China Tower Corporation Limited (788) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to China Tower's 2022 Annual Results Earnings Call. We've just released our 2022 results in June, and the results presentation can be downloaded at our IR website, www.chinatower.com. I'll remind you that this call might contain forward-looking statements that involve a number of risks and uncertainties. Examples of these statements include: Our expectations regarding future growth, including our future outlook, capital allocation and future operating performance and any other statements regarding matters that are not historical facts. You should be aware that certain factors may affect us in the future and could cause actual results to differ materially from those expressed in those forward-looking statements.[Operator Instructions] The following speech and Q&A session will be conducted mandatory, and we will provide consecutive interpretation. Now I would like to transfer the call to Mr. Zhiyong Zhang, Chairman of China Tower, Mr. Zhiyong Zhang.

Good evening, ladies and gentlemen. Welcome, and thank you for joining us for China Tower's 2022 Annual Results Presentation. We would like to express our gratitude for your ongoing support of China Tower. To begin with, allow me to introduce the management team joining us for today's earnings call. Mr. Mr. Gu Xiaomin, Executive Director and General Manager; Mr. Gao Chunlei , Executive Director; Mr. Hu Shaofeng, Chief Accountant, And 3 Deputy General managers, Mr. Liu Guofeng , Mr. Yin Wenkai, Mr. Zhao Jingbao , For today's presentation, I will begin with an overview of the company's overall performance in 2022 then we'll have a Q&A session, where we will be happy to answer your questions. On Slide #5, as you can see the figures on Slide #5. In 2022, China Tower capitalized on development opportunities and meet the difficult environment under COVID. the company pushed for synergetic environment of its various business and maintained overall stable growth of its operating results. Our operating revenue grew steadily with a year-on-year increase of 6.5% to RMB 92.2 billion. Our profitability continued to improve with a net profit margin increase of nearly 20% year-on-year to RMB 8.8 billion. Also, we generated abundance and stable operating cash flow of RMB 65.1 billion reflecting a year-on-year increase of 7.7%. Moreover, our TSP business tenancy ratio was 1.74 tenants per tower, increased by 0.04 tenants per sites over the same period last year, which highlights the steady growth in our colocation rates. In 2022, we also leveraged our resources capabilities to make significant progress in implementing our One Core and Two Wings strategy, resulting in outstanding business performance in various segments. TSP business record stable growth with its revenue increased by 3.5% year-on-year to RMB 33 billion, accounting for 90.1% of the total revenue. This indicates that the company's fundamentals for sustainable development has been further strengthened. Our Two Wings business has been showing strong development momentum in 2022; two, achieved a revenue of RMB 8.9 billion, an increase of 45.2% from last year and accounting for 9.7% of our overall operating revenue, up 2.6 percentage points for the same period in 2021, proving that the company has a solid and growing multi-pillar development structure. In 2022, we seized the opportunity presented by the deepening coverage of the 5G network and closely align ourselves with the TSPs construction plans. We coordinated and developed our resources, continuously innovating our construction plans and service model to efficiently and effectively met the TSPs construction needs. As of the end of December 2022, the company has cumulatively constructed 1.76 million 5G base stations, of which more than 96% were built using existing site resources to meet the demand, contributing to China's leading position in global 5G infrastructure. And in the reporting period, revenue from 5G tenants contributed 84.3% to the incremental growth of the TSP business revenue with an increase of 9.7 percentage points compared to the same period last year. This continues to drive our business forward. On Slide #8. As for the Smart Tower business, we seized the new opportunities presented by the development of the digital economy. We proactively integrate ourselves into the modernization of the national government system taking advantage of mid- and high point site resources, we continuously improve the platform's ability to assess data from multiple resource, building multiple source and multiple dimension data fusion and analysis capabilities. We also developed a leading algorithms for middle to high point monitoring scenarios continuously create industrial application products that are close to user needs. Moreover, the company has also established a customer-centric companion-based operating system, which realized all run shared service. As you can see on this page, there is a diagram of our tower. There are more and more equipment mounted on our towers, not just from the TSP, but also for non-TSP. So we are upgrading our telecommunication towers to digital tower. Actually, in 2022, accumulatively more than 200,000 of telecom towers already upgraded to digital towers. And in their reporting period, Smart Tower business achieved a revenue of RMB 5.7 billion representing