CITIC Telecom Announces 2018 Annual Results

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Profit attributable to equity shareholders Up by 7.9% Year-on-year to Over HK$950 Million

Total Dividend Increases by 12.5% Year-on-year to HK18.0 Cents per Share

(28 February 2019, Hong Kong) — CITIC Telecom International Holdings Limited (“CITIC Telecom” or the “Group”; stock code: 1883) ), a leading international integrated telecommunications, and information and communications technologies services provider in Asia, has reported profit attributable to equity shareholders of HK$951 million for the year ended 31 December 2018, representing a year-on-year growth of 7.9%. Excluding the valuation gain on investment property, the growth was 11.6%. Revenue for the year surged by 27.0% to HK$9,464 million when compared with last year. Revenue from the Group’s telecommunications services, excluding revenue from equipment and mobile handset sales, rose by 12.6% when compared with last year. Basic earnings per share were HK26.7 cents.

The Board recommended payment of a final dividend of HK14.0 cents per share for 2018. Together with the interim dividend of HK4.0 cents per share, the total dividends per share for 2018 would be HK18.0 cents, representing a 12.5% year-on-year growth.

Mr. Xin Yue Jiang, Chairman of CITIC Telecom, said, “The year 2018 was a year of hard-fought progress as well as a lucrative harvest for CITIC Telecom. The Group as a whole pursued our stated goals of ‘growth in strength, quality and scale, achievement of higher standards, and delivery of top-rated results’. By capturing the opportunities and leveraging its advantages, all core businesses achieved satisfactory progress and its market scale continued to increase while operating results marked a record high. The Group has been developing into an Internet-based integrated telecommunications enterprise in full swing”.

The Group has maintained a healthy financial position and a strong cash flow. As at 31 December 2018, the Group had cash and bank deposits of approximately HK$1,049.1 million, which is sufficient to meet its financial obligations and contractual capital commitments in the coming 12 months.

Business Highlights

The Group continued to reinforce its competitiveness in network and services, facilitating sound growth in the mobile sales and services business. During the year, the surge in equipment and mobile handset sales, along with growth in services revenue, boosted the revenue from mobile sales and services business by 54.5% year-on-year to HK$3,601.4 million. The “Guangdong-Hong Kong-Macau Bay Area Mobile Service Plan”, the first of its kind in the Greater Bay Area, introduced by the Group at the end of 2017 to capture opportunities from the Greater Bay Area development, has been immensely popular, boosting the Group’s 4G market penetration rate and data usage in Macau mobile market, as well as maintaining its leading position. As a new achievement in the SIMN business in which the Group has accumulated strength over the years, a PRC carrier has transferred all businesses conducted on its own platform to the Group’s SIMN platform, demonstrating industry players’ trust in and recognition of the Group. The Group is the first operator who conducted 5G network testing successfully in Macau, and is well-prepared for the 5G era.

Increased weighting of the fibre Internet business and faster pace in data centre construction drove growth in the Internet services business. Internet services revenue amounted to HK$1,009.7 million, representing a year-on-year increase of 8.1%. As at the end of 2018, the number of the Group’s fibre customers in Macau grew by 12.9% compared with the start of the year. 100% of its business broadband service customers and 87% of its home broadband customers had used fibre network, accounting for 97% of Macau’s Internet market, making the Group a world leader in this respect. CITIC Telecom Tower Phase III (A) Data Centre has been made available to the market upon successful completion of its construction. CTM (Hong Kong) Data Centre is the first cross-border data centre outside Macau which was approved by the Macau SAR government to provide data centre service to Macau government and enterprises, underlining perfectly the Group’s unique strengths in bringing synergies across its operations in Hong Kong and Macau. The Group has also stepped up the development of its global cloud computing centres, numbering 18 as at the end of 2018.

International telecommunications services business achieved notable progress in its transformation into an Internet-based operation, with significant revenue growth. Revenue of the international telecommunications services business increased by 35.6% year-on-year to HK$1,655.7 million. The Group has been driving the transformation of its telecommunications services business into Internet-based operation. For example, capturing the opportunities presented by the surging demand for SMS-based services like authentication and confirmation of transactions, it has devoted great efforts to develop its A2P SMS business which reported notable growth compared with the previous year. Revenue of “DataMall自由行 ”, its Internet-based global data traffic trading platform, exceeded HK$100 million during the year, representing a year-on-year increase of 62.9%.

