CITIC Telecom International Holdings Limited (1883) Earnings Call Transcript & Summary

Investors, good afternoon. Welcome to CITIC Telecom International Holdings Limited 2025 Interim Results Announcement Investor Session. I am [ Karis ]. In today's investor presentation, we are using a hybrid mode. So those investors on the phone, before the start of event, should have received the presentation PPT. If you haven't received it, please contact our team. So the English line is only for listening. [Operator Instructions] So now let me introduce our management. Mr. Luo Xicheng, Chairman; Mr. Wu Jun, Chief Executive Officer; Mr. Luan Zhenjun, Chief Financial Officer; Executive Vice President of the company and Chief Executive Officer of CTM, Mr. Vandy Poon; Vice President of the Company and Chief Executive Officer of CITIC Telecom CPC, Mr. Brook Wong. Now may I ask Chairman Luo to make opening welcome remarks, please.

Investors, friends, good afternoon. Thank you for spending time with us. Thank you for attending CITIC Telecom International Holdings Limited's 2025 Interim Results Announcement Investor Session. In the first half 2025, in face of international economy and industrial technology iteration and various challenges, well, we united our effort, and we seized the opportunity from new round of tech reform and industrial transformation. So concerning cloud network, computing power, AI and other related technologies, we deepened core technology development, and we accelerated our development of new quality productive force so as to promote stable development of our core businesses. In first half 2025, our total revenue was HKD 4.807 billion. Profit attributable to equity holders amounted to HKD 461 million. Basic earnings per share was HKD 0.125 per share. We attach importance to shareholder return. The Board announced to pay interim dividend for 2025 at HKD 0.060 per share, so aligned with first half of 2024. For CTM, well, it digs deep into the Macau market. As of 2025 30th June, CTM in the Macau mobile market has market share being #1 in the market. And 5G subscribers amounted to 800,000. Penetration rate is almost 100%. In first half 2025, CTM incorporated and integrated the 5.5G technology. So for business and government customers, they provided 5.5G private network service. In face of digital intelligence integration trend, we expedited digital transformation and also deployment of emerging businesses. In first half 2025, together with Macau, we introduced -- we took the lead to introduce F5.5G optic broadband Internet service. So we are in the first 10-gigabit neighborhood in Macau, helping to forge the development of smart city. So for broadband penetration or market rate -- market share, Macau is #1 -- we are #1 in Macau. So we expanded our effort to develop overseas business. In first half 2025, our new net nodes in Sichuan. We have new net -- new nodes in Sichuan, and we have built Beijing-Guangzhou hybrid cloud platform. And then also the bandwidth of the backbone network in Vietnam and Indonesia was upgraded. In Southeast Asia, service exceeded 90G. And then in the Philippines, we also signed Internet service agreement with local customers. In Malaysia, we actually worked with local renowned chain stores to collaborate on network collaboration projects. So our overseas layout has been deepened. What is worth mentioning is that in tech innovation area, we have achieved very notable results and rich progress. So for smart tourism projects in 2025, in the world mobile Internet or mobile telecommunication conference, we got the third rate award, so the #3 award. Looking into the future in face of new situations, we will continue to deepen our innovation and transformation. We will expedite digital transformation. We will actively make deployment in strategically emerging industries. We will strengthen organizational process, and we'll bring in digital operation. We'll deepen the use of digital tools. So on an all-round basis, we will promote efficiency enhancement on the front end and back end. At present, the market is very complicated and changes fast. There are both development opportunities and challenges. So in critical areas, we will step up our strategic layout. We will build digital industrial ecosystem. At the same time, we will also enhance international operation level. We will dig deep into the market and seize the business opportunities from the Belt and Road and overseas emerging market, hoping to be the first choice digitalization working partner of various enterprises. Besides, we will enhance our risk management capability. We will strengthen information network, data security work. So given the complex environment, we can still achieve high-quality development targets. So we will adhere firmly to our safety and security bottom line. Now I would like to introduce to you Mr. Wu Jun, our new CEO. He has rich experience in technology, R&D, and he is also very creative and has a team spirit. So he has achieved a lot in the fintech area. The Board has a lot of confidence in him, hoping that he will lead the group to a new chapter. Now I will invite Mr. Luan Zhenjun, CFO, to report to you in greater detail our interim results for 2025. Thank you.

