Citic Telecom International Stock

Dear friends, good afternoon. Welcome to CITIC Telecom International's 2025 Annual Results Announcement. I'm Curis, the MC. Today, we are going to use a hybrid mode. We also have online attendance. And I think before the event, you have received our PPT materials. If you haven't, please contact our [SBRG] colleagues. If members of the press or investors have questions, you can call into the Chinese line. We have with us Mr. Luo Xicheng, our Chairman; Mr. Wu Jun, our CEO; Mr. Vandy Poon, Executive VP and COO of CTM; Mr. Brook Wong, Vice President and CEO of CPC. Let's invite Mr. Wu to deliver his welcoming speech.

Dear members of the press and also investors, good afternoon. I'm grateful for your attendance out of your busy schedule to attend our 2025 annual results announcement by CITIC Telecom International.

In 2025, the global economic situation remains complex with cutting-edge innovations represented by AI and new generation information technology continuously breaking through, driving increasingly fierce competition in the information and communication industry. We confronted multiple challenges head on and by adhering to the development positioning of -- with the backing of Chinese Mainland establishing a foothold in Hong Kong, Macau and connecting to the world, we promoted international development and technological leadership. Aligning with Belt and Road initiative and the 1 country 2 systems, we continuously strengthened our core functions and enhance our core competitiveness.

Our overall operations have stabilized and improved, striving to become a leading digitalized and intelligent comprehensive telecom enterprise in Asia Pacific. In the year, the group achieved a very good revenue at HKD 9.567 billion. Profit attributable to equity shareholders, HKD 920 million, an increase of 1.1%. Basic earnings per share, HKD 0.249 per share, an increase of HKD 0.03 compared to 2024. Final dividend, HKD 0.13 per share, including interim dividend of HKD 0.06 per share. Full year dividend totaled HKD 0.19, representing year-on-year increase of HKD 0.02. Dividend payout ratio remained consistent. Our CTM business is very well established in Macau. Towards the end of the year in Macau, the market share has been stabilized at #1 and 100% penetration rate for 5G services.

We have launched the 5.5G private network applications. We launched upgraded eSIM services to enhance users' digital and intelligent experience. And we have also acquired 100% of Hutchison Macau, further stabilizing our leading position in Macau. We further enhanced our international foothold in Singapore, Malaysia, Thailand, et cetera. Our group has been depending on AI service platforms to provide better services to our consumers. We have launched a number of projects in relation to data security, retail and other areas. We also focus on AI-related services. We have been cultivating our growth engines. We have set up the City Hong Kong AI Innovation Center and it has commenced operations. We have completed our AI joint laboratory with local universities, integrating research resources with industry needs.

We also have AI-assisted programming, research assistance and intelligent assistance. Concerning data services, we've provided customized data center hosting solutions to our enterprise customers. We have joined the Trusted Data Space Alliance and collaborated with China Future Internet Engineering Center and the International Data Spaces Association to advance the cross-border trusted data space for the financial industry project. We passed qualification review and become a data merchant of the Shenzhen Data Exchange. And we have also completed commercialization of global mobile number authentication service on GSMA Open Gateway network as a service platform.

We continue to deepen our internationalization efforts and rapidly developed more markets along the Belt and Road areas so as to enhance our brand influence. We continue to leverage on our existing presence and strength and strive to gain greater market share, relying on our presence in Macau, we maintain our competitive edge and expand into emerging areas. We will continue to deep dive into AI capabilities so that we can provide better services covering different aspects so that we can continue to attract more support from the local enterprises and bring them towards their overseas expansions. And I will hand over to my colleague now to take you through some financial highlights, Mr. Wu Jun.

Dear investors and members of the press, good afternoon. Well, just now, our Chairman has already presented very briefly the overall situation. I would like to dive into greater details. Our total revenue, HKD 9.567 billion, profit attributable to shareholders, HKD 920 million. Basic earnings per share, HKD 0.249, up HKD 0.03. So the full year dividend, HKD 0.19 per share. Dividend payout ratio more than 76%, a relatively high level. Total debt, HKD 3.257 billion, down HKD 650 million. Net debt, HKD 1.312 billion, down HKD 984 million. Net gearing ratio decreased by 7 percentage points to 11%. So our financial situation is very solid. Now let's dive into more details. You can see our financial results overview for recent years.

