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OFFON

HUTCHISON TELECOMMUNICATIONS HONG KONG HOLDINGS LIMITED

(215)
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Hutchison Telecommunications Hong Kong : AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2019

02/28/2020 | 04:45am EDT

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

Hutchison Telecommunications Hong Kong Holdings Limited

和記電訊香港控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 215)

AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2019

HIGHLIGHTS

Post-IFRS 16 Basis (1)

2019

2018

HK$ million

HK$ million

Change

Service revenue

3,613

3,662

-1%

Service EBITDA

1,634

1,108

+47%

Total EBITDA

1,662

1,157

+44%

Total EBIT

409

339

+21%

Profit attributable to shareholders

429

404

+6%

Earnings per share (in HK cents)

8.90

8.38

+6%

Final dividend per share (in HK cents)

3.75

3.20

+17%

Full year dividend per share (2) (in HK cents)

6.68

6.30

+6%

Pre-IFRS 16 Basis (1)

2019

2018

HK$ million

HK$ million

Change

Service revenue

3,613

3,662

-1%

Service EBITDA

1,173

1,108

+6%

Total EBITDA

1,201

1,157

+4%

Total EBIT

393

339

+16%

Profit attributable to shareholders

428

404

+6%

Note 1: Following the adoption of International Financial Reporting Standard 16 "Leases" ("IFRS 16") on 1 January 2019, the Group's statutory results for the year ended 31 December 2019 are on an IFRS 16 basis, whereas the statutory results for the year ended 31 December 2018 are on an IAS 17 basis ("Pre-IFRS 16 basis") as previously reported. Hence, any comparison between the two bases of reporting would not be meaningful. The Group believes that the IAS 17 basis metrics, which are not intended to be a substitute for, or superior to, the reported metrics on an IFRS 16 basis ("Post-IFRS 16 basis"), allows a like-with-like comparison with the prior year results, and better reflects management's view of the underlying operational performance. As a result, the Group has provided an alternative presentation of the Group's EBITDA, EBIT and profit attributable to shareholders prepared under the Pre-IFRS 16 basis relating to the accounting for leases for the year ended 31 December 2019. Unless otherwise specified, the discussion of the Group's operating results in this results announcement is on a Pre-IFRS 16 basis.

Note 2: The full year dividend per share is before one-off special interim dividend.

1

CHAIRMAN'S STATEMENT

Hutchison Telecommunications Hong Kong Holdings Limited ("the Company") and its subsidiaries (collectively "the Group") are pleased to announce the annual results for 2019. The intense competition in the mobile telecommunications market, which dampened the Group's service margin and profitability in the first half, remained unabated in the second half of the year. Nevertheless, the Group demonstrated resilience in this challenging operating environment and delivered a set of solid financial results with satisfactory earnings growth for the full year. This was mainly attributable to the customer segmentation strategy which deepened customer engagement and experience, commitment to drive further operational efficiency through disciplined cost controls, as well as continued focus on exploring new and innovative revenue initiatives.

Service revenue marginally decreased by 1% to HK$3,613 million, mainly due to pricing pressure on local data tariffs, partly offset by strong growth in roaming data revenue as well as higher contribution from corporate solutions. Service EBITDA (Pre-IFRS 16 basis) increased by 6% primarily driven by stringent spending controls to improve operational efficiency. The Group continued to report a healthy service EBITDA margin (Pre-IFRS 16 basis) of 32%, a 2%-point growth compared with last year.

On a Pre-IFRS 16 basis, the Group's total EBITDA and EBIT increased by 4% and 16% to HK$1,201 million and HK$393 million respectively against last year.

On a Post-IFRS 16 basis, the Group's total EBITDA and EBIT increased by 44% and 21% respectively against last year. Profit attributable to shareholders increased by 6% to HK$429 million in 2019. Earnings per share were HK$8.90 for 2019, an increase of 6% compared with last year.

As of 31 December 2019, the Group's total number of customers in Hong Kong and Macau was approximately 3.7 million, a 12% increase from 3.3 million as of 31 December 2018. The increase was mainly driven by growing subscriptions in the prepaid segment. Postpaid customers accounted for 40% (31 December 2018: 46%) of the total customer base. Postpaid churn rate improved to 1.2% (2018: 1.3%), reflecting the effectiveness of the Group's retention programme. Postpaid gross ARPU decreased by 6% to HK$205 in 2019 (2018: HK$219), mainly due to keen market competition, despite rapid growth in data demand.

Dividend

The Board recommends payment of a final dividend of 3.75 HK cents (2018 final dividend:

3.20 HK cents) per share, payable on Wednesday, 27 May 2020, to shareholders whose names appear on the Register of Members of the Company at the close of business on Monday, 18 May 2020, being the record date for determining shareholders' entitlement to the proposed final dividend. Combined with the interim dividend of 2.93 HK cents per share, the full year dividend amounts to 6.68 HK cents per share (2018 full year dividend: 6.30 HK cents before one-off special interim dividend, and 86.30 HK cents after). The Board expects the total full year dividend payout to be equivalent to 75% of annual profit attributable to shareholders.

2

Outlook

The Hong Kong economy faced significant downward pressure during 2019. This economic downswing, together with the recent outbreak of coronavirus disease ("COVID-19"), cumulate in additional uncertainties in the Group's operating environment going forward. Domestic demands and local sentiments are expected to stay sluggish and soften further in the near term.

Against this challenging backdrop, the Group will continue to focus on simplification of operating processes and optimisation of resources for generating better efficiency and returns. While maintaining a prudent stance on spending, the Group will continue to focus on digital transformations to further enhance customer experience and engagement. The Group will also continue collaborations with the members of the CKHH Group as well as other partners, to unleash new digital services and Internet-of-Things solutions to facilitate market demands and sustain its competitiveness.

The Group is currently devoting resources in developing 5G infrastructure as part of the Group's long-term plan to revolutionise its network infrastructure, in particular to expand and improve the coverage of its services to customers while at the same time maintaining its competitive telecommunications service offerings to customers. The Group contemplates to deploy advanced 5G technology and develop high quality 5G network services to stay competitive as the telecommunications industry progresses towards the new 5G era.

The Group is taking precautions to safeguard its employees and business operations in light of the COVID-19 outbreak and will continue to monitor the development, ensuring appropriate steps are taken to manage the risks. Finally, I would like to thank the Board of Directors and all staff members for their dedication, professionalism and contributions to the Group.

FOK Kin Ning, Canning

Chairman

Hong Kong, 28 February 2020

3

MANAGEMENT DISCUSSION AND ANALYSIS

Financial Performance Summary - Pre-IFRS 16 basis (1)

2019

2018

HK$ million

HK$ million

Change

Revenue

5,582

7,912

-29%

Net customer service revenue

3,613

3,662

-1%

Local service revenue

2,875

2,980

-4%

Roaming service revenue

738

682

+8%

- Data

517

427

+21%

- Non-data

221

255

-13%

Hardware revenue

1,969

4,250

-54%

Bundled sales revenue

472

667

-29%

Standalone handset sales revenue

1,497

3,583

-58%

Net customer service margin

3,266

3,318

-2%

Net customer service margin %

90%

91%

-1% point

Standalone handset sales margin

28

49

-43%

Total margin

3,294

3,367

-2%

CACs

(797)

(959)

+17%

Less: Bundled sales revenue

472

667

-29%

───────

───────

CACs (net of hardware revenue)

(325)

(292)

-11%

Operating expenses

(1,837)

(1,991)

+8%

Operating expenses as a % of net customer service margin

56%

60%

+4% points

Share of EBITDA of a joint venture

69

73

-5%

EBITDA

1,201

1,157

+4%

Service EBITDA

1,173

1,108

+6%

Service EBITDA margin %

32%

30%

+2% points

CAPEX (excluding telecommunications licences)