a year-on-year growth of 40.5%. This growth rate is 5.3 percentage points higher than the 35.2% growth achieved last year. As for our energy business, drawn our resource advantage and continue to strengthen our core competency. We continuously deepened our presence in battery Exchange markets for food and parcel delivery, creating a large-scale operation based on sharing consolidating our low-cost competitive advantage and maintaining our leading position in the low-speed electric vehicle battery exchange market. We also strengthened our 4-in-1 service capabilities of power backup, power generation, supervision and maintenance and continuously expanding the scale of power backup business. At the same time, relying on the unified operational supervision system nationwide, we kept enhancing delicate asset management and improving operational efficiency. Also, we promoted smart customer service applications, optimized complaints handling and repair processes has significantly improved our service capabilities. Energy business recorded revenue of RMB 3.2 billion in 2022, representing a 54.5% increase from the previous year, showing a strong development momentum. In 2022, we focus on enhancing our capabilities on operation and management, technological innovation, customer service and reform and development helping to build a solid foundation with multiple development approaches. Firstly, we have strengthened the company's asset operating capabilities. We have accelerated platform construction to efficiently support business development. Also, we are advancing intelligence operation and maintenance to improve the precision of operations and maintenance and to strengthen asset life cycle management, and also to improve our efficiencies than returns. Secondly, our customer service competencies were improved by optimized service standards and from building a standardized system with differentiation. In addition, we did not only enhance our service quality and build static at service team. We had also implemented a transparent, fully closed-loop procedures to provide high-quality service. Thirdly, the company has improved its technological innovation competency by developing plans to scientific and technological innovation, which focus on key areas and leverage strategic leadership. Our R&D investment has doubled compared to the previous year, and we continue to strengthen the research and development of key projects and improve our technological capabilities. Lastly, we further add our reform and development competencies by promoting full coverage of tenure-based contractual management and strengthened our incentive mechanism plus implemented plans for talent development in the 14th Five-Year period to support the strong future of the company. We also deepened double-hundred-action reform in subsidiaries to unleash and boost their vitalities. On Slide #11, the company always attach great importance to shareholder returns. We continue to maintain an active dividend policy and are committed to sharing the fruits of the company's growth with our shareholders. After considering the cash flow and future development needs of the company, the Board has recommended a final dividend of RMB 0.03232 per share in 2022 representing a year-on-year increase of 23.2%, equivalent to a payout ratio of 72% of our annual distributable net profits. Looking ahead, we will continue to bolster our growth momentum and profitability so that we can create greater value for our shareholders. I will talk about the company's future development in the last 2 slides of this presentation. The company is facing new opportunities for future developments, which including for the TSP business, the construction of 5G network continue moving forward. It is expected that by the end of the 14th Five-Year plan period, indoor 5G coverage will reach the same level as 4G coverage, driving greater demand for the construction of information infrastructure. As for the Smart Tower business, the digital economy has a promising development prospects. There is an urgent need for different sectors to use digital means to improve governance capability, which provides a policy dividend to the development of digitalized Smart Tower business that's based on mid- and high point site resources. And regarding the Energy business, the acceleration of dual-carbon strategies has driven greater demand for electricity and the development of the economy and society is transitioning to green and low carbon rates, bringing anomalous opportunities for the company to expand its new energy application service. In the future, with our One Core and Two Wings strategy and 3 providers missions, the company will strengthen the leading position of TSP business in the communication infrastructure industry, drive to open up a new space for digitization, development of Smart Tower business. We're also building up the development momentum of energy business. The company is committed to maintaining stable operating revenue and fortifying lean management to improve profitability and create greater value for our shareholders, customers and wider society. So that concludes my presentation today. I'm happy to -- the management team are happy to answer your questions.

This concludes the prepared remarks for today, and we are now ready for your questions. [Operator Instructions]. Operator, please proceed.

