SEHK: 215 29 Interim Results 12 August 29
Disclaimer These materials have been prepared by Hutchison Telecommunications Hong Kong Holdings Limited (HTHKH) solely for use at this presentation and have not been independently verified. No representations or warranties, express or implied, are made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions presented or contained in these materials. It is not the intention to provide, and you may not rely on these materials as providing, a complete or comprehensive analysis of the financial or trading positions or prospects of HTHKH. None of HTHKH or any of their respective directors, officers, employees, agents, affiliates, advisers or representatives accepts any liability whatsoever in negligence or otherwise for any loss howsoever arising from any information or opinions presented or contained in these materials or otherwise arising in connection with these materials. The information presented or contained in these materials is subject to change without notice and its accuracy is not guaranteed. These materials are for information purposes only and do not constitute or form part of any invitation or offer to acquire, purchase or subscribe for securities and none of them shall form the basis of or be relied upon in connection with any contract, commitment or investment decision in relation thereto. These materials contain forward-looking statements. Statements that are not historical facts, including statements about management s beliefs and expectations, are forward-looking statements. These statements are based on current plans, estimates and projections, and you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and HTHKH undertake no obligation to update publicly any of them in light of new information or future events. Forward-looking statements involve inherent risks, uncertainties and assumptions. HTHKH caution you that if these risks or uncertainties ever materialize or the assumptions prove incorrect, or if a number of important factors occur or do not occur, HTHK actual results may differ materially from those expressed or implied in any forward-looking statement. While non-generally accepted accounting principles (GAAP) measures such as EBITDA (earnings before interest, taxation, depreciation and amortization) and are often used by companies as an indicator of operating performance, they are not expressly permitted measures under the GAAP or the International Financial Reporting Standards (IFRS) and may not be comparable to similarly titled measures for other companies. Accordingly, such non- GAAP measures should not be considered as an alternative to operating income as an indicator of the operating performance of HTHKH, and its subsidiaries or as an alternative to cash flows from operating activities as a measure of liquidity. The use of non-gaap measures is provided solely to enhance the overall understanding of the current financial performance of HTHKH, and its subsidiaries. Additionally, because HTHKH has historically reported certain non-gaap results to investors, HTHKH considers the inclusion of non-gaap measures provides consistency in its financial reporting. 1
Business Performance 2
Highlights 1 2 3 4 5 Consolidated turnover up by 8% to HK$4,97 million The largest 3G HK mobile operator and the first operator offers iphone 3G and 3GS service Carrier, Corporate and Business revenues of fixed-line business achieved strong growth Profit attributable to equity holders grew by 4% to HK$256 million Interim dividend per share at 1.12 HK cents 3
1 Turnover Consolidated turnover 4, 3,783 8% growth 4,97 HK$ mm 3, 2, 1, '8 1H '9 1H Mobile business turnover Fixed line business turnover 3, 2,413 1% growth 2,647 2, 1,516 7% growth 1,623 HK$ mm 2, 1, HK$ mm 1, '8 1H '9 1H '8 1H '9 1H 4
2 Mobile - customers Total customers Postpaid customers 7% Total growth 18% 3G growth 6% Total growth 17% 3G growth 3, 2,596 2,775 2, 1,721 1,828 ' 2, ' 1, 1, 1,222 1,442 1,127 1,324 '8 1H '9 1H '8 1H '9 1H 3G 2G 3G 2G 5
2 Mobile handset subscription 69% data centric devices Data ARPU driven Others 31 % Dongles 15 % iphones and other smartphones 54% Based on July 29 operational data 6
2 Mobile - iphone customers over 5% port in ~ 2-3 times 3G ARPU ~9% high tariff plans Based on June 29 operational data 7
2 Mobile - KPIs Stable postpaid ARPU and Churn under softened economy HK$ / month 25 2 15 1 5 Postpaid ARPU 29 213 22 '8 1H '8 2H '9 1H Postpaid Churn 2.% 1.8% 1.7% 1.8% Percentage (%) 1.5% 1.%.5%.% '8 1H '8 2H '9 1H 8
3 Fixed-line - key revenue drivers Focused and well-executed growth strategy Carrier Business Revenues 19% Growth Strong growth (HK$ mm) 648 773 '8 1H '9 1H Corporate & Business Markets Revenues 1% Growth (HK$ mm) 381 418 '8 1H '9 1H 9
4 Profit attributable to equity holders and EPS Achieving 4% growth under financial turmoil Delivering value HK$ mm 3 2 1 Profit attributable to shareholders 247 256 '8 1H '9 1H 6 5 Earnings per Share 5.13 5.32 HK cents 4 3 2 1 '8 1H '9 1H 1
