China Telecom Corp Ltd (NYSE:CHA) Q2 2020 Earnings Conference Call - Preliminary Transcript

China Telecom Corp Ltd (NYSE:CHA) Q2 2020 Earnings Conference Call - Preliminary Transcript 2020-08-18T04:30:00+0000 Executives Mr. Ke Ruiwen - China Telecom Corporation Limited, Li Zhengmao - China Telecom Corporation Limited, Analysts Operator - Good afternoon, ladies and gentlemen. Good afternoon, ladies and gentlemen, on behalf of our management. I'd like to welcome all of you to join our 2020 Interim Results Media Conference Call. May I introduce our management attending the presentation today, Mr. Ke Ruiwen, Eecutive Director, Chairman and CEO, Mr. Li Zhengmao, Executive Director, President and COO, Mr. Shao Guanglu, Executive Director, Mr. Liu Guiqing, Executive Director and Executive Vice Presedent, Madam Zhu Min, Executive Director, Executive Vice Presedent, CFO, Mr. Wang Guoquan, Executive Director and Executive Vice President. Thank you for joining us and hope you find this presentation helpful. Now, welcome Mr. Ke Ruiwen, to walk us through our 2020 interim results. Mr. Ke Ruiwen - China Telecom Corporation Limited Good afternoon, Media friends, for the sake of the epidemic control and prevention. This presentation is still conducted in the form of Conference call. Thank you for joining and for your care and support of the company. This presentation has 2 sections. I will provide an overview of first then Mr. Li Zhengmao, will go through the business review and financial performance. We have 6 key development highlights in the first half of 2020. One, proactively tackle challenges and seed ceased new opportunities to maintain solid results. Two, 5G promising start enhanced both subscale embedded. Three, smartphone [Indecipherable] with propane value we stored. Four, industrial digitalization [Indecipherable] new potential fueling future development. Five, consolidate cloud network integration edge and develop digitalized platform capabilities. Six, promo codification and digital transformation for high quality development. In the first half, the company proactively responded to the challenges to the operations, the epidemic cost fully ceased the new informatization demand into society expedited 5G scale commercialization expanded integrated information services and proactively promoted profitable scale development leading to monthly improvement of operating results to a solid and stable one. Our revenue and profit growth maintained of which service revenue was renminbi [Phonetic] 187.1 billion up to from 5% YoY. EBITDA and EBITDA margin were generally stable. Net profit also maintain stable at renminbi 13.9 billion. Our operations in the first quarter was impacted by the epidemic. But then major KPIs rebounded in the second quarter as the epidemic was quite fully under control. In particular surface revenue worldwide grew substantially increased from 0.7% in Q1 to 4.3% in Q2. Net profit growth achieved turnaround from negative 2.2% in Q1 to 2.2% in Q2. Mobile service revenue of 2.0% QoQ. Broadband Access Western heels of 4.9% QoQ and industrial digitalization revenue of 3.9% QoQ. While striving to foster operating results rebound, we also continued to place high importance on service quality achieving industry leading offer satisfaction. Our 5G business momentum remained robust skill development achieved solid results with 5G package subs, reaching 37.84 million and industry leading penetration rate of 11%. 5G ARPU was renminbi 80.6 and there is around 10% of ARPU uplift in 4G upgrading to 5G demonstrating user value. We continued to enrich 5G to see content. We have over 1,000 ultra HD and via video content, hundreds of cloud games and where we are live broadcast content introduced. To be use cases continue to flourish, we have over 1100 benchmark industry 5G projects covering eight key industries and over 300 use cases and outstanding results, particularly in industrial internet new media and smart health care and where we see it by enterprise customers. We continued to innovate 5G to see products and optimize to membership scheme of 5G plus privileges plus applications and expanded the portfolio of relevant applications to enhance user experience. We also strengthened handset operation to further a (niche) market demand in facility scale determined, on to be we combined cloud Big Data, IOT, AI and other emerging information technologies to launch various innovative business models to match customers digitalization upgrade demand. We established extensive ecological cooperation systems for 5G business innovation and cooperation in joint development of which applications and content. We persisted building and sharing in that will build out as at the end of June, we had nearly 210,000, 5 GBDS in use, we contiguous coverage in over key cities. We will continue to extend (compute and Co share)to lower network construction and maintenance costs. We persistent SAS the target network architecture and 5G SAS the best practice of cloud network integration. Our industry-leading technological achievements include 200 megahertz bandwith, 5G commercial network with peak speed at 2.7 GBPS, offering leading user experience in 5G speed. Accelerated the construction of a nationwide SA network for commercial use that the development and release of 5G SA implementation guidelines, globally, et cetera. We continue to expense smartphone new product and service portfolio in achieved strong business growth with ease of XT, Smart family applications and service revenue grew by 16.9% in the 131% respectively. These businesses integrated with and mutually promoted the proppant business powerful new feeling the stabilization and even rebound of broadband revenue which achieved turnaround in the first half of 2020 in the achieved YoY growth. The rapid development of smart family market effectively facilitated the value restoration of broadband subs. In the first half, propane excess ARPU increased 4.6% HoH. While Broadband blended ARPU increased 