[Operator Instructions]

There are 2 questions from Gary Yu of Morgan Stanley. The first question is about the future development of our TSP business. With the new 2022 commercial service agreement signed with 3 TSP at the end of 2022. What will be the -- what would they affect TSP business revenue growth in 2023 and onwards. That's the first question. The second question is more about the CapEx. The TSPs are saying that they are going to decrease the overall 5G-related CapEx on infrastructure, but the CapEx from China Tower haven't been decreased in 2022. And also, there's news saying that the CapEx of tower will increase to RMB 32 billion in 2023. What will be the CapEx structure in 2023. That's 2 questions asked by Gary Yu of Morgan Stanley.

Thank you for asking these very good questions. I'm sure many of you are very concerned about the commercial pricing agreements that were signed. Actually, last year, together with the 3 TSPs, we did a lot of communication and studies and research. And after serious consideration, we signed a 5-year commercial pricing agreement based on fairness and also based on a legal and compliant basis. So it is a renewal of the original commercial pricing agreement. So this year, because of more advanced 5G technological development and also developments in the telecommunication industry as a whole, we would like to seize opportunities arising from the development of Digital China. So we hope to seize the opportunities to make sure that our products and services will be more competitive. After the 2018 commercial pricing agreement that was the previous one signed, on this foundation, we are going to enhance and optimize the operation basis. So as I said just now, it is a very good opportunity for us to seize the opportunity to improve and make our products and services more competitive. There will be a lot of concessions as in the past, and especially we'd like to encourage colocation and sharing of resources. But then in the process, there would be inevitable changes and adjustments to the current operation and functioning. So in some provinces, there are going to be some adjustments. So as a result, there may be some impacts caused to the TSPs and also some adjustments and impacts to Discount as well. In 2023, if you compare our TSP business revenue with 2022, it is going to remain more or less the same. For Tower business, there would be some decline in revenue. But then for DAS business, it is going to grow fast because it is subject to less impact. After signing the commercial pricing agreement, well, there would be more enhancement in terms of colocation discount or resource sharing discount. In some provinces, in particular, there would be even more concessions to encourage more coordination and resource sharing. And then we are going to anticipate that the system, the service system will also be optimized, so we believe that this will improve our market acquisition capability. Costs will also come down as a result. So 5G development as a whole can become faster. Because of this 5-year commercial pricing agreement, we will be in a better position to anticipate what will happen in the coming 5-year period. So even though TSP revenue is going to remain flat as compared to previous year; however, if you look at our overall revenue, we believe that our operation profit margin is going to be an improvement. You also asked a question about CapEx. In 2022, our CapEx was RMB 26.2 billion. If you talk about the structure for new construction of tower sites as well as well as sharing and co-location, the amount of CapEx in 2022 was RMB 14.6 billion for Tower business and DAS together. So these 2 -- the sum together is RMB 14.6 billion. And then we also have our smart business -- our Smart Tower business, the CapEx amounted to RMB 700 million. For Energy business, CapEx was RMB 2.08 billion. If you compare this year and last year, we believe that CapEx will increase because we have to satisfy the bigger and deeper coverage needs of 5G. Besides, we'd like to seize opportunities arising from development of Digital China, Smart Tower business as well as the dual-carbon development goal. So we believe that CapEx is going to be larger than last year. And besides, there are some assets which will reach their maturity term. And so we have to increase our input and investment in that as well. So this year, if you talk about new construction and also colocation and sharing of tower site, these will lead to increase in CapEx. Our Two Wings business also will incur additional expenses, so we believe that this year, CapEx will be around RMB 32 billion, which is more than this year -- more than last year. But referring to the structure, it will be the same as in 2022. We're going to enhance our efforts in construction -- new construction as well as colocation, equipment replacement as well as maintenance, and also, we want to make sure our service to customers is sustainable, and we will also increase input to R&D as well.

There are 2 questions from Sara Wang of UBS. The first question is more about the dividend policy. She would like to know with the further improve of our free cash flow in 2023 and 2024, whether the management considered to pay off free cash flow as dividend. The second question is more about Chinese is emphasizing the revaluation of assets recently. Is there any plan to go back to list in Asia or any share buyback plan? That's the 2 questions asked by Sara. Thank you.