(503)

(522)

+4%

EBITDA less CAPEX

698

635

+10%

Depreciation and amortisation (2)

(808)

(818)

+1%

EBIT

393

339

+16%

Service EBIT

365

290

+26%

Net interest and other finance income (2)

147

171

-14%

Profit before tax

540

510

+6%

Tax (2)

(104)

(77)

-35%

Profit attributable to non-controlling interests

(8)

(29)

+72%

Profit attributable to shareholders

428

404

+6%

Note 1: Following the adoption of IFRS 16 on 1 January 2019, the Group's statutory results for the year ended 31 December 2019 are on an IFRS 16 basis, whereas the statutory results for the year ended 31 December 2018 are on an IAS 17 basis ("Pre-IFRS 16 basis") as previously reported. Hence, any comparison between the two bases of reporting would not be meaningful. The Group believes that the IAS 17 basis metrics, which are not intended to be a substitute for, or superior to, the reported metrics on an IFRS 16 basis ("Post-IFRS 16 basis"), allows a like-with-like comparison with the prior year results, and better reflects management's view of the underlying operational performance. As a result, the Group has provided an alternative presentation of the Group's EBITDA, EBIT and profit attributable to shareholders prepared under the Pre-IFRS 16 basis relating to the accounting for leases for the year ended 31 December 2019. Unless otherwise specified, the discussion of the Group's operating results in this results announcement is on a Pre-IFRS 16 basis.

Note 2: Depreciation and amortisation, net interest and other finance income and tax include the Group's share of joint venture's respective items.

4

Financial Performance Summary - Post-IFRS 16 basis (1)

2019

2018

HK$ million

HK$ million

Change

Revenue

5,582

7,912

-29%

Net customer service revenue

3,613

3,662

-1%

Local service revenue

2,875

2,980

-4%

Roaming service revenue

738

682

+8%

- Data

517

427

+21%

- Non-data

221

255

-13%

Hardware revenue

1,969

4,250

-54%

Bundled sales revenue

472

667

-29%

Standalone handset sales revenue

1,497

3,583

-58%

Net customer service margin

3,266

3,318

-2%

Net customer service margin %

90%

91%

-1% point

Standalone handset sales margin

28

49

-43%

Total margin

3,294

3,367

-2%

CACs

(744)

(959)

+22%

Less: Bundled sales revenue

472

667

-29%

───────

───────

CACs (net of hardware revenue)

(272)

(292)

+7%

Operating expenses

(1,429)

(1,991)

+28%

Operating expenses as a % of net customer service margin

44%

60%

+16% points

Share of EBITDA of a joint venture

69

73

-5%

EBITDA

1,662

1,157

+44%

Service EBITDA

1,634

1,108

+47%

Service EBITDA margin %

45%

30%

+15% points

CAPEX (excluding telecommunications licences)

(503)

(522)

+4%

EBITDA less CAPEX

1,159

635

+83%

Depreciation and amortisation (2)

(1,253)

(818)

-53%

EBIT

409

339

+21%

Service EBIT

381

290

+31%

Net interest and other finance income (2)

132

171

-23%

Profit before tax

541

510

+6%

Tax (2)

(104)

(77)

-35%

Profit attributable to non-controlling interests

(8)

(29)

+72%

Profit attributable to shareholders

429

404

+6%

Note 1: Following the adoption of IFRS 16 on 1 January 2019, the Group's statutory results for the year ended 31 December 2019 are on an IFRS 16 basis, whereas the statutory results for the year ended 31 December 2018 are on an IAS 17 basis ("Pre-IFRS 16 basis") as previously reported. Hence, any comparison between the two bases of reporting would not be meaningful. The Group believes that the IAS 17 basis metrics, which are not intended to be a substitute for, or superior to, the reported metrics on an IFRS 16 basis ("Post-IFRS 16 basis"), allows a like-with-like comparison with the prior year results, and better reflects management's view of the underlying operational performance. As a result, the Group has provided an alternative presentation of the Group's EBITDA, EBIT and profit attributable to shareholders prepared under the Pre-IFRS 16 basis relating to the accounting for leases for the year ended 31 December 2019. Unless otherwise specified, the discussion of the Group's operating results in this results announcement is on a Pre-IFRS 16 basis.

Note 2: Depreciation and amortisation, net interest and other finance income and tax include the Group's share of joint venture's respective items.

5

Review of Financial Results

The Group's total revenue decreased by 29% to HK$5,582 million (2018: HK$7,912 million).

Service revenue slightly dropped by 1% to HK$3,613 million, primarily due to a 4% decrease in local service revenue from stiffening market competition in local data tariffs, largely offset by the improvement in roaming service revenue and higher contribution from corporate solutions.

Roaming service revenue, which accounted for 20% of the Group's service revenue (2018: 19%), reported an 8% increase to HK$738 million, underpinned by a 21% strong growth in data roaming revenue, reflecting the increasing popularity of our innovative roaming products and packages for frequent and leisure travellers.

Hardware revenue of HK$1,969 million was 54% lower than last year, mainly due to softer demand for new smartphones as the handset replacement cycle lengthened.

During the year, the Group continued to adhere to its strict cost discipline, fostering a low cost high efficiency operational environment. Key costs (Pre-IFRS 16 basis), comprising CACs, staff costs and other operating expenses, decreased by 4% to HK$2,509 million mainly due to operating expense savings from the implementation of various efficiency measures and initiatives.

On a Pre-IFRS 16 basis, the Group's total EBITDA increased by 4% to HK$1,201 million (2018: HK$1,157 million).

Service EBITDA (Pre-IFRS 16 basis) grew 6% to HK$1,173 million, benefiting from the aforementioned savings in key costs, partly offset by lower service margins from keen market competition. Service EBITDA margin (Pre-IFRS 16 basis) improved to 32% from 30% in 2018.

On a Pre-IFRS 16 basis, the Group's total EBIT increased by 16% to HK$393 million (2018: HK$339 million) and profit attributable to shareholders increased by 6% to HK$428 million (2018: HK$404 million), mainly due to the same factors noted above in respect of EBITDA.

On a Post-IFRS 16 basis, total EBITDA grew by 44% to HK$1,662 million. Taking into account the additional amortisation charges of HK$445 million from the recognition of right-of-use assets under IFRS 16, total EBIT increased by 21% to HK$409 million and profit attributable to shareholders increased by 6% to HK$429 million.

6

Key performance indicators

2019

2018

Change

Number of postpaid customers ('000)

1,475

1,499

-2%

Number of prepaid customers ('000)

2,180

1,777

+23%

───────

───────

Total customers ('000)

3,655

3,276

+12%

Postpaid customers to the total customer base (%)

40%

46%

-6% points

Postpaid customers' contribution to the net

87%

90%

-3% points

customer service revenue (%)

Monthly churn rate of postpaid customers (%)

1.2%

1.3%

+0.1% point

Postpaid gross ARPU (HK$)

205

219

-6%

Postpaid net ARPU (HK$)

176

186

-5%

Postpaid net AMPU (HK$)

161

169

-5%

As of 31 December 2019, the total number of customers in Hong Kong and Macau was approximately 3.7 million (31 December 2018: approximately 3.3 million). The increase was mainly due to growing subscriptions in the prepaid segment, which accounted for 60% of the total customer base (31 December 2018: 54%), as a result of increasing popularity of prepaid roaming cards for travellers.

During the year, as the Group continued to focus on enhancing its customer retention programmes, monthly postpaid churn rate improved to 1.2% (2018: 1.3%). Postpaid gross ARPU decreased by 6% to HK$205 in 2019 (2018: HK$219), reflecting tariff pricing pressure from keen market competition, despite rapid growth in data demand.

