HONG KONG SmarTone 315 HK Outperform

Price (at 07:59, 01 Sep 2015 GMT) HK$13.90 Telecommunications

Valuation HK$ 16.00 - DCF Making a strong comeback 12-month target HK$ 16.00 Upside/Downside % +15.1 Event 12-month TSR % +18.9 Volatility Index Medium . SmarTone reported 74% y-y earnings growth for FY15 (FY14: -36.3%). With GICS sector earnings 17% above consensus, we believe the latest set of financial results Telecommunication Services should restore investor confidence. Market cap HK$m 14,539 Market cap US$m 1,927 Impact 30-day avg turnover US$m 2.3 . Financial highlights. For FY15 (year ends on June 30), SmarTone reported Number shares on issue m 1,046 total revenue of HK$18.7bn (+41% y-y), EBITDA of HK$2.9bn (+14% y-y) and Investment fundamentals net profit of HK$935m (+74% y-y). The company declared a final DPS of 33 Year end 30 Jun 2014A 2015E 2016E 2017E HK cents (FY14: 13 HK cents), that represents a 75% payout for 2HFY15. Revenue m 13,244 16,689 17,343 18,018 EBIT m 807 1,146 1,161 1,191 . Positive: Service revenue experienced stabilisation. The company’s EBIT growth % -28.9 41.9 1.3 2.6 Reported profit m 537 855 906 937 service revenue was +2.6% y-y. In particular, for the period of Jan-Jun, Adjusted profit m 537 855 906 937 SmarTone achieved 7.0% y-y revenue growth. Recall, Hutchison Telecom’s EPS rep HK$ 0.52 0.82 0.87 0.90 EPS rep growth % -36.4 58.1 5.9 3.4 mobile service revenue fell 10.9% y-y during the same period. SmarTone EPS adj HK$ 0.52 0.82 0.87 0.90 proved it is quite effective in driving for service revenue growth. EPS adj growth % -36.4 58.1 5.9 3.4 PER rep x 26.9 17.0 16.1 15.5 . Positive: Revision of payout ratio from 60% to 75% will be welcomed by PER adj x 26.9 17.0 16.1 15.5 Total DPS HK$ 0.31 0.49 0.52 0.54 the market. Recall, the company cut its payout ratio from 100% to 60% upon Total div yield % 2.2 3.5 3.7 3.9 announcement of its FY13 results in September 2013. With the payout ratio ROA % 8.3 12.0 12.1 11.9 ROE % 17.4 24.7 23.1 21.7 revised up to 75%, we believe the market should welcome such shareholder EV/EBITDA x 5.3 4.8 4.4 4.2 friendly policy. Net debt/equity % -10.0 -25.5 -31.7 -37.5 P/BV x 4.6 3.9 3.5 3.2 . Mixed: Permanent CEO’s seat not yet filled. Currently, SmarTone’s CTO is 315 HK rel HSI performance, & rec serving as interim CEO for a period of 12 months. We believe the market history would like to see the appointment of a permanent CEO as soon as possible. Until then, we believe a minor degree of overhang has been created. Earnings and target price revision

. We roll forward our 10-year DCF model. Our 12-month DCF-based price target is HK$16 (formerly HK$15). Price catalyst

. 12-month price target: HK$16.00 based on a DCF methodology. Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, September 2015 . Catalyst: 1HFY16 to be released in February 2016. (all figures in HKD unless noted)

Action and recommendation

. We maintain our Outperform rating, given: (1) the higher percentage of subs taking tiered data pricing plans; (2) SIM-only subs moving back to contract plans; (3) its ability to maintain a churn rate at a relatively low level; Analyst(s) Macquarie Capital Securities Limited (4) maintaining a lean and mean cost structure; (5) keeping capex under Danny Chu, CFA control post the rollout; (6) its ability to fend off competition despite a lower +852 3922 4762 [email protected] subscriber base than others. Macquarie Capital Securities (Japan) Limited Nathan Ramler, CFA +81 3 3512 7875 [email protected]

1 September 2015

Please refer to page 7 for important disclosures and analyst certification, or on our website www.macquarie.com/research/disclosures.

Macquarie Research SmarTone Telecommunications

For FY15 (year ends on June 30), SmarTone reported total revenue of HK$18.7bn (+41% y-y), EBITDA of HK$2.9bn (+14% y-y) and net profit of HK$935m (+74% y-y). SmarTone raised its payout ratio from 60% to 75%, the company declared a final DPS of 33 HK cents (FY14: 13 HK cents). We note FY15’s net profit is ~17% higher than consensus. While the company’s EBITDA is ~3% above consensus, we believe depreciation expense, finance costs and effective tax rate (FY15: 17.3%; FY14: 19.7%) all come in lower than expectation.

