2003 Interim Results. China Mobile (Hong Kong) Limited August 12, 2003

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2 2003 Interim Results China Mobile (Hong Kong) Limited August 12,

3 Management Mr. Wang Xiaochu Mr. Li Yue Mr. Lu Xiangdong Mr. Xue Taohai Mr. He Ning Chairman & CEO Vice President Vice President Vice President & CFO Vice President 3

4 Agenda Results Overview for 1H2003 Operating Performance for 1H2003 Financial Results for 1H2003 4

5 Results Overview for 1H2003 Favorable business development with strong growth in new business Brief impact of SARS allowing stable profitability Secure market leadership despite increasing competition Solid financial position with first interim dividend payout 5

6 Steady Business Growth 1H2002 1H2003 Change Subscribers (Millions) Revenue (RMB Millions) EBITDA (RMB Millions) EBITDA Margin (%) Net Profit (RMB Millions)* % 55,146 76, % 33,433 45, % 60.6% 59.0% -1.6 ppt 15,451 17, % * As required by revised SSAP 12 regarding the change in accounting treatment of deferred taxation, retrospective adjustments had been made to the relevant financial data of 2002 whereby net profit was adjusted to RMB15,451 million from the original RMB15,215 million. 6

7 Pro-forma Results 1H2002 1H2003 Change Pro-forma** Subscribers (Millions) Revenue (RMB Millions) EBITDA (RMB Millions) EBITDA Margin (%) Net Profit (RMB Millions)* % 70,368 76, % 41,468 45, % 58.9% 59.0% 0.1 ppt 16,882 17, % * As required by revised SSAP 12 regarding the change in accounting treatment of deferred taxation, retrospective adjustments had been made to the relevant financial data of 2002 whereby net profit was adjusted to RMB16,882 million from the original RMB16,590 million. ** All pro-forma data in this presentation is based on the assumption that the current group structure (including 21 subsidiaries) existed throughout the relevant period. 7

8 Continuous Strong Growth of New Business Mobile Data Users (Millions) % New Business Revenue (RMB Millions) 86% 6,392 3,440 SMS Usage (Billion Messages) Pro-forma 144% % 8.3% H2002 Pro-forma 1H2003 New Business Revenue / Total Revenue 1H2002 Pro-forma 1H2003 8

9 Brief Impact of SARS Monthly Net Additions for 1H2003 (Thousands) 2,101 2,001 2,028 1,702 1,671 1, Average Daily Operating Revenue for Each Month of 1H2003 (RMB Millions) Number of net adds, roaming and international call usage were affected by SARS in 1H2003 The impact of SARS has generally abated

10 Intensified Competition China Mobile China Unicom Xiaolingtong The large-scale expansion of Xiaolingtong has put pressure on mobile tariffs 10

11 Effective Competitive Strategies Ensured Stable Revenue Growth Q2002 4Q2002 1Q2003 2Q2003 Operating Revenue (RMB Billions) ARPU (RMB) MOU (Minutes) Average Revenue / Minute (RMB) Relatively flexible tariff Customer satisfaction Subscribers and usage volume Overall competitiveness MOU ARPU relatively steady Stable revenue growth 11

12 Benefiting from Price Elasticity, ARPU Decline Moderated Price Elasticity of Contract Subscribers ARPU (RMB) 1H2003 vs 1H2002 (Pro-forma) % Average Voice Revenue per Minute* MOU % * After Deducting New Business Revenue 1H2002 2H2002 1H2003 Pro-forma Contract Blended Prepaid Favorable price elasticity and the strong growth of new business revenue have led to moderating ARPU decline 12

13 Capital Expenditure (USD Billions) 5.6 Budgeted capital expenditure for Capital expenditure incurred for 1H2003 Capital expenditure in 1H03 was less than originally planned due to the impact of SARS; the pace of investments will quicken in 2H03 to ensure sustained business development. Effective marketing strategies increased the proportion of offpeak hour usage thereby easing part of the pressure for network expansion. Full year capital expenditure is expected to be maintained at around USD 5.6 billion. 13

