1934 Act Registration No. 1-14696
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the Month of March 2004
China Mobile (Hong Kong) Limited
(Translation of registrant's name into English)
60/F The Center
99 Queen's Road Central
Hong Kong, China
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
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(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes____ No X
-------
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):82-________________.)
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EXHIBITS
Exhibit Number Page
1.1 Announcement, dated March 18, 2004
FORWARD-LOOKING STATEMENTS
The Announcement, constituting Exhibit 1.1 to this Form 6-K, contains
forward-looking statements that are, by their nature, subject to significant
risks and uncertainties. Such forward-looking statements include, without
limitation, statements relating to the Company's ability to maintain a
relatively high growth rate, maintain its position as the market leader and
implement measures to maintain and consolidate market share in the high-value
customer market, as well as statements relating to improvements in China's
telecommunications regulatory environment following entrance into the World
Trade Organization and the future growth in China's mobile telecommunications
market.
Such forward-looking statements reflect the current views of the
Company with respect to future events. Actual results may differ materially from
information contained in the forward-looking statements as a result of a number
of factors, including, without limitation, any changes in regulatory policies of
the Ministry of Information Industry and other relevant government authorities,
the effects of competition on the demand and price of the Company's cellular
services, any changes in wireless and related technology, which could affect the
viability and competitiveness of the Company's cellular networks and its
cellular and other services, and changes in political, economic, legal and
social conditions in China including the Chinese government's policies with
respect to economic growth, foreign exchange, foreign investment and entry by
foreign companies into China's telecommunications market. In addition, the
Company's future network expansion and other capital expenditure and development
plans are dependent on numerous factors, including the availability of adequate
financing on acceptable terms, the adequacy of currently available spectrum or
the availability of additional spectrum, the availability of transmission lines
and equipment when required on acceptable terms, and the availability of
qualified management and technical personnel.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CHINA MOBILE (HONG KONG) LIMITED
Date: March 19, 2004 By: /s/ Wang Xiaochu
----------------
Name: Wang Xiaochu
Title: Chairman and Chief Executive
Officer
3
Exhibit 1.1
[LOGO OF CHINA MOBILE]
CHINA MOBILE (HONG KONG) LIMITED
(Incorporated in Hong Kong with limited liability under the Companies Ordinance)
2003 ANNOUNCEMENT OF FINAL RESULTS
.. Consolidated turnover reached RMB158.6 . Consolidated net profit of
billion, up by 23% RMB35.6 billion, up by 9%
.. Consolidated EBITDA of RMB92.3 billion, . Total subscribers exceeded
up by 19% 141.6 million, up by 20%
.. Sustained high EBITDA margin of 58.2%
CHAIRMAN'S STATEMENT
Dear Shareholders,
With intensified competition in Mainland China's telecommunications market and
the outbreak of Severe Acute Respiratory Syndrome, or SARS, in certain regions
of China during the first half, 2003 was a challenging year for the Group. It
is, thus, gratifying to note that, notwithstanding the intensely competitive
market environment, by unswervingly pursuing its established development
strategies and focusing on its core mobile telecommunications businesses,
proactively integrating its brands and developing new businesses, while
concurrently leveraging its competitive advantages, enhancing management
techniques and improving efficiency, thereby preserving its sound fundamentals,
the Group nonetheless sustained continued steady business growth and its solid
financial profile, while maintaining its position as the industry and market
leader.
Financial Results
By leveraging the advantages of scale that result from its being the market
leader in Mainland China's mobile telecommunications industry and ceaselessly
pursuing refined management techniques, despite the intensified competition in
the telecommunications market and the impact of SARS, the Group's operating
revenue in 2003 reached RMB158,604 million, representing an increase of 23.4 per
cent. compared to 2002's figure. EBITDA reached RMB92,278 million, representing
an increase of 19.4 per cent. compared to that of 2002. EBITDA margin was
maintained at a relatively high level of 58.2 per cent. Net profit reached
RMB35,556 million, representing an increase of 9.1 per cent. compared to that of
2002. The Group's earnings per share was RMB1.81, representing an increase of
6.5 per cent. compared to 2002's figure. In 2003, the Company maintained its
sound capital structure and robust free cash flow, thereby providing a solid
foundation and safeguard for the Company's future development.
Business Review
Throughout the past year, competition within Mainland China's telecommunications
market intensified by the day. The lower-end market was particularly impacted.
To meet this competition, the Group fully leveraged its network advantages,
integrated its brands and enhanced its customer service, rolled out marketing
plans, such as service packages and point accumulation reward programs to meet
the needs and consumption characteristics of different customer segments, and
aggressively promoted voice usage volume, to increase business revenue. Focusing
on the unique characteristics of the Chinese telecommunications market, by
actively developing corporate and institutional customers, the Group stabilized
its base of high-value subscribers while concurrently introducing and developing
new and innovative businesses. Through the adoption of a series of effective
competitive strategies, the Group experienced steady business growth. As at 31
December 2003, the Group's subscriber base reached 141.6 million and the total
usage volume reached 373.2 billion minutes. The Group's average revenue
per user per month (ARPU) in 2003 was RMB102, reflecting a moderating rate of
decline. As a result, the Group's position as the market leader in Mainland
China's mobile telecommunications industry was further secured.
In 2003, to address market needs and implement the Company's strategies, further
brand integration programs were launched and brand value has assumed increasing
prominence, including the successful full-scale launch of the new "M-Zone"
services targeting the youth market. In its first year, through a series of rich
and vibrant marketing campaigns that have elicited a vigorous response and
acclaim from its target market, the "M-Zone" services have rapidly achieved a
subscriber base of over 10 million. This robust brand positioning has shown
promise. The marketing initiatives for "M-Zone" resulted in the Group winning
various awards, such as "The Best Show" from The Regional DM Asia Awards 2003.
