China Mobile : Announcement with respect to 2019 Interim Results

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CHINA MOBILE LIMITED

中 國 移 動 有 限 公 司

(Incorporated in Hong Kong with limited liability under the Companies Ordinance)

(Stock Code: 941)

2019 INTERIM RESULTS

• Operating revenue was RMB389.4 billion, down by 0.6%, of which revenue from telecommunications services was RMB351.4 billion, down by 1.3%
• EBITDA1 was RMB151.1 billion, up by 3.6%2
• Profit attributable to equity shareholders was RMB56.1 billion, down by 14.6%2
• Total number of mobile customers was 935 million, representing a net addition of 9.98 million
• Total number of wireline broadband customers was 175 million, representing a net addition of 18.20 million
• Payment of an interim dividend of HK$1.527 per share was declared

CHAIRMAN'S STATEMENT

Dear Shareholders,

In the first half of 2019, we witnessed ever-intensifying competition within the telecommunications industry and from cross-sector players. When this is combined with the continued implementation of the national policy on "speed upgrade and tariff reduction", the operating environment has become more complex and is full of uncertainty. Faced with these challenges, we have introduced timely and measured adjustments to our operations. While adhering to the "Big Connectivity" strategy and advancing the integrated development of the "four growth engines" (personal mobile, household, corporate and emerging businesses), we have maintained a clear focus on high-quality development, supported by solid progress in our business transformation and upgrade. In addition, we have stepped up reforms and innovation,

1

2

EBITDA = profit from operations + depreciation and amortization

The Company has applied the new accounting standard on leases (IFRS/HKFRS 16) since 2019. Should the former corresponding accounting standard (IAS/HKAS17) were applied to the results of the current period (meaning "an exclusion of the impact of the new accounting standard on leases"), the year-on-year decreases in EBITDA and profit attributable to equity shareholders would be 4.6% and 13.9% respectively.

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laid out plans for 5G development, and introduced measures to further reduce costs and increase operating efficiency. By taking these steps, we have reinforced our competitive advantage in terms of scale and strengthened our leadership position in the industry, while establishing a solid foundation for the sustainable development of the Company.

Operating results

As the traditional communications market is becoming almost saturated, the upside of data traffic is rapidly diminishing and it is increasingly difficult for operators to boost operating results by relying on traditional growth drivers alone. The industry saw negative growth overall, and the Company's revenue and profit were inevitably squeezed.

In the first half of 2019, we recorded operating revenue of RMB389.4 billion, which represented a decrease of 0.6% compared with the same period last year. Of this, revenue from telecommunications services accounted for RMB351.4 billion, down by 1.3% year-on- year. We posted EBITDA of RMB151.1 billion, up by 3.6% compared with the first half of 2018. This represents an EBITDA margin of 38.8%, or an increase of 1.6 percentage points year-on-year. Profit attributable to equity shareholders reached RMB56.1 billion or RMB2.74 per share. Despite a year-on-year decline of 14.6%, our profitability still remained at a leading level among top-tier global telecommunications operators. Our capital expenditure was RMB85.2 billion, and we maintained a healthy level of free cash flow at RMB41.0 billion.

We recorded a net addition of 9.98 million mobile customers, bringing our total to 935 million. Of these, the total number of 4G customers reached 734 million, with a net addition of 21.13 million customers during the first half of 2019. In the wireline broadband market, with a net addition of 18.20 million customers, the total number of customers has reached 175 million. We added 142 million net new Internet of Things (IoT) smart connections, driving the total number of connections to 693 million. The MIGU products saw a rapid uptick in monthly active users. Our household and IoT customers continued to deliver robust growth.

Our efforts to optimise revenue structure and inject new momentum into the growth of our revenue streams have paid off, with the household and corporate businesses both maintaining double-digit revenue gain and contributing a bigger portion to our total revenue. Of which, revenue from Mobaihe amounted to RMB6.2 billion (up by 59.7% year-on-year) while that of DICT (data, information and communications technology) reached RMB13.6 billion (up by 47.3% year-on-year). Meanwhile, revenue from IoT stood at RMB5.2 billion (up by 43.8% year-on-year).

In accordance with the guidance provided earlier this year, the dividend payout ratio for the first half of 2019 was 49%, equivalent to an interim dividend of HK$1.527 per share. The Company attaches great importance to shareholder returns, and will strive to maintain a stable dividend per share for the full year, after giving due consideration to its performance in 2019.

The Board believes that our industry-leading profitability and on-going ability to generate a healthy cash flow will provide sufficient support for our future development and generate good returns for our shareholders.

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Advancing our business transformation and upgrade

In the first half of 2019, we were able to get to grips with the new market trends and advance our business transformation and upgrade. This is yielding positive changes to our business development through the three strategies of convergence, integration and digitisation.

Convergence

Maintaining a clear focus on satisfying customer demand, we made efforts to increase convergence in our products, sales efforts and operations to expand our market.

With regard to enriching our product portfolio, we collaborated with a number of well-known Internet companies to capitalise on the opportunities presented by large volumes of data traffic. We developed products combining "traffic, content and applications" to boost data traffic growth. In the first half of the year, our 4G DOU (the average handset data traffic per user per month) increased by 132.5% year-on-year to 7.1 GB. In the household and corporate markets, we have striven to provide one-stop smart family and smart corporate services to meet customers' divergent application needs. In the first half of 2019, we also recorded a net addition of 14.33 million customers for our digital set-top box Mobaihe, which represented a penetration rate of 68.7% in the household market, with ICT (information and communications technology) revenue increasing by 149.8% year-on-year.