Net interest and other finance income

Net interest and other finance income (Post-IFRS 16 basis, with share of a joint venture) amounted to HK$132 million in 2019, compared with HK$171 million in 2018, mainly due to lower net cash balance subsequent to the distribution of special interim dividend in May 2019.

The Group continues to maintain a healthy financial position, despite a 43% decrease in net cash from HK$9,555 million at 31 December 2018 to HK$5,416 million at 31 December 2019. The lower net cash position was mainly due to the distribution of 2018 special interim dividend and final dividend as well as 2019 interim dividend totalling HK$4,150 million, and the acquisition of non-controlling interests in key subsidiaries of the Group during the year.

Acquisition of non-controlling interests

On 31 May 2019, the Group completed the acquisition of non-controlling interests in its key subsidiaries at a consideration of US$60 million (approximately HK$471 million). Post the acquisition, the Group now has 100% interest in its mobile business.

7

Capital expenditure

Capital expenditure on property, plant and equipment, which accounted for 14% (2018: 14%) of the Group's service revenue, reduced by 4% to HK$503 million. The decrease was mainly attributable to stringent control on capital expenditure and rescheduling of projects to better match future benefits. The Group continues to scrutinise capital expenditure with care and prudence, ensuring adequate resources are made available in accordance with operational and technological needs.

Spectrum investment

In October 2019, the Group acquired 40 MHz in the 3500 MHz band for 15 years from 2020 for a spectrum utilisation fee of HK$202 million through auction. In November 2019, the Group further acquired 30 MHz in the 3300 MHz band for a spectrum utilisation fee of HK$199.5 million for 15 years from 2019 through another auction.

Summary of spectrum investment as of 31 December 2019

Spectrum band

Bandwidth

Year of expiry

Hong Kong

900 MHz

10 MHz

2026

900 MHz

16.6 MHz

2021

1800 MHz

23.2 MHz

2021

2100 MHz

29.6 MHz

2031

2300 MHz

30 MHz

2027

2600 MHz

30 MHz

2024

2600 MHz

10 MHz

2028

3300 MHz

30 MHz

2034

Macau

900 MHz

10 MHz

2023

1800 MHz

20 MHz

2023

2100 MHz

10 MHz

2023

  • After the spectrum auction and licence renewal in 2018, the licence period of the existing 16.6 MHz in the 900 MHz band was extended from November 2020 to January 2021 to align with the new spectrum assignment period. Subsequently, the Group will hold 10 MHz in the 900 MHz band and 30 MHz in the 1800 MHz band from 2021 to 2036.
  • The spectrum band was shared under 50/50 joint venture - Genius Brand Limited.

8

HUTCHISON TELECOMMUNICATIONS HONG KONG HOLDINGS LIMITED CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2019

Note

2019

2018

HK$ million

HK$ million

Revenue

4

5,582

7,912

Cost of inventories sold

(1,941)

(4,201)

Staff costs

(376)

(374)

Expensed customer acquisition and retention costs

(202)

(160)

Depreciation and amortisation

(1,207)

(768)

Other operating expenses

6

(1,470)

(2,093)

─────

─────

386

316

Interest and other finance income

7

188

214

Interest and other finance costs

7

(35)

(21)

Share of result of a joint venture

(4)

(4)

─────

─────

Profit before taxation

535

505

Taxation

8

(98)

(72)

─────

─────

Profit for the year

437

433

═════

═════

Attributable to:

Shareholders of the Company

429

404

Non-controlling interests

8

29

─────

─────

437

433

═════

═════

Earnings per share attributable to shareholders of

the Company (expressed in HK cents per share):

- basic

9

8.90

8.38

═════

═════

- diluted

9

8.90

8.38

═════

═════

Details of interim dividends paid and proposed final dividend payable to shareholders of the Company are set out in Note 10.

9

HUTCHISON TELECOMMUNICATIONS HONG KONG HOLDINGS LIMITED

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2019

2019

2018

HK$ million

HK$ million

Profit for the year

437

433

Other comprehensive income

Item that will not be reclassified subsequently to income

statement in subsequent periods:

- Remeasurements of defined benefit plans

8

2

Item that may be reclassified subsequently to income

statement in subsequent periods:

- Currency translation differences

-

(2)

─────

─────

Total comprehensive income for the year, net of tax

445

433

═════

═════

Total comprehensive income attributable to:

Shareholders of the Company

437

404

Non-controlling interests

8

29

─────

─────

445

433

═════

═════

10

HUTCHISON TELECOMMUNICATIONS HONG KONG HOLDINGS LIMITED

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2019

Note

2019

2018

HK$ million

HK$ million

Non-current assets

Property, plant and equipment

2,326

2,194

Goodwill

2,155

2,155

Telecommunications licences

2,238

2,289

Right-of-use assets

435

-

Customer acquisition and retention costs

142

132

Contract assets

173

130

Other non-current assets

227

300

Deferred tax assets

169

258

Investment in a joint venture

336

396

─────

─────

Total non-current assets

8,201

7,854

-----------

-----------

Current assets

Cash and cash equivalents

11

5,416

9,555

Trade receivables and other current assets

12

564

546

Contract assets

240

276

Inventories

55

107

──────

──────

Total current assets

6,275

10,484

-----------

-----------

Current liabilities

Trade and other payables

13

1,509

1,755

Contract liabilities

142

132

Lease liabilities

300

-

Current income tax liabilities

24

16

──────

──────

Total current liabilities

1,975

1,903

-----------

-----------

Non-current liabilities

Lease liabilities

129

-

Other non-current liabilities

409

288

──────

──────

Total non-current liabilities

538

288

-----------

-----------

Net assets

11,963

16,147

══════

══════

Capital and reserves

Share capital

1,205

1,205

Reserves

10,758

14,771

──────

──────

Total shareholders' funds

11,963

15,976

Non-controlling interests

-

171

──────

──────

Total equity

11,963

16,147

══════

══════

11

HUTCHISON TELECOMMUNICATIONS HONG KONG HOLDINGS LIMITED

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2019

Attributable to shareholders of the Company

Retained

earnings/

Non-

Share

Share

(accumulated

Pension

Other

controlling

Total

capital

premium

losses)

reserve

reserves

Total

interests

equity

HK$ million

HK$ million

HK$ million

HK$ million

HK$ million

HK$ million

HK$ million

HK$ million

At 31 December 2018, previously reported

1,205

11,185

3,442

140

4

15,976

171

16,147

Changes in accounting policies (Note 2.3(b))

-

-

(7)

-

-

(7)

(1)

(8)

──────

──────

──────

──────

──────

──────

──────

──────

At 1 January 2019

1,205

11,185

3,435

140

4

15,969

170

16,139

----------

----------

----------

----------

----------

----------

----------

----------

Profit for the year

-

-

429

-

-

429

8

437

Other comprehensive income

Remeasurements of defined benefit plans

-

-

-

8

-

8

-

8

──────

──────

──────

──────

──────

──────

──────

──────

Total comprehensive income, net of tax

-

-

429

8

-

437

8

445

----------

----------

----------

----------

----------

----------

----------

----------

Dividend paid (Note 10)

-

-

(4,150)

-

-

(4,150)

-

(4,150)

Acquisition of non-controlling interests (i)

-

-

-

-

(293)

(293)

(178)

(471)

----------

----------

----------

----------

----------

----------

----------

----------

At 31 December 2019

1,205

11,185

(286)

148

(289)

11,963

-

11,963

══════

══════

══════

══════

══════

══════

══════

══════

  1. On 31 May 2019, the Group effectively acquired the entire 24.1% interests in each of HTCL, which indirectly holds 100% interests in HTMCL, and H3GHK from NTT DOCOMO, Inc., a subsidiary of Nippon Telegraph and Telephone Corporation, at a consideration of US$60 million (approximately HK$471 million). Consequently, HTCL, HTMCL and H3GHK became wholly-owned subsidiaries of the Group. The difference of HK$293 million between the proportionate share of the carrying amount of net assets of these subsidiaries and the consideration paid for the additional interests have been debited to other reserves of the Group.