Thank you for asking this very important question about dividends. Since our company was listed, we attached a lot of importance to shareholders' return. Overall speaking, when we make dividend decision, we consider a number of factors, including our cash flow, future operation and CapEx needs and also the need to upgrade some of our assets. So this year, we are going to also consider all these factors. And we have decided to increase our dividend payout ratio vis-a-vis 2022. So in other words, we have actually increased the payout from 70% to 72%. In terms of dividend per share, it is up 23.2% this year. After the signing of the new commercial pricing agreement, we are very confident that the development of our company can accelerate, and our profitability can also improve. Of course, we will also consider our cash flow but then we will try our best to consider to improve our dividend payout, so as to satisfy shareholders' requirements or requests for more or improved return. We hope that in the long run, we are able to improve value to shareholders. In terms of value to shareholders, there are actually 2 dimensions. Dividend is the first dimension. The second dimension is share price. So if share price can be enhanced, this also leads to a better value to shareholders. And so dividend plus share price improvement together will lead to better return to shareholders. Now you also asked a question whether we can pay out dividend based on cash flow. However, according to Mainland Laws and Regulations , we can only pay out dividends based on distributable earnings. You asked whether we have planned to buy back our shares or to do a share listing. For the time being, we do not have any plan in terms of share buyback or listing in a share market. However, we will consider all factors and all possibilities that will be beneficial to our long-term sustainable development. We will consider factors that will lead to better shareholder value. So we will be very cautious in making the consideration and decision. If you look at share price, actually, it is determined by our company's value and value is determined by our company's fundamentals as well as our development prospects. In terms of our fundamentals, well, our fundamentals have been growing and developing in a sustainable way. And then because we are operating in the telecom infrastructure sector, and we are also involved in the 5G development. Together with the 3 goals, namely Digital China, Dual-Carbon and Cyber Power, all these will present a lot of good opportunities for our future developments. So -- and if you look at our own capabilities, in terms of resource coordination and also our competitiveness, our capabilities have improved a lot. So with the positive fundamentals with all the good opportunities, we believe that we are able to strive for high-quality developments in the future. So let's work together to improve our overall value. We have been doing a lot of studies in terms of how we can enhance our long-term sustainable development and how to deliver more valuable shareholder return to our shareholders. And we we'll also look into different financing plans. If there is any update in terms of possible financing plan that we are going to take, we will announce or we will notify shareholders and investors in due course, in a legal and compliant manner.

[Interpreted] There are 2 question from Qian Kai of CICC. The first question is, first of all, congratulation to the company with such a good result in 2022 given such a difficult environment. I would like to know that -- the first question is about doing business. For the Two Wings business, the Smart Tower business and the Energy business grew 40% and 50%, respectively, in 2022. So I would like to know what would growth rates of this 2 business in the future. And what is the profit margin of these 2 business? The second question is more about whether the company are more willing to pay down the debts in the future and to improve the net profit given such a strong cash flow on the company's balance sheet.

