Chairman's Statement

Dear Shareholders,

In the first half of 2015, amidst the complex competitive landscape, the Group proactively seized the good opportunities brought by the "Internet+" Plan, aligned with the development trends of three growth curves in voice, data traffic and digital services, further advanced strategic transformation, accelerated business redeployment and innovation, persistently bolstered our leading advantages in 4G business, fostered digital services and improved quality and efficiency, demonstrating a sound growth momentum. The Group led the industry in terms of revenue growth and maintained favorable profitability.


Financial Results

In the first half of 2015, the Group's operating revenue recorded a favorable growth and reached RMB340.7 billion, up by 4.9% over the same period last year, of which, revenue from telecommunications services was RMB299.5 billion, up by 0.5% over the same period last year. Driven by the rapid development of 4G business, data business continued to maintain a positive growth momentum with revenue of RMB151.5 billion, up by 24.3% over the same period last year, and as a percentage of revenue from telecommunications services increased to 50.6%. The revenue structure was further optimized, of which, revenue from wireless data traffic reached RMB100.9 billion, up by 40.1% over the same period last year and was the primary driver of the growth of revenue. In addition to the endeavor of increasing revenue, the Group further reinforced cost reduction and efficiency enhancement, deepened the transformation of marketing and sales model, strictly controlled administrative expenses and the results are favorable and continuously maintained favorable profitability. Profit attributable to equity shareholders decreased by 0.8% over the same period last year to RMB57.3 billion, and the margin of profit attributable to equity shareholders was 16.8%. EBITDA1 increased by 7.3% over the same period last year to RMB126.9 billion, and EBITDA margin2 was 37.2%. EBITDA was 42.4% of revenue from telecommunications services.

Rapid 4G Developments

Focusing on 4G quality network construction, we continue improving our capabilities in network and marketing and rapidly expanding our 4G customer base to consolidate our leading position in 4G development.

In the first half of 2015, the number of our 4G base stations reached 940,000. Keeping enhancing our network capability and coverage, we achieved the world's largest 4G network covering a population of more than one billion people, realizing nationwide continuous coverage in almost all cities and counties as well as data hotspot coverage in developed rural towns and villages. We proactively guided the development of the device supply chain to launch 4G devices of more diversified models at more affordable prices. In the first half of 2015, 140 million 4G handsets had been sold through all distribution channels. We accelerated our customer migration to 4G network by promoting the integrated marketing of devices, USIM cards and 4G tariff plans. The number of our 4G customers demonstrated an accelerating growth momentum, and a net increase of 99.6 million customers was recorded in the first half of 2015. As at the end of June 2015, our 4G customer base reached 190 million, accounting for 23% of our total number of customers, and our 4G customers' DOU reached 704MB. Meanwhile, we have launched 4G international roaming services in 82 countries and regions and accelerated the global development of TD-LTE through the efforts of GTI (Global TD-LTE Initiative).

Business Development

Seizing the opportunities arising from the 4G developments, the Group actively expanded the market focusing on the three major drivers of operations, namely, existing customers and business, data traffic and corporate customer services, and maintained stable growth in business development.

In terms of existing customers and business, we maintained a stable customer base and advantages in customer scale. As at the end of June 2015, we had over 810 million customers, representing a growth of 10.56 million customers as compared with the end of 2014. We further developed our operations of existing customers and business, and accelerated the migration of customers from 2G and 3G networks to 4G network with a stable retention of middle-to-high-end customers.

We achieved notable increase in data traffic operation and transition from voice-centric to data-centric operations. We accelerated the construction of internet infrastructure to increase the internet access speed, and the mobile phone on-net hits rate reached 84.8%. In the meantime, aligned with customers' demand, we promoted the restructuring of tariff plans and launched innovative services such as integrated data tariff plans and data traffic sharing service. Our data traffic operations showed a rapid growth momentum. In the first half of 2015, our mobile data traffic increased by 154% as compared with the same period last year. The driving force of data traffic as the primary driver of revenue growth becomes more apparent.