In conjunction with brand promotion, the Group further refined its operation
support systems, to fully implement its "single point access to all network
services" model. In 2003, the Group also completed a subscriber information
management platform. By providing both standardized basic service offerings plus
personalised services, the Group was able to fulfil the needs of various market
segments. Furthermore, leveraging these new systems and capabilities, the Group
launched new initiatives such as "Any Billing Error, Double Refund" and
International Roaming Chinese Greeting Messages, that are unique to the Chinese
market, thereby further enhancing customer satisfaction and loyalty.
In 2003, the Group's new businesses continued to drive rapid growth. The
proportion of the Group's operating revenue derived from new businesses
increased by 4.1 percentage points when compared to that of 2002, reaching a
double-digit figure of 10.2 per cent. for the first time ever. In particular,
the Short Message Service, or SMS, grew rapidly, doubling in both usage volume
and revenue when compared to 2002. SMS continued to be the main source of
revenue growth for new businesses. Concurrently, in accordance with principles
of "fairness, openness and `win-win' co-operation", the Group's "Monternet"
entered into broad co-operation arrangements with third-party mobile service
providers, with outstanding results. With more than 880 SMS service providers
offering more than 70,000 types of services, and with a subscriber base
exceeding 62.42 million, the widely-recognised "Monternet" brand is now
beginning to assert its truly massive market influence.
In 2003, the Group stepped up its efforts to promote voice usage volume,
especially by stimulating off-peak hour usage and increasing network utilization
during off-peak hours and in low-traffic areas. Further, under the principle of
optimizing its investment structures and pursuing economically efficient
investments, the Group implemented network construction and optimization
initiatives to meet the needs of the Group's growing subscriber base and
business operations, thereby laying a solid foundation for the Group's long-term
development. The Group is actively monitoring and studying the development of 3G
mobile telecommunications technology and will conduct 3G technology trials in
certain cities, to prepare for the future adoption of, and smooth migration
into, next-generation mobile technology.
Active Implementation of External Growth -- Continuing our Acquisition
Strategies
By unswervingly pursuing the complementary development strategies of organic and
external growth, the Company has actively sought opportunities to invest in
quality telecommunications assets in Mainland China. At present, the Company is
proceeding with the acquisition of mobile telecommunication companies in
Neimenggu (Inner Mongolia) and 9 other provinces and autonomous regions in
Mainland China, thereby continuing to create value for its shareholders.
Management of the Group
In 2003, the Group's development strategy employed refined management
techniques. By implementing thorough budget management and truly comprehensive
performance appraisal systems, the Group ensured the high-level integration of
all aspects of management and realized the benefits of its incentive and control
mechanisms, to enhance internal controls and reduce risk. The Company's
outstanding performance in 2003 won popular recognition and acclaim from various
sectors, chief among them: once again being selected as one of "The World's 400
A-List Companies" by the
renowned business magazine Forbes, and being the only company in Mainland China
to receive this honor two years in a row; being ranked first in "The Top 200
Emerging-Market Companies" by BusinessWeek for the fourth consecutive year;
being named "Best Managed Telecommunications Company in China 2003" by the
renowned financial magazine Euromoney; and being named "Best Financial
Management" in China in the "Asia's Best Companies 2003" survey by the renowned
financial magazine FinanceAsia.
Corporate Social Responsibility
As the industry leader, the Group has always stressed corporate social
responsibility and contributing to the community. In 2003, the Group continued
to engage in community service, such as making charitable donations to combat
the SARS outbreak, supporting environmental protection and helping the
disadvantaged. The Group also effectively employed its own network resources to
disseminate timely and helpful SARS-related news, as authorised by the News
Center of the Ministry of Health of China, to all its customers free of charge
via its SMS platform. This initiative not only provided the public with access
to the latest information, but also enhanced the Group's corporate profile and
received wide acclaim from the community. The "8858" SMS-based charitable
donation service established by the Company in 2002 to support the China
Children and Teenagers' Fund has significantly benefited the community. More
than RMB20 million in private donations has been collected through this channel.
Dividend
The Company holds in the highest regard the interests of its shareholders and
the returns achieved for its shareholders, especially minority shareholders.
Having taken into account such factors as the Company's financial position, cash
flow position and requirements to ensure the sustainable future growth of the
Company's business, particularly the current acquisition of the mobile
telecommunications companies in Neimenggu (Inner Mongolia) and 9 other provinces
and autonomous regions, the Board recommends payment of a final dividend of
HK$0.20 per share for the financial year ended 31 December 2003. This, together
with the interim dividend of HK$0.16 per share already paid during 2003, amounts
to an aggregate dividend payment of HK$0.36 per share for the full financial
year, representing an increase of 12.5 per cent. over the annual dividend of
HK$0.32 for the financial year 2002 and a dividend payout ratio of 21.1 per
cent. The Board is of the view that the Company's strong free cash flow will be
capable of supporting the investments required for sustained and steady growth
and generating a good cash return to shareholders. The Company will endeavour to
achieve a long-term sustainable, steadily increasing dividend, with a view to
generating the best possible return for shareholders.
Looking to the Future
From a macro market environment perspective, along with the continuous rapid
rate of China's overall economic growth, the continual increase in consumer
spending, improvements in mobile telecommunications technologies and rich mobile
telecommunications services offerings, will all help promote the increasing
acceptance and usage of mobile telecommunications in China, as such services
become more and more an integral part of daily life. The number of mobile
subscribers in China has already surpassed the number of fixed-line subscribers.
