China Telecom Corp. Ltd. Class A · SSE:601728
China Telecom Corp. Ltd. Class A — FY2004 Earnings Presentation
35 slides from China Telecom Corp. Ltd. Class A's earnings presentation, Mar 31, 2005
Slide 1: China Telecom Corporation Limited
China Telecom Corporation Limited 31 March 2005
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. Leng Rongquan Executive Director, President & COO Ms. Wu Andi Executive Director, EVP & CFO Mr. Li Ping Executive Director & EVP 3
Slide 4: Agenda
Agenda Review & Outlook Business Performance Financial Results 4
Slide 5: Favorable Results
Favorable Results 2003 2004 Growth Access Lines in Service (Mil) 160.99 186.65 15.9% Broadband Subs (Mil) 7.23 13.84 91.4% Operating Revenue (RMB Mil) 151,553 161,212 6.4% EBITDA (RMB Mil) 79,449 87,000 9.5% EBITDA Margin 52.4% 54.0% 1.6PP Net Profit (RMB Mil) * 13,882 ** 28,023 - EPS (RMB) * 0.18 *
Slide 6: Favorable Results (Ex-Connection Fees)
Favorable Results (Ex-Connection Fees) Continuous growth in subscribers, revenue and net profit EBITDA margin sustained at a relatively high level 2003 2004 Growth Access Lines in Service (Mil) 160.99 186.65 15.9% Broadband Subs (Mil) 7.23 13.84 91.4% Operating Revenue (RMB Mil) 141,782 152,754 7.7%
Slide 7: Revenue Growth Drivers
Revenue Growth Drivers RMB Mil +5.8% +5.8% +41.0% +41.0% +4.5% +4.5% +7.7% +7.7% Annual Growth Rate 2,489 152,754 4,102 4,381 141,782 2003 Local Internet VAS and other 2004 Telephony service businesses Local Telephony and Internet service are key drivers of revenue growth 7
Slide 8: Broadband Boosting Revenue Growth
Broadband Boosting Revenue Growth Broadband Subs Internet Service Revenue Mil RMB Mil 9.2% 7.1% 4.6% CAGR: CAGR:+53.4% +53.4% CAGR: CAGR:+139.6% +139.6% 13.8 14,109 10,007 7.2 5,998 2.4 2002 2003 2004 2002 2003 2004 % of Operating Revenue Broadband subs grew by 6.61 million in 2004 and Internet serv
Slide 9: PAS
PAS PAS Subs Strategies Mil 22.7% Focus on network quality 15.9% enhancement to raise customer satisfaction rather 8.1% than geographical expansion CAGR: CAGR:+97.7% +97.7% Increase network utilization 42.2 Effectively expand subscriber base by controlling SAC 25.6 10.8 Promote VAS like SMS and Colo
Slide 10: CAPEX
CAPEX CAPEX Investment Focus RMB Mil 43.4% 36.9% Transform existing networks into intelligent, -8.6% -8.6% broadband and IP based networks Leverage urbanization and maintain leading advantage 61,587 56,307* 55,800 of access networks Prepare for next generation 2003 2004 2005E networks CAPEX/Operatin
Slide 11: Dividend
Dividend The Board of Directors proposes a dividend of HK$0.065 per share for 2004 Proper balance between sustainable development needs and shareholders’ demand for favorable cash return z Robust operating cash flow well supports funding demands for both z Maintain sufficient financial flexibility f
Slide 12: Perfecting Corporate Governance
Perfecting Corporate Governance Improve corporate governance according to OECD standards • More independent directors with increased authority • Strengthen functions of audit and remuneration committee, study the set up of nomination committee Promote transparency • Enhance quality of information di
Slide 13: Opportunities and Challenges
Opportunities and Challenges Economic Environment • Sustained and robust economic growth • Speeding up of national economic informatization Strong demand for telecommunications services Customers Competition • Demand for diversified and one-stop • Increasing mobile substitution services • New VAS op
Slide 14: Near Term Development Focus
Near Term Development Focus Product Bundling • Wireline：Leverage bundling and and Tariff Packaging packaging to boost usage • Broadband：Expand subscriber Targeted marketing, base and extend value chain strengthening sales channel • VAS：SMS, color ringtone management • Enterprise Subs：Provide total s
Slide 15: Extension of value chain
Progressive Strategic Transformation Consumer Contents and Enterprise Applications Applications and Solutions （IP VPN、System （Games, VOD, family Integration, IT informatization） Outsourcing） Extension of value chain Communication Services (Voice, Data, Media….) Wireline Fixed Mobile Broadband Wirele
Slide 16: Agenda
Agenda Review & Outlook Business Performance Financial Results 16
Slide 17: Revenue Breakdown
Revenue Breakdown Share of 2003 2004 Operating （RMB Mil） （RMB Mil） Growth Revenue Local Installation Fees 2,643 2,865 8.4% 1.9% Monthly Fees 27,499 29,827 8.5% 19.5% Local Usage Fees 45,815 47,646 4.0% 31.2% 75,957 80,338 5.8% 52.6% DLD 25,460 26,231 3.0% 17.2% IDD 3,943 3,788 -3.9% 2.5% Internet 10
Slide 18: Continued Growth in Access Lines
Continued Growth in Access Lines Access Lines in Service Net Adds of Access Lines in Service Mil Mil 98.1% 97.8% 96.5% 95.1% 186.6 28.0 178.5 25.7 161.0 42.2 146.9 36.5 25.6 17.0 11.0 12.4 14.8 8.0 9.6 17.7 18.4 19.0 17.1 16.6 2.5 1.4 104.8 108.1 112.6 113.1 2.8 9.3 1.3 5.0 2003.6 2003.12 2004.6 200
