hutchison telecommunications hong kong holdings limited
TRANSCRIPT
20 March 2012
Hutchison Telecommunications Hong Kong Holdings Limited (Stock Code: 215)
2011 Annual Results Presentation
Disclaimer
1
These materials have been prepared by Hutchison Telecommunications Hong Kong Holdings Limited (HTHKH) solely for use at thispresentation and have not been independently verified. No representations or warranties, express or implied, are made as to, and no relianceshould be placed on, the fairness, accuracy, completeness or correctness of the information or opinions presented or contained in thesematerials.
It is not the intention to provide, and you may not rely on these materials as providing, a complete or comprehensive analysis of the financial ortrading positions or prospects of HTHKH. None of HTHKH or any of their respective directors, officers, employees, agents, affiliates, advisersor representatives accepts any liability whatsoever in negligence or otherwise for any loss howsoever arising from any information or opinionspresented or contained in these materials or otherwise arising in connection with these materials. The information presented or contained inthese materials is subject to change without notice and its accuracy is not guaranteed.
These materials are for information purposes only and do not constitute or form part of any invitation or offer to acquire, purchase or subscribefor securities and none of them shall form the basis of or be relied upon in connection with any contract, commitment or investment decision inrelation thereto.
These materials contain forward-looking statements. Statements that are not historical facts, including statements about the beliefs andexpectations of HTHKH, are forward-looking statements. These statements are based on current plans, estimates and projections, and unduereliance should not be placed on them. Forward-looking statements speak only as of the date they are made, and HTHKH has no obligation toupdate any of them publicly in light of new information or future events. Forward-looking statements involve inherent risks, uncertainties andassumptions. HTHKH caution that if these risks or uncertainties ever materialize or the assumptions prove incorrect, or if a number ofimportant factors occur or do not occur, actual results of HTHKH may differ materially from those expressed or implied in any forward-lookingstatement.
While non-generally accepted accounting principles (GAAP) measures such as EBITDA (earnings before interest, taxation, depreciation andamortisation and share of results of jointly controlled entities) are often used by companies as an indicator of operating performance, they arenot expressly permitted measures under the GAAP or the International Financial Reporting Standards (IFRS) and may not be comparable tosimilarly titled measures for other companies. Accordingly, such non-GAAP measures should not be considered as an alternative to operatingincome as an indicator of the operating performance of HTHKH, and its subsidiaries or as an alternative to cash flows from operating activitiesas a measure of liquidity. The use of non-GAAP measures is provided solely to enhance the overall understanding of the current financialperformance of HTHKH, and its subsidiaries. Additionally, because HTHKH has historically reported certain non-GAAP results to investors,HTHKH considers the inclusion of non-GAAP measures provides consistency in its financial reporting.
Business Performance
HighlightsYoY Growth
� HK$ 13,407m
� HK$ 1,432m
Consolidated turnover
� HK$ 1,020m
� Final: 10.70 HK cents
� HK$ 2,611m Consolidated EBITDA
Consolidated EBIT
Net profit 1
Dividend per share
3
1 Net profit attributable to shareholders
� 2011 total: 15.86 HK cents
36%
19%
29%
35%
57%
56%
Strong stock performance
4
HK HSI Performance
215.HK Performance
HSI
253%
25%
0.40
1.20
2.00
2.80
3.60
Share Price
May 2009
(Since listing)
Dec 2009
Jun 2010
Dec 2010
Jun 2011
Dec 2011
Feb 2012
12,000
22,000
32,000
May 2009
Dec 2009
Jun 2010
Dec 2010
Jun 2011
Dec 2011
Feb 2012
Turnover
Hardware revenue
Service revenue
1,630 1,653
5,1585,467
1,792
4,939
0
2,000
4,000
6,000
FY 2010 FY 2011
HK$ m
5,158
Hardware: + 176%Service: + 6%
5,467
8,088 8,468
1,792
4,939
0
5,000
10,000
FY 2010 FY 2011HK$ m
0
2,000
4,000
FY 2010 FY 2011
HK$ m
3,286
+ 4%
3,403
Consolidated turnover
Mobile business turnover Fixed-line business turnover
Hardware: + 176%Service: + 5%
Hardware revenue
Service revenue
5
Mobile
Quality customer base
� >87% postpaid customers under 3G
7
3G
2G
Total: + 10%3G: + 27%
Total subscribers*
1,5191,761
2,014
Total: + 3%3G: + 13%
1,138 891
2,061 2,614
0
2,000
4,000
FY 2010 FY 2011
’000
3,1993,505
402 259
1,536 1,739
0
1,200
2,400
FY 2010 FY 2011
’000
1,9981,938
All percentages represent compound annual growth rate
Postpaid subscribers*
* Include HK and Macau
Smart device trendsetter
8
Smart device penetration*
1,5191,761
2,014
920822
616 917
0
1,200
2,400
FY 2010 FY 2011
Postpaid Sub ’000
1,9381,998
49%
40%
53%
0%
50%
100%
0
600
1,200
FY 2010 FY 2011
% to 3G postpaid sub
’000
917
616
Smart device ownership*
� Smart device penetration ↑
� Internal upward migration focus
402 259
3G smart device
3G non-smart device
2G
Note: Smart devices refer mainly to devices using iPhone OS,
Android and Blackberry based platforms as well as dongle.