Enterprise solutions business, which expanded from Asia Pacific to the world and from CT to ICT, maintained a higher growth rate. Enterprise solutions revenue increased by 10.1% to HK$2,953.6 million. The Group has consolidated CPC Europe’s business to form a global service network, enabling the global sales of CPC Europe’s products and the expansion of the Group’s enterprise solutions business from Asia-Pacific to the world. It also formed a unique edge with its presence along the “One Belt One Road” area. While bolstering its strengths in network connection (i.e. communications technology, CT), the Group has continued to seek expansion in information and communications technology (ICT) services with greater growth prospects, and has deployed cutting-edge technologies such as AI and Big Data to better serve enterprise customers. During the year, the Group has made breakthroughs in a number of Smart City projects, including the successful bid for and subsequent smooth delivery of a large-scale smart transportation project in Singapore. These projects have laid a solid foundation for the Group’s undertaking of more Smart City projects in Singapore and neighbouring countries in the future.

Enhancing Innovation and R&D by joining forces with manufacturing, academic and research sectors to build a driving force for future development. To grasp the immense business opportunities in Smart City construction, AI, ‎Augmented Reality (AR), and Virtual Reality (VR), the Group has entered into cooperation agreements with a number of institutions, including the University of Macau, for the joint development of related solutions. The Group has set up a research and development centre in Zhuhai for the proprietary development of software for itself. This will reduce its reliance on outsourced suppliers and enhance its ability to proactively address market demand and rapid changes. CTM has also become a preferred partner of Tencent in Macau and its exclusive partner in Macau’s telecommunications sector, whereby the two parties will launch Tencent’s cloud technology and related Smart City solutions in Macau.

Development Strategies

Looking into 2019, the markets for Internet, IoT, 5G, AI, cloud computing and enterprise services will continue to thrive, while the PRC economy has entered a new stage of qualitative growth. In the face of complex and uncertain business environment, the Group will remain clear-headed, persist in innovative development, seize the opportunities of the times, continue its transformation into an Internet-based integrated telecommunications enterprise, and promote the sustainable and healthy development of all of its major businesses.

With the advent of the IoT era driven by 5G technology, Smart City will be the key development direction of the industry. The promulgation of the “Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area” will also bring new opportunities for the Group’s development in the area. The Group will strategically position CTM as an “industry leader in Macau and expanding into Mainland China and overseas markets”. The Group will closely track the development of 5G technologies and make timely investment and business preparations. The Zhuhai R&D Centre will play an important role to improve the Group’s software development and project delivery capabilities, as it strives to be a preferred partner in Smart City and enterprise ICT services in the region, while also becoming a major Smart City operator.

The enterprise solutions services is one of the most dynamic markets for the global telecommunications industry. With the philosophy of “innovation never stops”, the Group will accelerate the application of cutting-edge technologies such as AI and Big Data in the field of enterprise services, and use IT to drive the development of its CT business, continuously upgrade its products, enhance its advantages, and expand the scale of its operations. In the meantime, it will extend its outreach to Southeast Asian countries from its base in Singapore, in order to speed up the progress of its growth into a one-stop enterprise ICT service provider in Southeast Asia and cement its leading position in global enterprise services.

Data centre and cloud computing are indispensable infrastructure for next generation technologies such as Big Data, AI, and IoT. This is also one of the key business focuses of the Group’s future development. In 2019, the Group will commence the construction of CITIC Telecom Tower Phase III (B) Data Centre to further expand the scale of its data centres in response to anticipated stronger market demand. The Group will continue to expand the coverage of its global cloud computing platform by implementing construction, removal, operation, security and systems management at its existing data centres, in order to increase the efficiency of these platforms as one of the new growth drivers for the Group.

The international telecommunications market is rapidly changing, bringing challenges but also opportunities. As new demands and new opportunities from customers are emerging, the Group will continue the transformation of its international telecommunications business into an Internet-based operation. Leveraging its comprehensive advantages in the cross-border roaming market, the Group will continuously upgrade the “DataMall 2.0” service, and develop new models such as the “Communication Mall” with richer content to strengthen its advantages in communications services across the Greater Bay Area. The Group will replicate such advantages to more regions around the world in order to realise Internet-based international telecommunications services.

Dr. Lin Zhenhui, Chief Executive Officer of CITIC Telecom, said, “Technological innovation and product R&D are the first drivers of the Group’s development. The Group will grasp the opportunities around the digital ecosystem of the IoT, and give full play to its unique advantages in the Greater Bay Area and the ‘One Belt One Road’ region. Towards that end, the Group will step up its technological innovation and product R&D efforts and accelerate the process of its “project productisation” and “product platformisation”. The Group will continue to expand from communications network services to platform services and application services with stronger development potential, and build itself into a one-stop integrated telecommunications and ICT services provider in a bid to create greater value for shareholders”.