CHUFF - China Unicom (Hong Kong) Limited (CHUFF) Q2 2023 Earnings Call Transcript

2023-08-10 15:02:09 ET

China Unicom (Hong Kong) Limited (CHUFF)

Q2 2023 Earnings Conference Call

August 09, 2023, 03:30 AM ET

Company Participants

Meng Shusen - Chairman and President

Chen Zhongyue - Executive Director and President

Presentation

Meng Shusen

Ladies and gentlemen, those of you from Beijing online, good afternoon. I'm Meng Shusen. Today, I'm very happy to meet with you here, and thank you very much for your long-term interest and support for China Unicom. On behalf of the management of the company, I would like to welcome you all to China Unicom's 2023 Interim Results Announcement.

In today's announcement, we are holding this on sites in both Hong Kong and Beijing and also video conferencing. So, we are here to communicate with Hong Kong and Beijing media friends.

First of all, our executive speech, after that, there will be an interaction session with Hong Kong and Beijing media, and our management will answer questions within the scope of this results announcement. Because of time, if there are questions that are left unanswered, the Investor Relations department of the company will follow-up after the announcement session.

This meeting is conducted in Chinese and English, and there is English simultaneous interpretation. So, please switch your mobile phone to vibration mode or switch it off.

The management all along has been attaching a lot of importance to communication and interaction with media friends. So, let me first of all introduce to you members of the Board and management in attendance today. They are: Executive Director and President, Mr. Chen Zhongyue; Senior Vice President, Mr. Liang Baojun; Senior Vice President, Mr. Tang Yongbo; Executive Director and CFO, Ms. Li Yuzhuo; Senior Vice President, Mr. Cao Xingxin.

Now, may I invite the Executive Director, Mr. Chen Zhongyue, to go through the company's 2023 interim results. Mr. Chen, please.

Chen Zhongyue

Ladies and gentlemen, online friends, good afternoon. First, on behalf of Chinese Unicom, a warm welcome to all media friends in attendance today.

In the first half of this year, we solidly promoted the deepening of the strategic planning system and actively integrated the current operation and long-term development. We made progress in steady operation and development, and our business revenue and profit scale have successfully set new records since listing.

Operating revenue reached RMB191.8 billion, an increase of 8.8% year-on-year. Net profit reached RMB12.4 billion, up 13.1% year-on-year, a double-digit increase for seven consecutive years. Revenue structure continued to be optimized. Industry Internet revenue accounted for more than one-fourth of the revenue. Return on net assets reached a new high of 3.6% in recent years. So, we are saying that the foundation for stable and far-reaching high-quality development was continuously strengthened.

In the first half, our company's CapEx amounted to RMB27.6 billion, which was mainly used to build the four premium networks of 5G, broadband, government and enterprise, and computing power for premium networks, supporting the enterprise's high-quality developments of the network foundation.

For 5G premium network, 5G mid-band base stations exceeded 1.15 million stations. The scale of base stations and coverage level remain comparable to that of the industry.

For broadband premium network, cities, counties and towns are fully equipped with gigabit capacity.

In terms of government and enterprise premium network, 335 local networks across the country have been fully covered. For computing power premium network, the number of gigabit networks -- well, we realize full coverage of 335 local network nationwide.

In terms of computing power, our cloud pool covers more than 200 cities. The scale of IDC cabinets exceeds 380,000, and the average latency of backbone network remains at a leading level.

The company promotes network infrastructure construction with innovative concepts and deeply promoted. We have built and shared with China Telecom and launched a joint press conference with China Telecom at the Mobile World Congress 2023 in Barcelona. At the Mobile World Congress 2023, we jointly released the 5G sharing guide.

We exported Chinese experience in key technologies and operation management for global operations. We have also promoted 4G mid-band one network, with more than 2 million shared stations and a shared rate of 1.5 million stations, with sharing rates of more than 90%. We also actively promoted the use of poles and pipelines. We have also actively promoted cross country -- cross-industry sharing of infrastructure.

We adhere to innovation-driven and embrace new blue ocean of the digital economy. In the first half of the year, our large connection subscriber base reached 928 million, a net increase of more than 66 million subscribers. The growth space of big connectivity has been further expanded. Mobile business achieved double increase in scale and value. Mobile subscribers exceeded 328 million, with net subscriber additions reaching 5.34 million in the first half. And this reached a record high in the same period of four years. Penetration rate of 5G package subscribers exceeded 70%. Subscriber structure was further optimized.

We strengthened product -- supply capacity with video ringtones, Unicom Assistant, Unicom Cloud Drive, personal digital smart living products. More than 87 million subscribers. Revenue increased by 90% year-on-year, leading to a continuous increase in mobile ARPU.

Broadband business achieved innovative growth and accelerated in speed. Fixed line broadband subscribers reached 108 million in the first half, with net subscriber additions exceeding 4 million in six months. And the integrated penetration rate reaching 75%. Taking the double gigabit network upgrade as an opportunity, we centered on the development of convergence all users, especially accelerating the development of FTTR, which opened the way for sustainable growth and value enhancement of broadband business.

IoT business realized revenue of RMB5.4 billion in the first half, up 24% year-on-year, injecting new vitality into the development of big connectivity. China Unicom's IoT business has now realized high, medium, and low speed, full scenario access; terminals, network, cloud, intelligence and security integration and developments, especially the Gewu platform, which has effectively helped accelerate the development of industrial internet, smart city, and ecological environmental protection, and other fields.