Investors, ladies and gentlemen, good afternoon. I can see some familiar faces, and I indeed feel very excited and emotional. I am happy to take this opportunity to report to you our 2025 first half operations. In the first half 2025, our total revenue was HKD 4.807 billion, down 1.7% year-on-year. Revenue from telecommunications services was HKD 4.072 billion, down 2.1% year-on-year. Profit attributable to equity holders of the company amounted to HKD 461 million, an increase of 1.3% year-on-year. Basic earnings per share increased by HKD 0.002, reaching HKD 0.125 per share. Interim dividend is HKD 0.06 per share, aligned with the first half of last year. As of 30th June this year, our total debt amounted to HKD 3.452 billion. Net debt was HKD 1.738 billion. Net gearing ratio was 14%. So from these numbers, you can see that, at the end of 2024, comparing with the end of 2024, we achieved quite significant decrease. So on this slide, you can see our total revenue and profit attributable to equity shareholders in the past few years. So you can see our numbers from 2021 to 2025. So here, you can see our total revenue during these years. In first half 2024, there was quite a big decline. However, in the first half this year, comparing with first half last year, the decline has narrowed a lot. And if you look at profit attributable to equity shareholders, in first half last year, it's HKD 455 million and this year, HKD 461 million, so there's a slight increase. So on this slide, you can see a number of major indicators: EBITDA, CapEx and liquidity. If you look at EBITDA in 2025 first half, our EBITDA was HKD 961 million. On a year-on-year basis, we are down by HKD 77 million. And if you look at CapEx, in the first half of the year, CapEx was HKD 127 million. Comparing with same period last year, we are down HKD 22 million. For cash in hand and also bank deposits as of 30th of June, we have a balance of HKD 1.714 billion. Comparing with the end of last year, there's an increase by slightly more than HKD 100 million. Total debt as of 31st December last year compared to 31st December last year, there is quite a big decline by HKD 455 million. And then for net debt, we declined further from HKD 2.3 billion at the end of last year to this year at 30th June, HKD 1.738 billion, so we are down by HKD 558 million. And then if you look at net gearing ratio at the end of last year, net gearing ratio was 18%. And on 30th June this year, it's 14%. So we are down by 4 percentage points. Then on this slide, we would like to report to you our basic earnings per share and dividends per share in the past few years. In first half last year, our basic earnings per share was HKD 0.123. This year, in the first half, it's HKD 0.125, so there is a slight increase. And then if you look at dividends per share, comparing with first half last year, we are flat. And then on this slide, it shows our gearing and debt levels in the past few years and the changes in these indicators. In 2020, you can see that our gearing ratio was rather high, 31%. But now our net gearing ratio already declined to 14%. So if you look at total debt, in 2020, it is almost HKD 4.4 billion. Now it's only HKD 1.738 billion, so there is a big decline. And then for interest rates and exchange rate, as of 30th June this year, our total debt amounted to HKD 3.45 billion and most of the debt, almost 90% of the debt are variable debt -- variable rate debt or borrowings. So from the perspective of control of exchange risk, well, our group's business is mainly denominated in Hong Kong dollar, USD and MOP. These are our transaction currencies. As you know, Hong Kong dollar is pegged to the U.S. dollar. MOP is pegged to the Hong Kong dollar. So there is no significant foreign currency risk between Hong Kong dollar, USD and MOP. Besides, we have some -- a small number of transactions denominated in RMB, Singapore dollar and euro. So in this process, basically, we make use of same currency debt and same currency assets to achieve natural hedging. But of course, there is some gap still, so we closely monitor factors that may affect exposure to exchange risk. On this slide, we would like to show our revenue breakdown by business sector. At present, our businesses can be divided into these 6 categories. If you look at mobile services in the first half, revenue was HKD 548 million, up 7.5% year-on-year. And then the second category is Internet services. In the first half, revenue was HKD 754 million, up 2.3% year-on-year. International telecommunication services in the first half, revenue was HKD 1.343 billion, up 8.6% year-on-year. And then for sales of mobile handsets in the first half of the year, revenue was HKD 735 million, up almost 1%. Then enterprise solutions revenue in the first half amounted to HKD 1.364 billion. It came down quite a lot by 15.2%. And then for fixed line services, in the first half, revenue was HKD 63 million, down 7.4% year-on-year. Then if you look at our various business segments, for mobile services, we achieved our 5G coverage targets, and we accelerated deployment of 5.5G and cross-border IPX services. In starting 5.5G application services, CTM secured a 5.5G private network service project from the Macau Printing Bureau and launched inbound 5G SA roaming services, further enhancing its brand influence in the 5G roaming market. In June 2025, we successfully completed the 3G network retirement. And as of the end of June, CTM has over 800,000 5G users registered in Macau. We know that in Macau population is rather small, and there are only a population of 400,000-odd permanent residents. There are some outside laborers. And so if you look at mobile user penetration rate, it's close to 100%. We strengthened strategic partnerships and expanded cross-border IPX landscape in the first half of the year. And then we accelerated the transition from 4G to 5G roaming with existing strategic partners to expand the international IPX roaming market. We enhanced