CITIC Telecom International Holdings Limited

Dear members of the media and investors, welcome to today's CITIC Telecom International Holdings Limited interim results announcement. I'm Charis. Today's presentation will be in a mixed mode for those dialing in. and for those on-site, you should have received your PPT slides before the meeting. If you still haven't got a copy, please contact our colleagues. The English telephone line is for listening only. If you have questions, please call the Chinese line. I will now introduce to you Mr. Luo Xicheng, our chairman, Mr. Wu Jun, our CEO, Ms. Wang Hua, our CFO. Mr. Fannie Poon, our Executive VP and CEO of CTM. Mr. Brooke Wang, our Vice President. Mr. Luo is going to deliver his welcoming speech. Dear members of the media and investors, good afternoon. Thank you very much for taking time to attend today's interim results announcement presented by CITIC Telecom International Holdings Limited. 2026 first half, we have seen new waves of technological reforms and evolution, AI continued to advance leading to rapid iterations. Our group has been adhering to internationalized development and continue to be led by technology to strengthen our foundation and improve quality of our development. At the moment, our performance results continue to grow. We see new points of development and competitive advantages. We continue to be a true leader in the sector. 2026 first half, our total revenue, HK$4.748 billion. Attributable profit, HK$463 million. Earnings per share, HK$0.125. we attach importance to return to our shareholders. We recommend interim dividend at HK$0.05 per share. CTM during this period continued to accumulate very good performance. We have successfully acquired 100% of Hutchison, strengthening its foundation in the city. Total number of users, 914,000 odd, penetration rate 93%. In the first half, CTM has been establishing a very well-founded 5.5 10 gigabit foundation. It would continue to upgrade its services offered to its customers and expand application and improve overall experience of its users, supporting Macau's high-quality growth. We continue to move forward by completing Hong Kong, Singapore, Dubai and other important cities in terms of capacity expansion construction. Together with Thailand, Singapore, et cetera, we have launched a number of network security projects. We cover public, education, retail and other key sectors, among which in Singapore, we successfully went over the tender for this IT project for a landmark building. In the Philippines, we continue to expand our internet services, effectively enhancing the penetration level. Our group continues to deepen AI efforts to drive our future growth. We have implemented various strategies with AI Security Operations Center as the focal point to enhance level of automation, assisting enterprises to go abroad and attracting foreign investments and businesses. In Macau, we have also set up this AI International Collaboration Service Center in terms of data services. We have provided one-stop services in terms of certification and we have accumulated eight GSMI certification in Hong Kong and Macau. We have has been the forerunner in this area. Looking ahead, we are going to use a multi-pronged approach to continuously promote 5.5G foundation construction. We will use AI application to promote our business upgrade. We also will continue to unleash AI value to enhance safety construction to perfect the security on all fronts so that we can achieve higher level of efficiency. Now, I would like to introduce to you Madam Wang Hua, our newly appointed CFO. In our group, she has been engaged in human Resources Personnel Management and Financial Control. We believe she is a very valuable addition to the management of the company so that we can continuously develop with high quality. Now, our CEO, Mr. Wu Jun, will take you through the details of our interim performance. Thank you. Dear members of the media and investors, good afternoon. I'm going to report to you our interim results. Our total revenue was 4.748 billion, down by 1.2%. Profit attributable to our shareholders, 463 million Hong Kong dollars, an increase of 0.4%. Interim dividend 5 Hong Kong cents down 1 Hong Kong cent. By the end of June, total debt 2.928 billion down 329 million. Net debt 1.148 billion down 164 million. Net gearing ratio decreased by 2 percentage points to 9%. Now let's look at our specific financial performance. total revenue as you can see it is stable slight growth for our telecom services we have been affected slightly by some new product launch affecting slightly the performance of the sales of mobile handsets. Profit attributable to shareholders in the past three years has been at a very stable level. We enjoyed a minor growth compared to last year. EBITDA, compared to 2025, we see a 20 million drop in EBITDA. CapEx increased by 18 million. cash and deposits. First half of the year is a drop of $165 million, standing at $1.78 billion. Total debt, $2.928 billion, a drop of $329 million. Net debt, $1.148 billion, a drop of $164 million. Negation ratio, 9%. You can tell. that would like to continuously suppress financial costs to ensure stability and security of cash. And we have made certain efforts to