Fig 1 SmarTone – comparison of actual versus consensus estimates Macquarie Actual vs. Consensus Consensus (HK$ m) FY15E FY15 (%) FY15E

Revenue 16,689 18,659 15.3 16,179 EBITDA 2,835 2,932 2.7 2,855 EBITDA margin (%) 17.0 15.7 17.6 Net profit 855 935 17.0 799 Source: Company data, Bloomberg, Macquarie Research, September 2015

We roll forward our 10-year DCF model. As a result, our 12-month DCF-based price target is HK$16 (formerly HK$15). Key takeaways from results and analyst briefing We see three major takeaways from the results and analyst briefing: Service revenue experienced stabilisation. The company’s service revenue was +2.6% y-y. In particular, for the period of Jan-Jun, SmarTone achieved 7.0% y-y revenue growth. Recall, Hutchison Telecom’s mobile service revenue fell 10.9% y-y during the same period. SmarTone proved it is quite effective in driving for service revenue growth. Hardware sales benefitted from sales of iPhone 6 and 6 Plus. The company reported hardware sales of HK$13.1bn (+67.4% y-y). We note this is a sharp jump from hardware sales of HK$7.8bn achieved one year ago. We believe the key contributor to such strong growth of hardware sales should be launch of iPhone 6 and 6 Plus in (19 September 2014). Revision of payout ratio from 60% to 75% will be welcomed by the market. Recall, the company cut its payout ratio from 100% to 60% upon announcement of its FY13 results in September 2013. With the payout ratio revised up to 75%, we believe the market should welcome such shareholder friendly policy.

Fig 2 SmarTone – half-yearly financial results 1H13 2H13 1H14 2H14 1H15 2H15 FY14 FY15

Revenue (HK$ m) 5,888 6,179 6,531 6,713 8,673 9,986 13,244 18,659 h-h change (%) 20.4 4.9 5.7 2.8 29.2 15.1 y-y change (%) 16.4 26.3 10.9 8.6 32.8 48.8 40.9

EBITDA (HK$ m) 1,537 1,452 1,348 1,215 1,469 1,463 2,563 2,932 h-h change (%) (3.1) (5.5) (7.2) (9.9) 20.9 (0.4) y-y change (%) 9.3 (8.4) (12.3) (16.3) 9.0 20.4 14.4

EBITDA margin (%) 26.1 23.5 20.6 18.1 16.9 14.7 19.4 15.7

Net profit (HK$ m) 459 384 311 226 466 469 537 935 h-h change (%) (16.2) (16.3) (19.0) (27.3) 106.2 0.6 y-y change (%) (3.4) (29.9) (32.2) (41.1) 49.8 107.5 74.1 Source: Company data, Macquarie Research, September 2015

1 September 2015 2 Macquarie Research SmarTone Telecommunications

3G speed-capped plan’s impact upon blended ARPU has diminished. Even though SmarTone has been gaining subscribers with a speed-capped plan (HK$88 monthly fee), the company’s blended ARPU did not fall much over the past 12 months. Over the past 12 months, we estimate the company has gained 20-30k subscribers via its 3G speed-capped plan (HK$88 monthly fee). However, we note the company’s blended ARPU did not fall as steeply as before. We believe one explanation could be the incremental ARPU extracted from existing subscribers has partially offset the lower ARPU (HK$88) of 3G speed-capped plan.

Fig 3 SmarTone – blended ARPU Fig 4 SmarTone – subscriber base in Hong Kong

(HK$) (000) (%)

300 2,500 13

250 2,000 12

200 1,500 11 150 277 278 272 262 243 234 229 230 1,000 10 100

500 9 50

0 0 8 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15

Blended ARPU Subs (000) Mkt share (RHS)

Source: Company data, Macquarie Research, September 2015 Source: Company data, Macquarie Research, September 2015

EBITDA margin dragged by heavy handset sales. The company reported 15.7% EBITDA margin (FY14: 19.4%). Based on our past experience, the bigger the composition of SmarTone’s revenue from handset sales, the lower the EBITDA margin.

Fig 5 SmarTone – breakdown of revenue into handset sales and service revenue (HK$ m) 1H13 2H13 1H14 2H14 1H15 2H15 FY14 FY15

Service rev 2,869 2,788 2,789 2,634 2,745 2,819 5,423 5,564 Handset sales 3,019 3,391 3,742 4,080 5,927 7,168 7,822 13,095 Composition (%) Service rev 49 45 43 39 32 28 41 30 Handset sales 51 55 57 61 68 72 59 70 Source: Company data, Macquarie Research, September 2015

Capex on a declining trend = good news for free cash flow. For FY15, SmarTone incurred capex of HK$680m (-27.3% y-y). The company spent most of the capex on expansion of network capacity and quality enhancement. We note the actual capex is 15% lower than the company’s previous guidance of HK$800m. Heading into FY16, SmarTone indicated that it would spend capex of HK$650-700m. With SmarTone’s capex clearly on a declining trend, we expect the company’s free cash flow to improve further. Investors should welcome a strengthening of free cash flow at SmarTone.