Concerning our telecom services and also handset and equipment sales, all the trends are very stable. We have seen some slight movements for 2 segments. But if you look at profit attributable to our shareholders, after a rather difficult time in 2024, last year, we have been able to stop the following trend. And our profit level has gone up slightly. From EBITDA, CapEx and liquidity, you can see our EBITDA has gone down slightly. But with lower cost levels, we have been maintaining a very good profit level. CapEx, HKD 360 million, cash and deposits, a very healthy level towards the end of the year, HKD 1.945 billion. Total debt, HKD 3.25 billion, net debt, HKD 1.31 billion; net gearing ratio, 11%.

Earnings and dividends per share. After a sharp decline in 2024, we've gone up in 2025 to HKD 0.249 per share -- dividends per share, HKD 0.19, showcasing our principle to create good return to our shareholders. If you look at the gearing situation, net gearing ratio is standing at only 11%, which is a relatively low level. If you look at interest rate and currency risk, we have optimized our financial structure, reduced our fixed rate borrowing by HKD 3.48 billion. Now 89% of our debt portfolio is at a variable rate, which is very conducive to better risk control.

At the moment, we expect the interest rate will remain at a relatively low level. We effectively managed currency risk exposure because our transactions are in Hong Kong dollars, U.S. dollars and also in MOP and the 3 are packed among themselves. So we are facing very low currency risk. At the same time, we have done some cross-currency swap and forward contracts to reduce our currency risk exposure. If you look at our operational performance, you can see the revenue breakdown by business sector. You can see that among our different segments, we are looking at certain growth and certain declines. Overall speaking, things are very stable. For mobile services, revenue increased 6.3% to HKD 1.159 billion. Internet Services decreased by 4.2% to HKD 1.436 billion. International Telecom services increased by 5.2% to HKD 2.489 billion.

Enterprise Solutions decreased by 7.2% to HKD 2.745 billion. Fixed line services decreased by 8.3% to HKD 122 million. Sales of handsets and equipment increased by 5.8% to 1.616 billion. So you can see some rises, some declines. But overall speaking, things are quite stable. Now let's look at mobile services with very satisfactory results. CTM is now moving towards 5.5G era. Penetration has already reached 100%. Number of users exceeded 110,000. Concerning our 5G stand-alone network, we have achieved some new developments. Internet services, we are accelerating the adoption of gigabit broadband. More than half of our users have been upgraded to gigabit level services. Our market share in Macau is an absolutely leading position. We will continue to accelerate the deployment of 50G PON, Wi-Fi 7, and we are going to service the 15th national game in Macau with the upgraded communications solutions.

In Europe, we have already completed our deployment of 100 gigabyte international Internet outbound bandwidth. International telecom services, we have DataMall [indiscernible] is moving along very well. So we are deepening the exploration of IoT and IoV opportunities with our high level of services, we further stabilize international voice business growth. Enterprise Solutions, we improved our global network presence and deepened the deployment of AI plus cloud network security strategies. We've added 2 new network POPs, upgraded 4 international network POPs, 6 new backbone network lines in Chinese Mainland were established and capacity increased on 10 international lines.

We've launched hybrid cloud platform service. And we also have this AI SOC, which is a security operations center driven by AI. This is the most -- among the top 3 most trusted SOC service providers. We also harness the power of AI. We have launched AI Pentest assistant and guardrail, further enhancing innovative advantage. We have the City Digital Economy Macau Innovation Center, co-built with Baidu, providing diversified AI applications and big data analysis. We have also empowered the Service One IT platform for diversified industry supporting more than 90 clients at the moment. Fixed line services, as we have mentioned previously, the overall trend is a decreasing one because of the decline in residential and business faced lines. The revenue level has dropped to HKD 122 million.

Now let's take a look at our major projects. In March '25, the CITIC Hong Kong AI Innovation Center constructed by the group has commenced operations. We jointly established the interdisciplinary mathematical digital AI joint lab. In the same month, we have fully redeemed the USD 450 million guaranteed bonds. Our capital structure has been optimized, reducing financing costs. In June, CTM has successfully decommissioned the 3G network, enhanced telecom network infrastructure capabilities in Macau. In July, the group has signed a strategic cooperation framework with China Mobile International, strengthening bilateral cooperation in international telecom services, integrated telecom services in Guangdong-Hong Kong-Macao Greater Bay Area and corporate communication services.

