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pww.comChina Mobile Limited, H1 2020 Earnings Call, Aug 13, 2020 - SEHK:941

SEHK:941

Jie Yang [Executive Chairman] 💬

During the 2020 Interim Results Briefing for China Mobile Limited, Jie Yang, the Executive Chairman, made several statements:

  1. Opening Remarks:

    • Welcomed everyone to the briefing and explained that due to the COVID-19 pandemic, the briefing would be conducted via telephone conference.

  2. Business Environment Overview:

    • Noted three key characteristics of the business environment in the first half of 2020:
      1. Impact of COVID-19: Highlighted the significant impact of the pandemic on the economy and society, as well as on the company's operations. However, he also pointed out the opportunities arising from increased demand for informatization.
      2. New Infrastructure Promotions: Mentioned China's active promotion of new infrastructure constructions, which is accelerating the digitalization of the economy and society.
      3. Competitive Landscape: Noted the complex and volatile competitive landscape due to industry convergence and competition both within and outside the industry.

  3. Operational Highlights:

    • Summarized seven key operational highlights:
      1. Stable Operating Results: Despite challenges, the company maintained stable operating results.
      2. Strategic Transformation: Achieved notable progress in strategic transformation, with growth drivers gaining momentum.
      3. 5G Development: Accelerated 5G development through the implementation of the 5G+ plan.
      4. COVID-19 Response: Leveraged 5G to support COVID-19 prevention and control efforts, turning negatives into positives.
      5. New Infrastructure Constructions: Made advanced planning and targeted investments to promote new infrastructure constructions.
      6. Management Mechanism Reforms: Extended reforms to management mechanisms and systems to boost organizational vitality and efficiency.
      7. Digital Innovations: Drove digital innovations across the board to establish a world-class enterprise.

  4. Financial Performance:

    • Reported that revenues from telecommunications services reached CNY 358.2 billion, up 1.9% year-on-year.
    • Net profit amounted to CNY 55.8 billion, down 0.5% year-on-year.
    • Emphasized the company's commitment to maintaining a stable dividend per share for the full year 2020, considering profitability and cash flow generation.
    • Announced an interim dividend payment of HKD 1.53 per share.

  5. Market Developments:

    • Described how the company is driving a scale-based and value-oriented operation system and promoting the coordinated development of CHBN markets (customer, home, business, and new markets).
    • Noted that the proportion of revenue from home, business, and new markets grew by 3.3 percentage points to 29.2%, representing a growth rate of 15%.
    • Mentioned that the proportion of revenue from non-traditional businesses increased by 1.4 percentage points to 16.2%, with a growth rate of 11%.

  6. Strategic Transformations:

    • Discussed the company's achievements in strategic transformations, including the development of smart home operations and the growth of smart family value-added services.
    • Highlighted the surge in DICT (Digital Information and Communication Technology) revenue, up 55.3% year-on-year to CNY 20.9 billion.
    • Mentioned the expansion of 5G base stations to over 188,000 and the provision of commercialized services in over 50 cities in China.
    • Described the launch of a dedicated 5G network product and BAF (Basic, Advanced, Future) business model, along with the construction of the Jiutian AI platform and the development of over 160 mobile cloud products.

  7. Industry Cooperation:

    • Expanded the "5G circle of friends" and lined up with over 2,100 partners through the 5G innovation center and 5G industry digital alliance.
    • Introduced initiatives to introduce RMB 10 billion ecosystem and proposed a plan to share incremental revenues from selected businesses with a scale of CNY 10 billion to encourage industry chain upgrades.

  8. COVID-19 Response:

    • Detailed the company's support and participation in COVID-19 prevention and control, including deploying 5G base stations in Leishenshan and Huoshenshan hospitals in Wuhan within 36 hours and launching a thematic campaign to provide 24/7 customer services.

  9. Future Plans:

    • Announced plans to raise the target number of new 5G base stations for the year from 250,000 to 300,000 while keeping the overall capital expenditure budget similar to the previous guidance.
    • Emphasized the commitment to building an organizational structure with effective coordination and extending reforms to management mechanisms and systems.

  10. Long-Term Strategy:

    • Stated the goal of becoming a world-class enterprise by building a dynamic powerhouse and focusing on high-quality development.

    • Outlined the strategy of expanding business from communication services to information services and shifting focus from personal mobile to CHBN's four growth engines.

    • Mentioned the adoption of a new development approach focused on innovation-driven business transformation and upgrade.