reshuffle our debt. Earnings and dividends per share. Earnings per share stable at 12.5 Hong Kong cents. Dividends per share we have decided to be five cents, a slight drop of one Hong Kong cent. Gearing and debt levels more solid at the moment. Nine percent net gearing ratio to further suppress our financial cost. Operational performance. Revenue from mobile services increased 11% to $610 million. International telecom services increased 3% to $1.39 billion. Enterprise solutions revenue decreased by 7% to $1.27 billion. Internet services down 1% to $750 million. Fixed line services decreased 8%. to 58 million sales of mobile handsets, down 9% to 670 million. Mobile services, we consolidated our regional advantages and built a cross-border service ecosystem. We continue to strengthen 5.5G services applications In Macau, the penetration rate has exceeded 93%. At the moment, we continuously strengthen the switching over. After completing the acquisition of 100% stake of Hutchinson Telephone Macau, we boosted our mobile business market share and strengthen competitiveness. We strengthen leading advantage of 5.5G network and deeply cultivate this industry private network application. We continue to deepen strategic cooperation with three major Chinese mainland operators and Asia Pacific operators. Internet services, we consolidate the dual 5.5G 10 gigabit foundation. We upgrade our optical network facilities to expand and speed up city network. In terms of enterprises, we continue to promote operation of enterprise surface market, expand internet exit bandwidth in the Asia-Pac and Hong Kong-Macau regions, and continuously deepen Hong Kong-Macau regional synergy. We cultivate We focus on high-value customers and steadily optimize customer base structure. International Telecom Services We continuously promote our refined operations, offering better quality services. You can see a growth of our performance in revenue. A growth of 15 million. Our data mall services, we continue to upgrade it. and we have also seen a growth of international mobile data traffic transactions. Enterprise Solutions, a mild drop in our revenue because of certain seasonal arrangements. We continuously expand and upgrade our backbone network, complete expansion and new construction in key hubs such as Hong Kong, Singapore and Dubai and further strengthen connectivity capabilities in nation region and along the belt and road countries. We deeply implement the cloud network security plus AI dual wheel drive strategy. We focus on AI to enhance user service experience and empower multi-scenario smart office upgrades. We also focus on AI-centered technology evolution and expand intelligent business. CTM continues to launch AI Macau based on deployment of localized AI platforms, successfully deploy multiple government and enterprise digital intelligence benchmark projects, and we plan to transform to token operations. So you can see that. That is a clear trend. In Southeast Asian market, we have made some major breakthroughs. We won a very well-known local project in Singapore, enhancing market competitiveness. Fixed line services continue to decline. This is a continuous trend. so far the revenue has been dropping to 58 million which is in line with our expectation now i would like to report to you what we have done in terms of innovation and technology, how we have deepened AI ecosystem development. We participated in the formulation of technical and application requirements for intelligent assistant agents standards, which has now been officially released. Leveraging a strength in AI security governance, the group continues to drive a dual engine strategy of standards leading technological innovation and technology empowering business expansion. Our AI Innovation Centre has been steadily advancing projects in areas such as smart finance, industrial intelligence and digital communications. We have developed our own SIEM Mind platform, achieving its first commercial breakthrough in Hong Kong. We've upgraded SaaS products with the addition of quantum encryption functionality further enriching its product portfolio. Concerning CTM side, concerning this smart city, we have launched Dr. Easy platform, providing and upgrading cloud and data center services for nine medical institutions. And we have also this new contract that has been signed to promote the use of AI. CTM announced a localized CTM AI platform offering one-stop service solution, integrating large language models, computing power tokens and AI tools, leveraging the upgrade of its computing and network infrastructure. CTM is planning a strategic transition towards a token-based business model. In recent years, CITIC has been working tirelessly and we have been widely recognized by all sectors. Here are some of the examples. For example, we have been chosen as the best product innovation partner by China Telecom. Our cross-border encrypted communication service solution was awarded top 10 Lighthouse projects by Kunlun Ecosystem Alliance Roundtable Conference. We have always attached a lot of importance to ESG principles. For example, green operations and environmental protection. In terms of community care, we have also done quite a bit, among which you can see in