12

HUTCHISON TELECOMMUNICATIONS HONG KONG HOLDINGS LIMITED

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2019

Attributable to shareholders of the Company

Cumulative

Non-

Share

Share

Retained

translation

Pension

Other

controlling

Total

capital

premium

earnings

adjustments

reserve

reserves

Total

interests

equity

HK$ million

HK$ million

HK$ million

HK$ million

HK$ million

HK$ million

HK$ million

HK$ million

HK$ million

At 1 January 2018

1,205

11,185

3,406

2

138

4

15,940

142

16,082

----------

----------

----------

----------

----------

----------

----------

----------

----------

Profit for the year

-

-

404

-

-

-

404

29

433

Other comprehensive income

Remeasurements of defined

benefit plans

-

-

-

-

2

-

2

-

2

Currency translation

differences

-

-

-

(2)

-

-

(2)

-

(2)

──────

──────

──────

──────

──────

──────

──────

──────

──────

Total comprehensive income,

net of tax

-

-

404

(2)

2

-

404

29

433

----------

----------

----------

----------

----------

----------

----------

----------

----------

Dividend paid

-

-

(368)

-

-

-

(368)

-

(368)

----------

----------

----------

----------

----------

----------

----------

----------

----------

At 31 December 2018

1,205

11,185

3,442

-

140

4

15,976

171

16,147

══════

══════

══════

══════

══════

══════

══════

══════

══════

13

HUTCHISON TELECOMMUNICATIONS HONG KONG HOLDINGS LIMITED

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2019

Note

2019

2018

HK$ million

HK$ million

Cash flows from operating activities

Cash generated from operations

1,512

530

Interest and other finance costs paid

(27)

(10)

Tax paid

-

(3)

──────

──────

Net cash from operating activities

1,485

517

-----------

-----------

Cash flows from investing activities

Purchases of property, plant and equipment

(503)

(513)

Additions to telecommunications licences

(203)

-

Proceeds from disposals of property, plant and

equipment

1

1

Interest received

200

173

Loan to a joint venture

(50)

(72)

──────

──────

Net cash used in investing activities

(555)

(411)

-----------

-----------

Cash flows from financing activities

Acquisition of non-controlling interests

(471)

-

Principal elements of lease payments

(448)

-

Dividend paid to the shareholders of the Company

10

(4,150)

(368)

Repayment of borrowings

-

(3,900)

──────

──────

Net cash used in financing activities

(5,069)

(4,268)

-----------

-----------

Decrease in cash and cash equivalents

(4,139)

(4,162)

Cash and cash equivalents at 1 January

9,555

13,717

──────

──────

Cash and cash equivalents at 31 December

5,416

9,555

══════

══════

14

NOTES

  1. General Information
    Hutchison Telecommunications Hong Kong Holdings Limited was incorporated in the Cayman Islands on 3 August 2007 as a company with limited liability. Its registered office address is P.O. Box 31119, Grand Pavilion, Hibiscus Way, 802 West Bay Road, Grand Cayman, KY1-1205 Cayman Islands.
    The Group is engaged in mobile business in Hong Kong and Macau. The shares of the Company are listed on the Main Board of the Stock Exchange.
    The consolidated financial statements of the Group are presented in Hong Kong dollars, unless otherwise stated. These financial statements were approved for issuance by the Board on 28 February 2020.
  2. Significant Accounting Policies
    The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with all applicable IFRS as issued by the IASB. These financial statements also comply with the applicable disclosure requirements of the Hong Kong Companies Ordinance (Chapter 622 of the Laws of Hong Kong).

The consolidated financial statements have been prepared under the historical cost convention and on a going concern basis. The preparation of the consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the

Group's accounting policies.

15

2 Significant Accounting Policies (Continued)

2.2 New/revised standard, amendments to existing standards and interpretation adopted by the Group

During the year, the Group has adopted the following new/revised standard, amendments to existing standards and interpretation which are relevant to the Group's operations and are effective for accounting periods beginning on 1 January 2019:

IFRSs (Amendments)

Annual Improvements 2015 - 2017 Cycle in relation to

IFRS 3 Business Combination, IFRS 11 Joint

Arrangements, IAS 12 Income Taxes and IAS 23

Borrowing Costs

IAS 19 (Amendments)

Plan Amendment, Curtailment or Settlement

IAS 28 (Amendments)

Long-term Interests in Associates and Joint Ventures

IFRS 9 (Amendments)

Prepayment Features with Negative Compensation

IFRS 16

Leases

IFRIC 23

Uncertainty over Income Tax Treatments

Save as disclosed in Note 2.3, the adoption of other amendments to existing standards and interpretation does not have a material impact to the Group's results of operations and financial position.

2.3 Changes in accounting policies

This note discloses the new accounting policies of IFRS 16 Leases that have been applied from 1 January 2019 and explains the impact of the adoption on the consolidated financial statements.

  1. IFRS 16 Leases
    The Group has adopted IFRS 16 from 1 January 2019 which resulted in changes in accounting policies. In accordance with the transition provisions in IFRS 16, the Group has adopted the modified retrospective approach for transition to the new lease standard. Under this transition approach, (i) comparative information for prior periods is not restated; (ii) the date of the initial application of IFRS 16 is the first day of the annual reporting period in which the Group first applies the requirement of IFRS 16, i.e. 1 January 2019; and (iii) the Group recognises the cumulative effect of initially applying the guidance as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) in the year of adoption, i.e. as at 1 January 2019.

16

2 Significant Accounting Policies (Continued)

2.3 Changes in accounting policies (Continued)

  1. IFRS 16 Leases (Continued) Accounting policies
    An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to control the use of an identified asset for a period of time in exchange for consideration. Such determination is made on an evaluation of the substance of the arrangement, regardless of whether the arrangements take the legal form of a lease.
    From 1 January 2019, leases are recognised as right-of-use assets and the corresponding lease liabilities at the dates at which the leased assets are available for use by the Group.
    Assets and liabilities arising from a lease are initially measured on a present value basis.
    1. Lease liabilities
      Lease liabilities include the net present value of the following lease payments:
      • fixed payments (including in-substance fixed payments), less any lease incentives receivable;
      • variable lease payments that are based on an index or a rate; and
      • payments of penalties for terminating the lease, if the lease term reflects the Group, as a lessee, exercising an option to terminate the lease.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Group's incremental borrowing rate, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar term and condition.

17

2 Significant Accounting Policies (Continued)

2.3 Changes in accounting policies (Continued)

  1. IFRS 16 Leases (Continued) Accounting policies (Continued)
    1. Lease liabilities (Continued)
      To determine the incremental borrowing rate, the Group:
      • where possible, uses recent third-party financing received by the Group as a starting point, adjusted to reflect changes in financing conditions since third party financing was received;
      • uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group, which does not have recent third party financing; and
      • makes adjustments specific to the lease.

The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until effective. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.

Lease payments are allocated between the principal and finance cost. The finance cost is charged to the consolidated income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

  1. Right-of-useassets
    Right-of-use assets are measured at cost comprising the followings:
    • the amount of the initial measurement of lease liability;
    • any lease payments made at or before the commencement date, less any lease incentive received;
    • any initial direct costs; and
    • restoration costs.

The right-of-use assets are amortised over the shorter of the assets' useful lives and the lease terms on a straight-line basis.

18

2 Significant Accounting Policies (Continued)

2.3 Changes in accounting policies (Continued)

  1. IFRS 16 Leases (Continued) Accounting policies (Continued)
    1. Short-termleases
      Payments associated with short-term leases for all classes of underlying assets are recognised on a straight-line basis over the lease terms as expenses in the consolidated income statement. Short-term leases are leases with a lease term of 12 months or less.