partnerships with China's 3 major telecommunications operators to continuously deliver a one-stop cross-border network coverage service. Now in terms of Internet services, from 10-gigabit city to cross-border connectivity, we built comprehensive digital infrastructure. We entered the F5.5G era and created a dual 5.5G 10-gigabit digital infrastructure. CTM took the lead in launching 5.5G optical broadband Internet service, successfully completed 50G PON deployment and continued building new high-speed networks, including 5.5G, 50G PON, Wi-Fi 7 and FTTR, laying a dual 5.5G 10-gigabit digital infrastructure for Macau. As at the end of June 2025, our broadband business in Macau continued to maintain a leading market share with nearly half of the users having upgraded to high-speed service plans of 1 Gbps or above. And then in launching 10 Gbps Internet services and expanding enterprise service market, we launched 10 Gbps Internet services in Hong Kong and facilitated the implementation of Internet projects. We actively developed the enterprise service market and assisted a new partner in implementing its first Internet service contract in Chinese Mainland. And then regarding international telecommunications services, we promoted technological upgrades and market coverage for DataMall. We unlocked new growth for DataMall and consolidated competitive advantage. So we enhanced DataMall platform with global eSIM integration and expanded 5G coverage to boost cross-border service differentiation. And we leveraged strategies through tourism data analytics and ramped up roaming package promotions. We launched dedicated IoT eSIM platform to support growth in the IoT and IoV sectors. We're committed to service excellence and continuous competitiveness enhancement. We maintained a stable customer base and high-quality international voice services by understanding customer needs and enhancing market competitiveness. Then regarding enterprise solutions, we enhanced enterprise solutions business competitiveness through integrated cloud network security, AI and platform-based strategies. We enhanced global PoPs construction for efficient cross-border connectivity. We built new trusted and innovative hybrid cloud platforms in Beijing and Guangzhou. We added a new network PoP in Yibin, Sichuan and completed backbone network bandwidth upgrades in Vietnam and Indonesia. And then we constructed an integrated cloud network security defense system. We developed a proprietary security information and event management platform, baseline inspection tools, AI data bank and workflow plus services. Our security operations center service was recognized among the top 3 in the Hong Kong market by IT PRO Corporate SOC Survey. On implementing multiple AI and IT service projects, we promoted the integration of AI and data to empower Macau's industrial upgrade, providing AI customer service and big data solutions to multiple departments of the Macau government. We deployed the ServiceONE customer service platform for Singapore University of Social Sciences' IT managed services, supporting over 90 institutions, serving more than 30,000 end users. And then on fixed line services, because residential and business network lines decreased, in the first half 2025, fixed line service revenue dropped to HKD 63 million in the first half of 2025 due to decrease in fixed residential and business lines. During first half of 2025, the group was granted 8 newly authorized patents and 1 software copyright because we are building an AI-powered ecosystem to maximize technology value. As at 30th June 2025, there are a total of 29 authorized patents and 64 software copyrights have been obtained. We undertook to build the CITIC Hong Kong AI Tech Innovation Center. We launched 2 new products, AI Databank and Workflow+, to assist customers in their endeavors to automate business processes and add value to data elements. We further enhanced the group's Dr. Easy Smart Healthcare Platform tailored for application scenarios in the Macau's medical sector, introducing smart medical services, including online AI advice to support medical institutions to improve operational efficiency. So we offer one-stop smart medical experience. On innovative AI industry solutions, CTM promoted the integration of AI large models, cloud, network, computing power and security, launching AI industry solutions for key sectors such as public administration, tourism, education and health care. On AI+ Cloud, Network, Security products upgrade were powered by large language models. The SmartCLOUD AI Assistant adopted a natural language Q&A interface, improving the customer service experience. On AI-driven internal operations for quality and efficiency, we introduced with deepened application of digital and intelligent tools such as big data and AI to improve the effectiveness of channel and staff resource deployment. In the first half 2025, growth was driven through innovation, and we won a number of global awards with our multiple technologies. For example, we won the third prize in the Open Gateway Global Use Case Innovation Challenge. And then, CTM also got BEYOND EXPO multiple awards. CPC's AI innovative product won Silver Medal at the 50th International Exhibition of Inventions Geneva. CPC won multiple global awards for its information security solutions. In the first half 2025, we're committed to discharging corporate social responsibility. In terms of ESG ratings, we received A rating in ESG assessments by both WIND and Sino Securities Index. Besides, we got the Privacy-Friendly Award, Gold Award from the Office of the Privacy Commissioner For Personal Data in Hong Kong. And Hong Kong ICAC presented to us the Integrity in Business Charter. Employees retraining Board honored us with ERB Talent Enterprise Recognition Scheme, Talent Enterprise. CTM organized the 12th CTM Youth Growth Program and offered dedicated scholarships to 5 universities in Macau. So that's all in my presentation. Thank you all.