This phenomenon demonstrates the tremendous growth potential for the mobile
telecommunications market in China and the growth opportunities portending for
the Group. At the same time, the increasingly intensified competition in the
Mainland China's mobile telecommunications market also presents demanding
challenges for the Group.
In the face of these opportunities and challenges, particularly the
ever-competitive market conditions, the Group will seize opportunities, leverage
its advantages and adopt effective measures to respond proactively. In 2004, the
Group will continue to further integrate its brands, continuously improve
customer service and satisfaction, proactively experiment with terminal
customization, strive for bold innovation, and develop new businesses, with a
view to nurturing new revenue contributors, while concurrently closely
monitoring the development of new mobile telecommunications technologies. The
Company also intends to complete the current acquisition of the mobile
telecommunications assets in
Mainland China from its parent company. The speedy integration of these
businesses and thorough reform of their management will further enhance the
Group's overall capabilities.
Looking ahead, the Group will continue to uphold the philosophy that Company
management must always be candid, open, innovative and resolute, to maintain
sound business fundamentals and pursue balanced and sustainable development. I
am resolute in my belief that, by leveraging the advantages of the Group in a
wide range of areas and pursuing an appropriate development strategy, relying on
the unwavering perseverance of the Group's management and its employees, we can
provide even better quality services to our customers and generate greater value
for our shareholders.
Finally, on behalf of the Board, I would like to take this opportunity to
express my heart-felt thanks to our shareholders and investors for their
continued support, and to all members of the Board and the employees of the
Group for their diligent work in the past year.
Wang Xiaochu
Chairman and Chief Executive Officer
Hong Kong, 18 March, 2004
GROUP RESULTS
China Mobile (Hong Kong) Limited (the "Company") is pleased to announce the
audited consolidated results of the Company and its subsidiaries (the "Group")
for the year ended 31 December 2003.
CONSOLIDATED INCOME STATEMENT
Year ended 31 December
2002
Note 2003 restated
RMB million RMB million
Operating revenue (Turnover) 4
Usage fees 111,027 93,272
Monthly fees 20,666 16,901
Other operating revenue 5 26,911 18,388
------ ------
158,604 128,561
Operating expenses
Leased lines 4,914 5,287
Interconnection 12,868 12,975
Depreciation 36,611 26,827
Personnel 7,700 6,757
Other operating expenses 6 43,308 27,919
------ ------
105,401 79,765
Profit from operations 53,203 48,796
Amortisation of goodwill (1,850) (936)
Other net income 2,464 1,686
Non-operating net income 434 571
Interest income 807 713
Finance costs (2,099) (1,852)
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Profit from ordinary activities before taxation 52,959 48,978
Taxation 7 (17,412) (16,375)
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Profit from ordinary activities after taxation 35,547 32,603
Minority interests 9 (2)
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Profit attributable to shareholders 35,556 32,601
======== ========
Dividends attributable to the year:
Interim dividend declared and paid during the year 8 3,339 --
Final dividend proposed after the balance sheet date 8 4,178 6,678
-------- --------
7,517 6,678
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Earnings per share--Basic 9(a) RMB 1.81 RMB 1.70
======== ========
Earnings per share--Diluted 9(b) RMB 1.81 RMB 1.70
======== ========
Dividend per share--Interim 8 HK$0.16 --
======== ========
Dividend per share--Final 8 HK$0.20 HK$0.32
======== ========
CONSOLIDATED BALANCE SHEET
As at 31 December
2002
2003 restated
RMB million RMB million
Non-current assets
Fixed assets 171,604 165,409
Construction in progress 28,370 23,013
Goodwill 34,373 36,223
Interest in associates 16 16
Investment securities 77 77
Deferred tax assets 3,263 4,991
Deferred expenses 143 190
--- ---
237,846 229,919
Current assets
Inventories 2,050 1,586
Amount due from ultimate holding company 762 1,282
Accounts receivable 6,116 6,066
Other receivables 1,787 1,465
Prepayments and other current assets 2,128 2,059
Tax recoverable 258 --
Deposits with banks 17,227 11,069
Cash and cash equivalents 39,129 32,575
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69,457 56,102
Current liabilities
Bank loans and other interest-bearing borrowings 13,090 8,132
Bills payable 2,059 1,256
Current instalments of obligations under finance leases 68 68
Current portion of deferred revenue 9,476 6,760
Amount due to ultimate holding company 1,352 1,217
Amount due to immediate holding company 47 402
Accounts payable 25,225 19,251
Accrued expenses and other payables 22,317 16,460
Tax payable 4,516 6,568
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78,150 60,114
Net current liabilities (8,693) (4,012)
Total assets less current liabilities 229,153 225,907
Non-current liabilities
Bank loans and other interest-bearing borrowings (19,407) (36,348)
Amount due to immediate holding company (9,976) (15,176)
Deferred revenue, excluding current portion (688) (869)
Deferred tax liabilities (97) (58)
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(30,168) (52,451)
Minority interests (182) (191)
NET ASSETS 198,803 173,265
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CAPITAL AND RESERVES
Share capital 2,099 2,099
Reserves 196,704 171,166
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198,803 173,265
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Notes:
1 Basis of preparation
The Group's audited consolidated results for the year ended 31 December
2003 include the results of the Company, Guangdong Mobile Communication
Company Limited ("Guangdong Mobile"), Zhejiang Mobile Communication Company
Limited ("Zhejiang Mobile"), Jiangsu Mobile Communication Company Limited
("Jiangsu Mobile"), Fujian Mobile Communication Company Limited ("Fujian
Mobile"), Henan Mobile Communication Company Limited ("Henan Mobile"),
Hainan Mobile Communication Company Limited ("Hainan Mobile"), Beijing
Mobile Communication Company Limited ("Beijing Mobile"), Shanghai Mobile
Communication Company Limited ("Shanghai Mobile"), Tianjin Mobile
Communication Company Limited ("Tianjin Mobile"), Hebei Mobile
Communication Company Limited ("Hebei Mobile"), Liaoning Mobile
Communication Company Limited ("Liaoning Mobile"), Shandong Mobile
Communication Company Limited ("Shangdong Mobile"), Guangxi Mobile
Communication Company Limited ("Guangxi Mobile"), Anhui Mobile
Communication Company Limited ("Anhui Mobile"), Jiangxi Mobile
Communication Company Limited ("Jiangxi Mobile"), Chongqing Mobile
Communication Company Limited ("Chongqing Mobile"), Sichuan Mobile
Communication Company Limited ("Sichuan Mobile"), Hubei Mobile
Communication Company Limited ("Hubei Mobile"), Hunan Mobile Communication
Company Limited ("Hunan Mobile"), Shaanxi Mobile Communication Company
Limited ("Shaanxi Mobile"), Shanxi Mobile Communication Company Limited
("Shanxi Mobile"), China Mobile Holding Company Limited, China Mobile
(Shenzhen) Limited, Aspire Holdings Limited ("Aspire"), Aspire Information
Network (Shenzhen) Limited and Aspire Technologies (Shenzhen) Limited, for
the year ended 31 December 2003.