* Include HK and Macau
ARPU
� Monthly spending ↑
� VAS Popularity ↑
9
3G
Blended
Postpaid ARPU
220229
244 248
150
200
250
FY 2010 FY 2011
HK$ / month
Blended: +11%3G: +8%
FY 2010
FY 2010
FY 2011
FY 2011
Churn
� Low and stable
10
HK Postpaid Churn
1.7% 1.7%
0.0%
1.0%
2.0%
FY 2010 FY 2011
Percentage (%)
11
Committed network excellence
March 2011 February 2012
Frequency Band 900MHz 2.3GHz
Bandwidth 10MHz 30MHz
Tailor for 3G network LTE network
Consideration HK$1,077m HK$150m
� Drive for network quality
FY 2010 FY 2011
Mobile CAPEX HK$507m HK$619m
Mobile CAPEX + Radio Spectrum HK$1,696m
12
Network excellence for now and future� Largest amount of available spectrum
2300
2100
1800
900
* Shared through a JV under Genius Brand Limited
30.0
34.6
23.2
26.6
Available
Bandwidth (MHz)
144.4
2600* 30.0FDD-LTE
TDD-LTE
3G
2G LTE
2G + 3G
13
New tariff plans and FUP
� A step forward from unlimited offer
� 97%* of mobile data users consume on average 5GB or less/ month
� Better network resources planning
� User-friendly monitoring applications
3%
* Out of the total Hong Kong 3G postpaid data users
Fixed-line
15
Robust growth in international market
� Further expansion of international footprint with new destinations covering EMEA, the Americas and Greater Mekong Subregion
� Network outsourcing services
16
Strong foothold in local carrier and business market
Mobile Backhaul
• Command substantial market share
Corporate and Business
• Accredited securities service vendor
• Network solutions for banking, retail and governmental sectors
Cloud computing & data centre
• Collaborate with Dimension Data, Microsoft and Oracle
School Market
• eduCloud and eLearning
17
Invest in consumer market
� Keen competition
� Cultivate growth in the long run
� FTTH
Profitability
Profitability
19
� Earnings upsurge
+35%
Net profit
300
750
1,200
FY 2010 FY 2011
HK$ m
755
1,020
3.32
5.16
6.83
10.70
0.00
6.00
12.00
FY 2010 FY 2011
HK cents
FY 2011FY 2010
Dividend
20
� Strong dividend growth
� 75% payout
Interim Dividend: +55%
Final Dividend: + 57%
Dividend per share
1 Total dividend per share being sum of interim and final dividend per shareFinal dividend
Interim dividend
Financial Overview
22
Financial Highlights
FY 2010 FY 2011 (HK$m) (HK$m)
Turnover 9,880 13,407 Cost of inventories sold (1,776) (4,663) Staff costs (646) (646) Depreciation and amortisation (1,087) (1,179) Other operating expenses (5,264) (5,487)
Operating profit 1,107 1,432 Interest income 5 6 Interest and other finance costs (128) (124) Share of results of jointly controlled entities (21) (4)
Profit before taxation 963 1,310 Taxation (63) (49)
Profit for the year 900 1,261
Attributable to:Shareholders of the Company 755 1,020 Non-controlling interests 145 241
900 1,261
Turnover – mobile business
23
� Service revenue sustainable growth
� Hardware revenue benefited from popularity of smart devices
Mobile service revenue Mobile hardware revenue
4,000
5,000
6,000
FY 2010 FY 2011
HK$ m
5,467
5,158
0
3,000
6,000
FY 2010 FY 2011
HK$ m
1,792
4,939+ 6%
1.8 times
Turnover – mobile service revenue
24
FY 2010
Carrier 48%
Corporate & Business 26%
Residential20%
FY 2011
Total service revenue: HK$5,158m
Total service revenue: HK$5,467m
� 53% data revenue
Carrier [48]%
Residential[20]%
Others1
[6]%
Corporate &
Business [26]%
Local voice 31%
Roaming – voice 16%
Local data 46%
Total Data: 53%
Local voice
38%
Local data
38%
Roaming - voice 18%
Total Data: 44%
Mobile data revenue
25
� Robust data growth
Local data
900
1,800
