Q.1. How was the Company's operating performance in the first half of 2024?
In the first half of 2024, the Company's operating revenues amounted to RMB268.0 billion, representing an increase of 2.8% year-on-year. Of which, service revenues amounted to RMB246.2 billion, representing an increase of 4.3% year-on-year, remaining above the industry's growth rate. EBITDA amounted to RMB76.8 billion, representing an increase of 4.7% year-on-year. Net profit amounted to RMB21.8 billion, representing an increase of 8.2% year-on-year. The basic earnings per share were RMB0.24. Free cash flow reached RMB15.5 billion.
Q.2. How was the Company's mobile service performance and 5G commercialisation?
For individual customers, the Company further promoted the innovation of 5G applications and personal terminals. In terms of applications, the Company accelerated the AI upgrade of applications such as Communications Assistant, Colour Ringback Tone with Video and China Telecom Cloud Drive. The Company also stepped up the scale expansion of differentiated businesses such as Quantum-encrypted Calls and Messages and Mobile Phones with Direct Satellites Connection, and rolled out the world's first Cars with Direct Satellites Connection service. In terms of handsets, the Company launched the first AI phone that is customised by an operator and embedded with proprietary large models to fulfil individual customers' demands for intelligent and convenient communications services.
In the first half of the year, the Company's mobile communications service revenues amounted to RMB105.2 billion, representing an increase of 3.6% year-on-year. Of which, revenues from mobile value-added and applications amounted to RMB18.1 billion, representing an increase of 17.1% year-on-year. The net addition of mobile subscribers was 9.08 million, bringing the total number of subscribers to 417 million. Mobile ARPU reached RMB46.3.
Q.3. How was the Company's 5G network deployment and result of co-building and co-sharing with China Unicom?
The Company further deepened co-building and co-sharing with China Unicom to build a high-quality network with high-/mid-/low-band coordination as well as 5G/4G integration. The newly added co-built and co-shared 5G mid-/high-band base stations exceeded 100,000, with the total number of 5G base stations exceeding 1.31 million. The Company steadily pushed forward with one single 4G network, with the number of 4G mid-band base stations exceeding 2 million. The Company coordinated the promotion of co-sharing 800MHz/900MHz low-band as well as 700MHz inter-network roaming, with the number of low-band base stations reaching 790,000. The 5G network achieved contiguous coverage in areas of townships and above across the country, while the in-depth coverage rate of key areas and key scenes increased by 7.4%. The 5G accessibility rate of administrative villages across the country increased by 25%. Coverage and perceived speed of mobile network steadily increased. The Company continued to strengthen the strategic deployment of 5G-A, promoted the upgrade of 5G-A capabilities on all fronts and jointly completed the large-scale deployment of Redcap and carrier aggregation in more than 100 cities.
Q.4. How was the Company's wireline and Smart Family service performance?
For household customers, the Company further advanced FTTR upgrades and the expansion of Gigabit broadband applications. The Company continuously promoted the AI upgrades of devices such as cloud computer and home monitor in cloud and further strengthened the AI upgrades as well as integration and mutual promotion of platforms such as Smart Family, Smart Community, Digital Village and Internet of Video Things (IoVT). The Company further enriched family applications and continued to enhance service capabilities. The Company created the living and service circles for communities/villages, to fulfil household customers' scene-based demands for "safe home, low-carbon home and intelligent home".
In the first half of 2024, wireline and Smart Family service revenues amounted to RMB64.0 billion, representing an increase of 3.2% year-on-year. Of which, revenue from Smart Family business reached RMB10.7 billion, representing an increase of 14.4% year-on-year. The number of broadband subscribers reached 193 million with a net addition of 3.19 million. Broadband blended ARPU reached RMB48.3.
Q.5. How was the Company's Industrial Digitalisation performance?
For government and enterprise customers, the Company fulfilled the demands for digitalisation from thousands of industries leveraging "network + cloud + AI + applications" and promoted in-depth integration between digital economy and real economy. The Company pushed forward the upgrade of the 5G NICES Pro+ integrated product portfolio. Through 5G definitive network and proprietary industrial PON, network construction and operating costs were significantly reduced for customers from the new industrialisation sector.
