China Mobile (Hong Kong) Ltd. (CHL)

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China Mobile Limited (CHL)

FY07 Earnings Call

March 19, 2008, 12:30 AM ET

Executives

Wang Jianzhou - Executive Director, Chairman and CEO

Li Yue - Executive Director and VP

Lu Xiangdong - Executive Director and VP

Xue Taohai - Executive Director, VP and CFO

Madam Xin Fanfei - Executive Director and VP

Analysts

Presentation

Operator

Ladies and gentlemen, good afternoon, welcome to the analyst briefing of 2007 annual results announcement of China Mobile Limited. In today's analyst briefing, the management will first present the results, which then will be followed by a Q&A session.

Please allow me to introduce our management members here today. Mr. Wang Jianzhou, Chairman and Chief Executive Officer; Mr. Li Yue, Executive Director and Vice President; Mr. Lu Xiangdong, Executive Director and Vice President; Mr. Xue Taohai, Executive Director and Vice President and Chief Financial Officer; Madam. Xin Fanfei, Executive Director and Vice President.

Now may I invite Chairman Wang to introduce the annual results of 2007. Mr. Wang, please.

Wang Jianzhou - Executive Director, Chairman and Chief Executive Officer

Thank you, Dong Ge [ph]. Good afternoon, ladies and gentlemen, thank you very much for coming to our 2007 annual results announcement briefing. Our presentation includes two parts, overall performance and financial results in 2007.

Overall performance. We're happy to announce a set of remarkable results for 2007. Revenue grew 20.9%; net profit, up 31.9%. Rapid subscriber growth sustained with an average monthly net adds exceeding 5.67 million. Value-added business developments were strong. Proportion in total revenue rose to 25.7%. Rural market exhibited a strong growth momentum, contributing nearly half of the subscriber growth. Full year dividend for 2007 was HK$1.997 per share. Full year special dividend was HK$0.101 per share.

2007 marks another year of record-breaking results as shown in the table compared with 2006. Our total subscribers reached 369 million, increased by 22.6%. Operating revenue grew 20.9% to 357 billion yuan. EBITDA, up 21.6% to 194 billion yuan. EBITDA margin continued to stand at a high level of 54.3%. Net profits grew 31.9% to 87 billion yuan. Net profit margin enhanced by 2 percentage points to 24.4%. Basic EPS increased by 31% to 4.35 yuan.

Our subscriber base continued its rapid expansion. Net adds exceeded 68 million with a market share of 79%. Total subscribers reached 369 million, picking up 69% of the whole market. While we continued to see growth in the affluent eastern region, significant results were achieved in realizing market potential in the central region, and the western region was even more pronounced. Subscriber base further expanded. Our strong growth momentum has furthered into 2008 with net adds hit 7 million in this January for the first time.

In 2007, voice business continued to grow by sticking to successful sales and marketing strategy. We utilized various promotional measures and price elasticity, effectively stimulated voice traffic and pushed forward our voice business developments. Total voice usage volume has reached 1,819 billion minutes.

Apart from voice business, our value-added business performed strongly with significant contribution in 2007. Value-added business revenue grew 32.2% to 91.6 billion yuan. Its contribution to total revenue has raised to 25.7%. Despite its high revenue contribution, SMS revenue continued its growth and reached 41.9 billion yuan. Non-SMS data business developed rapidly, in particular Color Ring, WAP, and MMS have achieved significant scale with increasing revenue contributions. Their respective growth rates were 75%, 32%, and 59%. As one of the drivers of our strong development, value-added business continued pulling revenue growth.

There is prosperous development of our VAS products. Mature data product continued showing that growth momentum. We have adopted various promotional values [ph] that have effectively boosted SMS usage as well as unleashing the enormous potential of products like Color Ring, WAP, and MMS. Meanwhile, the business scale of key products such as Mobile Music, Mobile Paper, and Fetion contributed to... continued to expand, exhibiting impressive growth trend and having become the new growth sources of the company. For example, paying subscribers of Mobile Paper increased 18 million to 23 million.

We have formed a stratified data product mix comprising potential products, growth products, key products, and mature products by spending efforts in different aspects. To begin with, we have strengthened new product developments, conducted customer demand study, and formulated a product design standard. Our… this cost rise in the international standard of setting process has also increased.

We ceaselessly developed new mechanism for product promotion. We conducted a product pilot test at provincial subsidiary level and once proven successful. Nationwide, the promotion will be launched. This mechanism helps to speed up product scale expansion while effectively reduce the risk and cost. In addition, we forced our stronger partnership with all kinds of partners with a view to achieving win-win situation in the value chain.

We have always noted the importance of our corporate customer market. We earnestly built and optimized our corporate customer operation system. In order to satisfy customer demand for mobile office, production monitoring, and service management, we strengthened the effort to promote informatization solutions and industry-specific applications based on mobile terminals. Various application series in society-focused areas such as rural development, education, and environmental protection, etcetera, have been launched and already reached certain scale. End-to-end business in the field of electricity, transportation etcetera has achieved scale expansion. As a result, the number of corporate accounts has increased to 2.12 million; registered subscribers on the corporate account reached 29.2% of our total subscriber base.

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