The Group's audited consolidated results for the year ended 31 December
2002 include the results of the Company, Guangdong Mobile, Zhejiang Mobile,
Jiangsu Mobile, Fujian Mobile, Henan Mobile, Hainan Mobile, Beijing Mobile,
Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong
Mobile, Guangxi Mobile, China Mobile (Shenzhen) Limited and Aspire and its
subsidiaries for the year ended 31 December 2002, and the post-acquisition
results of Anhui Mobile, Jiangxi Mobile, Chongqing Mobile, Sichuan Mobile,
Hubei Mobile, Hunan Mobile, Shaanxi Mobile and Shanxi Mobile for the period
from 1 July 2002 to 31 December 2002.
2 Change of accounting policy
In prior years, deferred tax liabilities were provided using the liability
method in respect of the taxation effect arising from all material timing
differences between the accounting and tax treatment of income and
expenditure, which were expected with reasonable probability to crystallise
in the foreseeable future. Deferred tax assets were not recognised unless
their realisation was assured beyond reasonable doubt. With effect from 1
January 2003, in order to comply with Statement of Standard Accounting
Practice ("SSAP 12 (revised)") issued by the Hong Kong Society of
Accountants, the Group adopted a new accounting policy for deferred tax.
Under the SSAP 12 (revised), deferred tax liabilities are provided in full
on all taxable temporary differences while deferred tax assets are
recognised to the extent that it is probable that future taxable profits
will be available against which the deductible temporary difference can be
utilised.
As a result of the adoption of this accounting policy, the Group's profit
for the year ended 31 December 2003 has been decreased by RMB62,000,000
(2002: RMB141,000,000) and the net assets as at 31 December 2003 have been
increased by RMB1,001,000,000 (at 31 December 2002: RMB1,063,000,000).
The new accounting policy has been adopted retrospectively, with the
opening balance of retained profits and reserves and the comparative
information of the Group adjusted for the amounts relating to prior
periods.
3 Segment reporting
No analysis of the Group's turnover and contribution to profit from
operations by geographical segment or business segment has been presented
as all the Group's operating activities are carried out in the People's
Republic of China (the "PRC") and less than 10 per cent. of the Group's
turnover and contribution to profit from operations were derived from
activities outside the Group's cellular telephone and related services
activities. There is no other geographical or business segment with segment
assets equal to or greater than 10 per cent. of the Group's total assets.
4 Turnover
Turnover represents usage fees, monthly fees and other operating revenue
derived from the Group's cellular telephone networks, net of PRC business
tax and government surcharges. Business tax and government surcharges are
charged at 3 to 3.3 per cent. of the corresponding revenue.
5 Other operating revenue
Other operating revenue mainly represents charges for wireless data and
value added services, roaming in fees and interconnection revenue. Roaming
in fees are received from China Mobile Communications Corporation in
respect of calls made by non-subscribers using the Group's cellular
telecommunications networks.
6 Other operating expenses
Other operating expenses primarily comprise selling and promotion expenses,
provision for doubtful accounts, operating lease charges, maintenance
charges, debt collection fees, spectrum charges and other miscellaneous
expenses.
7 Taxation
Taxation in the consolidated income statement represents:
2002
2003 restated
RMB million RMB million
Current tax
Provision for PRC enterprise income tax on the estimated taxable
profits for the year 16,020 17,724
Over-provision in respect of PRC enterprise income tax for prior year (375) (14)
------ ------
15,645 17,710
Deferred tax
Origination and reversal of temporary differences 1,767 (1,335)
------ ------
17,412 16,375
====== ======
(i) No provision has been made for Hong Kong profits tax as there were
no estimated Hong Kong assessable profits for the years ended 31
December 2003 and 2002.
(ii) The provision for the PRC enterprise income tax is based on a
statutory rate of 33 per cent. of the assessable profit of the Group
as determined in accordance with the relevant income tax rules and
regulations of the PRC during the year, except for certain
subsidiaries of the
Company and certain operations of the subsidiaries located within
special economic zones in the PRC, which enjoy a preferential rate
of 30 per cent. and 15 per cent. respectively.