In the first half of 2024, revenues from Industrial Digitalisation amounted to RMB73.7 billion, representing a year-on-year growth of 7.2%, accounting for 30.0% of service revenues, up by 0.8 p.p. year-on-year.
Q.6. How was the Company's China Telecom Cloud performance?
The Company fully upgraded China Telecom Cloud products and ecological matrix, with China Telecom Cloud entering into the new development stage of intelligent cloud. In the first half of 2024, revenue from China Telecom Cloud amounted to RMB55.2 billion, representing an increase of 20.4% year-on-year.
Q.7. How was the Company's AI development?
Grasping the development direction of AI, the Company deeply implemented "AI+" and completed the overall AI deployment of "1+1+1+M+N" (1 foundation for intelligent computing cloud, 1 foundation for the general-purpose large models, 1 data foundation, "M" refers to the number of large models for own use, and "N" refers to the number of large vertical models) with "Xingchen" as the brand. The Company strengthened the integration and mutual promotion of capabilities in various fields, continuously enriched the Xingchen large model series product portfolio, empowered the intelligent transformation for thousands of industries, and supported enterprises to achieve costs reduction and efficiency enhancement. In terms of the intelligent computing cloud foundation, the Company established the leading integrated intelligent computing service capabilities, "Xirang", to offer supreme computing power scheduling services, highly efficient integrated computing acceleration services and inclusive one-stop intelligent computing services, as well as a thriving model application ecosystem. The Company pushed forward the deployment of proprietary intelligent computing power with a hierarchical approach. "Xirang" has the access of a total of 22 EFLOPS of various types of intelligent computing power from 39 partners. In terms of the foundation for the general-purpose large models, the Company further enhanced the capabilities of large foundation models. The large language model, large speech model and large multimodal model of Xingchen series have all completed "dual recordation" of algorithms and services. Of which, Xingchen large speech model was the first large speech model that is independently recorded in China. The Company also released China's first AI development tool "Xingchen • Software factory" that can generate code with one click and autonomously test and correct errors. The Company proactively promoted the advancement of large model technologies through open source, and took the lead among state-owned central enterprises to achieve open source for large language models at various grades with billions, tens of billions, and trillions of parameters. The Company has launched 32 large vertical models in fields such as industrial, education, healthcare, as well as government administration, empowering 370 2B projects. The Company also launched standardised AI products such as AI phones, AI cloud computers, AI large model integrated devices to meet the diverse intelligent demands of customers. The Company also launched 10 internal large models for customer service, network operations, office administration and other corporate operation segments. The proportion of intelligent voice service by avatar customer service representatives has steadily increased, while the AI-empowered smart energy-saving effects for base stations and facility rooms have continuously become prominent. In terms of data foundation, the Company launched the "Data Chain AI Network (DCAN)" capability system, and created high-quality data sets that aggregate data from fields such as public, industry and internet. The Company created Xinghai data intelligent core platform which empowered more than 150 projects for government and enterprise customers. The Company also upgraded Lingze 2.0 data elements platform to serve public data operation and the construction of data infrastructure in 22 provinces and cities. The number of partners of data product supermarket model exceeded 1,300, with the number of data products exceeding 2,000.
Q.8. What is the dividend policy of the Company?
The Company attaches great importance to shareholder returns and strives to enhance its profitability and cash flow generation capabilities. The Board of Directors has resolved to continue declaring an interim dividend in year 2024, and the profit to be distributed in cash represents over 70% of the profit attributable to equity holders of the Company for the first half of 2024, i.e., RMB0.1671 per share (pre-tax), representing an increase of 16.7% year-on-year.
Within three years from 2024, the Company's profit to be distributed in cash will gradually increase to above 75% of the profit attributable to equity holders of the Company for the year, continuously creating more value for shareholders.
Q.9. What is the Company's CAPEX plan?
In the first half of 2024, the Company's CAPEX reached to RMB47.2 billion. The Company will continue to optimise its investment structure and maintain the CAPEX to service revenues ratio to be under 20%.