8.1% HoH, and back to the scene therefore, as the first half of 2019. Demonstrating remarkably increase in value contribution by Smart family. We promoted robust development of industrial digitalization by leveraging unique cloud network integration edge. We focus on new technologies such as 5G Cloud, IoT, AI et cetera. Industrial digitalization includes 5 major services, namely IDC, Industry Cloud, Network Dedicated Line, IoT and Internet Finance. In the first half, Industrial Digitalization Revenue up 5.1% YoY to renminbi 42.9 billion, achieving an industry leading revenue size. We offer a full range of cloud products, our ease of, in cloud is already serving 500,000 large and medium sized enterprise customers and 50 million personal and family customers. Overall cloud revenue was renminbi 6.68 billion in the first half. Esurfing cloud remain number one in hybrid cloud enterprise ranking in the PRC in the teen free best practice awards and 5 outstanding cases awards, in Trusted Cloud Summit 2020, showing widespread recognition in the market. We expedited the cloud network integration strategy of cloud Central, cloud - network around, network adaptive to cloud, cloud and network (this one) in the accelerated to unified cloud and IDC structure in 2 plus 4 plus one plus X layout and the chief high efficiency in the cloud connection, we've CN to DCI and OTN networks, which cover all local networks and Esurfing public cloud resource pools. Our cloud net was security system continue to strengthen and we can provide cloud- based products and services for all scenarios with public, private dedicated and hybrid clouds. Our powerful cloud unified resource - resources provide strong support to the development of industrial digitalization. We have extensive network infrastructure in which we have the largest in number and most likely deployed ITC resources in the PRC. We have over 600 IDC sites and over 380,000 cabinets, 60% of which in MECA large-scale data centers. National average cap in this utilization rate was 70% above industry average and has room for further expansion. Total outbound bandwidth of resource pools was over one TBPS and latency was many second (great). With mega scale IDC parks in in the Mongolia in Guizhou to satisfy nationwide large customers demand. We also have ITCs in the full major economically developed regions and consolidate provincial level cloud resources pools in key cities in 31 provinces across the PRC to satisfied localized business demands. We will leverage our unique Internet access capability extensive product portfolio secure and reliable service assurance and strong client to continue to strengthen our leading ITC competitive edge. We are the number one in IDC business overall ranking in the PRC. Witnessing the accelerated development of digital economy we promoted full qualification and digital transformation by accelerating the build-out of new infrastructure related to cloud network integration, we constructed digitalized platforms based on cloud network unification which congregated capabilities in areas such as connectivity, cloud, security payment, we deal big data and AI. So as to empower internal operations, external ecosystem. So as well as our customers and partners to facilitate the company's digital transformation. We also as established a digitalized ecosystem that connects industry value chains and integrate with multiple industries. We launched market-oriented reform in enterprise surface structure and professional companies and promoted the formation of fundamental capabilities in professional aspects. We also proactively commenced open cooperation stepped up creation of new growth drivers to few high quality development, led by customer demand we kick-started enterprise service structure reform, we focused on the hygiene and health care Digital Equipment, Smart City, Industrial Internet, Finance in other targeted markets to establish Information Service business groups targeting enterprise customers vertically integrating headquarters provincial and municipal levels. The headquarter strengthens professional organizations focusing on capabilities, the professional companies establish professional organizations focusing on industry to enhance fundamental capabilities ecological cooperation and industry platforms. To provincial and municipal companies strengthened local specialist team for industrial digitalization in the power of system and surface in the equation. We will form mechanism and system assurance introduced market-oriented mechanisms, strengthen cross sector capability coordination and his R&D and innovation of cloud-based and platform-based solutions, optimize employee structure and then hence capabilities in order to drive to healthy 4 months for the company. We leveraged to capabilities of digitalized platform to drive internal digital transformation by data application online in cloud migration, AI, Big Data and other technologies were applied in dedicated programs to reduce costs empower sales and marketing and hence surface efficiency and user experience. Internal digitalization will facilitate rapid change of development models and foster the completion of digitalized and integrated online, offline channel system, Dipen value operation and hence product and service quality promo data application and continue to increase quality and efficiency. Internal digitalization we have strengthened precision network investment and operation, AI powered correlation analysis of massive data enables accurate trending of network construction and the enhancement of network operation efficiency. With the outbreak of the COVID19 early this year we were fully committed to the telecommunications and emergency assurance for epidemic prevention and quickly activated 5G [Indecipherable] hospitals. We also provide the 4K Ultra HD live, 5G Cloud broadcast of the construction of the hospitals, which we received widespread attention. We further established 5G HD video connection to enable remote