China Mobile Ltd
SSE:600941
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China Mobile Ltd
Earnings Call Analysis
Q2-2024 Analysis
China Mobile Ltd
In the first half of 2024, China Mobile Ltd reported solid financial results, with operating revenue of CNY 546.7 billion, representing a 3% increase year-over-year. This growth comes despite facing a challenging external environment, showing the company's resilience and ability to capture new market opportunities. Net profit increased by 5.3% to CNY 80.2 billion, reflecting a robust performance and profitability within the telecommunications sector.
The company is actively transforming its operational model to align with changing market demands. Notably, revenue from digital transformation initiatives reached CNY 147.1 billion, up 11% from the previous year, now accounting for 31.7% of total service revenue. This strategic shift emphasizes China Mobile's commitment to enhancing its service offerings and improving revenue structure, which is projected to continue to evolve as traditional revenue streams decline.
China Mobile has successfully maintained cost efficiency, with network operation expenses decreasing 0.6% to CNY 142.7 billion. Depreciation and amortization costs were down by 6.4% due to the extended useful lives of 5G equipment. This attentiveness to operational expenses has contributed to sustaining profitability while investing adequately in growth areas.
The company's commitment to 5G expansion is evident, with a penetration rate reaching 51.4%, an increase of 11.5 percentage points year-over-year. Additionally, wireline broadband revenue increased by 8.4%, underlining a shift towards more modern and profitable services. China Mobile also saw a 7.5% rise in its home market revenue, bringing in CNY 69.8 billion, securing its industry leadership with over 272 million broadband customers.
Despite challenges, China Mobile has not held back on capital investment, spending CNY 64 billion in the first half of 2024, supporting the dual gigabit network and smart digital infrastructure enhancements. This investment is influential as the company prepares for future growth trajectories within the evolving technology landscape.
Looking ahead, China Mobile aims for stable revenue growth and profit improvements, continuing to lay the groundwork for strong performance in the coming years. The company's full-year capital expenditure guidance is set at CNY 173 billion, with plans to keep the CapEx-to-revenue ratio below 20%. Coupled with an interim dividend increase of 7% year-over-year to HKD 2.6 per share, shareholder returns remain a priority amidst ongoing corporate growth strategies.
The company's strategy is poised towards embracing AI and cloud capabilities, expanding digital offerings across various sectors. By leveraging digital transformation and 5G advancements, China Mobile is positioned not just as a telecommunications provider but as a pioneer in integrating cutting-edge technologies that cater to a modern economy, creating a future ecosystem that is rich in potential revenue streams.
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Good evening, ladies and gentlemen. Welcome to China Mobile Limited's 2024 Interim Results Presentation. In today's presentation, I will first brief you on our overall results for the first half of 2024. Then Mr. He Biao, our CEO, will talk about our operating performance. Finally, Mr. Li Ronghua, our CFO, will walk you through our financial results.
We achieved the following favorable results for the first half of 2024. First, we achieved new milestones in high-quality development. Second, we further advanced strategic transformation with remarkable results. Third, we accelerated the upgrade of the Two New Elements. Fourth, we obtained growing momentum of technological innovation. Fifth, we effectively unlocked benefits from enterprise reform and innovation. Sixth, we persistently enhanced cash returns of shareholders. Seventh, we accelerated the building of a world-class enterprise.
By way of reference, we have provided results of key performance indicators for the first half of 2024 in this table. In the first half of 2024, despite various challenges with a complex external environment, we worked closely together and forged ahead with determination as a strong team to seize the important opportunities brought by developing new quality productive forces to the information services industry. We relentlessly pursued the 1-2-2-5 strategy. Our business operations and development maintained stable progress with an upward momentum, and our efficiency and effectiveness saw ongoing growth.
We have marked new milestones on our journey to high-quality development. Operating revenue was CNY 546.7 billion, an increase of 3% year-on-year. Net profit reached CNY 80.2 billion, a year-on-year increase of 5.3%. Net profit as a percentage of services revenue remained high and continued to increase. We realized value highly effectively, taking up a leading position amongst global operators in terms of total market capitalization. Our brand has also secured a prominent position in the brand value ranking issued by an international authoritative institution.
We have advanced strategic transformation with remarkable results, and we have further optimized our revenue structure. HBN revenue as a percentage of services revenue reached 45%, an increase of 2.3 percentage points year-on-year. Digital transformation revenue reached CNY 147.1 billion, a year-on-year increase of 11%. It accounted for 31.7% of services revenue and represented an increase of 2.4 percentage points year-on-year. Digitalization revenues from our customer, home, business and new markets grew across the board.