Thank you, management, for your sharing. Now it is Q&A session. We will first invite questions from on-site investors. [Operator Instructions] Now after on-site investors ask questions, we will give the floor to online investors. So now let's take the first question.

I have a few questions. In the first half, the macro environment was very volatile. What measures have you taken to face up to the challenges? Besides, in the future, where do you think opportunities lie? In terms of strategies, which major projects or development segments will you focus more on?

Thank you. Thank you for your questions. I will ask Mr. Wu to take your questions.

Okay. In the first half, our overall operations and results were rather stable. If we look internally, revenue declined in 2 directions: enterprise solutions and also fixed line business. Now I think it is the same with your feelings. The economic environment is complex and volatile. So enterprise solution business decline is just natural and forgettable. And then for fixed line business, I think you at home seldom use fixed line already, so this is a mainstream trend globally. But how could we still maintain operational stability? I think the management and our overall team put an effort in 4 areas. First, regarding traditional businesses, we enhanced our service quality to make sure that the related businesses can maintain steady development. If we use mobile telecom as an example, in the first half of the year, we achieved some growth in Macau. We continue to be #1 in market share. For 5G users, there are already 800,000, so for customer coverage in Macau, we are almost 100%. So if we do not offer good service quality, it is difficult to achieve this result. Besides, I think that in terms of advanced equipment manufacturers and also mobile operators internationally, we enhanced our collaboration with them. And gradually, we have signed a number of strategic cooperation agreements. In terms of broadband Internet service in -- with the effort of CTM, in the market, we are the first to introduce the F5.5G optic broadband Internet service, so 50 GPON 5.5G and Wi-Fi 7 technologies. We're the first to get into or introduce the 10-gigabit neighborhood. This is leading in the industry. In terms of operators, recently, we worked with a renowned operator in Malaysia, and we formed the exclusive -- globally exclusive short messaging service or agency service. So I think this can give good guarantee for growth of our traditional businesses. The third point is the use of new technologies. Now just now, I think you have heard a lot from Mr. Luan's presentation in relation to innovative businesses driven by AI. So we have a new strategy, and that is we use AI to power our cloud computing, network, telecommunications, information security development. So we introduced a number of products. They are not only limited to traditional services. For traditional business, we have SmartCLOUD AI Q&A Assistant, and we have also Databank, Workflow+ and so on. Just now, Mr. Luan talked about innovative applications. For example, in Macau, we launched Dr. Easy. So I won't repeat the points. Anyway, in terms of use of new technologies, we are actually increasing our efforts. The fourth point is about refined management. In Mr. Luan's presentation, he mentioned that, in the first half, by means of refined management and adjustment of our debt structure, our debt cost or financing cost has come down significantly. So with this effort, in the first half of the year, we achieved a steady results and performance. Now for the future, I believe that there are 2 opportunities for our development. One is technology-driven development. As we all know, AI is developing very rapidly. So for ICT industry, there will be a big change that will come because of AI. This is a big challenge as well as an opportunity besides demand-driven business. So this is related to the technology drive. Right now, we can feel that when AI develops in terms of computing power, network, information security, customers have more and more demands and needs. And if you look at our group's