14 First Interim Dividend Payout First interim dividend payout will be HK$0.16 per share, amounting to half of the total dividend payout last year. The total dividend payout for 2003 will be determined by the Board on approving the accounts for the year 2003 after taking into consideration such factors as the Company s future business development, asset acquisition, financial position and cash flow. Strong free cash flow is capable of supporting investments for steady business growth while ensuring a favorable cash return for shareholders. Endeavour to achieve a sustainable and steadily increasing dividend in the long run, while maximizing the return for shareholders. 14

15 Prospects Mobile telecommunications market in China Sustained robust growth of Chinese economy Continuous emergence of new technologies and new businesses 15

16 Operating Performance 16

17 Key Operating Statistics (1) Total Subscribers (Millions) Total Usage (Billion Minutes) MOU (Minutes) ARPU (RMB) Average Revenue per Minute (RMB) Mobile Data Users (Millions) SMS Usage (Billion Messages) Network Capacity (Millions) Network Utilization Rate (%) Average Monthly Churn Rate (%) 2002 Pro-forma % 0.69% 1H % 0.87% 17

18 Key Operating Statistics (2) 2002 Pro-forma 1H2003 Contract Subscribers - Subscribers (Millions) - MOU (Minutes) - ARPU (RMB) Prepaid Subscribers - Subscribers (Millions) - MOU (Minutes) - ARPU (RMB)

19 Promoting Off-peak Usage to Improve Network Productivity Growth of Off-peak Hour Traffic 27% Growth of Peak Hour Traffic 16% 18% 17% vs Pro-forma vs vs Pro-forma vs Effective marketing strategies Growth of off-peak usage Improved network productivity 19

20 An Efficient and High Quality Network Network Utilization Rate Wireless Connection Rate Call Drop Rate 87.0% 99.7% 99.5% 0.80% 0.75% 83.2% H2003 Pro-forma H2003 Pro-forma Network optimization and management ensures an efficient and high quality network 20

21 Successful Launch of M-Zone Brand Building New Business Revenue / Total Revenue 33% GoTone Middle to High- End Users Brand- conscious Users 8% Middle to Low- End Users Technophiles Value- conscious Users Other Mobile Subscribers M-Zone Subscribers M-Zone Other brands 21

22 Win-win Monternet Business Model 22 > > Millions* Millions* > 600* > 600* > > Billions** Billions** Monternet Users Monternet Service Providers Monternet SMS Usage * The above data is as of ** The above data is for 1H2003

23 Enhancing Customer Satisfaction Streamlined customer service process to to promote efficiency Leverage our comprehensive network coverage to to actively implement nationwide service accessibility Provided customized services and multi distribution channels to to cater for different customer needs 23

24 Advanced Support Systems to Promote Overall Efficiency Integrated NMS Flexible network management Centralized BOSS Rapid response to market changes Intelligent analysis of operations Maintained competitive advantages of support systems Unified MIS Comprehensive internal management 24

25 Financial Results 25

26 Revenue and EBITDA Revenue (RMB Millions) 39% 76,657 EBITDA (RMB Millions) 33,433 35% 45,201 55, % 59.0% 1H2002 1H2003 1H2002 1H2003 EBITDA Margin Revenue increase driven by favorable subscriber growth and acquisitions. Asset integration and cost control initiatives help sustain a high EBITDA margin. 26

27 Net Profit and EPS Net Profit (RMB Millions) EPS (RMB) 13% 17, % ,451 1H2002 1H2003 1H2002 1H2003 * As required by revised SSAP 12 regarding the change in accounting treatment of deferred taxation, retrospective adjustments had been made to the relevant financial data of

28 Key Financial Data 1H2002 Pro-forma RMB Millions 1H2003 RMB Millions Change (%) Operating Revenue Usage Fees Monthly Fees New Business Others 52,247 8,800 3,440 5,881 70,368 54,528 10,075 6,392 5,662 76, (3.7) 8.9 Operating Expenses Leased Lines Interconnection Depreciation Personnel Others 3,442 8,480 14,107 3,746 14,141 43,916 2,655 7,510 16,907 3,900 18,488 49,460 (22.9) (11.4) Operating Profit 26,452 27, Other Net Income 909 1, Profit Attributable to Shareholders 16,882 17, EBITDA 41,468 45, Note: EBITDA = Operating Profit + Depreciation + Other Net Income 28