Practical expedients applied

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

  • the use of a single discount rate to a portfolio of leases with reasonably similar characteristics; and
  • the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date, the Group relied on its assessment made applying IAS 17 Leases and IFRIC 4 Determining whether an Arrangement contains a Lease.

19

2 Significant Accounting Policies (Continued)

2.3 Changes in accounting policies (Continued)

  1. Impact of adoption to the consolidated financial statements
    The following tables illustrate the amounts by each financial statements line item affected in current year by the application of IFRS 16 as compared to IAS 17 and IFRIC 4 that were previously in effect before the adoption of IFRS 16:

2019

Reported

under

Balance

current

without the

accounting

Effect of

adoption of

Consolidated Income

policies

IFRS 16

IFRS 16

Statement

HK$ million

HK$ million

HK$ million

Revenue

5,582

-

5,582

Cost of inventories sold

(1,941)

-

(1,941)

Staff costs

(376)

-

(376)

Expensed customer acquisition

and retention costs

(202)

-

(202)

Depreciation and amortisation

(1,207)

445

(762)

Other operating expenses

(1,470)

(461)

(1,931)

─────

─────

─────

386

(16)

370

Interest and other finance income

188

-

188

Interest and other finance costs

(35)

15

(20)

Share of result of a joint venture

(4)

-

(4)

─────

─────

─────

Profit before taxation

535

(1)

534

Taxation

(98)

-

(98)

─────

─────

─────

Profit for the year

437

(1)

436

═════

═════

═════

Attributable to:

Shareholders of the Company

429

(1)

428

Non-controlling interests

8

-

8

─────

─────

─────

437

(1)

436

═════

═════

═════

20

2 Significant Accounting Policies (Continued)

2.3 Changes in accounting policies (Continued)

  1. Impact of adoption to the consolidated financial statements (Continued)

2019

Reported

under

Balance

current

without the

accounting

Effect of

adoption of

Consolidated Statement of

policies

IFRS 16

IFRS 16

Comprehensive Income

HK$ million

HK$ million

HK$ million

Profit for the year

437

(1)

436

Other comprehensive income

Item that will not be reclassified

subsequently to income statement

in subsequent periods:

- Remeasurements of defined

benefit plans

8

-

8

─────

─────

─────

Total comprehensive income for

the year, net of tax

445

(1)

444

═════

═════

═════

Total comprehensive income

attributable to:

Shareholders of the Company

437

(1)

436

Non-controlling interests

8

-

8

─────

─────

─────

445

(1)

444

═════

═════

═════

21

2 Significant Accounting Policies (Continued)

2.3 Changes in accounting policies (Continued)

  1. Impact of adoption to the consolidated financial statements (Continued)

At 31 December 2019

Reported

under

Balance

current

without the

accounting

Effect of

adoption of

Consolidated Statement of

policies

IFRS 16

IFRS 16

Financial Position

HK$ million

HK$ million

HK$ million

Non-current assets

Property, plant and equipment

2,326

12

2,338

Goodwill

2,155

-

2,155

Telecommunications licences

2,238

-

2,238

Right-of-use assets

435

(435)

-

Customer acquisition and retention costs

142

-

142

Contract assets

173

-

173

Other non-current assets

227

-

227

Deferred tax assets

169

(1)

168

Investment in a joint venture

336

-

336

──────

──────

──────

Total non-current assets

8,201

(424)

7,777

-----------

-----------

-----------

Current assets

Cash and cash equivalents

5,416

-

5,416

Trade receivables and other current assets

564

2

566

Contract assets

240

-

240

Inventories

55

-

55

──────

──────

──────

Total current assets

6,275

2

6,277

-----------

-----------

-----------

Current liabilities

Trade and other payables

1,509

-

1,509

Contract liabilities

142

-

142

Lease liabilities

300

(300)

-

Current income tax liabilities

24

-

24

──────

──────

──────

Total current liabilities

1,975

(300)

1,675

-----------

-----------

-----------

Non-current liabilities

Lease liabilities

129

(129)

-

Other non-current liabilities

409

-

409

──────

──────

──────

Total non-current liabilities

538

(129)

409

-----------

-----------

-----------

Net assets

11,963

7

11,970

══════

══════

══════

Capital and reserves

Share capital

1,205

-

1,205

Reserves

10,758

7

10,765

──────

──────

──────

Total equity

11,963

7

11,970

══════

══════

══════

22

2 Significant Accounting Policies (Continued)

2.3 Changes in accounting policies (Continued)

  1. Impact of adoption to the consolidated financial statements (Continued)

2019

Reported

under

Balance

current

without the

accounting

Effect of

adoption of

policies

IFRS 16

IFRS 16

Consolidated Statement of Cash Flows

HK$ million

HK$ million

HK$ million

Net cash from operating activities

1,485

(448)

1,037

Net cash used in investing activities

(555)

-

(555)

Net cash used in financing activities

(5,069)

448

(4,621)

──────

──────

──────

Net decrease in cash and cash equivalents

(4,139)

-

(4,139)

══════

══════

══════

23

2 Significant Accounting Policies (Continued)

2.3 Changes in accounting policies (Continued)

  1. Impact of adoption to the consolidated financial statements (Continued)

31 December 2018

As previously

Effect of

1 January 2019

Consolidated Statement of

reported

IFRS 16

As restated

Financial Position

HK$ million

HK$ million

HK$ million

Non-current assets

Property, plant and equipment

2,194

(16)

2,178

Goodwill

2,155

-

2,155

Telecommunications licences

2,289

-

2,289

Right-of-use assets

-

621

621

Customer acquisition and retention costs

132

-

132

Contract assets

130

-

130

Other non-current assets

300

-

300

Deferred tax assets

258

1

259

Investment in a joint venture

396

-

396

──────

──────

──────

Total non-current assets

7,854

606

8,460

-----------

-----------

-----------

Current assets

Cash and cash equivalents

9,555

-

9,555

Trade receivables and other current assets

546

-

546

Contract assets

276

-

276

Inventories

107

-

107

──────

──────

──────

Total current assets

10,484

-

10,484

-----------

-----------

-----------

Current liabilities

Trade and other payables

1,755

-

1,755

Contract liabilities

132

-

132

Lease liabilities

-

398

398

Current income tax liabilities

16

-

16

──────

──────

──────

Total current liabilities

1,903

398

2,301

-----------

-----------

-----------

Non-current liabilities

Lease liabilities

-

216

216

Other non-current liabilities

288

-

288

──────

──────

──────

Total non-current liabilities

288

216

504

-----------

-----------

-----------

Net assets

16,147

(8)

16,139

══════

══════

══════

Capital and reserves

Share capital

1,205

-

1,205

Reserves

14,771

(7)

14,764

──────

──────

──────

Total shareholders' funds

15,976

(7)

15,969

Non-controlling interests

171

(1)

170

──────

──────

──────

Total equity

16,147

(8)

16,139

══════

══════

══════

24

2 Significant Accounting Policies (Continued)

2.3 Changes in accounting policies (Continued)

  1. Impact of adoption to the consolidated financial statements (Continued)
    Difference between operating lease commitments disclosed under IAS 17 and lease liabilities recognised under IFRS16
    The operating lease commitments disclosed as at 31 December 2018 were HK$265 million, while the lease liabilities recognised as at 1 January 2019 were HK$614 million, of which HK$398 million were current lease liabilities and HK$216 million were non-current lease liabilities.
    The differences between the operating lease commitments discounted using the lessee's incremental borrowing rate and the total lease liabilities recognised in the consolidated statement of financial position at the date of initial application of IFRS 16 comprised the exclusion of non-lease components and short-term leases recognised on a straight-line basis as expenses, and different treatments on lease contracts in relation to termination options or under renewal process. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on
    1 January 2019 was 3.0%.