In September, CTM and Macau government entered into a supplemental agreement to the concession agreement. The group will continue to strengthen its operations in Macau, deepen communication with the government and positively respond to market opening and enhance service quality and competitiveness. I think that is a rather major event in relation to concession agreement, which ensures stability and continuity of our services. In January this year, CTM acquired 100% equity interest in Hutchison Telephone Macau Company Limited. That means another monthly fee-paying customer up to 100,000, further consolidating our leading position in Macau. In 2025, we have been recognized by diverse stakeholders. And here, we have listed a number of examples. We have established collaboration with China Unicom and some awards we have received.

CTM in terms of serving the city. It's done a lot including support to the 15th national games. It has also received from [AI Data] Innovation Awards. CPC in 2025 won the Hong Kong Sustainable Development Innovation and Technology Awards. And we also one of the top 3 AOC, as I mentioned earlier. Next page. You can see we showed the social responsibilities and set a benchmark for sustainable development. First of all, we deepen AI applications and safety management because data security is a huge topic for everyone. So concerning this direction, we have done some strengthening work. We leveraged AI to help us with management and operations. For important communication missions, we have excelled and our various systems have been running in a stable manner in terms of data privacy were also well recognized by the Hong Kong government.

We strengthened the organization by building a robust talent pipeline. We implemented the ideology of strengthening the enterprise through talent and launched a management trainee program to cultivate leading technological talents. We cultivate innovative teams focusing on AI computing power and data elements. In terms of social responsibilities, we have actively responded to Macau government's telecom reform policies. We launched inclusive telecom service fee reduction measures for all customers. After the fire incident in Hong Kong, we activated emergency assistance mechanism and organized charitable donations. Concerning our corporate governance efforts, we continue to maintain high level of corporate governance, improve our compliance management system, optimize internal control to protect the interest of our shareholders.

We have been awarded a number of prices as well. Looking forward, to sum up, we will enhance service capabilities by AI focused on information security, user network connectivity as a link to provide one-stop IT services for Chinese enterprises to go global and provide full process support for Chinese software products going global. We continue to rely on our conventional business, especially in Macau market. And we will continue to strengthen our capability in the region. We will provide cross-border data support to our customers. We will strengthen communication and collaboration with other operators so as to sustain stable growth. We will deeply cultivate AI and build a highland of innovation. That is going to take the lead of the next phase of our development.

Concerning the use of AI and big data, we are going to promote development of AI Macau. We have done a lot of groundwork already, and we'll continue along this pathway and direction. We have set up the Hong Kong AI Innovation Center. We have set up an AI department so that we can leverage AI to drive our digital transformation. Internally, we also need to allow AI empowerment, so we have promoted intelligent internal operations within the group, and we have developed AI agents. We will deepen market strategic layout and strengthen market coverage in order to better service our customers or enterprises customers. We will bring international players to the local market and help local enterprises to go abroad. We will provide one-stop IT services, including AI services in this process. That is going to be an important area of development.

We'll continue to enhance our AI plus cloud network security solution capabilities and deeply develop in enterprise market. We will strengthen our international coverage as well. Thank you very much.

Thank you for the sharing by our management. We'll now take questions. We'll first invite questions on site. [Operator Instructions] Can we have the first on-site question?

Can you hear me?

Yes.

[indiscernible]. Recently, I saw some news about you in Macau, acquiring Hutchison. I would like to gain some understanding how much is the expansion of your customer base? Any impacts on your business layout? And then I also want to ask you want to do more about cross-boundary data. Now we are seeing a lot of geopolitical tension. Are you having some different plans? Do you have any new measures looking ahead? Any breakthroughs anticipated?

Thank you. Mr. Poon and Mr. Wong will take your questions.

Cross-boundary data. Thank you for your question. I will answer in Cantonese. Concerning Hutchison, a number of days ago, they have already made the announcement we have acquired 100% of their shares. Previously, Hutchison has been actively looking for a buyer. We met and they wanted to make sure that while they exit the market, they want their customers to be well taken care of, receiving the best services. That's why the deal was a good match. You shouldn't pay too much attention to the consideration. The seller and the buyer of this deal both feel comforted and assured. Our customers and our resources are well aligned and integrated. Hutchison did not submit their bid for the 5G license. So their existing customers, how can they receive 5G services. That is the most important and pressing matter.

Of course, we will ensure that if they're able to use 5G or our resources that will be best. we can achieve better synergy. Ultimately, it will be the customers who will benefit. As for our staff concerning their arrangements, well, we have taken over all the staff members. We are operating normally. For future arrangements, we are talking about 2 different licenses under the government. So we will handle this. And we are sure that the government will support us because we are facing the market and we are facing the consumers. There is still competition in Macau. There are still other operators in the Macau market. So future competition will continue to be fierce.