We diversified our products designed for corporate customers and achieved a rapid growth in revenue. We launched the commercial Mobile Cloud service and the trial commercialization of three corporate integrated products of Cloud Switchboard, Cloud Corporate Messaging and Cloud Video; endeavored to establish major products such as "and-Education", "and-Health" and "Internet of Vehicles" to provide integrated solutions targeting different industries and enhance customer value and revenue scale. Revenue from informationalization services increased by 18.7% as compared with the same period last year, with a notable increase in market shares.

Strategic Transformation

The Chinese government has formulated the "Internet+" action plan and is actively promoting the integration of mobile Internet, Big Data, Cloud Computing and Internet of Things with modern manufacture to achieve industrial upgrading and updating. In the future, digital services will extensively reshape the mode of production and lifestyle, providing a promising market for the development of the information and communication industry. Aligned with the development trends of mobile Internet and the "Internet+", the Group seized the alternating trends of the three curves and deepened its strategic transformation.

The Group focused on the establishment of a quality and efficient 4G network, persisted with the development of Four-Network Coordination and enhanced its overall network capability, leading to a more reasonable data carrying structure. Our 4G mobile data traffic increased to 62% of the total data traffic. The major data carrying 4G network had promoted the transition from voice-centric to data-centric operations. We further improved our infrastructure network capabilities, focusing on the accumulation and construction of infrastructure resources including our transmission networks, public Internet and IDC. Leveraging our wireless broadband advantages, we promoted the development of fixed-line broadband access with actual situation, to provide foundation and support for the transition from mobile services to innovative full-services.

Adhering to the "smart pipes, open platform, featured services, friendly interface" policy, the Group promoted the development of mobile Internet and its capacities in digital services. Leveraging our advantages in resources, scale and capabilities, we consolidated and promoted the product series of "and-Entertainment", "and-Life" and "and-Communication", and accelerated the construction and function development of integrated communication platforms. In the meantime, we strengthened redeployment in entertainment, education, transportation, Internet of Things and other key areas, attached great importance to the building of our new capacities in Next Generation Network, Big Data and Open Platform, actively promoted the specialized reform in digital services, accelerated the development of the third growth curve and carried out the transformation and evolution from communications to digital services.

Reform and Innovation

The Group endeavored to promote business redeployment and innovation. Adhering to the principles of centralized management, operational specialization, marketoriented mechanisms, the building of a flat organization and the standardization of processes, the Group constructed new infrastructure and developed products and services for specialized operations and further strengthened our capabilities to achieve sustainable growth.

We improved our capabilities in specialized company operation. With respect to devices, we created our own brand devices and launched the VoLTE-supported smartphones A1 and N1 featuring five modes and eleven frequencies priced at around RMB1,000. With respect to corporate customer operations, we built network-wide collaborative sales systems for major customers and corporate customer product systems for various industries. We established the China Mobile Innovation Industry Fund to promote industrial innovation. We have commenced construction of research centers in Suzhou and Hangzhou. MIGU Company Limited which focuses on mobile Internet digital content services has gradually achieved full integration of the five content areas. Our online services company has accelerated the capacity building of centralized services.

We strengthened centralized management focusing on network malfunction, performance, optimization and maintenance. We continued promoting centralized procurement, further centralized the management of sales outlets and optimized our centralized information security system. We also accelerated the centralized construction of modern infrastructure and our International Information Port Data Center has started production.

Corporate Governance

Abiding by corporate governance principles of integrity, transparency, openness and efficiency, the Company strived to better corporate governance practices by strictly following the requirements under the Listing Rules. We continued to improve the risk management and internal controls, enhance risk predictions and the effects of risk management and control, and promoted the integration of internal controls and business processes. In the first half of 2015, in response to internal and external operating environments as well as regulatory requirements, we focused on the effectiveness and standards of our development, strengthened the supervision on major items in key areas to prevent operation risks and eliminate management loopholes. We continued improving our management systems and mechanisms to ensure our healthy operations.

Investment and Acquisition

Taking into consideration our full-service strategic development, in order to obtain quick access to fixed-line broadband core resources and enhance our operational and managerial efficiency, the Company is currently considering a potential acquisition (the "Potential Acquisition") of the assets and businesses of China TieTong Telecommunications Corporation, a wholly owned subsidiary of China Mobile Communications Corporation, the Company's ultimate controlling shareholder.