8 Dividends
2003 2002
RMB million RMB million
Interim dividend declared and paid of HK$0.16
(equivalent to approximately RMB0.17) (2002: nil) per share 3,339 --
Final dividend proposed after the balance sheet date of HK$0.20
(equivalent to approximately RMB0.21)
((2002: HK$0.32) (equivalent to approximately RMB0.34)) per share 4,178 6,678
----- -----
7,517 6,678
===== =====
The final dividend proposed after the balance sheet date has not been
recognised as a liability at the balance sheet date.
9 Earnings per share
(a) Basic earnings per share
The calculation of basic earnings per share for the year is based on
the profit attributable to shareholders of RMB35,556,000,000 (2002
(restated): RMB32,601,000,000) and the weighted average number of
19,671,653,899 shares (2002: 19,151,322,221 shares) in issue during
the year.
(b) Diluted earnings per share
The calculation of diluted earnings per share for the year is based on
the adjusted profit attributable to shareholders of RMB35,685,000,000
(2002 (restated): RMB32,729,000,000), after adding back the interest
expense on the convertible notes, and the weighted average number of
19,762,812,436 shares (2002: 19,243,049,749 shares) issued and
issuable after adjusting for the effects of all dilutive potential
ordinary shares, as if all the outstanding share options and
convertible notes issued by the Company had been exercised or
converted into ordinary shares at the date of issue.
DISCUSSIONS OF SELECTED ITEMS OF THE RESULTS FOR THE YEAR 2003
1. Strong Cash Flow and Sound Capital Structure
In 2003, the Group's net cash from operating activities was RMB85,534
million and free cash flow (net cash from operating activities after
deduction of capital expenditure incurred) was RMB35,529 million. At the
end of 2003, the Group's total cash and bank balances were RMB56,356
million, of which 93.9 per cent., 5.3 per cent. and 0.8 per cent. were
denominated in RMB, U.S. dollars and Hong Kong dollars, respectively.
During 2003, in accordance with its overall capital arrangement, the Group
repaid, in advance of the original repayment timetable, RMB5,200 million of
the deferred consideration arising out of the year 2002 acquisition of
Anhui Mobile and the other 7 subsidiaries, in order to fine-tune its debt
profile and lower its cost of capital. The Group's debt to capitalization
ratio (capitalization represents the sum of total debts and shareholders'
equity) at the end of 2003 was approximately 18.3 per cent. This reflects
the Group's success in maintaining its financial position at a sound level
and provides a solid foundation for the implementation of the Group's
development
strategies of organic and external growth, including the intended
acquisition of the 10 provincial mobile telecommunications companies in
Mainland China.
To further reduce the cost of capital, the Group continued to fortify its
centralized treasury function, making appropriate capital allocations,
thereby enhancing the Group's ability to deploy internal funds with maximum
utility. At the end of 2003, the Group's short-term and long-term
borrowings totaled RMB44,600 million, representing a decrease of RMB16,380
million from those at the end of 2002. Of the total borrowings, 53.1 per
cent. was in RMB (consisting principally of RMB bonds, bank loans and
finance leases), and 46.9 per cent. was in U.S. dollars (consisting
principally of U.S. dollar-denominated fixed rate notes and convertible
notes, as well as the balance of the deferred consideration for the
acquisition of the 8 provincial operators in 2002). Approximately 49.7 per
cent. of the Group's borrowings were made at floating interest rates. The
average interest rate of borrowings (ratio of interest expenses to the
average balance of borrowings, including capitalized interest) of the Group
in 2003 was approximately 4.3 per cent., whereas the interest coverage
multiple (ratio of profit before interest and tax to interest expenses) was
26 times. This reflects the prudent financial risk management policies
consistently adopted by the Group, as well as its solid cash flow and sound
repayment capability. In 2003, Moody's upgraded the Company's corporate
credit rating to Baa1 and Standard and Poor's has also recently upgraded
the Company's corporate credit rating to BBB+, reflecting that the prudent
financial measures consistently adopted by the Group have won further
recognition from the market.
The Group will continue to pursue prudent financial policies, strictly
control financial risks, maintain its strong cash-flow generating
capability, realize its competitive advantages, allocate its resources in a
scientific manner, maintain debt at a sustainable level, lower its overall
cost of capital and reinforce and develop favorable economic efficiency,
with a view to generating greater returns for our shareholders.
2. Capital Expenditure
The Group's capital expenditure in 2003 was approximately US$6.0 billion,
which represents an increase of approximately US$400 million from the
original plan. In face of intensified market competition, the Group
promoted voice usage volume in a flexible manner, which increased total
network usage. Though the Group endeavored to promote voice usage volume
during off-peak hours while concurrently continuing to optimize the
allocation of network resources so as to ensure the effective utilization
of its networks, pressures for network capacity expansion continued. In
order to meet market needs, and after taking into account the Company's
future development and investment efficiency, the Group increased its
investment in GSM networks in 2003.
The Group's newly budgeted capital expenditure from 2004 to 2006 is US$14.0
billion. The budgeted capital expenditure for each of the three years is
US$5.8 billion, US$4.3 billion and US$3.9 billion, respectively. The new
capital expenditure budget for 2004 is higher than the amounts previously
budgeted, primarily as a result of the increased traffic volume and the
need to enhance the Company's foundation for its future development. The
capital expenditure for the next three years will be used mainly for the
construction of GSM networks, support systems, and for the development of
new technologies and new businesses. The required funding will be sourced
largely from cash generated from the Group's operating activities. The
Group is actively monitoring the development of 3G technologies and adopts
a prudent approach to the full-scale investment and construction of 3G
networks. Currently, only a minimal capital expenditure is budgeted
annually for 3G monitoring and performance trials.
