HKT Trust and HKT : Annual Results Announcement for the year ended December 31, 2020

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HKT Trust

(a trust constituted on November 7, 2011 under the laws of Hong Kong and managed by HKT Management Limited)

and

HKT Limited

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 6823)

ANNUAL RESULTS ANNOUNCEMENT

FOR THE YEAR ENDED DECEMBER 31, 2020

The directors of HKT Management Limited (the "Trustee-Manager", in its capacity as the trustee-manager of the HKT Trust) and HKT Limited (the "Company" or "HKT") are pleased to announce the audited consolidated results of the HKT Trust and of the Company together with the Company's subsidiaries (collectively the "Group") for the year ended December 31, 2020.

• Despite the challenging conditions during the year, Adjusted Funds Flow increased by 1% to HK$5,384 million reflecting the benefits of the scale and breadth of our Telecommunications Services segment as well as improvements in operational efficiencies and savings from our retail network consolidation;
• Total revenue excluding Mobile product sales rose slightly to HK$29,780 million due to a significant surge in demand for data and broadband services coupled with an encouraging take-up of our 5G services albeit offset by the decline in roaming revenue;
• Total revenue decreased by 2% to HK$32,389 million following softer Mobile product sales;
• Total EBITDA decreased to HK$12,527 million with the 2% decline cushioned by steps to improve operational efficiencies including digitizing business processes and optimizing online-to-offline sales channels;
• Profit attributable to holders of Share Stapled Units increased by 2% to HK$5,303 million; basic earnings per Share Stapled Unit was 70.01 HK cents; and
• Final distribution per Share Stapled Unit is 40.97 HK cents, resulting in a total distribution of 71.07 HK cents representing the full payout of Adjusted Funds Flow per Share Stapled Unit for the year.

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MANAGEMENT REVIEW

We are pleased to announce that HKT delivered a resilient set of financial results for the year ended December 31, 2020 underpinned by the scale and breadth of our Telecommunications Services ("TSS") segment. While COVID-19 shook the global economy and deepened Hong Kong's recession, HKT remained focused on its customers by offering innovative value-added services and a personalized experience on multiple fronts that helped to deepen customer engagement. Incorporating Now TV in the fourth quarter of 2020 has since made HKT the only true quadruple-play services provider in Hong Kong with offerings that cut across product and service lines and utilize common assets.

During the year, international travel was severely curtailed, causing HKT's mobile roaming revenue to drop precipitously and delaying many of its information and communications technology ("ICT") projects in the private and public sectors. These project delays coupled with poor market sentiment also depressed business equipment sales. HKT's retail stores saw less foot traffic due to the social distancing measures implemented in Hong Kong throughout 2020, which in turn dampened Mobile product sales.

While the Mobile segment was lackluster, the TSS segment put up a solid performance. TSS revenue increased by 2% to HK$22,357 million, as more people stayed home and sought reliable, high-speed home broadband services to accommodate their work, study and entertainment needs. The pandemic has also forced many businesses no matter big or small, especially those in retail, travel and hospitality, to downsize or even shut down. To counter this impact, HKT took steps to improve operational efficiencies including digitizing business processes and optimizing online-to-offline sales channels and exercised stringent cost control throughout the year in discretionary areas such as publicity and promotions as well as travel and entertainment, resulting in a 1% increase in EBITDA to HK$8,412 million.

Mobile services revenue fell by 8% to HK$7,757 million, primarily due to the sharp decline in mobile roaming. However, the core local revenue held steady, benefitting from the uplift in the average revenue per user ("ARPU") from upgrades to 5G services which offset the revenue pressures from the stiff price competition in the low-end segment of the market. Subdued consumer confidence put downward pressure on Mobile product sales, which fell to HK$2,609 million. EBITDA from the Mobile segment declined by 6% to HK$4,747 million, with the overall margin increasing to 46%.

Consequently, total EBITDA for the year came to HK$12,527 million, down 2% over the previous year.

As a result of savings in finance costs, lower tax expense and one-time other gains, profit attributable to holders of the share stapled units of the HKT Trust and HKT ("Share Stapled Units") was HK$5,303 million, up 2% from a year ago. Basic earnings per Share Stapled Unit was 70.01 HK cents.

Adjusted funds flow for the year ended December 31, 2020 increased by 1% to HK$5,384 million due to savings in rental payments and more prudent capex investments. Annual adjusted funds flow per Share Stapled Unit was 71.07 HK cents.