[Interpreted] You asked about our Two Wings business, where last year, we performed very well in our Two Wings business, and we recorded very fast growth. Now for our Two Wings businesses, if you first look at our Smart Tower business, revenue was RMB 5.7 billion, is up 40% year-on-year. Energy businesses revenue was RMB 3.2 billion, up 54.5% year-on-year. Regarding our Smart Tower business, it is a very competitive business because we are capitalizing of our -- capitalizing our layout -- nationwide layout of our tower sites. And also, we make use of our very professional operational capability in terms of big data operation, cloud computing, AI. And then we also seized opportunities from sharing and colocation of resources in terms of providing data and information technology and services. So for our Smart Tower business, actually, it is divided into 2 different pieces. The first piece is the sharing and colocation of tower sites. The second piece is a monitoring -- power monitoring business or service. For the first piece, that is sharing and colocation of tower sites where it is basically related to the leasing and renting of power tower sites, resources, including shelters and cabinets. We provide electricity supply, we do maintenance and repair and then we offer network services and also data support. For the second piece, it is about Tower Monitoring service. So it is basically based on our very broad mid- to high-point sites located all over the country. And then we provide AI, cloud computing, transmission, terminal services, platform services in the forms of video, images, sensor information and so on. Talking about our Smart Tower business, we have actually 6 competitive strengths. First of all, our layout is all over the country. We cover all China in terms of our coverage by mid- to high-point sites. And the second strength is that we have a country-wide unified Tower Monitoring platform. The third strength is our AI, our leading AI computing capability. The fourth strength is our big data analytical and service capability, our companion service and also companion customer base system. And the sixth point is our ability to do cybersecurity. So with the above 6 competitive strengths, we are able to provide very competitive and also advanced solutions and products to our customers in terms of gathering, collection and creating of data and information and also processing and application as well. Now we are turning telecommunication towers into digital towers and telecommunication shelters into digital shelters. In this way, we are able to deliver very excellent services to serve the community and people with daily likelihood. We believe that there will be broad space for development in the future for our Smart Tower business. And we also expect that in the future, revenue growth is going to be fast. Regarding our Energy businesses. Last year, we achieved a year-on-year growth of 54.5%. If you look at our battery exchange business, revenue was RMB 1.8 billion, growing 56.3% year-on-year. There are altogether 900,000 users. In other words, there are around -- I mean per unit of 57,000 users. And then for our power storage -- or sorry, power backup business, the total revenue was RMB 1.169 billion, up 36.5%, on average, 64,000 users per unit. And under the dual-carbon development strategy, we are making our service very professional. We are strengthening our platform. We are optimizing and enhancing our service and also building a very good and influential brand. We also capitalized on our colocation and resource-sharing capabilities. We are making our services and our platform more market-oriented. And we are enhancing and optimizing our products and services together with our low-cost advantage and also our differentiated competitive strength, we are able to seize better opportunities in this business in the future. Concerning our Energy businesses, there are 2 main pieces: first, battery exchange; and second, power backup. In terms of battery exchange, our 2 main customer clusters are delivery -- I mean express delivery and also courier and food delivery. And in various cities over the country, we are expediting our coverage. And we are also improving and optimizing our products and services. We are improving our network layout as well. And we are capitalizing on our colocation and resource-sharing capability. Besides, we will seize our leading position, our leading status with regards to our food delivery and courier service sectors. As regards to our power backup business, it is a [ 2B ] business mainly. So we focus on, for instance, telecommunication sector, finance sector, public security sector, medical and health care sector, petrochemical sector as well as education. So we are making use of our 4-in-1 service capabilities and also our unified products and offerings to increase the scale of our operation. Under the dual-carbon development path of our country, we believe that in the coming few years, our revenue is going to enjoy rapid growth. You also asked about the profitability of our Two Wings business. Our Two Wings business is still in the early stage of development. So that means we need to make more investment in terms of market acquisition and R&D. So for the time being, profit margin is not as favorable as our TSP business. However, on a marginal basis, it is actually better than our overall operating profit margin. So it is very favorable and important in pushing up or improving our overall company's profitability. If you look at the past 2 years, we have seen very rapid growth in our Two Wings business development. So first of all, we are strengthening our overall operating capability. At the same time, by means of increasing scale of the development, we believe that it is going to be one of the very important profit growth drivers in the future.

[Foreign Language]

[Interpreted] Right. Let me comment on our debt or liabilities. At the end of December of 2022, for our interest-bearing liabilities, the total amount was RMB 57 billion. We have been improving and enhancing our debt structure. In terms of our debt structure, medium- to long-term debt accounted for 55%; short-term debt, 40.9%. As regards average financing costs, in 2022 is 3.1%. So it is better than in 2021 because we are lower than 2021 by 0.2%. This year, we believe that the overall monetary easing will continue in our country. And all in all, we have been maintaining very good working conditions or relationship with various financial institutions. So in terms of availability of credit, we are very adequate. At the same time, we have very good bargaining power in terms of the pricing of our debt. So all in all, our financing cost has been lower than the market rate. So in the period to come, we are going to step up our cash recovery position for our policy. And we will try our best to enhance our cash flow management, hoping to decrease the overall amount of interest-bearing debt. We will explore more financing tools and maintain our very positive relationship with various financial institutions. So as to continue to secure low-cost financing, we hope that this overall financing costs will continue to come down. Thank you.

