China Telecom Corp. Ltd. Class A · SSE:601728
China Telecom Corp. Ltd. Class A — FY2002 Earnings Presentation
37 slides from China Telecom Corp. Ltd. Class A's earnings presentation, Nov 20, 2003
Slide 1: 2002 Annual Results
DP +s er CHINA TELECOM
Slide 2: Disclaimer
Disclaimer 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 involve k
Slide 3: Management
Management Zhou Zhou Deqiang Deqiang Chairman Chairman&&CEO CEO Chang ChangXiaobing Xiaobing ED ED&&President President Wu WuAndi Andi ED ED &&CFO CFO 3
Slide 4: Agenda
Agenda Annual Annual Highlight Highlight Business Business Review Review Financial Financial Review Review 4
Slide 5: Annual Highlight
Annual Annual Highlight Highlight
Slide 6: Strong Operating and Financial Performance
Strong Operating and Financial Performance Net Income (1) 13% 13% EBITDA 10% Revenue 248% Broadband sub Local sub 17% A Solid Foundation Laid for Sustainable and Profitable Development (1)Excluding effects of one-time revaluation deficit in 2001 6
Slide 7: Favorable Business Environment
Favorable Business Environment Strong & Growing Intensifying But More Transparent Demand Manageable Competition Regulation • Low penetration • Local not • Industry driving basic experiencing restructuring telecom demand significant direct largely completed competition • Move toward • Very limited In
Slide 8: Ensure Sustained Growth and Value Creation
Ensure Sustained Growth and Value Creation Revenue Growth • Leverage local strengths to continue subscriber and traffic growth • Focus on broadband and other high-growth, high-margin businesses • Improve customer service through segmentation and differentiation Profitability & FCF Growth • Continue
Slide 9: Enhance Competitiveness through Continued Re-Structuring & Innovation
Enhance Competitiveness through Continued Re-Structuring & Innovation Organizational Corporate Restructuring Governance Business KPI based Process Reengineering VALUE Evaluation and Compensation Key Business Function Centralization 9
Slide 10: 2003 Prospects
2003 Prospects Revenue Growth In line with GDP growth Room for further improvement with Profitability effective cost control Significant growth sustained with Free Cash Flow capex budget of RMB 25b reiterated Potential Acquisition Earnings accretion and value creation ; To be completed as soon as pr
Slide 11: Business Review
Business Business Review Review
Slide 12: Business Overview: Steady Growth, Lower Risk
Business Overview: Steady Growth, Lower Risk 2001 RMB Mn 2002 2001 Δ% 5.3% 26.4% Local 35,847 31,970 12.1% 46.6% 9.7% Data & Internet 5,564 3,627 53.4% 9.2% 2.8% LD 17,650 18,068 -2.3% 2002 LL & 7.4% 7,458 6,676 11.7% Interconnection 23.4% Upfront 6,018 6,290 -4.3% 47.5% 9.9% Others 2,959 1,915 54.5
Slide 13: Local: Continued Strong Growth
Local: Continued Strong Growth Local Subscribers Local Usage Volume Million Pulses in billions 56.9 3.2 226.6 48.5 3.0 212.4 1.4 1.9 8.5 52.5 53.7 7.0 42.1 174.1 38.1 158.8 2001 2002 2001 2002 Residential Public telephones Voice Dial-up Business Wireless Local Access 13
Slide 14: Local: Pillar Position further Consolidated
