China Unicom (Hong Kong) Limited (762) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon. I'm Shui Ming Chung. Welcome to our annual results announcement. Thank you for your long-term concern and support for China Unicom. On behalf of the management, I would like to welcome all of you to our presentation this evening. There are 2 sessions. First, our Chairman will deliver his speech to be followed by Q&A. Will only respond to content relevant to the presentation. If we are not able to take all your questions, after the meeting we will follow up. We will use Chinese for our exchange, you can listen to our English SI. Please turn your mobile phones off or to vibration mode. We attach great importance to exchanges with our analysts and investors. Allow me to introduce members of the management to you. We have Mr. Zhongyue Chen, Chairman and CEO; Executive Director, Mr. Junzhi Wang; Mr. Baojun Liang, Senior Vice President; Executive Director and CFO, Ms. Yuzhuo Li. Next Mr. Chen, our Chairman and CEO, will take us through the performance highlights.

Dear investors and analysts, ladies and gentlemen, good evening. Welcome to our results announcement. Thank you for your concern and support for China Unicom. In 2023, we have achieved new heights for our operating performance. We have steady growth in revenue, reaching RMB 372.6 million, up by 5%. We have rapidly improving profitability at RMB 22.9 billion, up by 11.5%. We also significantly enhanced investment returns. We have reached a record high in recent years of up to 5.4% ROE. This is because of our focus on setting up a cyber superpower and Digital China, and we have 2 major segments: Connectivity and Communications and Computing and Digital Smart Applications. Now I will talk about the development details for the 2 major segments. For Connectivity and Communications, we are talking about mobile connectivity, broadband connectivity, TV connectivity, leased line connectivity, communication services and info services. Connectivity and Communications segment currently takes up 75% of our revenue. User base already exceeded 1 billion households. For Mobile Connectivity, net increase of users 10.6 million, up 90%. The total number is 330 million households. We continue to optimize the structure. 5G penetration rate up by 12 percentage points, reaching 78%, IoT scale about 500 million, more than 90% are high-speed connections. Broadband business, we rely on the gigabit reputation. The net increase has reached new heights in the past decade, reaching 113 million households with improving structure and the broadband infiltration rate is 76%. Gigabit penetration, 22%, up by 6 percentage points. It also drives development of TV connectivity. IPTV total volume of users already exceeded 47 million, penetration rate reaching 42%. Communications Information Services has been growing rapidly. We perfected the platform plus cloud plus application model. We have innovative products for our users. Revenue scale exceeded RMB 10 billion. Personal Smart Living and Unicom Smart Home have achieved new scales. CDSA include Unicom cloud, DC, system integration, data application, data services and cybersecurity subsegments. In 2023, CDSA has been doing very well, taking up about 1/4 of our revenue, creating more than 50% of newly added revenue. To be more specific, our cloud continues to be very strong. Revenue increased by 41.6%, reaching RMB 51 billion. Because of digitalization among all industries, we serve 21 ministry level projects, 19 provincial government clouds, more than 1,000 medical cloud projects, and we have been speeding up AI layout to construct a 1+N+X AI computing capability system and Yuanjing AI LLM system. We focus on innovation and Data Services continue to take the lead in the market. We obtained certification with a higher score for DCMM5. Our share has been exceeding 50% for many years. We provide comprehensive support to government affairs digital transformation. We cover more than 15 provincial level platforms and more than 100 district and county-level cities. We are thriving in terms of the digital application ecosystem. Revenue up by 17.5%, reach RMB 5.6 billion, and we provide reformed support to various sectors. 5G coverage, more than 71 categories of national economy and 5G private network more than 8,500 households. We also focus on proprietary R&D capability, more than 32 new professional specialized products, self-developed products, contract value exceeded RMB 16 billion. Cybersecurity. Revenue up by 120%. We focus on safety of data information and network. We step up our layout and set up the first megacity Digital Security Operations Center and the first anti-fraud center with enhancing infrastructure capability. We use Mogong platform as the foundation to provide platform plus module plus services packages to more than 10,000 households or clients. International business, also a lot of good news. Revenue reached RMB 10.8 billion, up by 15%. We will focus on infrastructural facilities that is high quality, accessible and reliable. Submarine cable exceeded 660,000 kilometers. Offshore data centers, nearly 10,000, and we provide high-quality services to Belt-and-Road countries, servicing more than 36 organizations around the world in more than 200 countries and areas. And we focus on co-build co-share model. We have rapid development of our network scale, 5G, 4G co-share base stations, more than 3.21 million. Coverage is leading in the world. And our efficiency is very high. Less than 3 years went into constructing this 5G network covering the entire nation. And in terms of innovation, we have overcome many world-class difficulties and issues, obtaining very outstanding performance awards, setting up new benchmark for the entire business. And in terms of savings, we saved RMB 39 billion in OpEx because of co-build and co-share and saving in terms of CapEx is RMB 340 billion already. for 2023 CapEx was RMB 73.9 billion, showing a turning point. We also focus on innovation, focus on core technologies. We have set up 40 international standard projects and 12 national projects, achieving 11 major breakthroughs. We focus a lot on measuring our talents. We have a team of more than 1,000 people who include leading experts and talents and professionals. We also have outstanding ESG performance. We focus on green development so that we can construct a beautiful China. We focus on social responsibility, and we provide a lot of support and reform initiatives to perfect our governance level, enhance our operating efficiency so that we can inform the market of our new value and new developments. In 2023, we are talking about per share dividend, RMB 0.33. We will continue to grow our profit and revenue while maintaining sustainable development. We are dedicated to sharing our long-term dividend with our shareholders. Payout level, 55% is actually historical high. In 2024, we will maintain our strategies to build a strong enterprise. We will build it with technology, talents, reform, digital intelligence and branding work. We will grow in terms of our connectivity, communications development, computing and network integration, development, digital smart application development, international development. We will focus innovation in Big Data and AI, so that we can promote new developments. We will also rely on the foundation of digital new infrastructure, high-quality service and cybersecurity so that we can be a world-class enterprise. For 2024, we are confident that we will maintain stable growth of our revenue and also growth in profit. Because of our investment going into our infrastructure, we're moving away from CNC to the high-growth computing front. The fixed investment plan is RMB 65 billion, which represents a drop of 10% or more since 2023. So the investment will mainly go into the computing front. Thank you very much for your support and concern. We will continuously enhance our core competitiveness so that we can return greater value to our shareholders, clients and the society. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]