3. Personnel Expenses
The Group bolstered its human resources reforms, by further optimizing the
closed-loop budget, performance-evaluation and incentive management system,
thereby enabling the Group to retain and attract talented staff while
maintaining effective control over personnel expenses. Personnel expenses
were RMB7,700 million in 2003. The Group had a total of 63,859 employees as
at 31
December 2003. In order to align the interests of staff with those of
shareholders, share options were granted to employees under the Company's
share option scheme. Further details of the share option scheme will be
disclosed in the "Report of the Directors" and Note 32 of the "Notes to the
Financial Statements" in the 2003 Annual Report. The Group has also
periodically provided training to its staff to encourage continuous
learning and self-development, thus ensuring the competitiveness in the
ever changing market environment.
COMPLIANCE WITH THE CODE OF BEST PRACTICE
Throughout the year ended 31 December 2003, the Company has complied with the
Code of Best Practice as set out in Appendix 14 to the Rules Governing the
Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Stock
Exchange") (the "Listing Rules") except that non-executive directors were not
appointed for a specific term but are subject to retirement by rotation and
re-election at the Company's annual general meeting in accordance with the
Company's Articles of Association.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES
The Company and its subsidiaries did not purchase, sell or redeem any of the
listed securities of the Company during the year.
CLOSURE OF REGISTER OF MEMBERS
The register of members of the Company will be closed from 14 June 2004 to 16
June 2004 (both days inclusive), during which period no transfer of shares in
the Company will be effected. In order to qualify for the proposed final
dividend, all transfers, accompanied by the relevant share certificates, must be
lodged with the Company's register, Hong Kong Registrars Limited, Room
1901-1905, 19th Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong
Kong, not later than 11 June 2004.
PUBLICATION OF ANNUAL RESULTS ON THE INTERNET WEBSITE OF THE STOCK EXCHANGE OF
HONG KONG LIMITED
The 2003 annual report containing the information required by paragraphs 45(1)
to 45(3) of Appendix 16 to the Listing Rules will be published on the website of
the Stock Exchange in due course.
The financial information set out above does not constitute the Company's
statutory financial statements for the years ended 31 December 2002 or 2003 but
is derived from those financial statements. Statutory financial statements for
the year ended 31 December 2003, which contain an unqualified auditors report,
will be delivered to the Registrar of Companies, and despatched to shareholders
as well as made available on the Company's website at
http://www.chinamobilehk.com.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this announcement may be viewed as
"forward-looking statements" within the meaning of Section 27A of the U.S.
Securities Act of 1933, as amended, and Section 21E of the U.S. Securities
Exchange Act of 1934, as amended. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors, which may cause the actual
performance, financial condition or results of operations of the Company to be
materially different from any future performance, financial condition or results
of operations implied by such forward-looking statements. Further information
regarding these risks, uncertainties and other factors is included in the
Company's most recent Annual Report on Form 20-F filed with the U.S. Securities
and Exchange Commission (the "SEC") and in the Company's other filings with the
SEC.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the Annual General Meeting of China Mobile (Hong
Kong) Limited will be held on 16 June 2004 at 2.30 p.m. in the Conference Room,
3rd Floor, JW Marriott Hotel, Pacific Place, 88 Queensway, Hong Kong for the
following purposes:
As Ordinary Business:
1. To receive and consider the financial statements for the year ended 31
December 2003 and the Reports of the Directors and the Auditors.
2. To declare a final dividend for the year ended 31 December 2003.
3. To elect Directors.
4. To re-appoint Auditors and authorise the Directors to fix their
remuneration.
And as Special Business, to consider and, if thought fit, to pass the following
as ordinary resolutions:
ORDINARY RESOLUTIONS
5. "THAT the director's fee for each Director shall be fixed at the sum of
HK$180,000 for each financial year commencing for the 2004 financial year
and until the Company in general meeting otherwise determines. The
director's fee will be payable on a time pro-rata basis for any non full
year's service."
6. "THAT:
(a) subject to paragraph (b) below, the exercise by the Directors during
the Relevant Period of all the powers of the Company to purchase
shares of HK$0.10 each in the capital of the Company including any
form of depositary receipt representing the right to receive such
shares ("Shares") be and is hereby generally and unconditionally
approved;
(b) the aggregate nominal amount of Shares which may be purchased on The
Stock Exchange of Hong Kong Limited or any other stock exchange on
which securities of the Company may be listed and which is recognised
for this purpose by the Securities and Futures Commission of Hong Kong
and The Stock Exchange of Hong Kong Limited pursuant to the approval
in paragraph (a) above shall not exceed or represent more than 10 per
cent. of the aggregate nominal amount of the share capital of the
Company in issue at the date of passing this Resolution, and the said
approval shall be limited accordingly;
(c) for the purpose of this Resolution "Relevant Period" means the period
from the passing of this Resolution until whichever is the earlier of:
1. the conclusion of the next annual general meeting of the Company;
2. the expiration of the period within which the next annual general
meeting of the Company is required by law to be held; and
3. the revocation or variation of the authority given under this
Resolution by ordinary resolution of the shareholders of the
Company in general meeting."
