2003 Annual Results Presentation

Transcription

1 2003 Annual Results Presentation

2 Disclaimer 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 involve known and unknown risks, uncertainties and other factors, which may cause the actual performance, financial condition or results of operations of China Telecom 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 to be filed with the U.S. Securities and Exchange Commission (the SEC ) and in the Company s other filings with the SEC. 2

3 Management Zhou Deqiang Chairman/CEO Chang Xiaobing President/COO Wu Andi EVP/CFO Li Ping EVP/Company Secretary 3

4 Agenda Annual Highlight Business Review Financial Review 4

5 Annual Highlight

6 Excellent Performance Achieved... RMB Billion, except for subscriber data Net Profit 16.8 (1) 51.9% (2) EBITDA 57.5 (1) 13.9% (2) Revenue (1) 9.5% Local Subscribers million Broadband Subscribers 5.63 million 22.0% 200.4% Note: (1) Excluding up-front connection fee (2) Effect of one-time appraisal deficit and related tax impact in 2002 excluded in calculation 6

7 In a Favorable Environment... GDP (1) Local Telephony Penetration (2) RMB Billion 9, % 10, % 11,669 16% 15% 19% 18% 23%21% 2001 In our service regions National average Internet Users (3) Million Source (1) National Bureau of Statistics based on comparable price 2001 (2) Statistics release of the MII and its provincial branches in our service regions (3) CNNIC, national data

8 Driven by Continued Reforms and Innovations External Growth Achieved via Acquisition Managerial Innovations driving Efficiency gains Creating Shareholder Value Stronger Distribution driving Revenue Growth Corporate IT Strategy Implemented Competitiveness Enhanced thru BPR 8

9 Acquisition Review: Target Performance (1) Faster Revenue Growth (2) Marked Margin Expansion (2) 10.1% 9.2% 45.1% 50.5% Targets Original Listco Net Profit Beating Forecast (2) Lower Capex/Sales (3) RMB Million 4,182 4, % 45.2% 2003 Forecast 2003 Actual Note (1) All financials unaudited (2) Excluding up-front connection fee (3) Including up-front connection fee 9

10 Acquisition review: Significant Benefits As of or for 2003 Targets Acquired Original Listco Combined Group Local Subs (million) (1) Service region pop.(million) Penetration (2) 16.6% 31.4% 22.8% Local sub growth (1) 23.1% 21.3% 22.0% Broadband sub growth 239.7% 186.3% 200.4% Operating Rev. (3) (RMB billion) Net profit (3) (RMB billion) EPS (3) (RMB) Dividend proposed:hkd 0.065/share Sichuan Chongqing Anhui Jiangsu Jiangxi Fujian Zhejiang Shanghai Guangxi Note: (1) Local sub of China Telecom (2) Penetration = Total local sub in service region/ Service region population (3) Excluding up-front connection fee, financials unaudited except for Combined Group 10 Guangdong Original Listco Targets acquired

11 Business Review

12 Overview: Continued Steady Growth RMB Million Revenue Local Telephony 58,021 55, % 3.0 Internet 8,160 4, % 3.2 Long Distance 23,658 23, % -0.1 Managed Data Leased Line Interconnection Other 2,540 3,915 6,444 7,828 2,431 4,214 5,921 4,707 Change Contribution to Rev. Growth(p.p.) 4.5% % % % 3.1 Total Revenue 110, , % 9.5 Note: Total revenue excluding up-front connection fee of RMB 7,885 million 12

13 Local Telephony: Positive Trend Local Subs Local Usage Million Billion Pulses % % % Residential Enterprise Public Phone Wireless Local Access Voice Dial-up 13

14 Local Telephony: Competition Effectively Countered to Boost Usage Monthly Usage Growth Rate (YoY), % 12.3% 6.3% 7.6% 6.6% 8.1% 7.1% 7.7% 9.1% 9.0% 1.6% 3.1%

15 Local Telephony: Proactive & Cautious Approach toward PHS Strong Sub Growth Declining Unit Cost & Improving Return Thousands 18,346 Centralized Procurement Higher Utilization 153.3% 2, % 7,243 Return further improved as Capex/Sub down 12% YoY

16 Broadband and other Internet: Continued Strong Growth RMB Million Internet Revenue 7.4% Sustained Broadband Growth Thousand Subs 5,630 4, % 66.1% 8, % 3, % 1, H Percentage of total rev. (excl. Up-front connection fee) Internet revenue 16

17 Broadband & Other Internet: Growing into A New Pillar Business Explosive Growth of Broadband Industry Value Chain Compelling Branding & Bundling Dominant Control of Last Mile Strong Demand 17

18 VAS: A Rising Star Million Rapid Growth of Caller ID 53.7% Expanding the VAS Horizon 28.3% % 41.5% % Percentage of Caller ID sub to Caller ID sub total local sub Million Voice Information Taking Off % % 1,335 Wireline SMS Caller ID Tele-Chat QQ Value Added Services Broadband New Vision PHS SMS 2001 Usage of voice information services 18