Local: Pillar Position further Consolidated Revenue Contribution Business Focus RMB billions 47.5% 46.6% • Take full advantage of our dominant 35.8 control of the “last mile” 32.0 1.0 0.8 12.5 • Develop high ARPU subscribers and 10.2 implement stricter return-based capex management 21.0 22.4 • Enhan
Slide 15: Broadband: Explosive Growth
Broadband: Explosive Growth Broadband Subscribers Internet Access Revenue ‘000 RMB billions 1,958 3.8 .6 % 1,379 75 % 14 4 7.9 243 2.2 2 397 1,123 8 88 300 2001 2002 2003 1Q 2001 2002 ADSL LAN Others 15
Slide 16: Broadband: The High-margin, High-growth Star
Broadband: The High-margin, High-growth Star Revenue Contribution (1) Business Focus • Leverage our huge subscriber base and dominant control of the “last mile” 5.0% 3.1% • Maintain premium product positioning through brand building and superior quality 2001 2002 (1)Internet access revenue, incl. di
Slide 17: Broadband: Access-Application Interaction -- the ChinaVnet Model
Broadband: Access-Application Interaction -- the ChinaVnet Model End Users • • E Ga • d m • I Co uc ing • n m a n. s •.. Str formme tion tio on dd lic s • A pp es ue . ea a rc ic ati .. • A cc en m tio e in n ev •A g •R China • Revenue • Customer access Service • Billing & collection • Lower operati
Slide 18: Managed Data: Robust Bandwidth Demand Driving Growth
Managed Data: Robust Bandwidth Demand Driving Growth Managed Data Usage (1) Managed Data Revenue Equivalent ports in ‘000 RMB billions 1.8 8 ATM . 1% 11 21 20 1.5 FR 24 159 DDN 208 2001 2002 (1) ATM in 2M equivalent; FR in 128k equivalent; DDN in 64k equivalent 18
Slide 19: Managed Data: Continue our Strategic Focus on Large Enterprise Customers
Managed Data: Continue our Strategic Focus on Large Enterprise Customers • Consulting • Provisioning • Trouble-shooting • Billing & Collection • Technical support Customer Single Point Office B of Contact Global One- Customer Office A China Telecom Stop Shopping Network Customer Office C Total Solut
Slide 20: DLD: Healthy Traffic Growth
DLD: Healthy Traffic Growth DLD Traffic Volume Traffic Volume Breakdown Minutes in billions 33.6 47% 47% 47% 30.6 62% 16.3 17.3 53% 53% 53% 38% 2001 2002 2002 2002 2001 2002 2002 1H 2002 2H 1H 2H VOIP PSTN 20
Slide 21: DLD: Encouraging Revenue Trend
DLD : Encouraging Revenue Trend DLD Market Share (1) DLD Revenue RMB billions 64.2% 14.7 14.4 54.5% 53.5% 7.1 7.1 7.2 2001 2002 2001 2002 2002 2001 2002 1H 2002 2H 2H 1H 2H (1) Market share in terms of traffic volume 21
Slide 22: IDD: Again, Encouraging Stabilisation
IDD (1): Again, Encouraging Stabilisation IDD Traffic Volume (1) IDD Revenue (1) Minutes in billions RMB billions 1.4 3.4 3.3 1.3 0.7 1.6 1.7 0.6 2001 2002 2002 2002 2001 2002 2002 2002 1H 2H 1H 2H (1) Including calls to HK, Macao and Taiwan (1) Including calls to HK, Macao and Taiwan 22
Slide 23: Interconnection and Leased Line: Steady Growth Ahead
Interconnection and Leased Line: Steady Growth Ahead Interconnection Leased Line Revenue RMB billions RMB billions 3.1 4.4 2.9 3.8 1.3 2.6 2.3 2.1 1.8 0.6 1.4 1.2 2.5 1.8 1.2 0.9 0.9 2001 2002 2001 2002 2002 2001 2002 2H 1H 2H Net Interconnection Revenue Interconnection Expenses 23
Slide 24: VAS: A Brave New World...