Slide 19: Growth in Local Voice Usage
Growth in Local Voice Usage Local Voice Usage Local Usage Revenue Pulses in Mil RMB Mil +11.6% +11.6% 429,150 +4.0% +4.0% 47,646 +3.1% +3.1% +6.5% +6.5% 384,496 45,815 360,986 44,440 2002 2003 2004 2002 2003 2004 Leverage sales channels and customer segmentation to launch targeted marketing Capitali
Slide 20: Robust Broadband Return
Robust Broadband Return Broadband Household Penetration Internet Service Revenue RMB Mil 81.2% +41.0% +41.0% 14,109 67.2% 10,007 43.8% 1,000 940 136 6.3% 102 Korea HK Singapore China Telecom 2003 2004 Service Areas Investment per Sub（RMB） Broadband ARPU （RMB） Sources：AsiaCom, China Statistical Yearb
Slide 21: Domestic Long Distance Service
Domestic Long Distance Service DLD Usage DLD Revenue 53.7% Minutes in Mil 0.43 RMB Mil 49.4% 0.38 0.32 45.8% +3.0% +3.0% -1.0% -1.0% +21.8% +21.8% +13.1% +13.1% 81,960 25,726 25,460 26,231 67,312 59,492 2002 2003 2004 2002 2003 2004 Market Share Unit Price (RMB) Public telephone and IP Supermarket t
Slide 22: Managed Data & Leased Line
Managed Data & Leased Line Managed Data Service Revenue Leased Line Service Revenue RMB Mil RMB Mil -6.1% -6.1% -18.6% -18.6% 3,210 3,015 5,103 4,154 2003 2004 2003 2004 To promote one-stop total solutions to corporate customers To provide economical and quality services to other operators 22
Slide 23: VAS
VAS Caller ID Subs Telephone Information Service Usage Mil Minutes in Mil 58.4% 51.2% 38.8% CAGR: +38.8% +38.8% 2,419 CAGR:+45.4% +45.4% 1,743 109.0 82.5 51.6 2002 2003 2004 2003 2004 % of Total Access Lines in Service 23
Slide 24: VAS Initiatives
VAS Initiatives Develop a wide variety of innovative services and products Improve network intelligence and new business platform Enhance value chain by win-win cooperation 24
Slide 25: Agenda
Agenda Review & Outlook Business Performance Financial Results 25
Slide 26: Key Financial Information
Key Financial Information 2003 2004 Change （RMB Mil） （RMB Mil） Operating Revenue 141,782 152,754 7.7% Operating Expenses Depreciation & Amortization 46,597 47,170 1.2% Network Operations & Support 31,338 27,611 -11.9% Personnel 20,812 23,233 11.6% SG&A 16,778 19,229 14.6% Other Operating Expenses 3,
Slide 27: Sustained Revenue Growth
Sustained Revenue Growth Operating Revenue Voice Revenue RMB Mil RMB Mil +7.7% +7.7% +6.4% +6.4% 152,754 118,211 141,782 111,082 63 57 2003 2004 2003 2004 Voice ARPU (RMB) Voice Revenue includes Monthly Fees, Local Usage Fees, DLD/IDD and Interconnection Revenue 27
Slide 28: Profit Growth
Profit Growth EBITDA Operating Profit RMB Mil RMB Mil CAGR: CAGR:+14.1% +14.1% 78,542 31,372 69,678 CAGR: CAGR:+46.9% +46.9% 60,354 23,081 51.4% 49.1% 14,544 46.3% 2002 2003 2004 2002 2003 2004 EBITDA Margin 28
Slide 29: Optimized Cost Structure
Optimized Cost Structure Expenses as % of Operating Revenue 83.7% Operating Expenses 79.5% Other Operating 2.2% Expenses 2.7% 14.7% Personnel 15.2% 11.8% SG&A 12.6% Network 22.1% Operations & Support 18.1% Depreciation & Amortization 32.9% 30.9% 2003 2004 29
Slide 30: Solid Financial Strength
Solid Financial Strength Total Debt/Total Net Debt/EBITDA Free Cash Flow * Capitalization RMB Mil 45.0% 41.3% 43.4% 17,048 1.81x 1.74x 7,622 2003.12 2004.6 2004.12 2003 2004 2003 2004 Solid financial strength and favorable cash flow well support our sustainable development Note: * Free Cash Flow = E
Slide 31: Financial Management
Financial Management Improve comprehensive budget management to effectively allocate resources and to realize strategic transformation Strengthen treasury management to reduce cost of capital Apply precision management to control costs and CAPEX effectively Persist to improve internal control to red
Slide 32: Strengthen Internal Control
Strengthen Internal Control Internal Internal control control on on corporate corporate governance governance Board of Directors Audit Committee Internal Internal control control on on business business operating operating system system CEO & CFO Internal Audit Internal Internal control control on o
Slide 33: Thank You
THANK YOU China Telecom Corporation Limited www.chinatelecom-h.com 33
Slide 34: Appendix 1: Extracted from audited statement of income for 2004
Appendix 1：Extracted from audited statement of income for the year ended 31 Dec 2004 (incl. upfront connection fees) 2003 2004 (RMB Mil) (RMB Mil) Operating Revenue 151,553 161,212 including: Upfront Connection Fees 9,771 8,458 Operating Expenses (118,701) (121,382) Revaluation Deficit on Property,
Slide 35: Appendix 2: Extracted from audited balance sheet as at Dec 2004
Appendix 2：Extracted from audited balance sheet as at 31 Dec 2004 (incl. upfront connection fees) 2003 2004 (RMB Mil) (RMB Mil) Current Assets 33,093 33,532 Non-Current Assets 370,849 379,038 Total Assets 403,942 412,570 Current Liabilities 149,135 151,944 Non-Current Liabilities 102,744 100,007 Tot