We will do well our work. So we will do our best to win. How many customers, how many staff members are you going to keep the brand? The agreement is that for the time being, we will continue to use that brand for quite some time. because we hope to offer seamless services to the customers during the transitional period. But for the longer term -- to be practical for the longer term, we should not continue to use that brand. But of course, we want to give some time to the market and the customers to get used to this. It should not be a major problem. I would like to confirm with you.

The second question. You mean previously, we have announced that in Macau, we are going to do something about cross-boundary data services, yes. Because your network is quite big. Do you have any plans or some new ideas because of geopolitical situation is rather serious, do you have any new plans, new layouts?

First of all, the press has mentioned that in Macau, with another entity from Guangxi, we have signed this agreement. We are prepared to establish Macau, this data service platform. I would like to take you through some background information. There is this application center at a national level concerning AI collaboration. And in terms of external collaboration, other than algorithm, we're talking about data, and it involves between China, ASEAN countries when data is exchanged, whether that is compliant with the laws and regulations. Together with this group in Guangxi, when we communicated, they put forth this request because there's a lack of standardization when it comes to connecting data among different countries.

So in Macau, the government would like to move ahead and Macau enjoys this special system. So after negotiation, we are planning to, in Macau, rely on the CTM's capabilities and influence to construct this cross-boundary data servicing platform. We would like to set up some standards so that China and ASEAN countries will enjoy the benefits first and then start to expand it to other countries. In terms of AI collaboration, we want to create this compliant channel to transmit data. It may not seem directly related to our existing network. We'd like to facilitate AI application algorithm in Chinese Mainland so that it will act as a fundamental service platform and people want to be connected with international players.

In the market, we'd like to be a service provider concerning AI capabilities. We will continue to propel forward along this direction. So we have reached some initial agreement concerning this data center, and we are prepared to continuously move forward. Do we have another question?

Congratulations about a very solid performance, especially since in 2024, we have seen some great challenges. Just now you talked about September announcement concerning the supplementary agreement with the Macau government. Can you elaborate more about that? What do you think about this supplemental agreement? How is that going to carry your business forward? Do you think that is going to create a good buffer moving forward? What do you think about this?

What language should I use? Well, I think that is a technical term. It's a supplemental agreement. It's a contract renewal in essence. the previous contract has expired. So if you want to extend it, you need to sign this supplement agreement. Undeniably, the Macau government over the years wanted to modernize the telecom sector in terms of rules and regulations, CTM or CITIC Group has been supporting that over the years. Macau government needed time and it has examined different models. Last year, they approached us. And this year, we have signed this agreement so that we can work together better moving ahead. Concerning the overall arrangement for Macau, it will allow sufficient time for both parties.

Just now Mr. Wu has already reported this contract renewal is good news to us because our initial intention is to stabilize the market so that we can continue to be the service provider. In fact, I'm confident that the Macau government is inclined towards this role as the underwriter if we are permitted to use the commissioned assets, we will enjoy clear advantage. So we have negotiated with the government concerning some concessions to the citizens. I'm sure that in the near future, we'll continue to leverage on this opportunity to do well our business. And also the impact from AI reshuffling in the industry to further expand our foothold other than doing well telecom services.

We also have high tech and new tech developments. I think CTM can shoulder more responsibilities on this front. Thank you.

Do we have other on-site questions?

I would like to ask about any acquisition plans in Macau or elsewhere? Any enterprises are concerned about AI? During your presentation, you also talked about AI business direction. So I want to ask you what will be your focus? What about 2026? The AI contribution to your revenue, what is the expected level?

So acquisition plans. For Macau, there aren't too many targets for acquisitions. To our company, previously, you have seen our high payout ratio because we do not have very good investment directions. So we decided to return the benefits to our investors. But we have heard that to facilitate future development, we need to do more in terms of investments. By identifying new targets of acquisition, not just locally in Macau, but also around the world. But of course, we'll continue to uphold our obligations towards our investors. We need to consider the security of investments and future development. We will do more in terms of such explorations. That is to answer your first question.