Q.10. How was the Company's cloud-network capabilities deployment and network upgrade?
Insisting on "network as the foundation and cloud as the core, while grasping the development direction of intelligence", the Company continued to promote the evolution and upgrades of the digital information infrastructure. The Company built computing infrastructure with cloud-intelligence integration and training-inferencing integration, completed the construction of domestically leading all liquid-cooling pools with ten-thousand GPUs in Beijing-Tianjin-Hebei and the Yangtze River Delta, which already undertook training tasks for large models at the trillion parameter level. The Company deployed inferencing pools in 31 provinces to meet the inferencing demands from various AI applications. The newly added intelligent computing power was 10 EFLOPS, bringing the total to 21 EFLOPS. The Company promoted the comprehensive upgrade of datacentres to AIDC and achieved agile delivery of cabinets, elastic supply of cooling and power, as well as efficient energy use. Focusing on areas where AI industry concentrates with abundant computing power and clean energy, the Company built computing power interconnection networks with high throughput and low latency, which are also intelligent, inclusive and easy-to-use. The Company continued to optimise the latency circles with the latency of 1ms within cities, 5ms for intra-region and 20ms for inter-regions to consolidate the foundation for computing power connection. The Company built the 400Gbps all-fibre high-speed network which supports elastic bandwidth and time slicing. The Company has exclusive capabilities of quantum-encrypted dedicated lines within the industry to fulfil the demands for secure, elastic and inclusive transmissions in the era of AI. The number of 10G PON ports of Gigabit fibre network exceeded 9 million, with a coverage of 94% of residential areas in cities and towns. The Company carried out the deployment of 50G PON network to support the demands for 10-Gigabit access in locations such as key subdistricts, industrial parks and factories. The Company's cloud-network operation capabilities continued to be strengthened and both the amount of network-wide fault work orders and the processing time have been reduced. The Company also promoted the automation of cloud-network operation, fully accelerated the creation and application of large model for network, and steadily enhanced the automatic processing rate in cloud-network operation and maintenance.
Q.11. How was the Company's sci-tech R&D?
The Company further intensified its efforts to achieve breakthroughs in key core technologies and sped up the development of new quality productive forces with a focus on four technological directions, namely network, cloud and cloud-network integration, AI and quantum/security. The Company fully completed the deployment of sci-tech innovation and R&D system RDO, optimised the R&D organisational system and continued to strengthen fundamental research. The Company also optimised the building of sci-tech innovation demonstration bases and accelerated the launch of sci-tech achievements. The Company further increased the input of sci-tech innovation and R&D, with R&D expenses increasing by 12.5% year-on-year. Focusing on strategic emerging industries, the Company accelerated the building of core scientific research teams comprising of top talents, with the number of R&D personnel increasing by 15.3% over the end of last year. The flying geese paradigm of technological experts and talents, comprising of scientists, chief experts, senior experts, and experts, has basically taken shape, with its scale exceeding 10,000 persons. The Company attained breakthroughs in core technologies and released 6G intelligent and simple network architecture and 6G sci-tech innovation experimental apparatus. "Xirang" platform achieved breakthroughs in core technologies of managing and scheduling ten-thousand GPUs in public cloud, and completed the industry's first verification of over 100-kilometre distributed lossless intelligent computing interconnection on existing network. In addition, the Company launched the industry's first large speech model that supports code switching of 40 dialects, and developed the first quantum security encryption system integrating QKD in China. The Company also upgraded the leading "Tianyan" quantum computing cloud platform. The Company further elevated the level of sci-tech innovation and was approved to be the source of original technologies for a number of cutting-edge technologies. The Company took the lead in creating innovation platforms such as cloud computing, quantum communications and next generation optical network innovation consortium. Two projects were awarded the first prize of the National Science and Technology Progress Award 2023 and were included in the list of outstanding enterprises of sci-tech innovation among state-owned central enterprises in 2023. Furthermore, the Company vigorously promoted the conversion of sci-tech achievements, with achievements on its proprietary list increasing by 40.4% year-on-year. The proportion of proprietary IT systems and business platforms reached 50.4%, up by 9.5p.p. year-on-year. The Company leveraged sci-tech innovation to promote industrial innovation, and fully completed deployment in seven strategic emerging businesses including cloud computing and computing power, new generation information communications, Big Data, AI, security, quantum and digital platform. The Company further strengthened external empowerment and internal applications, accelerated the cultivation of new growth areas, effectively supported the enhancement of corporate operating efficiency, and continued to create new momentum and edges for high-quality development.