Xin Dong [Former CEO & Executive Director] 💬

During the China Mobile Limited H1 2020 Earnings Call, Xin Dong, the then-Chief Executive Officer and Executive Director, discussed the company's operating and financial performance for the first half of 2020. Here is a detailed summary of his remarks:

Customer Market

  • Industry Competition: Actively promoted more rational industry competition.
  • Network Services and Brand Operations: Scaled up efforts to strengthen these areas, aiming to build differentiating competitive advantages.
  • Customer Management Operations: Enhanced using cases, promoting value uplifts based on scale.
  • Mobile Customers: Reached 950 million, with mobile ARPU decreasing by 3.7% YoY to RMB 50.3. The decline rate flattened compared to the previous year.
  • 5G Package Customers: Reached 17.2 million, maintaining market leadership. ARPU and DOU for 5G package customers increased by 5.9% and 23% respectively, compared to pre-migration figures.

Home Market

  • Household Broadband Products: Focused on quality enhancements to drive customer growth.
  • Mobaihe: Registered a total of 130 million customers, representing a penetration rate of 72.1%.
  • Smart Family Operations: Stimulated value uplift, with household broadband blended ARPU reaching RMB 35.4, a YoY increase of 1%.
  • Revenue Growth: Increased by 18.1% YoY to RMB 37.4 billion, achieving enhancements in both customer value and scale.

Business Market

  • Product R&D and Service Support Systems: Continued to enhance, leveraging the advantages of cloud, network convergence, and DICT services.
  • Network + Cloud + DICT Services: Focused on key business areas, with revenue reaching CNY 55.2 billion, up by 18.4% YoY.
  • Corporate Customers: Exceeded 11.29 million, a YoY increase of 42.6%.
  • Cloud and Network Conversions: Enhanced resource utilization capabilities and enriched offerings.
  • Mobile Cloud Revenue: Leapt by 556.4% YoY to CNY 4.5 billion.
  • IDC Revenue: Grew by 61.4% to CNY 9.3 billion.
  • ICT Revenue: Increased by 37.7% to CNY 5.1 billion.

New Market

  • International Business: Grew by 26.1% YoY to CNY 5.7 billion.
  • MIGU Video Platforms: Monthly active users increased by 114.8% YoY.
  • Video Connecting Tones: Number of users exceeded 100 million.
  • and-Wallet: Monthly active users increased by 92.2% YoY.

Future Approach for 5G Integration

  • Premium 5G Network Construction: Speed up network construction, enhance network performance and reception.
  • Integrated Innovations of New Technologies: Leverage unique 5G advantages in network, capability, and platform, utilizing AI, IoT, cloud computing, big data, and edge computing technologies.
  • New Business Opportunities and Operating Models: Focus on product innovation for the customer market and explore the setting up of a 5G dedicated network operations system and new business model for the business market.

Financial Performance

  • Telecommunication Services Revenue: Grew 1.9% YoY to CNY 358.2 billion.

  • Sales of Products: Down by 16.8% to CNY 31.6 billion, mainly due to the decline in sales of handsets resulting from COVID-19.

  • Operating Expenses: Increased by 0.3%.

  • Interest and Other Incomes: Decreased by 6.3% YoY.

  • Net Profit: Decreased by 0.5% YoY to CNY 55.8 billion.

  • Profitability: Remained at a leading level among first-tier international operators.

  • Revenue Growth Breakdown: Incremental revenue contributions from wireless data traffic, wireline broadband, and applications and information services amounted to CNY 6.5 billion, CNY 3.5 billion, and CNY 6.6 billion, respectively.

  • Cost Structure:

    • Network Operations and Support Expenses: Increased by 10.9% to CNY 108.8 billion.
    • Depreciation and Amortization: Dropped by 5.3% to CNY 86.6 billion.
    • Employee Benefits and Related Expenses: Increased by 8.8% to CNY 49.1 billion.
    • Leasing Fee of Tower: Increased by 7.3% YoY to CNY 21.8 billion.
    • Tower Leasing Fee: Expected to be controlled at about CNY 45 billion in 2020.

  • Selling Expenses: Decreased by 8.7% to CNY 31.4 billion.

  • EBITDA: Decreased by 3.6% to CNY 145.7 billion.

  • Free Cash Flow: Increased by 44.1% to CNY 59 billion.

  • Capital Structure: Maintained solid, with corporate credit ratings equivalent to China sovereign ratings.

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