We accelerated the upgrade of the Two New Elements. We spent an overall CapEx of CNY 64 billion in the first half of the 2024 and continuously optimized our smart digitalization infrastructure. We maintained a leading position in a dual gigabit network. Accumulatively, there were over 2.29 million 5G base stations put into use. At present, we have promoted 5G a commercial deployment in over 280 cities with gigabit broadband covering 438 million households.
We continue to lead the development of computility network. General computility reached 8.2 EFLOPS and intelligent computility reached 19.6 EFLOPS. We continue to optimize our N+X multilayer and full coverage deployment of intelligent computility capability. The first batch of 13 intelligent computing center nodes in regions such as Beijing, Tianjin, Hebei, Yangtze River Delta, Guangdong, Hong Kong, Macau, Greater Bay Area, Chengdu, Chongqing have been put into operation.
We expanded the applications of the integration platform. The capabilities on our integration platform were accumulatively deployed 319.7 billion times for the first half of 2024. We have also implemented DSSN in 6 provinces and across 8 industries. We will continue to strengthen targeted investment and meticulous management. Full year CapEx will be controlled within the CNY 173 billion guidance set at the beginning of the year with CapEx-to-revenue ratio decreasing to below 20%.
We continue to optimize our smart info-service spectrum. Connection scale reached a record high. Total connections surpassed 3.5 billion with a net addition of 150 million. The number of mobile customers exceeded 1 billion. Product expansion showed robust momentum. In the mass market, 17 of our products each had a user base of over 100 million. In the business market, the revenue from 6 products each exceeded CNY 10 billion.
In the computility network business, we have developed over 70 intelligent computility projects with a cumulative contract value surpassing 2 billion. In the big data business, we leveraged Wutong Big Data platform to accumulate more than 2,000 PB of data resources, achieving a total of 100 billion times of data deployment throughout the year.
In the visual Internet business, we have accumulated 70.3 million video cloud connections. We maintained industry-leading service quality. We continue to enjoy an ongoing advantage in customer perception and significantly enhanced network quality and touch point service efficiency. We fully promoted the basic 6 initiatives and continuously achieved fruitful innovation results. We remain to be a first-tier global operator in terms of 5G-A standard setting contributions.
We successfully developed the “4-in-1 Brain of Computility Network, and the Yangtze River Delta Hub Wuhu Cluster Computility Public Service Platform was launched as a national level hub node for the first time. We launched the Jiutian 100 billion-parameter multimodal large model, and we were the first SOE to have obtained double filings from the Chinese government.
We achieved remarkable results in technological innovation. The 5G Key Technologies and Engineering Applications project that we led has won the first-class award of the State Scientific and Technological Progress Award. China Mobile was also named as the #1 enterprise on the inaugural list of 2023 outstanding enterprises leading in science and technology innovation released by the SASAC of the State Council.
We seized opportunities timely and firmly. We implemented the AI+ initiative and achieved breakthroughs. We released the Jiutian artificial intelligence foundation comprising 10,000-card intelligent computing clusters, 100 billion-parameter multimodal large models and an eco-platform that brings together hundreds of major elements. We accumulated 450 AI capabilities and empowered nearly 1,000 applications. We expedited industrial and scaled development of large models, opening large model training bases, evaluation bases and industrial innovation bases to provide one-stop industry integration and facilitating services such as model training and inference and AI+ native application incubation to society.
We accelerated the commercial monetization of AI capabilities. We have launched 23 AI+ products and 20 AI+ DICT industry applications. We have deployed high-performance industry-specific large models in 40 subsectors. In the first half of 2024, we have released 17 self-developed Jiutian industry-specific large models, implementing the applications of large-scale models across multiple industries such as public administration, IoT-enabled irrigation and social general administration and governance.
We continue to deepen reforms and improve management quality and fully stimulated growth momentum. We continue to implement enterprise reforms in greater depth and breadth. The system of Boards of Directors of our subsidiaries has become more robust, and we continue to enhance our diverse and structured talent pool. We generated notable results in frontline reforms. We developed 15 technological research special zones and further advanced the national technology company development program and the Double-hundred Action.
We continue to strengthen management using scientific approaches. We further refined the collaboration mechanism between headquarters, regional companies and specialized teams to continuously improve the lean management capabilities. Our digital intelligent ecosystem grew and thrived. Our circles of relatives and friends continue to expand through strategic capital, innovative and ecological partnerships. Our overall ESG performance is widely recognized. We have been rated as the highest 5-star excellence in the 2024 China ESG Listed Companies Pioneer 100 list.