diagnostics and consultation between hospitals in Wuhan in other cities. Furthermore we proactively undertook social responsibilities and contributed our effort in the employee protection, customer service giving to society and strengthening investor confidence demonstrating sense of corporate responsibility. My part ends here. Mr. Li Zhengmao, we will walk you through our business and financial performance. Li Zhengmao - China Telecom Corporation Limited Thank you, Chairman. I shall now discuss our business and financial performance in the first half of 2020. In the first half, our mobile business enhanced in both scale and quality. In skill development, our mobile surface revenue and hence the Internet access revenue, both achieved industry-leading growth rates at 2.5% and 6% YoY respectively. We were also the only operator achieving positive mobile subs growth in the first half. Mobile ARPU turned around from the previous declining trend rebounding from second half of 2019 to renminbi 44.4, the knocking result of customer restoration. We will proceed to and emphasis on scale and quality continue to optimize customer privilege system and rich product and content commence extensive cooperation in innovation and hence online, offline full channel sales capability and strive to enhance the value of our mobile business. In the first half our smart family business maintained rapid development with revenues of ease of HD, home Wi-Fi, family cloud and Esurfing webcam, we markedly increased by 16.9%, 87.4%, 147% and 6.5 to 2 times YoY respectively. We deeply explore the potential of family improve monetization market from our 154 million broadband subscribers to ignite exclusive scale growth of Smart family applications and services. Number of whole home Wi-Fi subs increased by 120%, family cloud subs by 45%, Smart family platform connected devices by 76% and Esurfing webcam by even 94 times, indicating our successful capturing of the immense demand of family implement Cision surfaces. We have a view to establish to integrate a competitive edge with smartphone many applications on top of premium GPPs excess. We will continue to drive the integration and mutual promotion of broadband and Smart firmly to further enhance GBPS access surface with 5G plus fiber broadband plus WiFi 6 and to strengthen content operation and promotion. We will catch it opportunities of industrial digitalization with a focus on targeted markets and leverage the cloud network integration edge to serve the development of industrial digitalization. In the first half, our industrial digitalization service achieved solid growth and industry leading scale. Revenue of industrial digitalization was renminbi 42.9 billion, up 5.1% YoY, in which IDC revenue up 11.9% YoY, Industry Cloud, up 30.4% YoY and network dedicated line up 4.6% YoY. Enterprise customer development showed strong momentum as number of new acquired enterprise orders. In the second quarter, Sky bracketed by 83% and revenue increased 3.9% QoQ, after the temporary slowdown in the first quarter. We will continue to strengthen the edges of various to be businesses to facilitate a continuous development of industrial digitalization. In the first half, we continued to optimize cost structure, tower usage free and electricity costs increased due to ink scaled up 5G construction and operation. We appropriately increased initiatives for capability to support industrial digitalization development increased incentives for high-tech tenants frontline employees and high performance teams to motivate vitality, continued optimization of sales model and hence online, offline food channel operation capability strengthened precision sales initiatives resulting in effective control of selling expense. Expanded R&D input to step a core capability formation. We carried acquisition, management and our selling expense unit electricity cost and maintenance costs dropped substantially, while tower sharing ratio, FTTH port utilization rate and wireline terminal recycle rate increased. Our strengthens effort in management and resourcing versus efficiency paid off. CapEx in the first half was renminbi 43.1 billion in which 5G CapEx was renminbi 20.2 billion, with 80,000 5G base stations installed and activated and we have nearly 210,000 5G base stations in use by [Indecipherable] in share it for China Unicom. Our investment focus will be on industrial digitalization and cloud network integration to support new generation to see [Indecipherable], to be in full amortization demands. Our financial strength continued to enhance with efficiency centralized capital management reducing in interest, interest-bearing debts. Depts maintains at healthy levels as total debt decreased by 5.3% YoY, while total debt to total capitalization dropped 5.9 pp to 12.2% and finance expenses also reduced by 23.6%. The solar financial capacity is poised to strongly support our sustainable development in future. In the second half, we will strive to maintain healthy service revenue growth, maintain profitability and stable [Indecipherable] for 5G and Mobile business. We will maintain mobile momentum with 2 emphasis on quantity and quality for value and quality enhancement. Our 2020 target is 15 million mobile subs net debt and 18 million 5G package subs net debt. For broadband and Smart family, we will focus on family amortization development we have stepped up efforts on broadband and smart family surface upgrade with a target of 5 million broadband subs net debt in 2020. For industrial digitalization, we will expedite transformation into cloud centric industrial digitalization development model, with industrial digitalization revenue targeted to achieve double-digit growth, this concludes our presentation today. Thank you. Q & A

China Telecom Corp Ltd (NYSE:CHA) Q2 2020 Earnings Conference Call - Preliminary Transcript

Aug 18, 2020 • 12:30 am ET

China Telecom Corp Ltd (NYSE:CHA) Q2 2020 Earnings Conference Call - Preliminary Transcript

Li Zhengmao