2,700
FY 2010 FY 2011
HK$ m 1,960
+ 27% 2,488
Roaming data
313
400
150
300
450
FY 2010 FY 2011
HK$ m
+ 28%
Turnover - Fixed-line business
261 Others include revenue from interconnection charges and data centers
FY 2010
Carrier 48%
Corporate & Business 26%
Residential20%
Others1
6%
FY 2011
Total revenue: HK$3,286m
Total revenue: HK$3,403m
� Steady growth and cushion against volatility
Carrier [48]%
Residential[20]%
Others1
[6]%
Corporate &
Business [26]%
Carrier 52%
Others1
6%
Residential 17%
Corporate & Business
25%
Carrier 48%
Others1
6%
Residential 20%
Corporate & Business 26%
27
Key cost items
1 Excluding revenue from sale of telecommunications hardware
Cost of inventories sold
Staff costs
0%
40%
80%
0
2,500
5,000
FY 2010 FY 2011
% to turnover
HK$ m
18.0%
34.8%
0%
6%
12%
0
400
800
FY 2010 FY 2011
% to turnover 1
HK$ m
1,776
8.0% 7.6%
646
4,663
Depreciation and amortisation
0%
8%
16%
24%
0
500
1,000
1,500
FY 2010 FY 2011
% to turnover 1
HK$ m
13.4% 13.9%
1,0871,179 646
28
Other operating expenses
� Cautious cost management
� Operating leverage ↑
1 Excluding revenue from sale of telecommunications hardware
65.0%
65.3% 64.9%
Other operating expenses
0%
50%
100%
0
3,000
6,000
FY 2010 FY 2011
% to turnover 1
HK$ m
5,264
65.1% 64.9% 64.8%
5,487
29
Capex investment
1 Excluding revenue from sale of telecommunications hardware
Capex and % of service revenue (Fixed-line)Capex and % of service revenue (Mobile)
0%
6%
12%
18%
0
400
800
FY 2010 FY 2011
% to se
rvice revenue
HK$ m
9.8%9.7%
11.3%
0%
15%
30%
0
400
800
FY 2010 FY 2011
% to se
rvice revenue
HK$ m
Capex and % of service revenue
0%
5%
10%
15%
20%
800
1,200
FY 2010 FY 2011
% to total se
rvice
revenueH
K$ m
13.8%
15.3%
1,119
507
18.7%
15.5%
613
� Cautious and selective
- 2G refarm
- LTE
- GAN 13.6%
1,148
619
529
Liquidity
30
� Strong FCF before spectrum acquisition
1 Free cashflow being cashflow from operating activities less cashflow
used in investing activities before payment of spectrum utilisation fee
Free cashflow (FCF) 1
500
1,000
1,500
FY 2009 FY 2010 FY 2011
HK$ m
951
1,168
+ 20%2
2 Percentage represents compound annual growth rate
1,375
Strong financial position
31
� Leverage ratio = 1.4
� Gearing ratio = 35%
� Undrawn credit facility of
HK$1.1b
Net debt
Net debt/ LTM EBITDA
0
2,000
4,000
6,000
FY 2009 FY 2010 FY 2011
HK$ m
4,090
3,386
0.0
1.0
2.0
3.0
4.0
FY 2009 FY2010 FY 2011
2.0x
1.5x
3,671
1.4x
Outlook
Outlook
Sustained Growth
Value Creation
34
Mobile
Demand for better quality
Leading mobile market
Enriching user experience
Network Excellence- LTE rollout
- Re-farm of 2G spectrum
Customer Oriented- Customer services focus
- Extensive distribution channel
- A variety of content and application offerings
Target Strategic measures
Smartphone subscription leader
- Enriched portfolio of devices and services
- Internal upward migration
35
Fixed-line
Customer segmentation
Demand for high performance
# 1 Backhaul market# 1 Banking & finance sector# 1 Public & school sector
Pursuing broadband performance
Extending global reach Residential Market - Go for extensive FTTH
Carrier and International Market
- Footprint expansion
- Leadership in local mobile
backhaul
Corporate and Business Market
- Go for leading position in
selective sectors
Segment Target Strategic measures
- Co-operate with leading local country-based operators
- GAN for mobile backhaul
- Increase high-speed coverage
- GAN for corporate customers
- Partnership with strategic vendors on cloud computing
Q & A
Thank You