2003 Annual Results Presentation

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Disclaimer

Certain statements contained in this document may be viewed as “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual performance, financial condition or results of operations of China Telecom Limited (the “Company”) to be materially different from any future performance, financial condition or results of operations implied by such forward-looking statements. Further information regarding these risks, uncertainties and other factors is included in the Company’s most recent Annual Report on Form 20-F to be filed with the U.S. Securities and Exchange Commission (the “SEC”) and in the Company’s other filings with the SEC.

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Management

Zhou Deqiang Chairman/CEO

Chang Xiaobing President/COO

Wu Andi EVP/CFO

Li Ping EVP/Company Secretary

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Agenda

Annual Highlight

Business Review

Financial Review

Annual Highlight

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Excellent Performance Achieved...

Net Profit16.8 (1) 51.9% (2)RMB Billion, except for

subscriber data

EBITDA57.5(1)

13.9% (2)

Revenue110.6(1)

9.5%

Broadband Subscribers5.63 million

Local Subscribers118.09 million22.0% 200.4%

Note: (1) Excluding up-front connection fee(2) Effect of one-time appraisal deficit and related tax impact in 2002 excluded in calculation

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In a Favorable Environment...

Local Telephony Penetration(2)GDP(1)

33.7

59.1

79.5

2001 2002 2003

9,59310,240

11,669

2001 2002 2003Source：(1) National Bureau of Statistics，based on comparable price(2) Statistics release of the MII and its provincial branches in our service regions(3) CNNIC, national data

Internet Users(3)

RMB Billion

Million

8.0%9.1%

In our service regions National average

16%19%

15%18%

21%23%

2001 2002 2003

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…Driven by Continued Reforms and Innovations

External Growth Achieved via Acquisition

Managerial Innovations driving

Efficiency gains

Stronger Distribution driving

Revenue GrowthCreating

Shareholder Value

Corporate IT Strategy

Implemented

Competitiveness Enhanced thru

BPR

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Acquisition Review: Target Performance(1)

10.1% 9.2%

2003 2003

Faster Revenue Growth(2)

Targets Original Listco

Marked Margin Expansion (2)

45.1% 50.5%

2002 2003

Net Profit Beating Forecast (2) Lower Capex/Sales(3)

RMB Million 4,18247.2% 45.2%

2002 2003

4.6％4,000

2003 Forecast 2003 Actual

Note：(1) All financials unaudited(2) Excluding up-front connection fee(3) Including up-front connection fee

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Acquisition review: Significant Benefits

JiangsuShanghai

Zhejiang

GuangdongGuangxi

SichuanChongqing

Anhui

JiangxiFujian

Original Listco

Local Subs (million) (1) 49 69 118

Service region pop.(million) 305 223 528

Penetration(2) 16.6% 31.4% 22.8%

Local sub growth (1) 23.1% 21.3% 22.0%

Broadband sub growth 239.7% 186.3% 200.4%

Operating Rev.(3) (RMB billion) 34.7 75.8 110.6

Net profit(3) (RMB billion) 4.2 12.6 16.8

EPS(3)(RMB) 0.17 0.22

As of or for 2003

Note: (1) Local sub of China Telecom (2) Penetration = Total local sub in service region/ Service region population(3) Excluding up-front connection fee, financials unaudited except for Combined Group

Dividend proposed:HKD 0.065/share

Targets Acquired

Original Listco

Combined Group

Targets acquired

Business Review

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Overview: Continued Steady Growth

RMB Million

Local Telephony 5.5% 3.0

Managed Data

Leased Line

Interconnection

66.3% 3.1

8.8% 0.5

-7.1% -0.3

4.5% 0.1

Long Distance -0.7% -0.1

Internet 66.1%

58,021

7,8286,444

3,915

2,540

23,658

8,160

55,006

4,707

5,921

4,214

2,431

23,817

4,914 3.2

Other

ChangeContribution

to Rev. Growth(p.p.)