Beijing, Shanghai, Guangzhou. We have launched this warm winter campaign working with the local district offices in Hong Kong together with Hong Kong Police, we have demonstrated some anti-fraud technologies to inspire students. In terms of security and compliance, CTM has established compliance governance framework integrating ISO standards and regulatory requirements to standardize policies, risk assessments, and audit processes, enhancing transparency and effectiveness of internal controls. It also established a data security governance framework Looking at our future development, we will continue to advance digital intelligence development, closely tracking our operators' evolving needs, expand our roaming services through data mall, and enhance IPX services to provide full support to 5G SA. We will accelerate product innovation and expand AI plus cloud network security business to coordinate internationalized and digital intelligent development. CTM is seizing the opportunities presented by AM Macau to advance its 5.5G infrastructure and is leveraging its innovation center to promote AI-powered smart solutions in areas such as tourism and transport to government and enterprise clients. We deepen our presence in the Southern Asian markets, including Singapore, Malaysia, and Thailand, expanding into the Indonesian and Philippines market actively. We will continue to deepen our development of AI. So far, we have driven business transformation and upgrade evolving into integrated AI service provider and promote commercialization of AI technologies. We promote diversified exploration of token services ecosystem. providing multilingual, multiregional and compliance adapted model. We will build a three-tier system of model plus application plus ecosystem, placing equal emphasis on internal benchmark development and external market expansion. We are going to set up landmark or iconic projects to take the lead. We will also accelerate cross-border connectivity on the security front. We will advance edge computing security research on a node-by-node basis, explore the deep integration of security capabilities into platform operations, and build a robust foundation for security technology. focusing on AI empowerment will drive cross-border circulation layout for token export services and accelerate development of a computing node network connecting Hong Kong Macau and Guangxi as well as a multi-cloud integration architect will recruit key talents, optimize T-structure, and strengthen R&D operations, sales synergies, and leverage the technology innovation center's role as a hub. So concerning AI development, that is the major direction for our next step forward. So that is our interim presentation. Thank you very much. Now we will proceed to the Q&A session. We will first take questions from on-site participants. Those calling in, please press star 1 and wait. We will invite questions from online participants later on. Let's take the first question from an on-site participant. I would like to ask about AI related business. What is the percentage of your revenue? What are the main products or client groups that represent the major sources of income? AI is going to be an important growth engine. So in what areas are you going to make your investments through strategic collaboration or M&A? Are you planning to use these methods to speed up your development? Okay. Concerning air-related development, as I have already pointed out, the entire enterprise has this major direction. But this year, at the moment, We are still at the starting point. So in order to be more specific concerning revenue proportion, we are not able to give you a figure because at the moment, when it comes to AI-related services, we are looking at a number of different directions. First of all, on the supply side, models and algorithm capability, computing power, that is one major direction in our company. is going to focus on computing power. We will do prudent investment. Secondly, in terms of application services, AI-related products, Concerning this, our company based on current applications, we have incorporated AI capabilities to provide more professional services to our customers. As I presented, we have our network operation center with AI and we will add that to our center so that we can offer to our customers more efficient and more accurate AI related services. So that is already incorporated into SOC capability including applications in CTM. We have provided to Macau government a lot of tourism, education, security, document analysis related products. At that time, they were all incorporated into the enterprise solutions segment to be launched and implemented. So in terms of this direction of application, we will rely more on AI capabilities to do certain complementary services, for the enterprises. Later on, in terms of AI applications, we're going to strengthen AI products and tools for enterprises. We'll focus more on that front and afterwards. Based on the products and revenue, we can do the statistics separately later on. If you look at the survey we have done in relation to customer needs, the use of AI shows a very strong demand. At the moment it is reflected in a number of areas. First of all, LLM and computing