for main stream (2-4Mbps) Mil % Premier service offering for high-end (>8Mbps) To strengthen integrated operation & interactive promotion of broadband, mobile and VAS to enhance customers value Net Adds 2010 Broadband ARPU (RMB) 19

20 Wireline VAS & Integrated Information Services RMB Mil 27,983 Revenue 1.2% 28, Initiatives Enhanced centralized operation 24, % 26,952 To strengthen product centres operation for developing innovative differentiated services Integrated development 2009 Ex-PAS related Wireline VAS & Integrated Information Services revenue Key Services 2010 PAS-related revenue To achieve interactive promotion of mobile & broadband business with wireline VAS & Integrated Information Services Scale expansion Best-Tone Type of Information Services RMB Mil 5, % 6,291 IT Services & Applications 4, % 5,253 To enhance development capability by leveraging cloud computing & Internet of Things and consolidating IDC, ICT resources To foster module development & standardized promotion of industry-specific applications To improve one-stop integrated solution for Government & Enterprise customers

21 Deepen Transformation and Innovation to Create Unrivalled Development Model Sharpen integrated operation edges with customer segmentation & differentiated operation Government & Enterprise customers Public customers Industry applications + Integrated services + Differentiated products Focus on key industry-specific applications & characteristic products with scale replication & standardized promotion esurfing RFID, transport & logistics, busy-shop assistant Mega Eye, encrypted communications, monitoring system, sales keeper, positioning Leverage rich customer resource to develop integrated services for value enhancement 2010: BizNavigator customers: 4.99 mil ( 14.4% yoy) Smartphones + App Store + Handset browsing Reinforce enhanced centralized operation & strengthen data traffic management to promote 3G scale development esurfing Video, estore, ereading, esurfing Live, imusic Interactive multi-screens, HD video, WiFi-mobile unified authentication, broadband roaming Leverage wireline broadband, 3G & WiFi integrated access edge with unified account operation to promote integrated development 2010: OneHome subs/household subs: 44% ( 12pp yoy) Mobile sub bundling penetration: 53% ( 3pp yoy) 21

22 Financial Performance

23 Key Financial Information RMB Mil Change Operating Revenue 208, , % Operating Expenses 186, , % Depreciation & Amortization 52,243 51, % Network Operations & Support 43,656 47, % Incl: Mobile Network Leasing 8,383 13, % Personnel 32,857 35, % SG&A 40,507 42, % Incl: Mobile Handset Subsidies 10,070 12, % Interconnection & Others 17,449 19, % Incl: Wireline Interconnection 6,167 5, % Mobile Interconnection 3,467 5, % Cost of Mobile Terminals Sold 4,980 4, % Operating Profit 21,507 23, % Note: Network Operations & Support included Asset Impairments Loss (2009: RMB753 mil; 2010: RMB139 mil) 23

24 Effective Cost Control Fuelling Sustainable Growth Operating Expenses as a % of Operating Revenue Optimized Cost Structure 89.7% 25.1% 21.0% Depreciation & Amortization Network Operations & Support 89.3% 23.6% 21.6% Depreciation & Amortization: 1.5pp, benefiting from prudent CAPEX control Cash operating expenses as a % of Operating Revenue remained relatively steady benefiting from enhanced operating efficiency enabled by appropriate & coordinated resources deployment Network Operations & Support: 0.6pp 15.8% Personnel 16.2% SG&A: 0.2pp (stringent control in sales & marketing expenses and handset subsidies) 19.4% 8.4% SG&A Interconnection & Others 19.2% 8.7% Personnel: 0.4pp (appropriate increase to attract & motivate talents, and enhance performance-based reward for general staff) Interconnection and Others: 0.3pp

