China Telecom Corporation Limited. Credit Suisse Asian Investment Conference Mr. Leng Rongquan, President & COO. 28 March 2006 Hong Kong

Transcription

1 China Telecom Corporation Limited Credit Suisse Asian Investment Conference 2006 Mr. Leng Rongquan, President & COO 28 March 2006 Hong Kong

2 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 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. 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 Performance Overview Business Transformation 3

4 Highlights of 2005 (Excl. Connection Fees) Solid Operating Performance RMB Mil Operating Revenue: 162, % Net Profit * : 21, % Strong Free Cash Flow Free Cash Flow * * : 21, % Effective CAPEX Control CAPEX: 53, % vs.2005e saving of RMB1.9bn Favorable Start-up of Strategic Transformation Revenue from Internet Access and VAS: 37.6% Internet Access and VAS Contribution to Revenue Growth : 78.1% Note: * Net profit used hereinafter represents profit attributable to equity holders of the company. * * Free Cash Flow = EBITDA (Excl. connection fees) CAPEX- Income Tax. Unless otherwise stated, all financial data used hereinafter exclude upfront connection fees. 4

5 Revenue Growth Drivers Operating Revenue 6.4% Contribution RMB Mil +1.4 pp +2.5 pp +2.5 pp +0.0 pp RMB Mil 3,753 3, % 2, , , Voice Business* Internet Access VAS Others Note:* Voice business revenue includes Monthly Fees, Local Usage Fees, Upfront Installation Fees, DLD/ILD and Interconnection Revenue 5

6 Robust Growth of Internet Access and VAS Revenue from Internet Access and VAS As a % of Operating Revenue RMB Mil +37.6% 27, pp 20,229 9, % 6, % 6.1% 4.0% 14,109 17, % 11.0% Internet Access VAS Internet Access VAS 6

7 Voice Business Stabilizing Local Voice Usage Voice Business Revenue Pulse in Mil +4.7% RMB Mil +1.7% +11.6% 429, , % 121, , , , Voice ARPU Voice business revenue includes Monthly Fees, Local Usage Fees, Upfront Installation Fees, DLD/ILD and Interconnection Revenue Intense market competition (especially from mobile substitution) Expanding client base and implementing targeted marketing to maintain steady development of voice business 7

8 Revenue Breakdown 2004 (RMB Mil) 2005 (RMB Mil) Growth Share of Operating Revenue Local Voice Upfront Installation Fees 2,865 2, % 1.8% Monthly Fees 29,827 30, % 18.7% Local Usage Fees 47,646 47, % 29.3% 80,338 80, % 49.8% Long Distance 30,019 29, % 18.1% Interconnections 10,719 12, % 7.9% Internet Access & VAS 20,229 27, % 17.1% Managed Data, Leased Line & Others 11,449 11, % 7.1% Total 152, , % 100% 8

9 Effective CAPEX Control Continuous decrease in CAPEX Optimized CAPEX Structure RMB Mil 43.4% 61, % 56, % vs.2005e saving of RMB 1.9bn RMB Mil Others Communication Infrastructure IT & Support System 53, % 15.1% 6.0% vs pp 0.6pp 0.6pp -8.6% 33% 53,864 51,000 PAS 15.4% 7.1pp -4.3% Data & Internet 20.7% 3.1pp -5.3% E Fixed Line & Transmission Network 36.8% 4.7pp CAPEX/Operating Revenue

10 Financial Results Change Operating Revenue (RMB Mil) 152, , % Operating Expenses (RMB Mil) 121, , % Operating Profit (RMB Mil) 31,372 32, % Net Finance Expenses (RMB Mil) 5,340 4, % Net Profit (RMB Mil) 19,565 21, % EBITDA (RMB Mil) 78,542 81, % EBITDA Margin 51.4% 50.3% -1.1pp EPS (RMB) % DPS (HKD) % 10