To create higher returns for our shareholders and share the results of our growth after giving full consideration to the company's profitability, cash flow generation and future development needs, the company has decided to pay HKD 2.6 per share for the 2024 interim dividend, representing an increase of 7% year-on-year. For the full year of 2024, profit to be distributed in cash as a percentage of the profit attributable to equity shareholders of the company will further increase from that of 2023.
The company will continue to create more value for shareholders. The evolving external environment has introduced growing adverse impacts, while effective demand has persistently remained inadequate. Our business transformation is clouded by the transitional phase between old and new growth drivers, introducing an element of uncertainty.
Meanwhile, the macroeconomic outlook continues to improve. The development of new quality productive forces has brought new growth opportunities, and a new digital intelligent era characterized by the deep integration of information and energy is arriving at an accelerating pace. Data, computility and AI have become the new engine for technological innovations. Information technology and its deep integration with the real and financial economies have given rise to emerging industries.
Internet+, 5G+ and AI+ have identified a new pathway for information technology to be integrated into all aspects of the economy, society and everyday life, which will profoundly revolutionize the way people work and live as well as upending the model of social governance, presenting unprecedented opportunities for the information and communications sector. Promoting economic and social transformation from “+AI towards AI+, this phenomenon has opened up a vast blue ocean of opportunities. Faced with the new business landscape and opportunities, we will fully implement the 1-2-2-5 strategy, further deepening reforms to bolster our organic growth momentum, innovative vitality and development potential.
We will also strive to promote the upgrades of Two New Elements, redouble efforts to carry out the AI+ and BASIC6 initiatives. By doing so, we will develop new quality productive forces at an accelerated pace, promote digital intelligent transformation and high-quality growth. As we establish ourselves as a world-class information services and sci-tech innovation enterprise, we will consistently create greater value for our shareholders and customers.
That's the end of my presentation. Next, Mr. He Biao will walk you through our operational performance.
Thank you, Chairman Yang. I will now present our operating situation for the first half of 2024. The table displays the composition of CHBN revenues of the company for your reference. For customer market, we have redoubled efforts to expand the scale of our 5G business. We have refined our customer acquisition strategy based on segments and use scenarios and promoted innovative, diversified and integrated business operation.
The customer market maintained stable performance. Mobile customers exceeded 1 billion. Mobile ARPU amounted to CNY 51, leading the industry. 5G network customer penetration rate reached 51.4%, an increase of 11.5 percentage points year-on-year. M-zone Mango Card products achieved a cumulative sales volume of 21.55 million. Revenue from personal China Mobile Cloud Drive reached CNY 4.8 billion, an increase of 47.7% year-on-year. Revenue from benefit products reached CNY 14 billion, an increase of 37.2% year-on-year.
For home market, we strengthened our brand-first approach on China Mobile Aijia and proactively developed new growth drivers. The home market recorded favorable growth. Revenue from the home market reached CNY 69.8 billion, an increase of 7.5% year-on-year. The number of household broadband customers reached 272 million or a net increase of 8.48 million customers, maintaining our industry leadership. Household customer blended ARPU reached CNY 43.4.
The number of gigabit broadband customers increased by 51.2% year-on-year, and that of FTTR, customers has increased by 296.4% year-on-year. Mobile HD customers reached 208 million. HDICT solutions attracted 35.52 million customers, an increase of 70.1% year-on-year.
For business market, we relentlessly expanded China Mobile cloud market, further promoted 5G industry applications and continuously tapped into new markets. We maintained favorable growth in this sector. Business market revenue reached CNY 112 billion, up by 7.3% year-on-year.
Our share of contracts won in open tenders amounted to an industry-leading 18.4%. Revenue from China Mobile Cloud reached CNY 50.4 billion, up by 19.3% year-on-year. Accumulatively, we have signed more than 40,000 agreements for 5G industry commercial projects. Our 5G-dedicated network has generated revenue of CNY 3.9 billion, an increase of 53.7% year-on-year.
IoV factory-installed connections recorded a net increase of 7.29 million. Accumulatively, the contract value for digital government projects exceeded CNY 12.6 billion.
For new market, we optimized layout of our international business, enriched our supply of digital content, strengthened fintech innovation and increased industry investment synergy and collaboration. Our new business witnessed rapid growth. Revenue from our new market reached CNY 26.6 billion in the first half of 2024, an increase of 13.2% year-on-year. Revenues from international business and digital content business amounted to CNY 11.8 billion and CNY 14.5 billion, respectively, both realizing double-digit growth.
The scale of our industrial chain finance business reached CNY 37.9 billion, an increase of 72.1% year-on-year. Investment gains from our equity investment amounted to CNY 6.15 billion, an increase of 24.2% year-on-year.
