China Mobile (Hong Kong) Ltd. (CHL)

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China Mobile Limited (CHL)

FY08 Interim Results Call

August 27, 2008, 01:30 AM ET

Executives

Wang Jianzhou - Executive Director, Chairman and CEO

Xue Taohai - Executive Director, VP and CFO

Analysts

Presentation

Unidentified Company Representative

Good afternoon, ladies and gentlemen. Welcome to the 2008 interim results announcement briefing of China Mobile Limited. In today's briefing, our management will first report the results, and then Chairman Wang will give you an update on TD before the Q&A session.

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

Now, may I invite Chairman Wang to introduce the interim results? Mr. Wang, please.

Wang Jianzhou - Executive Director, Chairman and Chief Executive Officer

Thank you, Dong Jie [ph]. Good afternoon, ladies and gentlemen, welcome to our 2008 interim results briefing. In today's presentation, I will present the overall performance and Mr. Xue will walk you through the financial results after which I will come back again to talk about the issue of TD-SCDMA.

Overall performance. In the first half of the year, despite the natural disasters including snowstorms, earthquake, and flood, we achieved remarkable results. Revenue grew 17.9%, net profit up 44.7%. Rapid subscriber growth sustained with an average monthly net adds exceeded 7.5 million. Value-added business developments were strong. Proportion in total revenue rose to 27%. Rural markets exhibited strong growth momentum, contributing nearly half of our subscriber growth.

Ordinary interim dividend for 2008 was 1.339 Hong Kong dollar per share, increased 60% over the same period of the last year. Our planned full-year dividend payout ratio is 43%.

As shown in the table, compared with the same period of last year, our total subscribers reached 415 million, increased by 24.7%. Operating revenue grew 17.9% to 196.5 billion yuan. EBITDA, up 16.2% to 104.4 billion yuan.

EBITDA margin continued standing at a high level of 53.1%. Net profit grew 44.7% to 54.8 billion yuan. Net profit margin enhanced by 5.1 percentage points to 27.9%. Basic EPS increased by 44.2% to RMB2.74 yuan.

Rapid growth of subscriber continued with net adds reached 45 million and a net add market share of 85%, taking our total subscribers to 415 million. We believe there remains vast potential for the future. Development of China's mobile market providing us room to further expand in a new competitive landscape.

Voice business continued to grow in the first half of the year, following a successful sales and marketing strategy. We utilized various promotional measures and price elasticity, effectively stimulated voice traffic and pushed forward our voice business development. Total voice usage volume has reached 1,160.5 billion minutes and voice revenue was 143.5 billion yuan.

Value-added service. Value-added business achieved strong growth and made a significant contribution in the first half of the year. Value-added business revenue grew 26.4% to 53 billion yuan, accounting for 27% of our total revenue.

Despite these high revenue contributions, SMS revenue continued its growth and reached 24.2 billion yuan. Non-SMS data business developed rapidly; in particular, ring back tone, Color Ring, WAP, and MMS have achieved significant scale with increasing revenue contribution. Their respective growth rates were 25%, 19%, and 91%.

As one of the major drivers behind our strong development, value-added business continued driving revenue growth. In the first half of the year, we carried out different sales and marketing activities and successfully sustained the SMS business growth. Usage of other businesses such as Color Ring, WAP, and MMS also grew rapidly, turning their high potential into economic benefits.

Mature products show a trend of continuous growth. At the same time, the industry value chain of mobile music continues to expand. Mobile paper business witnessed a strong growth and its monthly revenue has surpassed 100 million yuan since May this year. Fetion, its share has leaped to third in Chinese IM market. These key data products have already reached a moderate scale, demonstrating accelerated development momentum and becoming a new source of growth of us.

In the first half of the year, along with the strengthened development of Mobile Media products such as Mobile Music, Mobile [inaudible], we have actively reinforced innovation and extended product reserves to enhance multi-uses of mobile phones.

We have also stepped up efforts on promotion for products related to information, Mailbox and gaming, etcetera. For instance, our integrated information service provides customers a wide variety of daily life information and recorded more than 60 million times of enquiry in the first half of the year.

Our Mailbox products allow users to send and receive e-mails anytime, anywhere. For mobile gaming, we continuously introduced the quality game content. In the month of June, Mailbox and mobile gaming subscribers exceeded 5 million and 2 million respectively.

In the first half of the year, rural market has contributed nearly half of our subscriber growth. While we furthered our rural market expansion, the company margins continued to stand at a high level, reflecting the significance of rural market to our overall results. Low penetration in rural markets indicates that it’s still in a high growth stage. Rising rural income will expand the number of mid-to-high-end rural customers. Continuous development in rural economy creates different needs for mobile communication, which increases penetration of new business and applications.

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