19 Long Distance: Steady Growth RMB Million 20,123 DLD Revenue -1.2% 19,888 Million Minutes 46, % 49.7% DLD Usage 15.0% 53, % 54.2% IDD Revenue IDD Usage RMB Million 3, % 3,770 Million Minutes 1, % 8.4% 1, % 51.1% 61.3% 19 VOIP PSTN

20 Managed Data & Leased Line: Smooth Growth RMB Million 2,431 Managed Data Revenue 4.5% 2,540 Managed Data Usage Thousand port equivalents DDN FR ATM (64K) (128K) (2M) 31.6% % % Leased Line Revenue Digital Circuits Leased RMB Million 4, % 3,915 Thousand 2M equivalents %

21 Interconnection: Rapid Growth Interconnection Income & Expense Inbound Local Call Volume RMB Million 5, % 6,444 Billion Minutes % ,828 2,848 Intercon rev. Intercon. expense 21

22 Managerial Innovation - Core Competitiveness of China Telecom Strengthened Construction of distribution system Headquarters Provincial companies Local networks Institution Procedure Modeling Financial Operational Capital IT Systems (CTG-MBOSS) 22

23 Managerial Innovation - Enhancement of the Distribution System Distribution Channels Key Account Managers Community managers Rural contract personnel service hot line Business customers Key Accounts Public Customers Product Bundling Fixed line PHS Data Broadband Internal Measures Re-allocate human resource Streamline IT systems Implement sales-based compensation Re-design business procedures 23

24 Managerial Innovation - Business Process Re-engineering Further Implemented Average capex saving:9% Utilization: 6% Key Account direct service time proportion: 30% Customer satisfaction: 2 p.c points BPR Front-end personnel:50%+ Major Services: Average time of provisioning: 40% Average breakdown duration: 50% 24

25 Financial Review

26 Strong Financial Performance Profit and Loss Revenue Growth: 9.5% EBITDA Growth: 13.9% EBITDA Margin: up 2 pc points Net Profit Growth: 51.9% Net Margin: up 4 pc points Cash Flow Capex: RMB 42.8 billion, down 4.9% YoY Free Cash Flow: RMB 8.7 billion Balance Sheet Acquisition of 6 Provincial Operations Total Debt/Total Cap: 36.3% Note: All figures excluding up-front connection fee and effects of asset appraisal deficit and related tax impact in

27 Significant Revenue and Net Profit Growth Revenue EBITDA Net Profit RMB Million RMB Million RMB Million 101, % 110,566 50,448 (1) 13.9% 57,484 11,061 (1) 51.9% 16,801 1,219 Note: All figures exclude up-front connection fee (1) Excluding effects of asset appraisal deficit and related tax impact in

28 Strict Cost Control and Improved Profitability Operating and EBITDA Margin (1) Operating Expense Structure Operating Margin EBITDA Margin RMB Million 22.2% 52.0% 83,567 86, % 3.4% 15.9% 17.7% 17.3% 49.9% 12.2% 14.1% 28.9% 26.5% 39.5% 38.3% Note: (1) Excluding up-front connection fee, and excluding effects of asset appraisal deficit and related tax impact in 2002 (2) Excluding personnel expenses 28 Depreciation Network O&S (2) SG&A (2) Personnel Interconnect & Others

29 Capex Control Target Met Capital Expenditure RMB Billion 41.1% % E Capex / Revenue (including up-front connection fee) 29

30 Significant FCF Growth and Return Enhancement Free Cash Flow (1)(3) ROE (2)(3) RMB Billion % 7.7% 1.17 Note: (1) FCF = EBITDA- Income tax- Capex (2) ROE =Net profit / Average shareholders equity (3) Excluding up-front connection fee and, excluding effects of asset appraisal deficit and related tax impact in

31 Solid Capital Structure Total Debt / Total Cap (1) Net Debt (2) / EBITDA (3) 36.3% 24.4% Note: (1) Total cap = Total debt + Deferred revenue + Shareholders equity + Minority interest (2) Net debt = Total debt - Cash and cash equivalents (3) Excluding up-front connection fee and effects of asset appraisal deficit and related tax impact in

32 Appendix I: Key Data from the Income Statement RMB million Operating Revenue 110, ,010 Operating Expense (86,003) (83,567) Operating Profit 24,563 17,443 Net Interest Expense (1,814) (2,144) Income Tax (5,933) (4,266) Net Profit 16,801 11,061 EPS (RMB) Weighted Average Number of Shares (Million) 75,614 69,242 Note All figures excluding up-front connection fee; 2002 figures excluding effects of asset appraisal deficit and related tax impact where applicable 32

33 Appendix II: Key Data from the Balance Sheet RMB million Cash and Cash Equivalents 10,119 18,685 Other Current Assets 15,385 15,015 Non-Current Assets 280, ,911 Total Assets 305, ,611 Current Liabilities 96,666 99,548 Non-Current Liabilities 76,398 50,029 Minority Interest 1,269 1,186 Shareholders Equity 131, ,848 Liabilities and Shareholders Equity 305, ,611 33

34 China Telecom Sharing the Very Best of This Information Age Thank You! For more details, please click onto China Telecom s corporate website at 34