We accelerated our business transformation towards AI+, adhering to the principle of serving the company's transformation and empowering the economy and society, and our digital intelligent empowerment has delivered initial results. Internally, we have promoted the continuous improvement of digital intelligent operation. Online customer acquisition rate increased by 2.9 percentage points year-on-year. Network-related costs per CNY 100 of fixed assets have decreased by 3.5% year-on-year. The number of onboard digital employees has reached 55,000, reducing the workload by 1.54 million man-days cumulatively.
Externally, we have provided high-quality intelligent business applications to meet the needs of digital and intelligent transformation in production, life and governance. In the mass market, we focused on building an AI+ platform+ connection+ application product system and carried out comprehensive AI+ upgrades. In the first half of 2024, the total number of AI-powered product customers has reached 110 million.
In the business market, we focused on building an AI+ platform + DICT product system, launching 20 industry applications, and we won the bid for an AI project of a large state-owned enterprise, achieving a major breakthrough. In the second half of the year, we will firmly adhere to a strategy that focuses on maintaining stable growth, strengthening business momentum and cultivating strategic advantages, meticulously advancing all areas of work.
Building on the results of the first half of the year, we will strive to achieve a stable increase in revenue growth rate and favorable growth in profit. Our full year targets are detailed here for your reference.
Next, please welcome Mr. Li Ronghua to present our financial performance.
Thank you, Mr. He Biao. Now I would like to present our 2024 interim financial results to you. In the first half of 2024, our business development has been steady and progressive with improved quality and efficiency. Revenue has achieved steady growth, and profit has achieved good growth. Operating revenue reached CNY 546.7 billion, a year-on-year increase of 3%, of which telecommunication services revenue were CNY 463.6 billion, up by 2.5%. And revenue from sales of products and others reached CNY 83.2 billion, up by 6% year-on-year.
While we continue to strengthen cost management, we have appropriately increased our investment to promote transformational development, resulting in a 2.3% year-on-year increase in operating expenses. Affected by market interest rate fluctuations, interest and other income decreased by 2.2% year-on-year. Benefiting from the improved efficiency of the invested companies, income from investments accounted for using the equity method increased by 24.2% year-on-year. As a result, our net profit increased by 5.3% year-on-year to CNY 80.2 billion.
Our profitability continued to stay at a leading level amongst top-tier global telecommunications operators. In terms of breakdown of revenue growth by business, wireline broadband, applications and information services shown a consistent increase in revenue contribution, while the percentage from traditional business has slightly decreased, indicating a steady progression in the transition from old to new drivers, of which the revenue from wireline broadband increased by 8.4% year-on-year, and the revenue from applications and information services increased by 10.9% year-on-year. Going forward, we will further deepen the digital intelligence transformation and promote the continuous optimization of revenue structure.
The company continued to enhance quality and efficiency and strengthen lean management, achieving favorable results in cost control. Network operation and support expenses amounted to CNY 142.7 billion, a decrease of 0.6%, which was mainly due to ongoing investments related to digital transformation, together with steps taken to strengthen classification management, reduce costs using technology and make improvements by benchmarking.
Depreciation and amortization decreased by 6.4% to CNY 96.5 billion, mainly attributable to the impact of adjustments to depreciable lives of 5G wireless and related transmission equipment. Employee benefit and related expenses were CNY 75.1 billion, up 6.6%, which was mainly due to the in-depth implementation of the sci-tech and innovation-driven strategy and ongoing efforts to increase incentives for scientific and technological personnel. Selling expenses increased by 8.9% to CNY 29.2 billion. It was mainly due to redoubled sales and marketing efforts on channel operations and customer services, et cetera. Other operating expenses were CNY 36 billion, up by 23.6%, which was mainly due to the increase in expenses for settlement of international business and others.
Our profitability continued to improve with net profit of CNY 80.2 billion, up 5.3% year-on-year. Basic earnings per share amounted to CNY 3.75, and annualized return on equity reached 11.8%, up 0.3 percentage points year-on-year.
The company continued to record healthy cash flow with net cash generated from operating activities of CNY 131.4 billion, free cash flow of CNY 67.4 billion, and cash and bank deposits of CNY 248.4 billion.
Our capital structure maintained stable and healthy with corporate credit ratings equivalent to China sovereign ratings. In the second half of the year, the company will focus on strengthening quality improvement and efficiency enhancement, lean management and risk prevention and control in order to complete the annual business objectives.
This is the end of our presentation and analysis on our 2024 interim results. Thank you.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]