Post on 16-Jul-2020
China Telecom
JP Morgan China Conference 2006
Ms. Wu Andi
CFO of China Telecom
26 April 2006Beijing
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 are subject to known and unknown risks, uncertainties
and other factors, which may cause the actual performance, financial condition or results
of operations of China Telecom Corporation 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 filed with the U.S. Securities and Exchange Commission (the “SEC”) and in the
Company’s other filings with the SEC.
Forward-Looking Statements
Highlights of 2005 Performance
Solid Operating PerformanceSolid Operating Performance
Strong Free Cash FlowStrong Free Cash Flow
Effective CAPEX ControlEffective CAPEX Control
Strategic Transformation on TrackStrategic Transformation on Track
Steady growth in revenue and net profit
Supportive of future investment and enhanced cash return to shareholders
Ensuring investment return and sustainable growth
To secure a promising prospect
20052004 Growth
Continuous growth in subscribers, revenue and net profit
DPS (HKD)
EPS (RMB)
Net Profit * (RMB Mil)
EBITDA Margin
EBITDA (RMB Mil)
Operating Revenue (RMB Mil)
Broadband Subs (Mil)
Access Lines in Service (Mil)
15.4%
5.2%
8.0%
-1.1pp
4.2%
6.4%
51.9%
12.6%
0.0750.065
0.2610.248
21,13119,565
50.3%51.4%
81,82578,542
162,529152,754
21.0213.84
210.09186.65
Key Performance Indicators of 2005(Excl. Connection Fees)
Note: * Net profit used hereinafter represents profit attributable to equity holders of the company.Unless otherwise stated, all financial data used hereinafter exclude upfront connection fees.
Key Performance Indicators of 1Q 2006
1Q 2006*
53.5%EBITDA Margin
5,908Net Profit (RMB Mil)
22,339EBITDA (RMB Mil)
7.3%Annual Growth of Operating Revenue
41,760Operating Revenue (RMB Mil)
2.14Net Adds of Broadband Subs (Mil)
23.16Broadband Subs (Mil)
5.09Net Adds of Access Lines in Service (Mil)
215.18Access Lines in Service (Mil)
* All data of 1Q 2006 used hereinafter were un-audited.
Steady growth in subscribers and revenue
Benefited from the seasonal strength, EBITDA margin was raised to 53.5%
Operating Revenue
38,92041,700 41,060 40,849 41,760
Operating Revenue
RMB Mil
RMB 41.76 billion of operating revenue in 1Q 2006, an increase of 7.3%, over the same period of 2005
Revenue from voice business stabilizing
Internet access and VAS remain as key drivers for revenue growth
1Q20061Q2005 2Q2005 3Q2005 4Q2005
Net Adds of Access Lines
7.30
4.463.23
5.09
Mil
2Q2005 4Q20053Q2005 1Q2006
Residential Enterprise Public Telephone PAS
1.28 0.94 0.761.97
0.670.41 0.35
0.280.530.46 0.35
0.39
4.83
2.65
1.77
2.45
Continued Growth in Access Lines
Composition of Net Adds of Access Lines
38.7%
48.1%
5.5%7.7%
2005
1Q200663.6% 7.1%
8.1%
21.2%
PAS
PAS Subscribers
Mil
15.9%
22.6%27.2%
59.5
42.2
25.6
57.1
2003 2004 2005 1Q2006
27.7%
Strategies and Progress
Enhance revenue from VAS over PAS
Reduce PAS investment plan
Lower handset subsidy
Improve PAS network utilization
Strengthen bundling with other services
1Q2006: more than 100%
2006: ↓ more than 50%
1Q2006: about 70%
PAS Subs/Access Lines in Service
Voice Usage
1Q2005 1Q2006
Pulse in Bil
Local Voice Usage
107.82 106.65
-1.1%
1Q2005 1Q2006
Minute in Bil
Domestic Long Distance Usage
21.3323.02
+7.9%
1Q2005 1Q2006
Minute in Bil
International LongDistance Usage
0.38 0.39
+2.6%
Implementing targeted marketing and bundled services to maintain voice usage stable
Robust Broadband Business
1.881.65
1.80 1.85
2.14
Net Adds of Broadband Subs
Mil
1Q20061Q2005 2Q2005 3Q2005 4Q2005
Broadband market is growing strongly in a sustainable way
To double broadband subscribers in 3-4 years
Broadband ARPU in 1Q 2006 remained relatively stable
Improve high-end users contribution by differentiated services
Rapid Growing VAS
26% 24%
135%
29%
Major Growth of VAS Revenue in 1Q 2006
Major VAS
Caller ID
SMS
Color Ring Tone
Telephone Information Service
Integrated Information Services
Penetration rate: 64.2%, ↑ 1.6pp
Usage: ↑ 74%
Penetration rate: 39%, ↑ 7pp
Caller ID Telephone Information
Service
SMS & Color Ring
Tone
Integrated Information
Services
Include: BestTone, China V-Net, BizNavigator and system integration
Favorable Start-up of Integrated Information Services
4446
51
BizNavigator Subscriber
Thousand
2006.1 2006.2 2006.3
+4.6%+8.7%
2.682.85
3.07
Daily Call-in Usage of BestTone
Pulse in Mil
2006.1 2006.2 2006.3
+6.3%+7.7%
Development Measures for 2006
Facing enormous pressure on revenue growth, due to intensified mobile substitution
Endeavor to stabilize voice business and, continuously develop broadband business, VAS and integrated information services
Controlled cash cost to maintain EBITDA margin at relatively high level
Stringent Cost Control
Ensuring steady growth of profitability
Continuously reduce capital expenditure, lower the ratio of depreciation and amortization to revenue
Enhance the control on repair costs, personnel and administrative expenses
Optimize finance structure to reduce finance cost— Issued RMB 10bn 6-month Short Term Commercial Paper (2.54% p.a.)
in October 2005
— Issued RMB 20bn 1-year Short Term Commercial Paper (3.05% p.a.) in April 2006
Strengthen Internal Control
The operational management has been tested and evaluated in accordance with the internal control policy per COSO system
Reducing corporate risk and further enhancing operating efficiency
Continuously improving information disclosure and perfecting corporate governance
Continue to strengthen internal control and reinforce management towards international best practices
Promising Prospect
Achieve robust
financial results
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Stringent control on investment
Increase contribution of non-voice business
Strengthen development of Internet access & VAS
Expand integrated information service
Enrich video communication business
“Triple-play” and “Fixed-Mobile Convergence”
Fully leverage existing resources to consolidate
traditional fixed line business