China Mobile (Hong Kong) Limited. April 28, 2004

Transcription

1 China Mobile (Hong Kong) Limited April 28, 2004

2 FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions, some of which are beyond our control. Actual results may differ materially from those expressed sed or implied by these forward-looking statements. Because of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this presentation might not occur in the way we expect, or at all. You should not place undue reliance on any of these forward-looking statements.

3 China Mobile (Hong Kong) Senior Management Name Title Mr. WANG Xiaochu Chairman and CEO Mr. LU Xiangdong Executive Director and Vice President Mr. XUE Taohai Executive Director, Vice President and CFO Mr. HE Ning Executive Director and Vice President 2

4 Agenda Overview of the Acquisition The Target Companies Benefits of the Acquisition 3

5 Overview of the Acquisition

6 China Mobile (Hong Kong) s Acquisition of Xizang (Tibet) Xinjiang Gansu Qinghai Heilongjiang Pop: 2.71 mn Pop: mn Pop: mn Pop: 5.34 mn Pop: mn GDP p.c.: 6,716 Rmb GDP p.c.: 9,157 Rmb GDP p.c.: 4,998 Rmb GDP p.c.: 7,308 Rmb GDP p.c.: 11,620 Rmb Sub (b) : 309 k Sub (b) : 2,329 k Sub (b) : 1,714 k Sub (b) : 625 k Sub (b) : 4,923 k Jilin Pop: Neimenggu (Inner Mongolia) GDP p.c.: Sub (b) : Guizhou mn 8,765 Rmb 3,079 K Pop: GDP p.c.: Sub (b) : Pop: GDP p.c.: Sub (b) : Ningxia mn 9,327 Rmb 3,830 k 5.80 mn 6,639 Rmb 805 k Pop: GDP p.c.: mn 3,339 Rmb Yunnan Target Companies (a) Existing Subsidiaries Sub (b) : 2,634 k Pop: GDP p.c.: mn 5,619 Rmb (a)target companies also include CMC and Jingyi Design Institute (b) Refers to the subscribers of Target Companies Sub (b) : 4,249 k 5

7 Key Elements of the Acquisition Consideration of US$3.65 billion Initial Payment: US$2.0 billion in cash Deferred Payment: US$1.65 billion as loan from the seller Assumed net debt of US$0.47 billion Enterprise value of US$4.12 billion Acquisition Consideration Principal Pre-condition for the Acquisition Approval by independent shareholders (EGM scheduled on June 16, 2004) Financial Advisors to the Company China International Capital Corporation (Hong Kong) Ltd Goldman Sachs (Asia) L.L.C. UBS Investment Bank Independent Financial Advisor N.M. Rothschild & Sons (Hong Kong) Ltd 6

8 Attractive Valuation P/E (x) 19.5% discount EV/EBITDA (x) 37.9% discount 12.03x 9.69x 4.59x 2.85x CMHK (a) Target CMHK (a) Target 2004E Net Profit (Target): US$376.6 mn 2004E EBITDA (Target): US$1,446.3 mn (a) Based on CMHK s per share price of HK$21.69, which was the average daily closing price during the 10-day period ended April 27th, CMHK s 2004E EBITDA per share (RMB4.89) and EPS(RMB1.913) are based on the average research forecasts by CICC, GS and UBS, for illustration only 7

9 Earnings Accretion We expect the Acquisition to be EPS accretive for 2004 and further enhance future earnings growth EPS Pre-Goodwill Amortization (a) EPS Post-Goodwill Amortization (a) (RMB) 7.1% Accretion (RMB) 6.5% Accretion CMHK Standalone 2004E EPS CMHK Pro forma 2004E EPS CMHK Standalone 2004E EPS CMHK Pro forma 2004E EPS (a) For illustration only, does not reflect CMHK s guidance on its 2004 earnings; Goodwill as used here refers to the goodwill amount arising from this acquisition only. Assumptions: 2004E EPS of RMB1.913 is based on the average research forecasts by CICC, GS and UBS of HK$1.803 and HK$ to RMB exchange rate of Interest rate of 1.02% on CMHK s average cash and bank deposits 2-year USD LIBOR swap rate of 2.595% for deferred consideration Effective tax rate of 33% to derive tax savings on the forgone interest income Assumes the Acquisition was completed on January 1st,

10 Deferred Payment Total deferred payment: US$1.65 billion 15-year subordinated debt, with no prepayment penalty Key Terms Interest rate: 2-year USD LIBOR swap rate, 2.595% for the first two years Fixed exchange rates Flexible payment currency choices CMHK intends to repay the deferred payment mainly through: Internal cash resources Repayment External financing, including possible bond issuance or other sources 9

11 Benefits of the Acquisition Extending coverage to further secure market leadership position Capturing new growth potential Capitalizing on solid track record of integration success Enhancing EPS and improving capital structure Consolidating to ensure long-term growth 10

12 The Target Companies

13 The Target Assets (a) (b) (c) Population (mn) (a) GDP per capita (RMB) (a) 6,486 7,292 Mobile penetration (%) (b) China Mobile Subscribers ( 000) 18,928 24,497 Contract (c) 6,955 6,990 Prepaid (c) 11,973 17,507 Market Share (%) MOU (minutes) Contract (c) Prepaid (c) ARPU (RMB) Contract (c) Prepaid (c) Monthly Churn (%) Provincial Statistical Yearbooks with respect to the 2002 data data are estimated by the target companies Penetration rates have been derived from published MII reports Classification for management reference purposes only 12