25

2 Significant Accounting Policies (Continued)

2.4 New/revised standard and amendments to existing standards that are not yet effective and have not been early adopted by the Group

At the date of approval of these financial statements, the following new/revised standard and amendments to existing standards have been issued but are not yet effective for the year ended 31 December 2019:

IAS 1 and IAS 8 (Amendments) (i)

Definition of Material

IFRS 3 (Amendments) (i)

Definition of a Business

IFRS 7, IFRS 9 and IAS 39

Interest Rate Benchmark Reform

(Amendments) (i)

IFRS 10 and IAS 28

Sale or Contribution of Assets between an Investor

(Amendments) (iii)

and its Associate or Joint Venture

IFRS 17 (ii)

Insurance Contracts

  1. Effective for annual periods beginning on or after 1 January 2020
  2. Effective for annual periods beginning on or after 1 January 2021
  3. The original effective date of 1 January 2016 has been postponed until further announcement by the IASB

3 Critical Accounting Estimates and Judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Significant estimates and assumptions concerning the future may be required in selecting and applying accounting methods and policies in these financial statements. The Group bases its estimates and assumptions on historical experience and various other assumptions that it believes are reasonable under the circumstances. Actual results may differ from these estimates or assumptions.

The following is a review of the more significant estimates and assumptions used in the preparation of these financial statements.

  1. Estimated useful life for telecommunications infrastructure and network equipment
    The Group has substantial investments in mobile telecommunications infrastructure and network equipment. As at 31 December 2019, the carrying amount of the mobile telecommunications infrastructure and network equipment was approximately HK$1,722 million (2018: HK$1,628 million). Changes in technology or changes in the intended use of these assets may cause the estimated period of use or value of these assets to change.

26

3 Critical Accounting Estimates and Judgements (Continued)

  1. Asset impairment Non-financialassets
    Management judgement is required in the area of asset impairment, including goodwill, property, plant and equipment, right-of-use assets and telecommunications licences, particularly in assessing whether: (i) an event has occurred that may affect asset values; (ii) the carrying value of an asset can be supported by the net present value of future cash flows from the asset using estimated cash flow projections; and (iii) the cash flow is discounted using an appropriate rate. Changing the assumptions selected by management to determine the level, if any, of impairment, including the discount rates or the growth rate assumptions in the cash flow projections, could significantly affect the Group's reported financial position and results of operations. In performing the impairment assessment, the Group has also considered the impact of the current economic environment on the operation of the Group. The results of the impairment test undertaken as at 31 December 2019 indicated that no impairment charge was necessary.
  2. Allocation of revenue for bundled transactions with customers
    The Group has bundled transactions under contracts with customers including sales of both services and hardware (for example handsets). The amount of revenue recognised for each performance obligation is determined by considering the standalone selling prices at contract inception of each distinct service element and hardware element of the contract and allocating the revenue in proportion based on these standalone selling prices. Significant judgement is required in assessing the standalone selling prices of these elements, including observable prices or estimated prices based on adjusted market assessment approach. Changes in the estimated standalone selling prices may cause the revenue recognised for sales of services and hardware to change individually but not the total bundled revenue from a specific customer throughout the contract term. The Group periodically re-assesses the allocation basis as a result of changes in market conditions.
  3. Deferred taxation
    Management has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the recognition criteria for deferred tax assets recorded in relation to cumulative tax loss carried forward. The assumptions regarding future profitability of various subsidiaries require significant judgement, and significant changes

in these assumptions from period to period may have a material impact on the Group's reported financial position and results of operations. As at 31 December 2019, the Group has recognised deferred tax assets of approximately HK$169 million (2018: HK$258 million).

27

4 Revenue

Revenue comprises revenues from provision of mobile telecommunications and other related service as well as sales of telecommunications hardware. An analysis of revenue is as follows:

2019

2018

HK$ million

HK$ million

Mobile telecommunications and other related service

3,613

3,662

Telecommunications hardware

1,969

4,250

─────

─────

5,582

7,912

═════

═════

  1. Disaggregation of revenue
    The Group derives revenue from the provision of services and delivery of goods by timing of satisfaction of performance obligations as follows:

2019

2018

HK$ million

HK$ million

Timing of revenue recognition:

Over time

3,613

3,662

At a point in time

1,969

4,250

─────

─────

5,582

7,912

═════

═════

  1. Unsatisfied mobile telecommunications service contracts
    The aggregate amount of the transaction price allocated to the performance obligations arisen from fixed-price mobile telecommunications service contracts that are partially or fully unsatisfied as at 31 December 2019 was HK$2,804 million (2018: HK$3,008 million). Management expects that the transaction price allocated to these unsatisfied contracts will be recognised as revenue in the following future years:

2019

2018

HK$ million

HK$ million

Not later than 1 year

1,769

1,883

After 1 year, but within 5 years

1,029

1,119

After 5 years

6

6

─────

─────

2,804

3,008

═════

═════

The performance obligations arisen from other mobile telecommunications service contracts are for period of one year or less or are billed based on usage incurred. As permitted under IFRS 15, the transaction price allocated to these unsatisfied contracts is not disclosed.

28

  1. Segment Information
    In a manner consistent with the way in which information is reported internally to the
    Group's chief operating decision maker for the purpose of resource allocation and performance assessment, the Group has identified only one reporting segment, i.e. mobile telecommunications business.
  2. Other Operating Expenses

2019

2018

HK$ million

HK$ million

Cost of services provided

1,255

1,447

General administrative and distribution costs

162

162

Rental expenses in respect of:

- Buildings

27

457

- Hire of plant and machinery

-

1

Loss on disposals of property, plant and equipment

1

1

Auditor's remuneration

7

7

Provision for doubtful debts

18

18

─────

─────

Total

1,470

2,093

═════

═════

7

Interest and Other Finance Income, Net

2019

2018

HK$ million

HK$ million

Interest and other finance income:

Bank interest income

167

193

Interest income from a joint venture

21

21

─────

─────

188

214

---------

---------

Interest and other finance costs:

Bank loans

-

(1)

Notional non-cash interest accretion (i)

(23)

(11)

Guarantee and other finance fees

(12)

(9)

─────

─────

(35)

(21)

---------

---------

Interest and other finance income, net

153

193

═════

═════

  1. Notional non-cash interest accretion represents the notional adjustments to accrete the carrying amount of certain obligations recognised in the consolidated statement of financial position such as lease liabilities, licence fees liabilities and assets retirement obligations to the present value of the estimated future cash flows expected to be required for their settlement in the future.

29

8

Taxation

2019

Current

Deferred

taxation

taxation

Total

HK$ million

HK$ million

HK$ million

Hong Kong

10

90

100

Outside Hong Kong

(2)

-

(2)

────

────

────

8

90

98

════

════

════

2018

Current

Deferred

taxation

taxation

Total

HK$ million

HK$ million

HK$ million

Hong Kong

16

46

62

Outside Hong Kong

-

10

10

────

────

────

16

56

72

════

════

════

Hong Kong profits tax has been provided at the rate of 16.5% (2018: 16.5%) on the estimated assessable profits less available tax losses. Taxation outside Hong Kong has been provided at the applicable current rates of taxation ruling in the relevant countries on the estimated assessable profits less available tax losses.