power supply is reflected on the demand for tokens. It corresponds to demand from different models. For example, for short videos, they will have their own LLM models. In terms of smart offices, they will need LLM such as Doubao. Our company is currently looking at enterprise solutions, helping them to use better models so that they can realize one-stop connection with external players. For example, we have heard about this tokenized platform, and we have already received standardization certification concerning this aggregation platform. We will continue to bring high level of convenience and security to enterprises when they use AI services. So this token service platform will continue to attract more customers. We see very great demand. enterprises, when they use AI, they are particularly concerned about security other than network connection services. We also have other types of security-related services. So when it comes to AI security direction, it is a very natural direction for our expansion. We'll have different points of breakthroughs, including together with mainstream LLM manufacturers. We will look into SaaS sandbox services to ensure when our enterprise customers use AI, their data or information won't be stolen by third parties. we can ensure enterprise customers higher level of security in the use of AI. When we look at the enterprise side where they use AI services, including sensitive data and when it comes to ethical or legal matters, Our products were able to help. We are still researching and developing these products. And we have launched a product with one of the mainstream players. And we're doing some pilot runs. We believe AI-related services represents a major direction for the group. We have already put together the 15 five-year plan so that we can transform ourselves into an AI consolidated service provider. We will continue to perfect our products and spare no effort in terms of marketing in Q4 this year. We believe we can totally commercialize this product. In addition to this direction, we understand there will be great challenges and difficulties, but we are confident with concerted efforts at the group level, we will be able to unleash our capability in the market. CTM as an operator, in terms of model plus computing power, CTM will play a very important role in the Macau market as well. Thank you. Can we take a second question? Thank you for the opportunity We can see attributable profit is stable, but dividend has been downward adjusted from six Hong Kong cents to five Hong Kong cents. What are the major considerations for this downward adjustment? Is it because of your capex or cash flow arrangements? How can the media present this dividend payout direction?

Thank you for the question. First of all

I would like to state that the company and the management attach great importance to return for our shareholders. For a very long period of time, the payout level is actually very high, around 75%. There's been no major capex or M&A in recent years. So when you ask the question, I have forgotten to answer. about AI direction M&A. So I can take you through that now very quickly. Well, we attach great importance to return to our shareholders in order to allow good growth of a company and create even greater return to our shareholders in the future. We must strengthen investment into CapEx, including actively looking for M&A opportunities. At the moment, our cash level is very sufficient, including our overall debt level is rather low. So we have made a downward adjustment, a difference of one Hong Kong cent. Later on, we hope to have sufficient cash flow to support our new business development. I would like to state one more time, our company attaches great importance to return to our shareholders. So despite this downward adjustment, it is still at a relatively high level. Looking ahead, we will maintain a relatively high pay ratio, but they will definitely be lower compared to previous years. If in the future we have major investments according to our revenue level, we will further consider downward adjustment of the payer level. Any other questions? Any other on-site questions? I would like to ask about the CTM's situation and its contribution. Since we acquired The entity, we have been working very hard to improve our cost and quality of our services. In the near future, we'll be able to reduce complaint level towards Hutchinson Macau to a satisfactory level. Of course, in the past six to seven months, we have done a lot of work when our customers make the decision they can freely choose between staying with Hutchison or CTM. We have seen nearly half of them have chosen to switch to 5G network under CTM for the time to come because Hutchison doesn't have 5G. So for the longer term, we will need our customers. for them to receive the best services. It should switch over to 5G. We will adhere to the ultimate interest of the users. Then in terms of service quality, of course, and integration, further advantages will be revealed. At the moment, I can say that the acquisition, compared to our expectation, things are outperforming. According to our expectation, it was not a losing business. So it is better. And I'm answering your question with a smile on my face.