[Interpreted] I got one question for our management. This question is coming from Michelle Fang from Citi. Just now, management talking about the Two Wings business enjoy a lower EBITDA margin compared to the traditional One Core business. So with the further increase of the revenue contribution from the Two Wings business, would that affect the overall -- the company's overall EBITDA margin in the future? And when do you expect the EBITDA margin become stabilized in the future?

[Interpreted] So you commented on the decline in our EBITDA margin. There are a few reasons behind that. The main reason is as below. So there are a number of assets which have already reached the end of their use cycle or life cycle. So we have to put in resources and we have to spend money, incur expenses on repair and maintenance and also arrangement of checks and inspections as well. So we incurred additional repair and maintenance costs, which was RMB 1.8 billion more than last year. So all these are to make sure that our assets can be maintained in a usable and good condition. So we incurred expenses in terms of repair and maintenance and also replacement. Concerning our Two Wings business, it is true that the EBITDA margin is lower than that of our TSP business. First of all, our Two Wings business is still in the early development stage, so growth has been very fast. And we are also expanding the scale of the business. So even though the EBITDA margin is now lower than TSP business, our Two Wings business is very conducive to overall improvement and enhancement of our company's overall EBITDA margin and profitability. So it can help our company's profitability, even though in the short term, it has actually pulled down our overall EBITDA margin. For our Two Wings business when it becomes more mature and when we are able to achieve synergy then we believe that the EBITDA margin will stabilize. And we will also continue to do more cost-control work and enhance our operation capability. So we have confidence that in the future, our Two Wings business will also be conducive to our EBITDA margin. Overall speaking, to comment on our EBITDA margin, first of all, as I mentioned just now, the most important factor affecting EBITDA margin now is the repair and maintenance expenses on many of our assets. After maintaining and repairing our assets, making sure that they are in a very good condition, then this part will no longer exert any impact. And then with the maturity and synergy from our Two Wings business, our overall profitability will also improve. So we believe by then, our EBITDA margin will stabilize.

[Interpreted] Okay. There are 2 questions from Jefferies. The first question is about the Energy business. Is there any plan to spin off this Energy business to separate list it? And is there any time line? The second question is about the other gain in 2022. Why the other gain in 2022 increased so much? Could you explain?

[Interpreted] You asked whether or not our Energy business will be spun off for listing. Well, actually, it is true that our Energy business company is being included in the list for state-owned enterprise reform action. And so we are going to optimize our asset allocation and make our business model and operation more market-oriented. In this way, we are able to improve our efficiency and competitiveness, hoping to improve our overall operation and results. It is true that we are now doing and preparing for some reform measures because as we said just now, we are included in the FX overall reform plan [indiscernible]. So we are now working with some intermediary companies in some early-stage preparation work, including financial audits, asset valuation and so on. So we are going to go according to strategy, coordination and optimization goal. And then we will also look at our industrial chain and bring in some working partners that can lead to more synergy with us so as to improve or plug the loopholes and weaknesses of our own operations, then we can become more market-oriented in our operation, we can make use of our very strong innovative capability and also our high efficiency in our operation and also our various competitive advantages. As regards to listing, so far, we do not have any timetable for listing. If we have any further update or if we have the possibility to get into the capital market, then we will do all the preparation work. And we will also share with investors in due course if there is any further update and progress. Thank you.

[Foreign Language]

[Interpreted] You asked about the increase in our other gains last year. Well, this is mainly because of concessions in our tax. And this arises from the state's policy of a progressive reduction of VAT. So last year, because of this very favorable taxation policy, we enjoyed a gain of RMB 949 million. Comparing with the previous year, this is actually RMB 855 million more than the previous year. So that's the reason why there is an increase in other gains. We believe that this very favorable tax policy is going to be tightened this year. So the gain that we are going to benefit or enjoy from it will also decrease. We will keep a close eye on changes and adjustments to this policy. Our overall concept and principle is that we will enjoy as much as we can from this very favorable policy.