To better coordinate our sales forces, we leveraged the cross-selling potential in the personal mobile, household and corporate markets. We further consolidated our core businesses while exploiting synergies between the household and personal mobile, as well as the corporate and consumer markets. We launched integrated marketing campaigns targeting customers with various parameters including levels of years of usage, bonus points and membership, coupled with rebranding and other precision marketing initiatives, to meet different customers' needs. In the first half of 2019, our wireline and mobile bundling rate saw an increase of 2.6 percentage points from the end of 2018, while our full business bundling rate rose by 8.6 percentage points from the end of 2018.

To drive operational convergence, we have accelerated the build-out of our network-wide "Mobile Cloud" to establish high-speed designated Internet connectivity amongst cloud resource pools. This initiative forms the architecture for the cloud network smart connection. We have further released synergies amongst the cloud, the network, ends and edge, launching "Cloud, Network and DICT" smart services to deliver a high-quality, low latency and end- to-end differentiating user experience. In the first half of 2019, the Company launched a project to build a cloud-based network resource pool. The aim of this project is to add 18 network elements that have proven commercialisation potential in the cloud for centralised development.

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Integration

Through integration, we have unleashed the synergy and value of our business by sharing capabilities, connecting channels and desegregating data.

Our capability-sharing measures were centred around smart families, the Internet and IoT. They included introducing continuous upgrades and taking a holistic approach to developing our digital household open platform, the centralised certification platform and the OneNET IoT open platform. In the first half of 2019, the digital household open platform managed 100 million gateways. On average, the centralised certification platform was deployed more than 1.09 billion times a day, up by 63% year-on-year. It also allowed access to 81 of the top 200 applications. Meanwhile, the OneNET API (Application Programming Interface) was deployed more than 217 million times a day on average and has become a hub for 124,000 developers.

To connect the channels, we are establishing a one-stop and all-inclusive channel system that effectively consolidates and streamlines online and offline development, in response to the growth of Internet consumption and new retail demand. In the first half of 2019, we adopted the new retail business model in 25 of our physical outlets and undertook initiatives to establish retail pilot smart stores. Of our services, 39.4% can now be processed on digital channels. Online monthly sales of the 2I2C Data Package were more than 2.8 times the monthly sales for 2018.

We have strengthened data integration across the board in order to maximise the value of our resources while enhancing operating efficiency, response speed and service quality. In the first half of 2019, the Company initiated the establishment of a tenancy-based big data platform, which will increase the effectiveness of precision marketing based on user profiling. We have been upgrading to a new-generation CRM (customer relationship management) system and have almost completed the integration and centralisation of service data. By taking these measures, we have further enhanced our integrated service capabilities.

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Digitisation

We have fully leveraged new technologies to digitise our production chains and operation processes, advancing our smart operation capabilities and enhancing operating efficiency.

We have continued to improve our smart mid-end platform and strengthened smart applications such as artificial intelligence (AI) and big data to support our capabilities across network, market, services, security and management. During the first half of 2019, we accelerated the process to assimilate SDN (software-defined networking) technology into our transmission and carrier networks, enabling us to introduce new functions such as one-stopself-service account opening and data traffic optimisation on our digital channels, substantially strengthening our competitiveness in the industry. We have also introduced a central management system to optimise our network capabilities. In the main urban areas in 100% of Chinese cities at prefecture level or above, we have implemented the more streamlined process of "management by checklist". In addition, 100% of NB-IoT (narrow band Internet of Things) base stations have connected to the optimised big data platform. To provide better support across our network, we have begun to centralise the construction of key nodes for our CRM and BOSS (business operations support system). Furthermore, to enable data visualisation of users' full and personalised life cycles, we have taken forward the construction of a central operating platform using big data and AI technology. This improvement will enable us to enhance the digital management of our sales and service efforts. We also launched a unified AI research and development platform and the Big Cloud 5.0 product portfolio to support digitisation and cloud-enabled transformation. This technology has been deployed in a number of internal AI applications, and has yielded tangible results.

Deepening reforms and fostering innovation

We continued to deepen reforms and foster innovation. Leveraging our strong capabilities, active collaborations and buoyant vitalities, we have accelerated the build-out of a synergetic and efficient operating system across the organisation.

We have further optimised our operation system toward better strategic planning, resources consolidation, coordination and management, while also driving proactivity. We have completed the organisational restructuring of our corporate, cloud, household and international businesses and formed the corporate business unit based on our corporate business subsidiaries. Additionally, we have established a cloud centre at our Suzhou research and development (R&D) centre and a smart family operation hub at our Hangzhou R&D centre. We have also set up our international business unit at our Headquarters. With these structures in place, we have expedited the development of our core competency in cloud services and household business. These changes have enabled us to better coordinate our corporate and international business for future expansion. Our structure equips Headquarters to command, the regions to compete and the specialised businesses to grow, linking a synergetic dynamic between fundamental factors and capabilities and infusing the Company with growth momentum.

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