14 Significant Business Growth Subscriber Usage CAGR = 33.0% 13,849 18, % 24, % CAGR = 49.8% 47,441 69, % 30, Subscribers ('000) (a) Mobile Penetration (%) Total Usage (million minutes) (a) Penetration rates have been derived from published MII reports 13

15 Solid Revenue and EBITDA Growth Revenue EBITDA (RMB million) (RMB million) CAGR = 14.0% 20,645 CAGR = 12.0% 8,373 9,385 17,843 7,479 15,

16 New Business - Key Growth Driver New Business Revenue SMS (RMB million) (million messages) CAGR = 150.9% 1,731 CAGR = 321.0% 9, % 3, % 1.7% New Business Revenue as % of Operating Revenue Total Usage 15

17 Ample Room for Cost Reduction to Improve Profitability Net Profit 2003 Cost Structure (RMB million) (as % of operating revenue) 2,593 2,214 2,112 Depreciation 32.3% 23.1% (a) Target CMHK Depreciation Personnel SG&A (RMB million) 3,859 5,385 6, % 4.9% 35.9% 27.3% Target CMHK Target CMHK (a) Before revaluation deficit of RMB3.47 bn. After revaluation deficit will be net loss of RMB1.36 bn 16

18 Expecting an Improvement in Profitability in 2004 Net Profit EBITDA (RMB million) 19.9% (RMB million) 27.6% 11,971 2,600 3,117 9, Adjusted (a) 2004 Forecast Forecast Change of management focus from business scale to profitability Maintain double-digit revenue growth Increased employee productivity through HR restructuring and training Efficient management through rationalizing SG&A per subscriber Tighter control of capital expenditure (a) Assumes the asset revaluation result was recorded on December 31st, Detailed adjustment is as follows: 2003 reported net profit (RMB-1,358 mn)+reduction of depreciation(rmb633 mn)*(1-effective tax rate(22.9%))+reversal of revaluation deficit(rmb3,470 mn)=2003 adjusted net profit (RMB2,600 mn) 17

19 Infrastructure and Distribution Infrastructure All digital, fully integrated GSM network Average population coverage rate of 80% 182 mobile switching centers; 20,847 base stations Network capacity of 29 million; average utilization rate of 84% Well-established intra and inter provincial backbone transmission Distribution Extensive network of sales and distribution channels 1,409 proprietary sales outlets 29,383 other retail outlets 18

20 Capital Expenditure Plan Planned capital expenditures significantly below historical levels % 63.8% Total expected capital expenditure for approximately US$2.95 billion % Network infrastructure similar to CMHK s existing operations Increased economies of scale and improved utilization expected to lead to higher return on investments E 2005E 2006E Capex (US$ bn) as % of operating revenue 19

21 Capitalization Targets Combined as of Dec. 31 st, 2003 RMB million Total Debt 5,174 Owners Equity 25,766 Total Book Capitalization 30,940 Cash and Bank Deposits 1,296 Net Debt 3,878 Total Debt /Total Capitalization 16.7% 20

22 Benefits of the Acquisition

23 Further Consolidating Market Leadership Position Subscribers Revenue EBITDA % of total Mainland China mobile subscribers (RMB million) (RMB million) 53% 62% 158, % 179,068 92, % 101,663 CMHK 2003 Pro forma Combined 2003 (a) CMHK 2003 Pro forma Combined 2003 (a) CMHK 2003 Pro forma Combined 2003 (a) (a) Assumes the Acquisition was completed on January 1 st,

24 Successful Path Towards Shareholder Value Creation EPS (b) (RMB) (a) 1999(a) E Acquired Jiangsu subsidiary Acquired 3 provincial subsidiaries Acquired 7 provincial subsidiaries Acquired 8 provincial subsidiaries (a) Prior to the write-down and write-off of analog assets (b) Includes both organic growth and value creation through acquisition 23

25 Capitalizing on Solid Track Record of Integration Successes 7 Acquired Subsidiaries EBITDA Margin Revenue per Employee Bad Debt Ratio (%) (RMB thousand) 1,857 2,053 (%) Acquired Subsidiaries EBITDA Margin Revenue per Employee Bad Debt Ratio (%) (RMB thousand) 1,361 1,642 (%)

26 Improving Capital Structure As of December 31 st, 2003 (RMB billion) CMHK Pro forma Combined (a) Cash and Bank Deposits Total Debt Total Capitalization Total Debt/Total Capitalization 18.3% 24.2% Total Debt/EBITDA 0.48x 0.62x (a) Assumes the Acquisition was completed on December 31 st,

27 More Efficient Corporate Structure CMCC: CMCC Public CMHK: CMCC s role primarily defined as controlling shareholder 75.7% 24.3% (Including Vodafone's 3.3%) China Mobile s core businesses and assets all under CMHK Operates non-core businesses Non-core Business and Assets China Mobile (HK) China 75.7% Mobile (HK) 31 Provincial Subsidiaries and Other Operating Entities Responsible for all strategic and operational decisions and execution Connected transactions significantly reduced 26

28 A Solid Foundation for Future Growth World-Class Wireless Multi-Media Media Services Provider World s largest wireless operator by subscriber number In the world s most dynamic and fast growing economy With ample financial strength to capture future growth potential in wireless multi-media services 27

29 Thank You