7. "THAT a general mandate be and is hereby unconditionally given to the
Directors to exercise full powers of the Company to allot, issue and deal
with additional shares in the Company
(including the making and granting of offers, agreements and options which
might require shares to be allotted, whether during the continuance of such
mandate or thereafter) provided that, otherwise than pursuant to (i) a
rights issue where shares are offered to shareholders on a fixed record
date in proportion to their then holdings of shares; (ii) the exercise of
options granted under any share option scheme adopted by the Company; or
(iii) any scrip dividend or similar arrangement providing for the allotment
of shares in lieu of the whole or part of a dividend in accordance with the
Articles of Association of the Company, the aggregate nominal amount of the
shares allotted shall not exceed the aggregate of:
(a) 20 per cent. of the aggregate nominal amount of the share capital of
the Company in issue at the date of passing this Resolution, plus
(b) (if the Directors are so authorised by a separate ordinary resolution
of the shareholders of the Company) the nominal amount of the share
capital of the Company repurchased by the Company subsequent to the
passing of this Resolution (up to a maximum equivalent to 10 per cent.
of the aggregate nominal amount of the share capital of the Company in
issue at the date of passing this Resolution).
Such mandate shall expire at the earlier of:
1. the conclusion of the next annual general meeting of the Company;
2. the expiration of the period within which the next annual general
meeting of the Company is required by law to be held; and
3. the date of any revocation or variation of the mandate given
under this Resolution by ordinary resolution of the shareholders
of the Company at a general meeting."
8. "THAT the Directors be and they are hereby authorised to exercise the
powers of the Company referred to in the resolution set out in item 7 in
the notice of this meeting in respect of the share capital of the Company
referred to in paragraph (b) of such resolution."
And as Special Business, to consider and, if thought fit, to pass the following
as a special resolution:
SPECIAL RESOLUTION
9. "THAT:
(a) Article 2 of the Company's Articles of Association be amended by
inserting the following definitions:
`"Associates" has the same meaning ascribed to it under the HKSE
Listing Rules;
"HKSE Listing Rules" means the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited;';
(b) Article 2 of the Company's Articles of Association be amended by
deleting:
`"Clearing House" shall mean a recognised clearing house within the
meaning of section 2 of the Securities and Futures (Clearing Houses)
Ordinance;'
and replacing with:
`"Clearing House" means a recognised clearing house under the
Securities and Futures Ordinance or any other ordinance substituted
therefor;';
(c) Article 75 of the Company's Articles of Association be amended by
inserting the words "Article 78A," immediately after the words
"Subject to" in the first line of Article 75;
(d) the following Article 78A be added to the Company's Articles of
Association:
`78A Where a member is, under the HKSE Listing Rules, required to
abstain from voting on any resolution or restricted to voting only for
or only against any resolution, any votes cast by or on behalf of such
member in contravention of such requirement or restriction shall not
be counted.';
(e) Article 97 of the Company's Articles of Association be deleted and
replaced with the following:
`97 At each annual general meeting one-third of the Directors for the
time being, or, if their number is not three or a multiple of three,
then the number nearest one-third, shall retire from office by
rotation. The Directors to retire in every year shall be those who
have been longest in office since their last election but as between
persons who became Directors on the same day shall (unless they
otherwise agree between themselves) be determined by lot. The retiring
Directors shall be eligible for re-election. The Company at any
general meeting at which any Directors retire may fill the vacated
offices.';
(f) Article 100 of the Company's Articles of Association be amended by
deleting the word "special" in the first line of Article 100 and
replacing it with the word "ordinary";
(g) Article 103 of the Company's Articles of Association be deleted and
replaced with the following:
`103 No person other than a retiring Director shall, unless
recommended by the Board for re-election, be eligible for election to
the office of Director at any annual general meeting unless notice in
writing of the intention to propose that person for election as a
Director and notice in writing by that person of his willingness to be
elected, shall have been lodged at the office or principal office of
the Company during a period of not less than seven days commencing no
earlier than the despatch of the notice of the annual general meeting
and at least seven days before the date of the annual general
meeting.';
(h) Article 108 of the Company's Articles of Association be deleted and
replaced with the following:
`108 A Director shall not vote (nor shall he be counted in the quorum)
on any resolution of the Board in respect of any contract or
arrangement or proposal in which he or any of his Associates, is to
his knowledge, materially interested, and if he shall do so his vote
shall not be counted (nor shall he be counted in the quorum for that
resolution), but this prohibition shall not apply to any of the
following matters, namely:
(i) any contract or arrangement for the giving by the Company
of any security or indemnity to the Director or his
Associates in respect of money lent or obligations
incurred or undertaken by him or any of them at the
request of or for the benefit of the Company or any of its
subsidiaries;
(ii) any contract or arrangement for the giving by the Company
of any security to a third party in respect of a debt or
obligation of the Company or any of its subsidiaries for
which the Director or his Associates has himself or
themselves assumed responsibility or guaranteed or secured
in whole or in part whether alone or jointly;
(iii) any contract or arrangement concerning an offer of the
shares or debentures or other securities of or by the
Company or any other company which the Company may promote
or be interested in for subscription or purchase where the
Director or his Associates are or are to be interested as
a participant in the underwriting or sub-underwriting of
the offer;
(iv) any contract or arrangement in which the Director is
interested in the same manner as other holders of shares
or debentures or other securities of the Company by virtue
only of his interest in shares or debentures or other
securities of the Company;
(v) any contract or arrangement concerning any other company
in which the Director or his Associates are interested
whether directly or indirectly as an officer or a
shareholder or in which the Director or his Associates are
beneficially interested in shares of that company other
than a company in which the Director and any of his
Associates are beneficially interested in 5 per cent. or
more of the issued shares of any class of the equity share
capital of such company (or of any third company through
which his interest or that of his Associates is derived)
or of the voting rights (excluding for the purpose of
calculating such 5 per cent. interest any indirect
interest of such Director or his Associates by virtue of
an interest of the Company in such company);
(vi) any proposal or arrangement for the benefit of employees
of the Company or its subsidiaries including the adoption,
modification or operation of a pension fund or retirement,
death or disability benefit scheme which relates both to
Directors, his Associates and employees of the Company or
of any of its subsidiaries and does not give the Director
or his Associates any privilege not generally accorded to
the class of persons to whom such scheme or fund relates;
and
(vii) any proposal or arrangement concerning the adoption,
modification or operation of any employees' share scheme
involving the issue or grant of options over shares or
other securities by the Company to, or for the benefit of,
the employees of the Company or its subsidiaries under
which the Director or his Associates may benefit.