30

  1. Earnings per Share
    The calculation of basic earnings per share is based on profit attributable to shareholders of the Company of approximately HK$429 million (2018: HK$404 million) and on the weighted average number of 4,819,033,194 (2018: 4,818,896,208) ordinary shares in issue during the year.
    The diluted earnings per share for the year ended 31 December 2019 is calculated by adjusting the weighted average number of 4,819,033,194 (2018: 4,818,896,208) ordinary shares in issue with the weighted average number of 43,183 (2018: 131,741) ordinary shares deemed to be issued assuming the exercise of the share options.
  2. Dividends

2019

2018

HK$ million

HK$ million

Interim, paid of 2.93 HK cents per share

(2018: 3.10 HK cents per share)

141

149

Special interim, paid of 80.00 HK cents per share

-

3,855

Final, proposed of 3.75 HK cents per share

(2018: 3.20 HK cents per share)

181

154

─────

─────

322

4,158

═════

═════

11

Cash and Cash Equivalents

2019

2018

HK$ million

HK$ million

Cash at banks and in hand

117

262

Short-term bank deposits

5,299

9,293

─────

─────

5,416

9,555

═════

═════

The effective interest rates on short-term bank deposits ranged from 0.14% to 2.86% per annum (2018: 0.26% to 2.05%).

The carrying values of cash and cash equivalents approximate their fair values.

31

12

Trade Receivables and Other Current Assets

2019

2018

HK$ million

HK$ million

Trade receivables

303

299

Less: Loss allowance provision

(42)

(41)

─────

─────

Trade receivables, net of provision (a)

261

258

Other receivables

101

175

Prepayments and deposits

202

113

─────

─────

564

546

═════

═════

The carrying values of trade receivables and other receivables approximate their fair values. The Group has established credit policies for customers. The average credit period granted for trade receivables ranges from 14 to 45 days, or a longer period for corporate or carrier customers based on individual commercial terms. There is no concentration of credit risk with respect to trade receivables as the Group has a large number of customers.

(a)

Trade receivables, net of provision

2019

2018

HK$ million

HK$ million

The ageing analysis of trade receivables, by invoice

date, net of loss allowance provision is as follows:

0 - 30 days

146

150

31 - 60 days

43

44

61 - 90 days

14

18

Over 90 days

58

46

─────

─────

261

258

═════

═════

32

13

Trade and Other Payables

2019

2018

HK$ million

HK$ million

Trade payables (a)

325

314

Other payables and accruals

1,009

1,250

Receipts in advance

102

135

Current portion of licence fees liabilities

73

56

─────

─────

1,509

1,755

═════

═════

The carrying values of trade and other payables approximate their fair values.

(a)

Trade payables

2019

2018

HK$ million

HK$ million

The ageing analysis of trade payables is as follows:

0 - 30 days

180

244

31 - 60 days

20

6

61 - 90 days

13

4

Over 90 days

112

60

─────

─────

325

314

═════

═════

33

GROUP CAPITAL RESOURCES AND LIQUIDITY

Treasury Management

The Group's treasury function sets financial risk management policies in accordance with policies and procedures that are approved by the Executive Director, and which are also subject to periodic review by the Group's internal audit function. The Group's treasury policies are designed to mitigate the impact of fluctuations in interest rates and exchange rates on the Group's overall financial position and to minimise the Group's financial risks. The Group's treasury function operates as a centralised service for managing financial risks, including interest rate and foreign exchange risks, and for providing cost-efficient funding to the Group and its companies. It manages the majority of the Group's funding needs, interest rate, foreign currency and credit risk exposures. The Group uses interest rate and foreign currency swaps and forward contracts as appropriate for risk management purposes only, for hedging transactions and for managing the Group's assets and liabilities' exposure to interest rate and foreign exchange rate fluctuations. It is the Group's policy not to enter into derivative transactions for speculative purposes. It is also the Group's policy not to invest liquidity in financial products, including hedge funds or similar vehicles.

Cash management and funding

The Group operates a central cash management system for all of its subsidiaries. In general, financing is mainly derived from operating income to meet funding requirements of the operating subsidiaries of the Group. The Group regularly and closely monitors its overall cash position and determines when external source of finance is needed.

Foreign currency exposure

The Group runs telecommunications operations principally in Hong Kong, with transactions denominated in Hong Kong dollars. The Group is exposed to other currency movements, primarily in terms of certain trade receivables or payables and bank deposits denominated in United States dollars, Macau patacas, Renminbi, Euros and British pounds.

Credit exposure

The Group's holdings of surplus funds with financial institutions expose the Group to credit risk of counterparties. The Group controls its credit risk to non-performance by its counterparties through monitoring their share price movements and credit ratings as well as setting approved counterparty credit limits that are regularly reviewed.

34

Capital and Net Cash

As at 31 December 2019, the Group recorded share capital of HK$1,205 million and total equity of HK$11,963 million.

As at 31 December 2019, the net cash of the Group was HK$5,416 million (2018: HK$9,555 million), 99% of which was denominated in Hong Kong dollars with remaining in various other currencies. The reduction in net cash balance was mainly due to the settlement of special interim dividend, final dividend and interim dividend of HK$4,150 million in total and the acquisition of non-controlling interests of the key subsidiaries of the Group for US$60 million (approximately HK$471 million) in May 2019.

Charges on Group Assets

As at 31 December 2019, same as prior year, except for all of the shares of a joint venture owned by the Group which were pledged as security in favour of the joint venture partner under a cross share pledge arrangement, no material asset of the Group was under any charge.

Borrowing Facilities Available

The Group has no committed borrowing facilities as at 31 December 2019 (2018: Nil).

Radio Spectrum

During the year ended 31 December 2019, HTCL, a subsidiary of the Group, acquired 40 MHz in the 3500 MHz band (for a 15-year period commencing April 2020) and 30 MHz in the 3300 MHz band (for a 15-year period commencing December 2019) for an aggregate of spectrum utilisation fees of HK$402 million through auctions.

Contingent Liabilities

As at 31 December 2019, the Group provided performance, financial and other guarantees of HK$106 million (2018: HK$5 million).

Commitments

As at 31 December 2019, the Group had capital commitments of property, plant and equipment of HK$271 million (2018: HK$396 million) and telecommunications licences of HK$2,242 million (2018: HK$2,040 million).

A subsidiary of the Group acquired various blocks of spectrum bands for the provision of telecommunications services in Hong Kong, certain of which over various assignment years/periods up to year 2021. The variable licence fees for these spectrum bands were charged on 5% of the network revenue or the Appropriate Fee (as defined in the Unified Carrier Licence), whichever is greater. The net present value of the Appropriate Fee has already been recorded as licence fee liabilities.

35

Corporate Strategy

The strategy of the Group is to deliver sustainable returns with solid financial fundamentals, so as to enhance long-term total return for shareholders. Please refer to the Chairman's Statement and Management Discussion and Analysis for discussions and analyses of the performance of the Group and the basis on which the Group generates or preserves value over the longer term and the strategy for delivering the objectives of the Group.

Past Performance and Forward-looking Statements

The performance and the results of operations of the Group contained in this announcement are historical in nature, and past performance is no guarantee for the future results of the Group. Any forward-looking statements and opinions contained in this announcement are based on current plans, estimates and projections, and therefore involve risks and uncertainties. Actual results may differ materially from expectations presented in such forward-looking statements and opinions. The Group, the Directors, employees and agents of the Group assume (a) no obligation to correct or update the forward-looking statements or opinions contained in this announcement; and (b) no liability in the event that any of the forward-looking statements or opinions do not materialise.

Human Resources

As at 31 December 2019, the Group employed 986 (2018: 1,219) staff members (full-time and

part-time) and on average 1,112 (2018: 1,183) staff members during the year ended 31 December 2019. Staff costs during the year ended 31 December 2019, including directors' emoluments, totalled HK$376 million (2018: HK$374 million).

The Group fully recognises the importance of high quality human resources in sustaining market leadership. Salary and benefits are kept at competitive levels, while individual performance is rewarded within the general framework of the salary, bonus and incentive system of the Group which is reviewed annually. Employees are provided with a wide range of benefits that include medical coverage, provident funds and retirement plans, long-service awards and a share option plan. The Group stresses the importance of staff development and provides training programmes on an ongoing basis. Employees are also encouraged to play an active role in community care activities.