25 Optimize Resources Deployment to Promote Profitable Scale Development Optimize resource allocation to support scale development Tilt resources & CAPEX to drive incremental revenue & rapid scale development Consolidate existing revenue via effective cost initiatives Improve resources deployment to foster transformation Tilt resources towards high growth & high return businesses to fuel scale development of new and strategic businesses Introduce incentives to enhance staff performance & edge while maintaining a reasonable personnel cost structure Reinforce budget control & implement precision management Scientific cost management to enhance efficiency Implement stringent handset subsidy policy with focus on 3G subs and commensurate with customer value Discipline in administrative and other indirect operating expenses Assure network maintenance initiatives for leading network quality Enhance investment structure to reap higher return Increase investment in fibre & broadband roll-out to build an IP-based intellectual network of high bandwidth Strengthen resources redeployment and asset utilization for enhanced return 25

26 Enhanced CAPEX Structure Supporting Strategic Transformation CAPEX Structure Wireline Voice 4.2% 2.4% IT & Support 3.7% 2.9% VAS & Integrated 13.9% 17.8% Information Services 20.2% Infrastructure & Others 16.6% Strictly control investment in traditional wireline business and increase investment in transformation business to enhance network servicing capability Broadband & Internet VAS & Integrated Information Services IT & Support Wireline Voice Infrastructure & Others 10.1pp yoy 3.9pp yoy 0.8pp yoy 1.8pp yoy 3.6pp yoy 54.1% Broadband & Internet 64.2% Speed up fibre & broadband roll-out to maintain edge and enhance sustainable development: 17.9m broadband access capacity in 2010 Customer access bandwidth capability: Coverage in cities Note: 1. Broadband & Internet included data network, transmission network, broadband access equipment & cable 2. VAS & Integrated Information Services included VAS platform & ICT 3. IT & Support included enterprise informatization services 4. Wireline Voice included switches, voice access equipment & cable 5. Infrastructure & Others included air-conditioning supply facilities, conduits, buildings, minor purchases, R&D, etc. 4M: 20M: 98% 3pp yoy 58% 22pp yoy 26

27 Enhanced Profitability EBITDA Net Profit 82, % 88, % 15,262 13,

28 Solid Financial Strength Total Debt / Total Capitalization Net Debt / EBITDA 31.5% 7.9pp x 23.6% Solid financial strength, strong free cash flow & robust repayment capability well support sustainable development 28

29 Innovative Financial Management to Create Value Amid Transformation Implement centralized financial management at provincial level to foster efficiency Enhance Shareholders Value Advance from traditional financial management to modern corporate value management Value Management Risk Management Deepen precision management in resources deployment to increase return Devise effective management initiatives fitting the dynamics of new emerging businesses Embed control points along the process of decision making and operation management Establish multi-level controls with regular assessment, inspection and continuous improvement Promote professionalism and informatization in risk control Improve operating efficiency by precision management Increase investment return by optimizing resources allocation Sharpen edge by innovation Ensure shareholders benefits by effective control 29

30 Thank You! For further information & enquiries, please contact our Investor Relations Department at

31 Appendix 1 Extracted from audited consolidated statement of comprehensive income for the year ended 31 Dec 2010 (incl. upfront connection fees) RMB Mil Operating Revenue 209, ,864 Upfront Connection Fees 1, Operating Expenses (186,712) (195,848) Net Finance Costs (4,375) (3,600) Investment Income, Share of Profit from Associates Profit Before Taxation 19,175 20,908 Income Tax (4,549) (5,031) Profit for the Year 14,626 15,877 Equity Holders of the Company 14,422 15,759 Non-controlling Interests

32 Appendix 2 Extracted from audited consolidated statement of financial position as at 31 Dec 2010 (incl. upfront connection fees) RMB Mil Current Assets 60,936 55,245 Non-current Assets 365, ,110 Total Assets 426, ,355 Current Liabilities 143, ,923 Non-current Liabilities 60,426 48,468 Total Liabilities 203, ,391 Total Equity 222, ,964 Equity Attributable to Equity Holders of the Company 221, ,468 Non-controlling Interests