In the area of big computing, we have continued to improve our self-research capabilities and establish the brand image of secure digital and intelligent cloud. So, we are able to form the characteristic advantages of safe and reliable cloud and network integration. And in the first half of the year, Unicom Cloud realized revenue of RMB25.5 billion, up 36% year-on-year. Annual revenues strive to exceed RMB58 billion. We're focusing on tapping into characteristics of the industry and iteratively improving construction of our platform. So, we have formed rich segmentation scenarios around the seven major scenario cloud solutions and upgraded infrastructure of Unicom Cloud, realizing unified architecture of one cloud with multiple states.

Big Data business realized revenue of RMB2.9 billion in the first half, up 54% year-on-year. Market share of the industry has exceeded 50% for consecutive years. We have fully utilized our advantage of being the first in the industry to centralize data and intensify operations where fully exploited advantages of the industry's earliest data concentration and intensive operation, integrated artificial intelligence and blockchain technology and established a complete big data capability system. Based on 400 petabytes of large scale data processing and over [$1 trillion] (ph) of data processing, we have established a complete big data capability system to unleash the value of data elements. So, we [plowed] (ph) into the fields of digital government and digital finance, intelligent culture and tourism, and industrial internet.

For Big Applications, we actively promote the deep integration of new generation digital technology and real economy, with 5G industry applications covering 60 categories of the national economy, more than 20,000 projects in total. So, we moved from show flats to commercial property units. And cumulative value or number of customers served by the 50 virtual profit network exceeded 5,800 and contracted amounts of 5G industry reached RMB6.2 billion. Number of 5G factories reached more than 2,600 and the depth of application was continuously extended. In eight areas, the depth of application has been continuously extended. The company completed [indiscernible] 5G RedCap testing and verification in eight major fields such as industry and electric power, effectively promoting integration and innovation between 5G and vertical industries.

Big Security's first half revenue grew 178% year-on-year, with more than 80 products on security cloud marketplace. We focus on network security, data security, information security. And we focus on network security and accelerated the large scale application and replication of platform plus products plus service model to widely meet the needs of digital economy.

We deeply implemented the Belt and Road Initiative and strive to expand new space for international cooperation. In the first half of the year, international business revenue reached RMB5.5 billion, up 21% year-on-year. Our international business service area has become more extensive, covering 264 countries and regions. The number of international friend circle continued to expand, with 635 carriers, we established roaming cooperation with a large number of inbound and outbound roaming users. So the system of international product has been further enriched and the main products such as dedicated Internet lines, global intelligence, networking, and Unicom Cloud have realized rapid growth and better service. In this way, we're able to better serve One Belt, One Road, and the going out of Chinese enterprises.

Our company holds in line with the enhancement of scientific and technological innovation capacity. First half of R&D investment intensity reached 2.94%. And we have 1,326 patents, an increase of 70% year-on-year, in total. We won the China Communications Association and Institute of Electronics Awards. The layouts of strategic emerging industries has been further accelerated. We actively promoted network technology innovation, creating more than 10 network innovation products and launching more than 100 network products. We attach a lot of importance to the big model, a new generation artificial intelligence technology. We have actively laid out frontier of artificial intelligence.

We promote reform and strategic cooperation to go deeper. We steadily pushed forward the spin-off and listing of subsidiaries. And then, we built diversified Board of Directors. We further promoted reform so that there is a multi-faceted and deep level cooperation with strategic investors. Now we have built strategic cooperation management system with 137 group-level strategic cooperation agreements, effectively enhancing closed-loop cooperation. We have built up a very sound system. And together with Tencent, Yunzhou Times, we have registered and started operation of a JV. And based on independent research and development, we utilize advantages of both shareholders to enhance our capability in terms of operation and product innovation. We will provide new generation CDN and edge computing services for digital government, artificial intelligence and other fields.

We have actively fulfilled our corporate responsibility and demonstrated our commitment as a centralized enterprise in major events such as cyber power, digital China, technological innovation and rural revitalization. In heavy security emergency communications, we made outstanding contributions to promoting the development of the enterprise. We are also doing a lot to enhance sustainable development of the economy, society, and environments, green developments, and so on. And then PUE of newly-built large scale data center is below 1.3. 5G plus AI, with this, we help people with disabilities. We continuously improve corporate governance and focus on shareholders. We continue to spread to the market the message of our new development and new value. We are expanding our revenue and profits, and at the same time, we also enhance our ability of sustainable developments.

We want to share with shareholders our success and our achievements. So, the Board has decided to continue to pay interim dividend of RMB0.203 per share, representing a year-on-year increase of 23%, significantly higher than the basic -- 13% year-on-year increase in basic earnings per share. In the future, we will grasp the relationship between short, medium, and long-term developments. We continue to reward our shareholders for their support and trust at the same time.

In the second half of the year, we will promote the basic business and emerging business segments at both ends in coordinated development manner. We will improve our core competitiveness and enhance core functions, and strive to achieve steady growth in service revenue, double-digit growth in net profit and enhanced return on net assets, so as to create bigger value for our shareholders, customers, and society. We want to make even bigger contribution to the modernization of China.

Thank you very much.

Question-and-Answer Session

Q -

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