OVERVIEW
In 2022, the Company firmly progressed to the Company’s “1 + 9 + 3” strategic planning, total revenue was RMB354.94 billion in 2022, up by 8.3% year-on-year. Service revenue reached RMB319.35 billion, up by 7.8% year-on-year. Net profit1 was RMB16.74 billion, up by RMB2.37 billion year-on-year.
In 2022, the Company’s net cash flow from operating activities was RMB100.54 billion. Capital expenditure was RMB74.20 billion. Liabilities-to-assets ratio was 46.5% as at 31 December 2022.
REVENUE
In 2022, the Company’s revenue was RMB354.94 billion, up by 8.3% year-on-year, of which, service revenue was RMB319.35 billion, up by 7.8% year-on-year due to continuous optimisation of the revenue mix.
The table below sets forth the composition of service revenue, and the percentage contribution of each service to total service revenue for the years of 2022 and 2021:
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2022 |
2021 |
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(RMB in billions) |
Total amount |
As a |
Total amount |
As a |
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|
|
|
|
|
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Service revenue |
319.35 |
100.0% |
296.15 |
100.0% |
|
Include: Basic business |
248.89 |
77.9% |
241.37 |
81.5% |
|
Industry Internet business |
70.46 |
22.1% |
54.78 |
18.5% |
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|
|
|
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Basic Business
In 2022, service revenue from basic business was RMB248.89 billion, up by 3.1% year-on-year.
Industry Internet Business
In 2022, service revenue from Industry Internet business was RMB70.46 billion, up by 28.6% year-on-year.
COSTS AND EXPENSES
In 2022, total costs and expenses amounted to RMB342.60 billion, up by 8.0% year-on-year.
The table below sets forth the items of the costs and expenses and their respective percentage of the revenue for the years of 2022 and 2021:
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2022 |
2021 |
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|
|
|
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|
(RMB in billions) |
Total amount |
As a |
Total amount |
As a |
|
|
|
|
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|
Operating costs |
342.60 |
96.5% |
317.18 |
96.7% |
|
Include: Interconnection charges |
10.95 |
3.1% |
11.56 |
3.5% |
|
Depreciation and amortisation |
86.83 |
24.4% |
85.65 |
26.1% |
|
Network, operation and support expenses |
56.42 |
15.9% |
53.09 |
16.2% |
|
Employee benefit expenses |
60.72 |
17.1% |
58.94 |
18.0% |
|
Include: salaries under employment contract |
40.85 |
11.5% |
39.75 |
12.1% |
|
Costs of telecommunications products sold |
34.72 |
9.8% |
30.68 |
9.4% |
|
Selling and marketing expenses |
34.46 |
9.7% |
32.21 |
9.8% |
|
General, administrative and other operating expenses |
58.50 |
16.5% |
45.05 |
13.7% |
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|
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Interconnection charges
The interconnection charges were RMB10.95 billion in 2022, down by 5.3% year-on-year and, as a percentage of revenue, changed from 3.5% in 2021 to 3.1% in 2022.
Depreciation and amortisation
Depreciation and amortisation charges were RMB86.83 billion in 2022, up by 1.4% year-on-year and, as a percentage of revenue, changed from 26.1% in 2021 to 24.4% in 2022.
Network, operation and support expenses
The Company expanded the scale of the basic network and relevant infrastructure. Network, operation and support expenses were RMB56.42 billion in 2022, up by 6.3% year-on-year and, as a percentage of revenue were basically stable, changed from 16.2% in 2021 to 15.9% in 2022.
Employee benefit expenses
The Company continued to optimise the operating results assessment to strengthen performance, effectiveness and the recruitment of innovative talents, employee benefit expenses were to RMB60.72 billion in 2022, up by 3.0% year-on-year and, as a percentage of revenue, changed from 18.0% in 2021 to 17.1% in 2022.