Revenue 2003 2002

Total Revenue 9.5% 9.5110,566 101,010

Note: Total revenue excluding up-front connection fee of RMB 7,885 million

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Local Telephony: Positive Trend

Local Subs Local UsageMillion Billion Pulses

274.5 294.2

71.9 52.7

346.4 346.9

2002 2003Voice Dial-up

7.2%

0.1%

72.3 79.4

12.513.64.86.77.2

18.4118.1

96.8

2002 2003

Wireless Local Access

EnterpriseResidentialPublic Phone

22.0%

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Local Telephony: Competition Effectively Countered to Boost Usage

Monthly Usage Growth Rate (YoY), 2003

6.3%7.6%

1.6%

3.1%

6.6%

8.1%7.1%

7.7%9.1% 9.0%

11.8% 12.3%

1 2 3 4 5 6 7 8 9 10 11 12

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Local Telephony: Proactive & Cautious Approach toward PHS

Strong Sub Growth Declining Unit Cost & Improving Return

Thousands

Higher Utilization

Centralized Procurement

2,696

7,243

18,346

2001 2002 2003

168.7%

153.3

%

Return further improved as Capex/Sub down 12% YoY

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Broadband and other Internet: Continued Strong Growth

4,914

8,160

4.9%

7.4%

2002 2003

Internet RevenueRMB Million

66.1%

483

1,874

3,590

5,630

2001 2002 1H2003 2003

Sustained Broadband Growth

Thousand Subs

288.0%

200.4%

Percentage of total rev. (excl. Up-front connection fee)

Internet revenue

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Broadband & Other Internet: Growing into A New Pillar Business

Explosive Growth of Broadband

Strong Demand

Industry Value Chain

Compelling Branding & Bundling

Dominant Control of Last Mile

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VAS: A Rising Star

22.87

40.14

63.4328.3%

41.5%

53.7%

2001 2002 2003Caller ID sub

Rapid Growth of Caller ID

Percentage of Caller ID sub to total local sub

Million

75.5%58.0%

Expanding the VAS Horizon

Broadband New Vision

Wireline SMS

Caller ID

PHSSMS

Tele-ChatQQ

ValueAdded

ServicesVoice Information Taking Off

527 627

1,335

2001 2002 2003

Million

Usage of voice information services

112.9%

19.0%

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Long Distance: Steady Growth

DLD Revenue DLD Usage

2002 2003

RMB Million-1.2%

20,123 19,888

2002 2003

Million Minutes

50.3%

49.7%

45.8%

54.2%

15.0%46,79353,809

IDD Revenue IDD Usage

2002 2003

RMB Million

2.1%3,6943,770

2002 2003VOIP PSTN

Million Minutes

48.9%

51.1%

38.7%

61.3%

8.4%1,493 1,618

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Managed Data & Leased Line: Smooth Growth

Managed Data Usage Managed Data Revenue

Digital Circuits Leased

Thousand port equivalents

31.6%

93.0%6.6%

(64K) (128K) (2M)

278.3

39.8 15.9

366.1

76.816.9

DDN FR ATM

2002 2003 2002 2003 2002 2003

2002 2003

2002 2003

Leased Line Revenue

RMB Million

RMB Million

4.5%

-7.1%4,2143,915

2,431 2,540

Thousand 2M equivalents

122.7 128.6

2002 2003

4.8%

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Interconnection: Rapid Growth

Interconnection Income & Expense Inbound Local Call Volume

2002 2003

Intercon. expense

RMB Million

Intercon rev.

8.8%5,921

6,444

2,828 2,848

39.9

53.6

2002 2003

Billion Minutes

34.4%

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Managerial Innovation - Core Competitiveness of China Telecom Strengthened

管控模式

管控模式

管控模式

管控模式

管控模式

管控模式

管控模式

管控模式

Institution Procedure Modeling

Financial

Construction of distribution system

Operational

Capital

Headquarters

Provincial companies

Local networks

IT Systems(CTG-MBOSS)

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Managerial Innovation - Enhancement of the Distribution System

Public Customers

Product Bundling

Fixed linePHSDataBroadband

Key Accounts

Business customers

Distribution Channels

• Key Account Managers

• Community managers

• Rural contract personnel

• 10000 service hot line

Internal Measures• Re-allocate human resource• Streamline IT systems • Implement sales-based compensation• Re-design business procedures

