China Mobile (Hong Kong) Ltd. (CHL)

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China Mobile Limited (CHL)

H1 2013 Earnings Call

August 15, 2013 1:30 am ET

Executives

Guohua Xi - Executive Chairman

Yue Li - Chief Executive Officer, Executive Director and President of China Mobile Communications Corporation

Taohai Xue - Chief Financial Officer, Vice President, Executive Director, Vice President of China Mobile Communications Corporation and Director of China Mobile Communications Corporation

Presentation

Operator

Good afternoon, ladies and gentlemen. Welcome to China Mobile Limited's 2013 interim results announcement briefing. In today's briefing, our company management will first present the overall result and then take questions from the audience.

First of all, let me introduce the senior management attending today's briefing: Executive Director and Chairman, Mr. Xi Guohua; Executive Director and CEO, Mr. Li Yue; Executive Director, Vice President and CFO, Mr. Xue Taohai.; Executive Director and Vice President, Mr. Sha Yuejia; Executive Director and Vice President, Mr. Liu Aili.

Now I would like to give word to Chairman Xi to present the interim results for 2014.

Guohua Xi

Good afternoon, ladies and gentlemen. Welcome to our 2013 interim results announcement briefing. Today's presentation is divided into 3 parts. I will present the overall performance for the first half of 2013, then Mr. Li will talk about the operating performance. Finally, Mr. Xue will walk you through the financial results.

Let me walk you through the company's overall performance for the first half of 2013. In the first half of 2013, the company overcame various difficulties and faired serious challenges. We actively transformed strategies and promoted innovation to continuously enhance our strategy implementation capabilities, leveraging our advantages and even quality service.

Our operating performance remained steady. Operating revenue, up 10.4%. Revenue from telecommunications service, up 6.8%. Net profit margin at 20.8%.

Total customers exceed 740 million. Total voice usage up 3.7%. Data business developed fast, with revenue up to 33.5% from telecommunication services. Wireless data traffic business has been a strong impetus. Revenue grew by 62.2%.

As 3G development accelerates, our customer base surpassed 137 million in the voice sales sold. TD-LTE development has been encouraging. The company is actively preparing for 4G commercialization, whilst trying to create value for our shareholders. Our interim dividend for 2013 is HKD 1.696 per share.

Here are the key operating data for the first half of 2013. Performance remains steady. In the first half of 2013, the slowing of the Chinese economy, coupled with rising penetration, have impacted the development of the information and communications industry. Competition have become more compassed [ph]. OTT headwinds have been increasingly notable. Fierce line grab among operators for existing business continued. All this have put the company in an unprecedentedly challenging situation.

Against the backdrop of strategic transformation, there emerged an increased requirement for resources. The company's medium- to long-term earnings will be under more pressure. However, we do see broad outlook in information service in China. The government introduced measures to increase spending of information service of late. The accelerating proliferation of smartphones has provoked rapid growth of data traffic and applications, which have become the key impetus to fill the company's revenue growth. Meanwhile, TD-LTE obtained a strong support from the supply chain, imminent commercialization awaits, bringing advantage and opportunities to the company's development.

To capture opportunities and to render challenges, the company jazzed up to pursue Four-Network Coordination, full service and mobile Internet, and effort to transform our strategies, change and [indiscernible]. We focus on enhancing network and in marketing capabilities, whereas, measures have achieved encouraging progress. The company is fully confident about its future.

In the first half of 2013, 3G development accelerated. Total customers exceed 137 million, with rising proportion using smartphones. The company actively drove construction and usage of the 3G network. Base stations reached 361,000. Network utilization increased to 25%. Competitiveness of device was enhanced [indiscernible], with more diverse models available. But opening up the social channel, devices sold was approximately 66 million TD handsets sold across all channels of the company in the first half of 2013, over 90% of which were smartphones. Moreover, our self-brand device have taken substantive steps for -- in R&D. Two TD smartphone models were developed in the first batch.

The company is actively preparing for TD-LTE commercialization. This year, we'll build over 200,000 base stations, with contiguous network coverage in the main districts of 100 major cities. Some other cities will re-unearth data hotspot coverage in the main district.

Regarding device, 28nm multi-mode, multi-frequency TD-LTE smartphones have been launched, indicating the event of device maturity. Planned procurement is over 1 million TD-LTE device this year. In addition, the company is actively promoting VoLTE as device solution, propelled by the development of the industry.

18 commercial networks have been launched worldwide. Scale commercialization of TD-LTE is underway across the globe.

Aiming for quality and differentiation, the company prioritized return to fair full-service competition. We adopted a long-term and scientific approach to planning. The company endeavors to excel in backbone transmission and the construction of metropolitan area networks. We actively drove the construction of public Internet, expedited IDC development, introduced hotspot resources and uplifted on-net traffic. The overall bearer costs were reduced. We developed broadband access targeting corporate customers to provide customized offerings and aimed for return.

In the first half of 2013 various infrastructure results capabilities were significantly enhanced. The company has been investing for long-term development and adopted a forward-looking approach to capital spending and focused on return. CapEx for the first half amounted to RMB 57 billion. We have continued to pursue the Four-Network Coordination strategy to achieve a balanced development in network capabilities, for more basic resource accumulation to enhance overall transmission network capability. We will step up efforts in the development of Mobile Internet, Internet of Things to foster new growth drivers. We will continue to promote centralization of support systems and reasonably control the direction and pace of property construction.

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