Environmental, Social and Governance Responsibility

The Group is committed to the long-term sustainability of its businesses and the communities with which it engages. It delivers quality products and services to its customers by managing its businesses prudently, while executing management decisions with due care and attention. The Group demonstrates a strong sense of corporate social responsibility and believes such a commitment helps strengthen its relationship with the community. Operating as a sound corporate citizen through sponsorship and supporting socially-responsible projects at company level, the Group is committed to bringing positive impact to the general welfare of the community.

36

Review of Financial Statements

The consolidated financial statements of the Group for the year ended 31 December 2019 have been reviewed by the Audit Committee of the Company and audited by the independent auditor of the Company, PricewaterhouseCoopers. The unqualified independent auditor's report will be included in the Annual Report to shareholders.

Closure of Register of Members

The register of members of the Company will be closed from Thursday, 7 May 2020 to Tuesday, 12 May 2020, both days inclusive during which period no transfer of shares will be effected to determine shareholders' entitlement to attend and vote at the 2020 Annual General Meeting (or at any adjournment thereof). All transfers, accompanied by the relevant share certificates, must be lodged with the Hong Kong Share Registrar of the Company (Computershare Hong Kong Investor Services Limited at Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong) for registration no later than 4:30 pm on Wednesday, 6 May 2020.

Record Date for Proposed Final Dividend

The record date for the purpose of determining shareholders' entitlement to the proposed final dividend is Monday, 18 May 2020. In order to qualify for the proposed final dividend payable on Wednesday, 27 May 2020, all transfers, accompanied by the relevant share certificates, must be lodged with the Hong Kong Share Registrar of the Company (Computershare Hong Kong Investor Services Limited at Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong) for registration no later than 4:30 pm on Monday, 18 May 2020.

Purchase, Sale or Redemption of Listed Securities

During the year ended 31 December 2019, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the listed securities of the Company.

37

Compliance with the Corporate Governance Code

The Company strives to attain and maintain high standards of corporate governance best suited to the needs and interests of the Group as it believes that an effective corporate governance framework is fundamental to promoting and safeguarding interests of shareholders and other stakeholders and enhancing shareholder value.

The Company has complied throughout the year ended 31 December 2019 with all code provisions of the Corporate Governance Code contained in Appendix 14 of the Listing Rules, other than those in respect of the composition of the nomination committee. The Nomination Committee of the Company comprises all Directors and is chaired by the Chairman of the Board. Its composition deviates from code provision A.5.1 which requires the nomination committee to comprise a majority of independent non-executive directors. The Board is of the view that the ultimate responsibility for the selection, nomination and appointment of Directors rests with the Board as a whole and it is in the best interests of the Company that the Board collectively reviews, determines and approves the structure, size and composition of the Board as well as the succession plan for Directors, as and when appropriate. A sub-committee, chaired by the Chairman of the Board and comprising members in compliance with the code provision requirement under the Listing Rules for a nomination committee, will be established as and when required to facilitate the Nomination Committee in the conduct of the selection and nomination process, and will be dissolved after the purpose for which it is established is achieved or discontinued.

Compliance with the Model Code for Securities Transactions by Directors

The Board has adopted its own HTHKH Securities Code regulating Directors' dealings in securities (Group and otherwise) on terms no less exacting than the required standard of the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 of the Listing Rules. In response to specific enquiries made, all Directors confirmed that they have complied with HTHKH Securities Code in their securities transactions throughout 2019.

Annual General Meeting

The Annual General Meeting of the Company will be held on Tuesday, 12 May 2020. Notice of the Annual General Meeting will be published and issued to shareholders in due course.

38

DEFINITIONS

In this announcement, unless the context otherwise requires, the following expressions have the following meanings:

"Board"

the Board of Directors

"CACs"

expensed customer acquisition and retention costs plus the related staff

costs, rental and other expenses

"CKHH"

CK Hutchison Holdings Limited, a company incorporated in the Cayman

Islands with limited liability, whose shares are listed on the Main Board

of the Stock Exchange (Stock Code: 1)

"CKHH Group"

CKHH and its subsidiaries

"Company" or

Hutchison Telecommunications Hong Kong Holdings Limited,

"HTHKH"

a company incorporated in the Cayman Islands with limited liability,

whose shares are listed on the Main Board of the Stock Exchange

(Stock Code: 215)

"Director(s)"

director(s) of the Company

"EBIT"

earnings before interest and other finance income, interest and other

finance costs, taxation, adjusted to include the Group's proportionate

share of joint venture's EBIT

"EBITDA"

earnings before interest and other finance income, interest and other

finance costs, taxation, depreciation and amortisation, adjusted to

include the Group's proportionate share of joint venture's EBITDA

"Group"

the Company and its subsidiaries

"H3GHK"

Hutchison 3G HK Holdings Limited

"HK$"

Hong Kong dollars, the lawful currency of Hong Kong

"HK" or "Hong Kong"

the Hong Kong Special Administrative Region of the People's Republic

of China

"HTCL"

Hutchison Telephone Company Limited

"HTHKH Securities

Model Code for Securities Transactions by Directors

Code"

"HTMCL"

Hutchison Telephone (Macau) Company Limited

"IASB"

the International Accounting Standards Board

"IFRS"

International Financial Reporting Standards

"Listing Rules"

the Rules Governing the Listing of Securities on the Stock Exchange

"mobile"

mobile telecommunications business

39

DEFINITIONS (Continued)

"net customer

net customer service revenue less direct variable costs (including

service margin"

interconnection charges and roaming costs)

"Postpaid gross

monthly average spending per postpaid user including a customer's

ARPU"

contribution to mobile devices in a bundled plan

"Postpaid net

average net margin per postpaid user; postpaid net AMPU equals

AMPU"

postpaid net ARPU less direct variable costs (including interconnection

charges and roaming costs)

"Postpaid net

monthly average spending per postpaid user excluding revenue related

ARPU"

to handset under the non-subsidised handset business model

"service EBITDA/

EBITDA/EBIT excluding standalone handset sales margin

EBIT"

"Stock Exchange"

The Stock Exchange of Hong Kong Limited

As at the date of this announcement, the Directors are:

Chairman and Non-executive Director:

Non-executive Directors:

Mr FOK Kin Ning, Canning

Mr LAI Kai Ming, Dominic

(also Alternate to Mr FOK Kin Ning, Canning

Co-Deputy Chairmen and Non-executive

and Ms Edith SHIH)

Directors:

Ms Edith SHIH

Mr LUI Dennis Pok Man

Mr MA Lai Chee, Gerald

Mr WOO Chiu Man, Cliff

(Alternate to Mr LAI Kai Ming, Dominic)

Executive Director:

Independent Non-executive Directors:

Mr KOO Sing Fai

Mr IP Yuk Keung

Dr LAN Hong Tsung, David

Dr WONG Yick Ming, Rosanna

40

Disclaimer

Hutchison Telecommunications Hong Kong Holdings Ltd. published this content on 28 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 February 2020 09:44:06 UTC


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Net income 2021 226 M 29,1 M 29,1 M
Net cash 2021 4 012 M 515 M 515 M
P/E ratio 2021 27,4x
Yield 2021 22,7%
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Nbr of Employees 991
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Mean consensus OUTPERFORM
Number of Analysts 6
Last Close Price 1,20 HKD
Average target price 1,63 HKD
Spread / Average Target 35,8%
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Managers and Directors
Sing Fai Koo Chief Executive Officer & Executive Director
Wai Sin Cheng Chief Financial Officer
Kin Ning Fok Chairman
Yiu Man Chung Chief Technology Officer
Yuen Chun Tan Chief Operating Officer