29 Revenue Composition 2002 Pro-forma 1H % 72.6% 7.4% 71.1% 6.1% 8.3% 13.2% 13.2% Usage Fees Monthly Fees New Business Others 29

30 New Business Revenue Composition 2002 Pro-forma 1H % 27.5% 15.4% 48.5% 17.4% 55.1% SMS Value-added Services Other Data Businesses SMS led the continued rapid growth in new business revenue 30

31 Cost Composition Total Operating 63.0% Expenses 64.5% 4.1% Leased Lines 3.5% 10.3% Interconnection 9.8% 21.2% Depreciation 22.1% 5.2% Personnel 5.1% 22.2% Others 24.0% 2002 Pro-forma 1H2003 Note: The above data is expressed as a percentage of total revenue. 31

32 Robust Bad Debt Control Bad Debt Ratio 1.78% 1.39% 1.44% H2003 Pro-forma Pro-forma 32

33 Effective SG&A Control Contributing to Sustained Favorable Profit Growth 41,468 9% 45, % % H2002 1H2003 Pro-forma EBITDA (RMB Millions) ARPU (RMB) Monthly SG&A / Subscriber (RMB) Rational and effective competitive strategies Sustained favorable growth in subscribers and revenue Effective SG&A control Sustained favorable profit growth 33

34 Further Realization of Integration Benefits from Eight Subsidiaries EBITDA Margin Average Monthly Expenditure per Subscriber (RMB) Average Expenditure per Minute (RMB) 54.6% 56.3% H H H

35 Solid Capital Structure (RMB Millions) Short Term Debt Long Term Debt Total Debt Shareholders Equity Total Book Capitalization Total Debt / Total Capitalization Cash & Bank Deposits Net Cash / (Net Debt) Interest Coverage 9,456 51,524 60, , , % 43,644 (17,336) 27X 14,329 43,061 57, , , % 57, X 35

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37 ~ Extract from unaudited consolidated profit and loss account for the 6 months ended 30 June 2003 Appendix I (RMB Millions) 1H2002 1H2003 1H2002 1H2003 Operating Revenue Usage Fees Monthly Fees New Business Others Operating Expenses Leased Lines Interconnection Depreciation Personnel Others Operating Profit 40,875 6,940 3,002 4,329 55,146 2,767 6,615 10,465 3,002 10,184 33,033 22,113 54,528 10,075 6,392 5,662 76,657 2,655 7,510 16,907 3,900 18,488 49,460 27,197 Operating Profit Amortization of Goodwill Other Net Income Non-operating Net Income Interest Income Finance Cost Taxation Profit from Ordinary Activities after Taxation Minority Interest Net Profit 22, (664) (7,564) 15, ,451 27,197 (936) 1, (1,088) (9,355) 17, ,469 * As required by revised SSAP 12 regarding the change in accounting treatment of deferred taxation, retrospective adjustments had been made to the relevant financial data of

38 Extracted from unaudited consolidated balance sheet at 30 June 2003 Appendix II (RMB Millions) Current Assets Non-current Assets Total Assets Current Liabilities Non-current Liabilities Total Liabilities Minority Interest Net Assets Audited at , , ,021 (60,114) (52,451) (112,565) (191) 173,265 Unaudited at , , ,927 (70,892) (43,796) (114,688) (184) 184,055 * As required by revised SSAP 12 regarding the change in accounting treatment of deferred taxation, retrospective adjustments had been made to the relevant financial data of

39 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 involve known and unknown risks, uncertainties and other factors, which may cause the actual performance, financial condition or results of operations of China Mobile (Hong Kong) Limited (the Company ) to be materially different from any future performance, financial condition or results of operations implied by such forwardlooking 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. 39