5 Deliver value to equity holders Stable and sustainable dividends while maintaining efficient capital structure and sufficiency of funding Supported by strong and stable operational cash flows In line with overall objective of maximizing long term shareholder value 29 interim dividend: HK$54 million or 1.12 HK cents per share 11
Financial Overview 12
Financial Highlights '9 1H '8 1H (HK$m) (HK$m) Turnover 4,97 3,783 Cost of inventories sold (279) (138) Staff costs (31) (296) Depreciation and amortisation (65) (688) Other operating expenses (2,459) (2,243) 8% Growth Operating profit 399 418 Interest income - 9 Interest and other finance costs (73) (15) Share of results of a jointly controlled entity (8) - Profit before taxation 318 322 Taxation (38) (47) Profit for the year 28 275 Attributable to: Equity holders of the Company: 256 247 Minority interests 24 28 28 275 4% Growth 13
Turnover mobile business 68% data revenue growth Data revenue (HK$ mm) 394 68% growth 664 Turnover analysis by segments '8 1H '9 1H Total: HK$2,647m Others 13% Total: HK$2,413m Others 7% Roaming 21% Voice 41% Roaming 25% Voice 52% Data 25% Data 16% 9 1H 8 1H 14
Turnover - Fixed-line business Strong growth in Carrier, Corporate & Business segments Total: HK$1,623m Others 1 7% Total: HK$1,516m Others 1 9% Residential 19% Carrier Business 48% Residential 23% Carrier Business 43% Corporate & Business Markets 26% Corporate & Business Markets 25% 9 1H 8 1H 1 Others include revenue from interconnection charges and data centers 15
Financial Highlights '9 1H '8 1H (HK$m) (HK$m) Turnover 4,97 3,783 Cost of inventories sold (279) (138) Staff costs (31) (296) Depreciation and amortisation (65) (688) Other operating expenses (2,459) (2,243) Operating profit 399 418 Interest income - 9 Interest and other finance costs (73) (15) Share of results of a jointly controlled entity (8) - Profit before taxation 318 322 Taxation (38) (47) Profit for the year 28 275 16
Key cost items Cost of inventories sold 3 279 1% HK$ mm 2 1 138 3.6% 6.8% 5% % to turnover Depreciation and amortisation expenses '8 1H '9 1H % Staff costs HK$ mm 8 6 4 2 688 18.2% 65 15.9% 2% 15% 1% 5% % to turnover HK$ mm 3 2 1 296 31 7.8% 7.6% 1% 8% 6% 4% 2% % to turnover '8 1H '9 1H % '8 1H '9 1H % 17
Financial Highlights '9 1H '8 1H (HK$m) (HK$m) Turnover 4,97 3,783 Cost of inventories sold (279) (138) Staff costs (31) (296) Depreciation and amortisation (65) (688) Other operating expenses (2,459) (2,243) Operating profit 399 418 Interest income - 9 Interest and other finance costs (73) (15) Share of results of a jointly controlled entity (8) - Profit before taxation 318 322 Taxation (38) (47) Profit for the year 28 275 18
Other operating expenses Cost of services provided General, administrative and distribution costs HK$ mm 2, 1, 1,614 1,763 42.7% 43.% 5% 4% 3% 2% 1% % to turnover HK$ mm 2 1 172 4.5% 16 3.9% 5% 4% 3% 2% 1% % to turnover '8 1H '9 1H % '8 1H '9 1H % Operating lease rental expenses Doubtful debt expenses HK$ mm 6 4 2 414 1.9% 494 12.1% 15% 12% 9% 6% 3% % to turnover HK$ mm 5 4 3 2 1 43 42 1.1% 1.% 1.5% 1.%.5% % to turnover '8 1H '9 1H % '8 1H '9 1H.% 19
Change in CAC/CRC Accounting Policy Objectives: align income statement with cash flow statement increase the comparability of performance with other operators within the global industry 2
Estimated financial impact Estimated Before change effect of (HK$m) in a/c policy change Restated Income Statement '1H 8 '1H 8 Turnover 3,783 3,783 Operating profit 421 (3) 418 Profit attributable to equity holders 253 (6) 247 '1H 9 '1H 9 Turnover 4,97 4,97 Operating profit 472 (73) 399 Profit attributable to equity holders 312 (56) 256 Statement of financial position 'FY 8 'FY 8 Goodwill and other intangibles 5,621 (733) 4,888 Current and deferred taxation 97 (9) 88 Total equity (2,837) (724) (3,561) '1H 9 '1H 9 Goodwill and other intangibles 5,672 (87) 4,865 Current and deferred taxation 136 (11) 125 Total equity 9,91 (796) 9,15 21
Capex and liquidity Revenue driven Capex investment Scheduled network modernisation and expansion Strong FCF to meet future liquidity needs HK$ mm 8 6 4 2 8 Capex and Capex as % of Revenue 737 56 371 17.% 13.7% 9.8% '8 1H '8 2H '9 1H 735 EBITDA-CAPEX 25% 2% 15% 1% 5% % 2% Capex / Revenue (%) HK$ mm 6 4 2 19.4% 1.3% 55 489 11.9% 1% Margin (%) '8 1H '8 2H '9 1H % 22
Managing financial position Leverage ratio at 2.5 HK$5.2B bank facilities available HK$ mm 6, 5, 4, 3, 2, 4,122 Net Debt 4,948 4,519 1, '8 1H '8 2H '9 1H Net Debt / LTM EBITDA 5. 4. (x) 3. 2. 2. x 2.6 x 2.5 x 1.. '8 1H '8 2H '9 1H 23
Outlook 24
Outlook Well positioned to capture global bandwidth demand and mobile data growth Continue to enlarge 3G premium customer base with increasing data usage Focus on growing Carrier, Business and Corporate markets of fixed-line business Improve cost structure leveraged on MIC Bill and Keep arrangements 25
Q & A 26
Thank You 27