[Interpreted] There are 2 questions from Mr. Yu from Guotai Junan. The first question is about the new commercial service agreement. Under the new agreement in 2023, what is your power business guidance in 2023? The second question is about the depreciation. As we know that there are bunch of power assets that will be fully depreciated in 2026 and '27. Is that means by the time the company will have a huge jump of net profit, what is your plan about this huge amount of free cash flow and net profit?

[Interpreted] In the past few years, we have seen an expansion of the scale of 5G development. In terms of 5G coverage, the coverage is being made more -- made deeper and also broader, and network is also being optimized. So as a result, we believe that tower demand is going to be stable. Besides, we also need to take into consideration the demand from new construction, new construction needs in cities and different regions and also new construction needs arising from transport infrastructure and development of new transport routes. So all in all, we believe that market demand for towers is going to be stable. Under the new commercial pricing and service agreement, our capabilities in terms of products and services will improve. And we are -- we will be able to meet the needs of our TSP clients in terms of network optimization and new construction as well. So we are -- we will be able to lower our costs in meeting our TSP customers' needs, and we will continue to innovate our services and products. So we are going to achieve a better interface with TSP service demands. Because of all these points, we believe that in the coming year, the guidance for tower business is going to be a stable growth. For our TSP business, such as now in face of the 5G development trend, we will be able to satisfy customers' demand by expanding scale and also by improving our operation capability. So in terms of guidance, we do see stable growth for our TSP business. In terms of depreciation and amortization, in 2022, the expenses decreased RMB 170 million year-on-year. In the coming 2 to 3 years, because a number of our tower sites will reach the end of the depreciation cycle gradually, so we can anticipate that depreciation expenses will come down. For our future development, there is no need for continuous with investment and input in order to make sure that when some of our assets have reached the end of the depreciation cycle, we're still able to make sure that we can operate our asset in a safe manner. Besides, we do want to improve our quality -- operating quality of our assets. So that's why we want to encourage more sharing of resources and colocation and also refurbishment or alteration of existing assets. And there is also the need for upgrading of some assets as well. So from this part, we do anticipate that depreciation expenses will be incurred for that purpose. So this can offset the reduction in the depreciation expenses for those assets that have reached the end of the depreciation cycle. All in all, because our CapEx is going to remain stable, we believe that in the coming 2 to 3 years, arising from our new construction of equipment and assets, we believe that it is going to be more or less flat. That means that we are going to remain more or less the same as last year or there may even be a slight decline. And then there are some assets that we acquired. These are tower assets that we acquired from the 3 TSPs in 2015. In the last quarter of 2025, they will reach the end of their depreciation cycle. So by then, depreciation expenses will decrease. And the main impact will be in 2025, 2026 and 2027. So in those 3 years, we believe that profit will increase as a result. And then according to our then -- operating condition and results, our actual cash flow level and also our CapEx needs, we will formulate our dividend policy accordingly. We want to make sure that our shareholders can benefit from long-term value creation and value enhancement. Thank you very much. As we are having a communication with global investors, I know that some of you are in early in the day time. Some of you are already in a very, very late time zone. So thank you very much for your support and interest in our company. We will consolidate your questions and pay attention to the direction of your concern. We will continue to strengthen our development by seizing 5G development opportunities and also development opportunities arising from cyberpower digital economy, digital China, dual-carbon development strategy. We will also tighten our work with the deepening coverage of network in agricultural villages. We will help reinforce TSP status and position. And then in terms of our Smart Tower business, we will try our best to turn telecommunication towers into digital towers for our Energy business. For both our power backup and also battery exchange businesses, we're going to accelerate our development. And then we will also capitalize on the new round of commercial service and pricing agreement to improve and enhance our products and services so that we can achieve healthy development of our company overall speaking. There are so many of your questions that are left unanswered. After the meeting, please feel free to contact our company secretary's office and also our IR department. This year, the pandemic impact was not as bad as previous years. So there will be more face-to-face communications opportunity. So let's work together to achieve better development in the future. Thank you.

Okay. Thank you very much for joining us today and your support as always. [Foreign Language].

[Foreign Language]. [Statements in English on this transcript were spoken by an interpreter present on the live call.]