1. What are the significance and benefits of the Company's acquisition of CDMA business?
2. What are the consideration and deal structure of the Company's acquisition of CDMA business?
The consideration for the CDMA business shall be RMB43.8 billion. The Acquisition comprises the entire CDMA business owned and operated by China Unicom Corporation Limited on 1 October 2008 and relevant assets (including CDMA and GSM shared base stations agreed between the Company and China Unicom Corporation Limited) and liabilities, but exclude any interest-accruing debt obligations relating to the CDMA Business and any other obligations agreed between the parties.
In addition, our parent company China Telecommunications Corporation acquired the CDMA network from the parent company of China Unicom Corporation Limited at a consideration of RMB66.2 billion. The acquisition of the CDMA network by China Telecommunications Corporation took place at the same time as the acquisition of the CDMA business by the Company. We launched mobile services operation thorugh leasing the CDMA network from our parent company.
3. How is the Group's operating performance in the first half of 2008?
In the first half of 2008, the Company's financial performance remained stable. Operating revenues reached RMB90,434 million, up by 0.8% from the same period last year, of which RMB1,028 million was accounted for by the amortization of upfront connection fees. Excluding the upfront connection fees, the operating revenues were RMB89,406 million, a 1.5% growth from the same period last year. Revenue from wireline voice service was RMB50,510 million, a 11.8% decrease from the same period last year. Revenues from Internet and data services as well as value-added and integrated information application services reached RMB24,534 million and RMB11,987 million respectively, representing 27.3% and 31.6% growth from the same period last year. EBITDA was RMB44,268 million, a 1.9% decrease from the same period last year, and the EBITDA margin was 49.5%. Profit attributable to equity holders of the Company was RMB11,606 million, a 4.0% decrease from the same period last year, and basic earnings per share was RMB0.14. Capital expenditure was RMB18,783 million, a 9.5% decrease from the same period last year. Free cash flow reached RMB21,669 million, a 11.3% increase from the same period last year.
In the first half of 2008, the Company continued to proactively and effectively implement strategic transformation. Focused on providing integrated information services to customers, we keep on innovating business model, expanding business services, and advancing customer brand management to continuously optimize subscriber base and revenue structure.
4. What is the Company's outlook?
In 2008, strategic transformation of the Company enters into a new phase. For this purpose, we have advocated the strategy of "Customer-focused Innovative Informatisation", which will accelerate our transformation into a leading integrated information services provider. We will make greater efforts in management reform and innovation, and consolidate provincial subsidiaries into branches to strengthen integration of operational management systems. We will also restructure our front-line departments, which will enable us to implement better customer group management and sales. We will allocate more resources to core customer groups and strengthen our customer-oriented operation systems to raise our brand recognition. Looking ahead, we are fully confident. Although the intensifying market competition is a serious challenge to us, the upcoming full services offering will bring enormous business opportunities. We will keep abreast of the trend of global telecommunications industry as we implement the convergence of multi-communication means and multi-products in a broader perspective. We will also strengthen our execution capabilities in providing integrated information services to customers, and thus to continually create new values for our shareholders.
The Company has commenced completion of the CDMA business acquisition and launched mobile services operation by leasing the CDMA network of our parent company. We will endeavour to achieve smooth transition of CDMA network operation and its earliest independent operation, which enable the Company to obtain on taking over the CDMA business, relatively complete mobile network resources and customer service system with stand-alone operation and continuous service capability. This is beneficial for the Company to quickly enter into the fast-growing mobile telecommunications market in China and achieve full services offering. The Company's core competitiveness can also be strengthened continuously by proactively implementing customer-focused differentiated operation strategy.
5. What is the Company's development strategy of the voice businesses?
In the first half of 2008, there was a significant decline in the Company's wireline voice service. Revenues from local telephone services and long distance services fell 13.9% and 9.4% respectively from the same period last year. There was a net decrease of 5.44 million access lines in service in the first half of the year, mainly of low-end subscribers. As a result of continuing significant reduction in mobile tariff, the imbalanced competitive landscape has worsened with immense pressure on expanding new add market share of wireline voice service. In response, we insisted on profitable development of voice service and controlled marketing expenditure of low return. We also insisted on driving the voice services through integrated development with transformation services, and continuously enriched informatization applications to provide differentiated services for different customers with a view to consolidating our traditional voice services.
6. What is the Company's CAPEX plan?
CAPEX was RMB18.783 billion in the first half of this year, a decline of 9.5% compared to last year. Due to the necessary network recovery and reconstruction after the snowstorm and earthquake and the CAPEX plan of the newly acquired Beijing Telecom, the CAPEX plan for 2008 is RMB47.093 billion (not including any necessary incremental mobile business CAPEX after the acquisition of CDMA business).
With due regard to the declining traditional business and fast developing transformation business, the Company will insist on the principle of "stringent overall CAPEX control with rationalized structure to improve profitability", to provide sufficient network capability for full service operations while ensuring investment return.
7. What is the dividend policy of the Company?
The Company declared a final dividend of HKD0.085 per share for the year 2007, same as that for the year 2006. We strive to make a proper balance between shareholder cash return demand and the Company's capital requirement for future development, while proactively preparing for the coming full services offerings.
updated 8th October, 2008
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