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Managerial Innovation - Business Process Re-engineering Further Implemented

BPR

•Front-end personnel:50%+

•Key Account direct service time proportion: 30%•Customer satisfaction: 2 p.c points

•Average capex saving:9%•Utilization: 6%

Major Services:•Average time of provisioning: 40%•Average breakdown duration: 50%

Financial Review

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Strong Financial Performance

Note: All figures excluding up-front connection fee and effects of asset appraisal deficit and related tax impact in 2002

Profit and Loss

Cash Flow

Balance Sheet

Revenue Growth: 9.5%

EBITDA Growth: 13.9% EBITDA Margin: up 2 pc points

Net Profit Growth: 51.9%Net Margin:up 4 pc points

Capex: RMB 42.8 billion, down 4.9% YoY

Free Cash Flow:RMB 8.7 billion

Acquisition of 6 Provincial Operations

Total Debt/Total Cap: 36.3%

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Significant Revenue and Net Profit Growth

Revenue EBITDA Net Profit

RMB Million RMB Million RMB Million

2002 2003

9.5%

101,010 110,566

2002 2003

13.9%

50,448(1)

57,484

2002 2003

51.9%

11,061(1)

1,219

16,801

Note: All figures exclude up-front connection fee(1) Excluding effects of asset appraisal deficit and related tax impact in 2002

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Strict Cost Control and Improved Profitability

Operating Expense StructureOperating and EBITDA Margin (1)

Operating Margin EBITDA Margin RMB Million

17.3%

22.2%

2002 2003

49.9%

52.0%

2002 2003

39.5% 38.3%

28.9% 26.5%

12.2% 14.1%

15.9% 17.7%3.4% 3.4%

83,567 86,003

2002 2003

Note: (1) Excluding up-front connection fee, and excluding effects of asset appraisal deficit and related tax impact in 2002(2) Excluding personnel expenses

Depreciation Network O&S (2)

SG&A (2) PersonnelInterconnect & Others

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Capex Control Target Met

Capital Expenditure

45.0

42.842.0

41.1%36.1%

2002 2003 2004E

RMB Billion

Capex / Revenue (including up-front connection fee)

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Significant FCF Growth and Return Enhancement

ROE (2)(3)Free Cash Flow (1)(3)

RMB Billion

Note: (1) FCF = EBITDA- Income tax- Capex(2) ROE =Net profit / Average shareholders‘ equity(3) Excluding up-front connection fee and, excluding effects of asset appraisal deficit and related tax impact in 2002

1.17

8.73

2002 2003

7.7%

11.8%

2002 2003

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Solid Capital Structure

Net Debt (2) / EBITDA (3)Total Debt / Total Cap (1)

24.4%

36.3%

2002 2003

0.9

1.5

2002 2003

Note: (1) Total cap = Total debt + Deferred revenue + Shareholders’ equity + Minority interest(2) Net debt = Total debt - Cash and cash equivalents(3) Excluding up-front connection fee and effects of asset appraisal deficit and related tax impact in 2002

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Appendix I: Key Data from the Income Statement

2003 2002

Operating Revenue 110,566 101,010

Operating Expense (86,003) (83,567)

Operating Profit 24,563 17,443

Net Interest Expense (1,814) (2,144)

Income Tax (5,933) (4,266)

Net Profit 16,801 11,061

EPS (RMB) 0.22 0.16Weighted Average Number of Shares (Million) 75,614 69,242

RMB million

Note：All figures excluding up-front connection fee; 2002 figures excluding effects of asset appraisal deficit and related tax impact where applicable

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Appendix II: Key Data from the Balance Sheet

2003 2002

Cash and Cash Equivalents 10,119 18,685

Other Current Assets 15,385 15,015

Non-Current Assets 280,101 269,911

Total Assets 305,605 303,611

Current Liabilities 96,666 99,548

Non-Current Liabilities 76,398 50,029

Minority Interest 1,269 1,186

Shareholders’ Equity 131,272 152,848

Liabilities and Shareholders’ Equity 305,605 303,611

RMB million

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