Secondly, you talked about AI development directions. I would like to say, first of all, to the entire industry, and changes in our society, AI will create huge impacts to a telecom business like us. Undoubtedly, we will seek new development opportunities around AI, and that is a certain option. In terms of development directions, I would like to share with you some thinking from the management. First of all, there are a number of major directions for AI, IDC or algorithm platforms or chip manufacturing. So that will require a lot of CapEx investment. If we are to do that, we will identify investment directions concerning computing power centers or algorithm power centers.

Secondly, large model, I don't think we are well positioned for that. So we'll start collaboration with other large model players. AI applications. And there are many players doing very well in the market. [OpenClaw] platform and also scenario-based customized application. Again, this is not our strength. We can't compare ourselves with open source communities or large LLM players. So we can do some R&D for certain specific scenarios for applications. We have set up this AI center so that we can collaborate more closely with tertiary institutions in Hong Kong and research institutes so that we can use their capabilities and our market position so that concerning vertical AI use, we can achieve some breakthroughs. That is definitely one major direction.

On top of that, as we can all see, AI will create great demand for open cloud services. We are now considering also AI security, data security, which are great challenges when it comes to data security and connectivity, these are traditional service segments for CPC operations. So when it comes to public cloud services, how do we strengthen our capability and leverage such services so that we can continue to attract new customers and also expand our customer base. We will make greater efforts on this front. We have been talking about AI, cloud network security. So we may use AI means to empower ourselves and at the same time, identify new market opportunities.

Your third question is about the expected revenue brought forth by AI. It's very difficult to quantify that unless I focus on AI dedicated projects. At the moment, we would like to rely on existing services and customer base, and incorporate our new challenges into the original AI plus cloud network security capabilities so that we can enjoy a higher level of efficiency. So I can't carve out how much contribution will come from AI. We will invest into algorithm, centers. But at the moment, the investment is still quite limited. And for LLMs, in relation to AI, that is not our existing strength. And when it comes to AI applications, we are still negotiating with external scientific institutions.

We will continue to rely on our AI cloud network security system. So I can't tell you how much will be brought forth by AI because everything is well integrated into the system. Thank you.

Do we have any more on-site questions? Now we will take online questions. [Operator Instructions]

I have 2 questions. First about the Data Center.

Mr. [indiscernible] Thank you for your concern about the data center. For enterprises, we provide integrated ICT services. So data center development is very important to us. We have 2 data centers in Hong Kong. We have 2,300-odd cabinets, rental level or the ratio of them being leased out 70%. At the moment, we are liaising with large enterprises to explore collaboration. So the utilization will continue to rise.

And looking forward, do we have any plans to establish other data centers?

Well, in Macau, because of local development, we are now planning to set up this super center for computing. We will continue to focus our efforts on this.

The sound quality is very poor. Can we ask you to repeat your question? Sorry, the interpreter is not able to decipher the question. Is that about dividend payout? We can't hear the question clearly. It is not clear. You are breaking up. Perhaps you can send a written question.

Yes, certainly. Thank you.

The signal is not very good. Do I have any other questions online?

Dividend payout direction. I will take that. Concerning dividend payout, all along, we've had a rather high level of payout. We attach great importance to the return to our shareholders. So when we do not have better investment channels, unpaid profit will first go to our shareholders as dividends. But if there are better investment channels, I trust that our investors and also friends of the media, you will understand if you are a growing enterprise, you need to continuously invest using up a lot of funds and capital. So money available for dividend payout will be of a smaller amount. But for a mature enterprise, the payout level is normally higher because CapEx investments is normally less.

So a growing stock, payout ratio is low, but stock price may be performing better. For mature type, payout ratio is high, but the stock price may be more flat or stable. As I've said, the management we attach great importance to our returns to our shareholders. So concerning our shareholders, a company is valuable when it makes the right investments. You need to have good operations, develop the company well so as to guarantee better return in the future, then we can repay our shareholders properly. So ultimately, I would like to say if we have better investment options, we do not rule out the possibility of lowering to a certain level of the payout ratio. But we have this image of high payout ratio.

So I would like to assure you, even if we are to invest more, our payout ratio will still be kept at a relatively high level through bank loans and other financing channels from the capital market, we will support the development of our enterprise. We hope with the concerted efforts of the Board and the management, our company can develop for a second round and identify suitable opportunities through M&A or by using AI to do capital investment or are possible.

Do we have other questions? [Operator Instructions] Do we have other questions on site? No? Then we will conclude the Q&A session. Thank you very much for your participation. This is the end of today's presentation. Thank you for your support again.