strategies, we'll continue to increase our R&D input in these areas. With AI empowerment, we hope that we will be a top-rate technology leading enterprise in the industry. As Mr. Luan said, in Hong Kong, we have taken the -- we have built the CITIC Group AI Innovation Center. With that innovation center, we will make use of the natural advantages of Hong Kong, and we will work with renowned educational institutions in Hong Kong. So we will identify more innovation opportunities in AI. So that is from the perspective of business development. There is another opportunity in the market. All along, our group is backed by the Mainland, and we are rooted in Hong Kong and Macau, and we are facing the world. In Mainland China, it is a huge market. There are still a lot of opportunities that are yet to develop -- yet to be developed. So we will increase our effort to develop the Mainland market. Besides in Hong Kong and Macau, we would expand our service scope. In Mr. Luan's presentation, he also said that for Digital Macau, actually, CTM has done a lot of development work, and this is going to be a new development direction in the future. For international markets, we need to enhance our competitiveness of enterprise Internet business. So in -- all over the world, we will actually enhance our development capabilities and network hub to improve our market competitiveness. Southeast Asia is going to be a region with bigger growth potential, so it is going to be our focus for development. So all in all, in the future, there are both opportunities and challenges. I have confidence to work with the management team in new business development. Besides, we will achieve better results in reinforcing traditional businesses as well. Thank you.

Next question. Any other questions, please? If there is no further question on site, let's see whether there are questions on the phone. [Operator Instructions]

[Operator Instructions] So here, we have a question.

My question is in the first half of the year regarding CapEx, comparing with same period last year, there was a slight decrease. So I want to ask the management. For the whole year, how much will be CapEx? And which will be the areas of main CapEx spending? And then in the coming period, what will be the trend of CapEx, please?

Thank you for your question. I will ask Mr. Luan to take the question.

Okay. Thank you for your question. In my presentation slides, we have disclosed the relevant numbers. In the first half 2025, our CapEx was HKD 127 million. And comparing with same period last year, we are down by HKD 22 million. So in terms of the ratio, it is more or less the same numbers. In the first half of the year, our CapEx was mainly spent in the following areas: first, 5G investment -- 5G project investments; building of the group's data center and also upgrading of network system. So these are the key areas. If you talk about traditional telecom industry, you may have realized that every year, our CapEx is spent on these areas. But sometimes, when we have to build new data centers or when we need to invest into 5G, then the number will increase. For building of data centers, after the building of data centers or 5G network is built, then the number will decrease about traditional businesses. So when there are projects, it will rise. When there is no project, then it will remain rather steady and stable. Looking into the future, in our Chairman's speech as well as in the answer given just now, I think some relevant points are made. In our Chairman's remarks, he said that, in the future, we will strengthen our deployment, strategic deployment in critical areas. We will develop overseas emerging markets, and we'll do more in AI technology R&D. We'll invest more into that. So it is another area on top of the original areas of CapEx. So from this perspective, in the future, our CapEx, apart from building of 5G network and data centers and also data maintenance, apart from these original areas, there will be also AI investment. So we are doing more studies to examine that.

Let's take the next question. [ Yu Yiting ], please.