11 Solid Financial Strength Total Debt/ Total Capitalization Net Debt/EBITDA Free Cash Flow 41.3% 43.4% 40.2% 1.81x 1.74x 1.54x RMB Mil 17,048 21,801 7, Note :Free Cash Flow = EBITDA (Excl. connection fees) CAPEX- Income Tax Solid financial strength and strong cash flow well support the Company s sustainable growth, and provide favorable cash return to shareholders 11

12 Performance Overview Business Transformation 12

13 Great Potential of China s Information Industry Industry Outlook Favorable policy support Revenue from posts & telecom service: RMB 700 billion in 2006, 10% up yoy Diverse customer demand Emerging new technology Information industry contributes 10% to GDP in % CAGR of telecom service revenue from 2006 to 2010 Telephone Subscriber New Add in 2006: 30 million wire-line subscribers 48 million mobile subscribers 1 billion telecom subs(including wire-line & mobile) in million Internet User base in 2010 Source:Ministry of Information Industry, China Sustainable Healthy Growth Enhanced by the State Development Policy of Informatization Leading Industrialization 13

14 Stable Development of Local Voice Business Access Lines in Service Strategies Mil 47.8% 44.3% % % Consolidating Subscriber Base By extending client base and enhancing customers stickiness Stimulating Voice Usage By appropriately increasing marketing initiatives and fully realizing customer value 1H2004 2H2004 1H2005 Market Share* 2H2005 Enhancing Network Functionalities By enhancing network intelligence, enriching and integrating terminal capabilities Note : * Company Subs/Total Fixed Lines and Mobile Subs in the Company s Service Area Sources: MII, China Telecom 14

15 Enhanced Return from PAS Development PAS Subscribers Strategies and Progress Mil 22.6% 27.2% Enhance VAS revenue contributions 15.9% : 19.2%, 15.1 pp 42.2 Reduce PAS investment 2005: 34.6% 25.6 Lower handset subsidy 2005: 21.7% PAS Subs/Access Lines in Service Improve network utilization and service quality Strengthen bundling with traditional voice service 15

16 Robust Broadband Business Thousands PC Household Penetration and Annual Sales in China 14.1% 12, % 16, % 19,897 Mil Broadband Subs & Internet Access Revenue PC Household Penetration in China PC Annual Sales in China Sources: CCID, China Telecom, iresearch RMB Mil 17,862 14,109 10, Broadband Subs Internet Access Revenue Broadband ARPU (RMB) 16

17 Rapidly Growing VAS VAS Revenue Major Growth of VAS Revenue in 2005 RMB Mil 649.6% 9,976 6, % 24.5% 22.9% Caller ID Telephone Information Service SMS & Color Ring Tone System Integration Cultivate and strengthen integrated information service capabilities 17

18 Effectively Developing Rural Markets Prioritize development in prosperous region to ensure investment return Strong demand from rural telecom markets pursuant to the Construction of New Rural Villages policy As at the end of 2005 Mil Promote information services and other VAS to increase ARPU Fully utilize network resources to lower investment per line Rural Area Subs Penetration Urban Area Subs Penetration Net Adds of Rural Area Subs % % Mil Control marketing expenses to achieve favorable return Above statistics refer to Company s services area Sources:MII and National Bureau of Statistics 18

19 Expanding Integrated Information Services Everyday life and infotainment Information Communication & Technology Information Release Communication Assistant Sector-specific Application Information Application Industry Directory Search Enquiry & Forward Services Communication Application Services Support Enhance customers stickiness to consolidate traditional business Generate new revenue sources Pave the way for providing seamless information and communication services in future 19

20 Promising Prospect Diverse market demand for telecommunications Maximize shareholders value Informationalization accelerating Technological advancement Achieve robust financial results Triple-play and Fixed-Mobile Convergence Expand integrated information service Enrich video communication business Increase contribution of non-voice business Strengthen development of Internet access & VAS Stringent control on investment Rapid economic growth Fully leverage existing resources to consolidate traditional fixed line business 20

21 THANK YOU 21