If any question shall arise at any meeting of the Board as to the
materiality of the interest of a Director (other than the
Chairman of the meeting) or as to the entitlement of any Director
(other than such Chairman) to vote or be counted in the quorum
and such question is not resolved by his voluntarily agreeing to
abstain from voting or not to be counted in the quorum, such
question shall be referred to the Chairman of the meeting and his
ruling in relation to such other Director shall be final and
conclusive except in a case where the nature or extent of the
interest of the Director concerned as known to such Director has
not been fairly disclosed to the Board. If any question as
aforesaid shall arise in respect of the Chairman of the meeting
such question shall be decided by a resolution of the Board (for
which purpose such Chairman shall not be counted in the quorum
and shall not vote thereon) and such resolution shall be final
and conclusive except in a case where the nature or extent of the
interest of such Chairman as known to such chairman has not been
fairly disclosed to the Board.'"
By order of the Board
Yung Shun Loy Jacky
Company Secretary
18 March 2004
Notes:
1. Any member entitled to attend and vote at the above Meeting is entitled to
appoint one or more proxies to attend and, on a poll, vote in his stead. A
proxy need not be a member of the Company.
2. In order to be valid, a form of proxy together with the power of attorney
or other authority (if any) under which it is signed, or a notarially
certified copy thereof, must be deposited at the Company's registered
office at 60/F, The Center, 99 Queen's Road Central, Central, Hong Kong at
least 36 hours before the time for holding the above Meeting. Completion
and return of a form of proxy will not preclude a member from attending and
voting in person if he is subsequently able to be present.
3. The Board of Directors has recommended a final dividend for the year ended
31 December 2003 of HK$0.20 per share and, if such dividend is declared by
the members passing Resolution 2, it is expected to be paid on or about 21
June 2004 to those shareholders whose names appear on the Company's
register of members on 16 June 2004.
4. The register of members of the Company will be closed from 14 June 2004 to
16 June 2004 (both days inclusive), during which period no transfer of
shares in the Company will be effected. In order to qualify for the
proposed final dividend, all transfers, accompanied by the relevant share
certificates, must be lodged with the Company's register, Hong Kong
Registrars Limited, Room 1901-5, 19th Floor, Hopewell Centre, 183 Queen's
Road East, Wan Chai, Hong Kong, not later than 4 p.m. on 11 June 2004.
5. Concerning item 5 above, the proposed amount of HK$180,000 for each
Director for each financial year is determined after taking into account
the scale and complexity of the Company's business, and the workload and
responsibility of Directors. The proposed amount is the same as that for
the 2003 financial year.
6. Concerning item 6 above, the Directors wish to state that they will
exercise the powers conferred thereby to repurchase shares of the Company
in circumstances which they deem appropriate for the benefit of the
shareholders. The Explanatory Statement containing the information
necessary to enable the shareholders to make an informed decision on
whether to vote for or against the resolution to approve the repurchase by
the Company of its own shares, as required by the Rules Governing the
Listing of Securities on The Stock Exchange of Hong Kong Limited (the
"Listing Rules") will be set out in a separate letter from the Company to
be enclosed with the 2003 Annual Report.
7. Concerning item 9 above, the purpose of this item is to bring the Articles
of Association of the Company in line with certain changes to the Listing
Rules (which will come into effect on 31 March 2004) and the Companies
Ordinance (which came into effect on 13 February 2004). The background for
the proposed amendments to the following Articles of Association of the
Company is set out below:
(a) Article 2 To reflect the change in the reference to the Securities
and Futures Ordinance (the "SFO"). The Securities and
Futures (Clearing House) Ordinance was repealed upon the
commencement of the SFO on 1 April 2003. Any recognised
clearing house under the repealed ordinance shall be
deemed to have been recognised as a clearing house under
the SFO.
(b) Articles 75 To reflect the restriction on voting by members as
and 78A required by the amended Appendix 3 to the Listing Rules.
(c) Articles 97 To (i) amend the articles so that all directors will be
and 103 subject to retirement by rotation; and (ii) be consistent
with the amended Appendix 3 to the Listing Rules which
requires there to be a minimum period during which notice
may be given by a person other than a Director to propose
a person for election as a Director (and during which
notice is also given by such person of his willingness to
be elected). The minimum period must be fixed for at least
seven days and should commence no earlier than the
despatch of the notice of the meeting appointed for such
election and at least seven days before the date of such
meeting.
(d) Article 100 To be consistent with the amended Companies Ordinance that
removal of any Director before the expiration of his
period of office can be made by Ordinary Resolution
instead of Special Resolution. That is to say, such a
resolution will be carried by a simple majority of votes
cast in favour of the resolution at that meeting.
(e) Articles 108 To be consistent with the provision of the amended
and 2 Appendix 3 to the Listing Rules so that (1) subject to
certain exceptions, a Director is not allowed to vote on
any resolution of the Board approving any contract or
arrangement or any other proposal in which he or any of
his associates has a material interest nor shall he be
counted in the quorum present at the meeting; and (2) the
term "associates" in relation to a Director will have the
same meaning as defined in the Listing Rules.
8. Concerning item 9 above, as the Articles of Association of the Company only
exist in English, the English text of the proposed resolution shall prevail
over the Chinese text.