The Company will comply with the relevant requirements under the Listing Rules and disclose information in relation to the Potential Acquisition as and when appropriate.

Corporate Social Responsibility

The Group has always attached great importance to corporate social responsibility. We continued to deepen the management of our corporate social responsibility, implemented innovative social responsibility practices and played an important role in providing emergency communication services, safeguarding network and information security, eliminating digital divide, facilitating energy saving and emissions reduction and supporting social and charity activities, thus earned wide recognition. We furthered our "Green Action Plan". In the first half of 2015, we realized a reduction in overall energy consumption per unit of information flow by 15.1% over the same period last year. Through our China Mobile Charity Foundation, we continued to carry out philanthropic activities such as poverty alleviation and education support. As at the end of June 2015, we have cumulatively sponsored surgeries for 2,456 children in poverty with congenital heart disease. We continue promoting the "Blue Dream" Education Aid Plan and plan to sponsor trainings for 11,000 primary and secondary school principals in central and western China in 2015.

Awards and Recognition

Our efforts have been widely recognized and praised. In 2015, our ranking in Forbes Magazine's "Global 2000" List improved to 20th and once again, we were listed among the "FT Global 500", ranking improved to 11th. The China Mobile® brand was named one of the "BRANDZ™ Top 100 Most Powerful Brands" by Millward Brown and Financial Times for the tenth consecutive year, ranking 15th globally. In the first half of 2015, Moody's and Standard & Poor's kept our corporate credit ratings equivalent to China's sovereign credit ratings, which are Aa3/ Outlook Stable and AA-/ Outlook Stable, respectively.


In view of our operating results in the first half of 2015, and taking into consideration of our long-term sustainable development, the Board declared an interim dividend of HK$1.525 per share in accordance with the dividend payout ratio planned for the full financial year of 2015.

The Board believes that the Company's favorable profitability and healthy cash flow generating capability will be able to provide sufficient support to its future development, while providing shareholders with a favorable return.

Future Outlook

Looking ahead, the Chinese government's promotion of the "Internet+" Plan will lead information consumption to become an emerging area with rapid growth. In the Internet of Everything era, everything including human beings, objects, locations, data will be re-organized and re-connected, which opens up a broad market for digital services, brings broad space for the sustainable development of the information and communication industry and provides unprecedented opportunities for the Company's development.

Nonetheless, we are facing severe challenges from intensified competition in three aspects. With respect to competition in Internet, the operators are facing with the pressure of business substitution of internet companies, the competition for customers as well as network bypass and reshaping of the industry landscape. With respect to cross-industry competition, the manufacturers of network equipment and devices are attempting to enter the field of operation. With respect to competition within the industry, the competition among operators focusing on existing customers and business and data traffic is further intensified, thus our leading window period in 4G is shortened under the growing competition. In addition, changes of customer demand leading to the adjustments of tariff policy will bring considerable impacts on our development.

Looking ahead, the Group will focus on the strategic vision of "Mobile Changes Life, Build Quality Smart Pipe, Become a Trustworthy Digital Services Expert", firmly seize the favorable opportunities arising during the golden period of data traffic operation for developing digital services, continue to adhere to quality and efficiency, and promote business redeployment and innovation. We will further bolster our leading advantages in 4G business and accelerate the development of fostering digital services. By carrying out industrial layout, capacity building, integrated innovation and reform drive, we will continue expanding our market share in daily life services oriented to individual customers and information services oriented to all industries to build our new advantages for competition and development.

Meanwhile, we will look for appropriate external investment opportunities in an active but cautious manner, and strive to broaden our presence in the market to support our transformation and development.

We will persevere as always and strive to create value for investors.

Xi Guohua
20 August 2015, Hong Kong

  1. The Company defines EBITDA as profit for the period before taxation, share of profit of associates, finance costs, interest income, non-operating income (net), depreciation and amortization of other intangible assets
  2. EBITDA margin = EBITDA/Operating revenue