China Unicom (Hong Kong) Limited (HKG:0762)
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Earnings Call: H1 2024

Aug 15, 2024

Operator

...Respected investors, analysts, and friends from the media, ladies and gentlemen, good afternoon. I am Wang Lingsheng from the Board of Directors Office of China Unicom. Welcome to our 2024 interim results briefing. Thank you for your support all along. We are having our briefing both in Beijing and in Hong Kong, with an online and offline combination. So I, with Ms. Meng Shusen and myself, will be hosting the meeting in the two places and to serve all of you. The management has always been attaching a lot of importance to the communication and interaction with you all. So they are here, all of them are here. They are respectively Mr. Chen Zhongyue, our Chairman and CEO; Mr. Jian Qin, Executive Director and President; Mr.

Dong Qun, Head of Discipline Inspection and Supervisory Team of the Group; Mr. Tang Yongbo, Senior Vice President; Ms. Li Yuzhuo, Executive Director and CFO; Senior Vice President, Mr. Cao Xinxin; and Senior Vice President, Mr. Wang Limin. According to our schedule, we will first invite Mr. Chairman to walk us through the interim results of 2024, and then the management will have exchanges with you. We will proceed in Chinese, but then we will have English simultaneous interpreting. First of all, let us invite Mr. Chen to walk us through 2024 interim performance. Respected investors, analysts, and friends from the media, ladies and gentlemen, good afternoon. Welcome to the 2024 interim results of China Unicom.

On July 19, we hosted a business partner conference with a joint vision and to share our new results. We have organized a historical exhibition and business exhibits of 100 years of heritage and 30 years of innovation for us to understand more about China Unicom. We have been developing both in scale and in profitability. In the first half, we have CNY 197.3 billion of operating revenue. That's a 2.9% increase, and our service revenue was at CNY 175.7 billion, an increase of 2.7%. Our profitability also increased by 10.4% to CNY 16.9 billion. That's a consecutive 8 years of double-digit growth.

Facing the great opportunity of industrial reform, we promote the three innovations in network technology and service, and to create synergies and positions, and to also open up new opportunities in our connectivity network as well as our computing network. We promote for synergies and precision in resources allocation. In the first half of the year, we have already invested CNY 23.9 billion of our CNY 65 billion total of CapEx and building a very strong basis. In the first half, the main focus of investment is in connectivity, computing, as well as data networks. As far as connectivity is concerned, we will continue to enhance our mobile network coverage. In the first half, we have 1.31 million 5G mid-band BTS, 780K low-band BTS, and over 2 million 4G mid-band BTS.

There's over 100 cities achieved commercial deployment of key 5G-A technologies, such as RedCap and carrier aggregation. We also stepped up on broadband network building. We promoted gigabit networks, and the proportion of 10G PON ports reached 79%, which is leading the industry. We also launched a 50G PON pilot project to support the construction of 10-gigabit cities. As far as computing network is concerned, we have built intelligence computing centers with over 10,000 AI accelerators in Shanghai and Huhhot, and 29 large-scale computing center parks to fulfill the Eastern Data and Western Computing hubs and nodes. We also accelerated the construction of new 8 vertical and 8 horizontal national backbone networks.

So we have built a Unicom Chain TPS of more than 100,000, which is the top five in industry. And we have also for gen to for flexible activity. And with data, we have a high-quality AI data, a multi-modal, high-quality shared data set of AI, empowering data factor of trusted data resource space. And we will continue to promote innovation in our investments, and we have increased 13% of our R&D investment. We emphasize on original technology and also to build data and network platform, such as the Yuanjing model, et cetera. This June, we have a 5G key technology engineer application prize, and also a first prize in national science and technology progress.

As far as network is concerned, we focus on the long-distance lossless transmission, meaning the industry's first 3,000 kilometers lossless transmissions, enabling the transfer of terabytes of data in minutes. We also build the computing power AI network, and that is to support 800G upgrades to ensure integrity and security of the network. We continue to apply 5G, 8G or 6G technologies to probe into the standards of 6G standards, satellite internet, low-altitude intelligent networks, air-ground integrations, et cetera. With data, we continue to promote Data Factor X, to launch AI data, a multimodal, high-quality shared data set for AI, as well as empowering data factor circulation of trusted data resource space. And we will also launch trustworthy data platform to provide trustworthy data use.