Q.12. How was the Company's work in areas of Environmental, Social and Governance (ESG)?
The Company proactively implemented the green development principles. Under the guidance of the "1248" green development model, the Company took different measures at the same time to further strengthen the green upgrade of cloud-network infrastructure. In the first half of 2024, the greenhouse gas emissions per unit of total volume of telecommunications services maintained a double-digit decline year-on-year. The Company established green datacentres in an all-round way and accelerated the green transformation of traditional communications buildings. 12 datacentres of the Company were newly rated as the national green datacentres, which was the largest number in the industry. The Company further promoted AI intelligent energy-saving and green transformation for facility rooms and base stations, with an AI energy-saving coverage rate of 96% among all 5G/4G base stations and a cumulative coverage of 1,800 facility rooms and 4.95 million sectors. The Company completed green transformation for 14,000 base stations and 280 facility buildings. The annualised energy-saving in total exceeded 1 billion kWh. The Company increased the use of green electricity, with the volume of green electricity with "integration of trading of permit and electricity" increasing by 960 million kWh in the first half of the year, representing an increase of over 200% year-on-year. By strengthening the promotion of green products and services, while focusing on areas such as clean production, pollution control and environmental protection, the Company built a series of green solutions such as ecological environment Big Data platform, air pollution prevention and control command and scheduling system, as well as green lighting to empower the green and low-carbon transformation of the economy and society.
The Company successfully completed communications assurance tasks for multiple key events including the launch of the Shenzhou-18 manned spaceship. The Company utilised satellite communications and drones to effectively assist flood fighting and disaster relief efforts during times of natural disasters such as heavy rains and floods. The Company empowered rural revitalisation with AI technologies, promoted the deep integration of agriculture and rural areas and developed the Digital Village information solution to bridge the digital divide between urban and rural areas. In addition, the Company remained committed to social welfare and proactively helped the disabled and underprivileged. Its more than 90,000 "Caring Stations" have provided 8.42 million person-times of services. The Company protected the rights and interests of its employees in accordance with the law, created a comprehensive system for employee care, and continued to enhance its institutional guarantees. The Company also created professional development paths for employees, striving to achieve the mutual growth of employees and the Company.
Insisting on high-standard corporate governance, the Company fulfilled its obligations of information disclosure in compliance with laws and regulations and increased the level of corporate transparency to effectively safeguard investors' rights to know. The Company continued to improve its corporate compliance management system, maintained compliance and efficient operation of its Shareholders Meeting, Board of Directors and Supervisory Committee and continued to optimise internal control process. The Company maintained steady and compliance operations and effectively safeguarded the best and long-term interests of its shareholders.
Q.13. What are the Company's priorities in 2024?
Currently, the Company is at an important point of high-quality development. With three years after A Shares listing as a new start, the Company will seize new opportunities, embrace the new blue ocean and accelerate the development of new momentum and new edges. The Company will continue to deeply implement its Cloudification and Digital Transformation strategy, further deepen reforms on all fronts and fully promote high-quality development. Insisting on the customer-oriented principle, the Company will develop more high-quality, efficient, green and secure integrated intelligent information products and applications to further fulfil customers' aspirations for a better digital life. The Company will further boost the principal role of enterprises in sci-tech innovation, continue to enhance its independent innovation capability, strive for breakthroughs in key core technologies, accelerate the conversion and application of sci-tech achievements and ensure the steady and far-reaching corporate development with high-level security. The Company will strive to enhance corporate value, proactively bring returns to shareholders and vigorously write a chapter of Chinese modernisation for telecommunications.
updated 6th September, 2024
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