VAS: A Brave New World... FocOne Corporations ATM VC Call Center Tailored Yellow Page APIX ChinaVNet Telephone Banking ADSL Individuals 17901 Direct Dial VoIP Telephone Lottery Information Telephone Telephone Chat Room New New New Services Technologies Service Models 24
Slide 25: Restructuring: Re-inventing China Telecom
Restructuring: Re-inventing China Telecom Enhanced Competitiveness •Operational Efficiency gains •Greater market responsiveness • Consolidate four distribution • Establish market-oriented, flat channels organizational structure comprising “Front-end” and • Improve customer satisfaction Back-end” thr
Slide 26: Financial Review
Financial Financial Review Review
Slide 27: Solid Financial Results
Solid Financial Results Revenue growth: 10.1% EBITDA growth: 12.5%, margin up 1.2 p.p. Net income growth: 13.4%, margin up 0.6 p.p.(1) Capex reduction: 27.8%, down RMB 11.1 billion Free cash flow: RMB 6.2 billion, up 12.8 billion Total debt to capitalization ratio: 17.4% (1)Excluding effects of one-
Slide 28: Strong Top-line and Bottom-line Growth
Strong Top-line and Bottom-line Growth Revenue EBITDA Net Income RMB billions RMB billions RMB billions % .5 % .4 % .1 75.5 12 42.3 13 16.9 10 (1) 68.5 37.5 14.9 2001 2002 2001 2002 2001 2002 (1) Excluding effects of one-time revaluation deficit in 2001 28
Slide 29: Strictly-controlled Opex and Improved Profitability
Strictly-controlled Opex and Improved Profitability Opex and EBIT margin Cash Opex and EBITDA margin RMB billions RMB billions 56.0% 28.3% 54.8% 26.4% 54.1 33.2 50.4 31.0 2001 2002 2001 2002 Opex EBIT Margin Cash Opex EBITDA Margin 29
Slide 30: Rationalised Opex Structure
Rationalised Opex Structure Network Operations & Support Opex Breakdown RMB billions 2.6% 4.9% 16.5 -1 0. 12.3% 6% 16.5% 13.8% 14.7 12.9% 32.7% 27.2% 38.6% 38.6% 2001 2002 2001 2002 D&A Network Operations and Support SG&A Personnel Interconnection 30
Slide 31: Improved Network Efficiency and Reduced Capex
Improved Network Efficiency and Reduced Capex Network Utilization Ratio Capital Expenditure % RMB billions 75.7% 40.0 70.7% 68.3% 65.1% 28.9 25.0 23.5 Local Switching LD Switching 2001 2002 2003E 2004E 2001 2002 31
Slide 32: Significantly Improved Cash Flow and Return
Significantly Improved Cash Flow and Return FCF (1) ROE (2) RMB billions % 9.7% 6.2 8.6% 2001 2002 -6.6 2001 2002 (1) FCF=Cash generated from operations+Income tax-capex (2) Excluding effects of one time revaluation deficit in 2001 income tax excludes effects of one-time revaluation deficit 2001; ex
Slide 33: Continue to Enhance Financial Efficiency and Create Shareholder Value
Continue to Enhance Financial Efficiency and Create Shareholder Value • Implement comprehensive budget control and further centralize procurement and cash management • Continue to temper expense growth and improve expense structure • Exercise strict control over capital expenditure • Improve capital
Slide 34: Solid Capital Structure
Solid Capital Structure RMB Mn 2002 2001 Short Term Debt 21,394 22,486 Long Term Debt 4,853 7,112 Total Debt 26,247 29,598 Shareholder's Equity 125,008 97,485 Total Book Capitalization 151,255 127,083 Cash and Cash Equivalents 16,423 3,882 Net Debt 9,824 25,716 Total Debt/Total Capitalization 17.4%
Slide 35: Thank You
China Telecom: Realize the Best of the Information Age Thank You This presentation is available at www.chinatelecom-h.com 35
Slide 36: Extract from audited consolidated profit and loss -- Appendix I
Extract from audited consolidated profit and loss for the year ended December 31, 2002 -- Appendix I Amounts in Mn, except for per share data 2002 2001 Operating Revenues 75,496 68,546 Operating Expenses 54,118 50,448 Operating Profit 21,378 18,098 Net Finance (Cost)/Income (632) 293 Taxation (3,855
Slide 37: Extract from audited consolidated balance sheet -- Appendix II
Extract from audited consolidated balance sheet at December 31, 2002 -- Appendix II RMB Mn 2002 2001 Cash and Cash Equivalents 16,423 3,882 Other Current Assets 10,079 10,246 Non-current Assets 184,350 175,206 Total Assets 210,852 189,334 Current Liabilities 57,627 57,444 Non-current Liabilities 27,