As far as intelligence innovation is concerned, we will continue to promote the 1+1+M AI deployment, and to promote the integration of AI with various industries, and also to promote the Yuanjing model, to promote the increase in users, and to form 35 industry-specific large models covering, consumer, industry, and various aspects of, life and society. We will continue to promote our service innovation. We continue to promote new circumstances of the use of connectivity. We will enhance our connectivity and communications, as well as computing and digital smart applications to cover various industries and aspects.

The first half, we have for CC revenue, CNY 105.1 billion, that's a 2.1% increase, and our CDSA revenue increased by 6.6% to CNY 43.5 billion. First of all, let's take a look at connectivity. Our users and the value also increased. In the first half, we have an additional 8,000 new customers. The total, it exceeds now 1.07 billion, and mobile subscribers reached 339 million. That's a new height for us. In IoT, connections exceeded 562 million. Fixed-line broadband subscribers continue to grow to 117 million, of which integrator subscribers takes up more than 80 million. And the customer mix continues to improve. 5G package subscribers penetration is exceeded 85%.

Gigabit broadband subscriber penetration rate is at 25%. ARPU exceeded CNY 103. As far as new scenarios and creating new value, we continue to grow through such a new integration. So the integration rate continues to improve, and our product integration versus personal customers, we have a developed end products with over CNY 1 billion in revenue. As far as family customers is concerned, we have been expanding Unicom Cloud Drive video ringtone to bring them quality upgrades. The FTTR subscribers is nearly 300,000 small and medium-sized enterprises. As far as terminal integration is concerned, there's a 4.3% increase in cumulative terminal sales volume up to 25 million.

We have promoted the integrated development in our various office. Let's take a look at computing power business. In the first half, Unicom Cloud revenue is at CNY 31.7 billion, that's a 24.3% increase. There is a breakthrough in both computing as well as product revenue. So we have been able to build ministerial cloud, provincial clouds, medium to large enterprise clouds, as well as medical clouds. So IDC business has been growing as far and leading the industry. We have launched 5 computing products to bring differentiated and scenario-ized products. Our data services also is industry-leading. In the first half, we have a 8.6% increase in our data services revenue.

We continued to achieve multiplier effect of data factors and promote various big data services to various industries. We continue to build trustworthy data platforms, as well as dedicated operation of public data and building data infrastructure. So we work with different partners, such as big data partners, to continue to push innovations in both public and private services. And as far as digital application is concerned, we have a double-digit growth. We have CNY 3.7 billion of revenue in the first half. That's a 13.5% increase. We have built 5,800 5G factories and 38K plus 5G digital smart applications.

Our influence in intelligent connectivity continues to rise, where Gewu platform supports ubiquitous and intelligent connectivities, devices with over 1,000 standard object models and over 10,000 categories of connected devices. We have empowering digital transformation of customers, and over one hundred k customers is using our services. We have strong growth in cybersecurity. We have CNY 1.4 billion revenue in the first half. That's 58.2%. We have a Mogong platform servicing. That's a security operation service platform, servicing over 200 cooperative products and 200 plus governments. Our security hub serves more than 1,400 customers with 100 plus partners. Let's take a look at our international business.

With the increase in international travel, we have been enjoying a lot of opportunities. We have, for the first half, CNY 6 billion of revenue. That's an 8.4% increase. That's mainly coming from international roaming and mobile prepaid revenue, having a lot of growth. The network and other main products were growing very quickly, and there's a breakthrough of 93% in international IoT revenue. This June, we organized the International Development Plan of China Unicom. We have also organized in Shanghai Global Partnership Conference in order to build our synergies and to take a wider stride towards international business development. Now, through continuous improvement in management, operations, and service, we have seen a lot of improvement. We have over...

We have optimized our system and also the operating cost and the management cost continues to come down. Our quality continues to improve. We have been able to optimize our product and also to optimize our strategy and our speed to market, as well as the service. And we're also building a smart customer service that's 99% of building a UniAI customer service large model and an 84.6% in resolution ratio of customer cases by smart customer service. We have 95 investor events in the first half and over one thousand investors engaged in the first half.

In the first half, we have reduced the GHG emission by 6.78 million tons, and our energy efficiency enhancement it has improved by 6%, and we have also contributed to Beautiful China efforts. We also focus on administrative villages covered and turning them into digital villages. There are over 20,000-50,000 of such villages. We have been shouldering the responsibilities as a that we should take, and we also have been communicating with our investors and enhancing the value that we can offer to our customers. Now, while we increase our revenue, we continue to share with our shareholders, and we will continue to 0.959 CNY per share, and this payout ratio is higher than our revenue growth ratio.

We will continue to bring better return to our shareholders. Today's China Unicom has an even stronger basis for development.

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