The board of directors of the Trustee-Manager has recommended the payment of a final distribution of

1. HK cents per Share Stapled Unit for the year ended December 31, 2020. This brings the 2020 full-year distribution to 71.07 HK cents per Share Stapled Unit (comprising 30.10 HK cents as interim distribution and

1. HK cents as final distribution) representing the full payout of the annual adjusted funds flow per Share Stapled Unit.

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OUTLOOK

While Hong Kong embarks on a bumpy path to recovery, we are hopeful that the arrival of vaccines will bring new impetus to the journey. Externally, development of China-US relations under the new US administration and how it may impact on the recovery process, however, remains to be seen.

5G will remain a focus area in 2021 as we believe there is not only significant upside potential in consumer adoption, but also enormous scope for applications in the commercial and public sectors. With our successful track record of implementing large-scale government and commercial ICT projects, HKT will make every effort to help enterprises go digital and assist Hong Kong's transformation into a smart city.

As a true quadplay provider following the incorporation of Now TV, HKT is ready to deliver an enriched total offering of superb connectivity, premium content including live sports programming, and other value- added services to better serve customer needs and interests.

We will continue to grow our digital ecosystem which comprises HKT's substantial customer base and an expanding number of merchants and partners. We will be seeking to enhance our revenue streams in the longer term, as we cater to the evolving customer needs under the new normal, through prudent investment in the digital businesses.

HKT embraces challenges for the betterment of our performance. We will remain agile and highly vigilant to changes in the macro-environment such as technology advancement, social trends and development of geopolitical relations. We will prudently control spending without sacrificing the quality of our services. Our missions are to continue to support the people of Hong Kong through the provision of resilient and innovative services, as well as bringing stable returns to our valued investors.

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FINANCIAL REVIEW BY SEGMENT

For the year ended December 31,		2019			2020		Better/
HK$ million							(Worse)
			Full			Full
	H1	H2	Year	H1	H2	Year	y-o-y
Revenue
TSS	10,209	11,744	21,953	10,386	11,971	22,357	2%
Mobile	5,222	6,592	11,814	4,543	5,823	10,366	(12)%
- Mobile Services	3,881	4,533	8,414	3,573	4,184	7,757	(8)%
- Mobile Product Sales	1,341	2,059	3,400	970	1,639	2,609	(23)%
Pay TV	-	-	-	-	647	647	NA
Other Businesses	103	133	236	106	135	241	2%
Eliminations	(425)	(475)	(900)	(429)	(793)	(1,222)	(36)%
Total revenue	15,109	17,994	33,103	14,606	17,783	32,389	(2)%
Total revenue (excluding Mobile
Product Sales)	13,768	15,935	29,703	13,636	16,144	29,780	0%
Cost of sales	(6,950)	(8,837)	(15,787)	(6,941)	(8,762)	(15,703)	1%
Operating costs before depreciation,
amortization, and gain/(loss) on
disposal of property, plant and
equipment, net	(2,426)	(2,073)	(4,499)	(2,119)	(2,040)	(4,159)	8%
EBITDA1
TSS	3,828	4,532	8,360	3,801	4,611	8,412	1%
Mobile	2,206	2,862	5,068	2,050	2,697	4,747	(6)%
- Mobile Services	2,222	2,879	5,101	2,057	2,639	4,696	(8)%
- Mobile Product Sales	(16)	(17)	(33)	(7)	58	51	NA
Pay TV	-	-	-	-	174	174	NA
Other Businesses	(301)	(310)	(611)	(305)	(501)	(806)	(32)%
Total EBITDA1	5,733	7,084	12,817	5,546	6,981	12,527	(2)%
TSS EBITDA1 Margin	37%	39%	38%	37%	39%	38%
Mobile EBITDA1 Margin	42%	43%	43%	45%	46%	46%
- Mobile Services EBITDA1 Margin	57%	64%	61%	58%	63%	61%
Pay TV EBITDA1 Margin	-	-	-	-	27%	27%
Total EBITDA1 Margin	38%	39%	39%	38%	39%	39%
Total EBITDA1 Margin (excluding
Mobile Product Sales)	42%	45%	43%	41%	43%	42%
Depreciation and amortization	(2,371)	(2,750)	(5,121)	(2,491)	(2,850)	(5,341)	(4)%
Gain/(loss) on disposal of property,
plant and equipment, net	1	(3)	(2)	2	-	2	NA
Other gains/(losses), net	1	2	3	(50)	411	361	>500%
Finance costs, net	(662)	(710)	(1,372)	(658)	(638)	(1,296)	6%
Share of results of associates and joint
ventures	(23)	(28)	(51)	(30)	(49)	(79)	(55)%
Profit before income tax	2,679	3,595	6,274	2,319	3,855	6,174	(2)%

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