Cost of telecommunications products sold
Costs of telecommunications products sold were RMB34.72 billion and revenue from sales of telecommunications products were RMB35.59 billion in 2022. Gross profits on sales of telecommunications products was RMB0.87 billion.
Selling and marketing expenses
With the Company fully strengthening digital empowerment and accelerating O2O integrated operation development, selling and marketing expenses were RMB34.46 billion in 2022, up by 7.0% year-on-year and, as a percentage of revenue, decreased from 9.8% in 2021 to 9.7% in 2022.
General, administrative and other operating expenses
General, administrative and other operating expenses were RMB58.50 billion in 2022, up by 29.9% year-on-year, mainly due to the rapid growth of the Industry Internet business leading to increased related service costs.
EARNINGS
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2022 |
2021 |
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(RMB in billions) |
Total |
Total |
Change |
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|
|
|
|
|
Operating profits |
12.34 |
10.67 |
15.7% |
|
Net interest income/(finance costs) |
0.66 |
–0.17 |
N/A |
|
Share of net profit of associates |
2.15 |
1.86 |
15.6% |
|
Share of net profit of joint ventures |
1.59 |
1.45 |
10.0% |
|
Other income-net |
3.85 |
4.12 |
–6.5% |
|
Profit before income tax |
20.59 |
17.93 |
14.8% |
|
Income tax expenses |
3.75 |
3.42 |
9.6% |
|
Profit for the year |
16.74 |
14.37 |
16.5% |
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EBITDA2
In 2022, the Company’s EBITDA was RMB99.17 billion, up by 3.0% year-on-year. EBITDA as a percentage of service revenue was 31.1%, down by 1.4 percentage points year-on-year.
CAPITAL EXPENDITURE AND CASH FLOW
In 2022, capital expenditure of the Company totaled RMB74.20 billion, which mainly consisted of investments in mobile network, household internet and fixed-line voice, government, enterprise and innovative business etc. In 2022, the Company’s net cash flow from operating activities was RMB100.54 billion. Free cash flow3 was RMB26.34 billion after the deduction of the capital expenditure.
The table below sets forth the major items of the capital expenditure in 2022:
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2022 |
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(RMB in billions) |
Total expenditure |
As percentage |
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|
|
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Total |
74.20 |
100.0% |
|
Include: Mobile network |
26.41 |
35.6% |
|
Household internet and fixed-line voice |
8.76 |
11.8% |
|
Government, enterprise and innovative business |
14.12 |
19.0% |
|
Transmission network, infrastructure and others |
24.91 |
33.6% |
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BALANCE SHEET
The Company’s total assets changed from RMB591.08 billion as at 31 December 2021 to RMB642.66 billion as at 31 December 2022. Total liabilities changed from RMB257.64 billion as at 31 December 2021 to RMB299.13 billion as at 31 December 2022. The liabilities-to-assets ratio changed from 43.6% as at 31 December 2021 to 46.5% as at 31 December 2022. The debt-to-capitalisation ratio increased from 9.7% as at 31 December 2021 to 14.3% as at 31 December 2022. The net debt-to-capitalisation ratio was 0.5% as at 31 December 2022.
Note 1: Net profit represented profit attribute to equity shareholders of the Company.
Note 2: EBITDA represents profit for the year before finance costs, interest income, shares of net profit of associates, share of net profit of joint ventures, other income-net, income tax expense, depreciation and amortisation. As the telecommunications business is a capital intensive industry, capital expenditure and finance costs may have a significant impact on the net profit of the companies with similar operating results. Therefore, the Company believes that EBITDA may be helpful in analysing the operating results of a telecommunications service operator like the Company. However, it is a non-GAAP financial measure which does not have a standardised meaning and therefore may not be comparable to similar measures presented by other companies.
Note 3: Free cash flow represents operating cash flow less capital expenditure. However, it is a non-GAAP financial measure which does not have a standardised meaning and therefore may not be comparable to similar measures presented by other companies.