1 September 2015 3 Macquarie Research SmarTone Telecommunications

Fig 6 SmarTone – capex and capex-to-sales ratio

(HK$ m) (%) 1,400 25

1,200 20 1,000

800 15

600 10 400 5 200

0 0 2011 2012 2013 2014 2015

Capex Capex/sales (RHS)

Source: Company data, Macquarie Research, September 2015

Catalysts In the short term (<12 months), we believe the catalysts that could drive the share price include: . Percentage of mobile subscribers taking up tiered data pricing plans; . SIM-only subscribers moving back to contract subscription plans; . Ability to retain the existing subscriber base despite competition from the other three operators. In the long term (>12 months), we believe the catalysts are: . Ability to lower capex spend post rollout of the 4G network; . Regulatory roadmap to be drawn out by the Office of Communications Authority (telecom regulatory body).

1 September 2015 4 Macquarie Research SmarTone Telecommunications

Macquarie Quant View

The quant model currently holds a strong positive view on SmarTone Attractive Displays where the Telecommunications. The strongest style exposure is Price Momentum, company’s ranked based on

indicating this stock has had strong medium to long term returns which s

l the fundamental consensus a often persist into the future. The weakest style exposure is Valuations, t

n Price Target and indicating this stock is over-priced in the market relative to its peers. e

Macquarie’s Quantitative m

a Alpha model.

15/171 d n

u Two rankings: Local market Global rank in F (Hong Kong) and Global Telecommunication Services sector (Telecommunication Quant % of BUY recommendations 100% (9/9) Services) Local market rank Global sector rank Number of Price Target downgrades 0 Number of Price Target upgrades 0

Macquarie Alpha Model ranking Factors driving the Alpha Model A list of comparable companies and their Macquarie Alpha model score For the comparable firms this chart shows the key underlying styles and their (higher is better). contribution to the current overall Alpha score.

SmarTone Telecommunicatio… 1.5 SmarTone Telecommunicatio…

China Mobile 1.4 China Mobile

Hutchison Telecommunicati… 1.1 Hutchison Telecommunicati…

China Communications Serv… 1.0 China Communications Serv…

China Unicom 0.8

HKT Trust 0.5 HKT Trust

China Telecom 0.5 China Telecom

-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 Valuations Growth Profitability Earnings Price Quality Momentum Momentum

Macquarie Earnings Sentiment Indicator Drivers of Stock Return The Macquarie Sentiment Indicator is an enhanced earnings revisions Breakdown of 1 year total return (local currency) into returns from dividends, changes signal that favours analysts who have more timely and higher conviction in forward earnings estimates and the resulting change in earnings multiple. revisions. Current score shown below.

SmarTone Telecommunicatio… SmarTone Telecommunicatio… 1.3 China Mobile China Mobile 0.9 Hutchison Telecommunicati… Hutchison Telecommunicati… 1.4 China Communications Serv… China Communications Serv… -0.4 China Unicom China Unicom -0.1

HKT Trust 0.2 HKT Trust

China Telecom 0.4 China Telecom

-3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 -30% -20% -10% 0% 10% 20% 30% Dividend Return Multiple Return Earnings Outlook 1Yr Total Return

What drove this Company in the last 5 years How it looks on the Alpha model Which factor score has had the greatest correlation with the company’s A more granular view of the underlying style scores that drive the alpha (higher is returns over the last 5 years. better) and the percentile rank relative to the sector and market. ⇐ Negatives Positives ⇒ Normalized Percentile relative Percentile relative Price to Book FY0 34% Score to sector(/171) to market(/449) Alpha Model Score 1.45 Price to Book FY1 31% Valuation -0.11 Price to Book NTM 31% Growth 0.21 Price to Book LTM 30% Profitability 0.67 Earnings Momentum 0.13 Return on Assets FY0 -39% Price Momentum 0.67 Return on Equity FY0 -40% Quality 0.23 Capital & Funding 0.20 CFROI -47% Liquidity -1.56 RNOA -47% Risk 0.27 Technicals & Trading -0.60 -60% -40% -20% 0% 20% 40% 60% 0 50 100 0 50 100 0 0 1 1

Source (all charts): FactSet, Thomson Reuters, and Macquarie Research. For more details on the Macquarie Alpha model or for more customised analysis and screens, please contact the Macquarie Global Quantitative/Custom Products Group ([email protected])

1 September 2015 5 Macquarie Research SmarTone Telecommunications

SmarTone Telecommunications (315 HK, Outperform, Target Price: HK$16.00) Interim Results 1H/15A 2H/15E 1H/16E 2H/16E Profit & Loss 2014A 2015E 2016E 2017E

Revenue m 8,344 8,344 8,671 8,671 Revenue m 13,244 16,689 17,343 18,018 Gross Profit m 8,344 8,344 8,671 8,671 Gross Profit m 13,244 16,689 17,343 18,018 Cost of Goods Sold m 0 0 0 0 Cost of Goods Sold m 0 0 0 0 EBITDA m 1,418 1,418 1,529 1,529 EBITDA m 2,563 2,835 3,059 3,224 Depreciation m 845 845 949 949 Depreciation m 1,755 1,690 1,898 2,034 Amortisation of Goodwill m 0 0 0 0 Amortisation of Goodwill m 0 0 0 0 Other Amortisation m 0 0 0 0 Other Amortisation m 0 0 0 0 EBIT m 573 573 580 580 EBIT m 807 1,146 1,161 1,191 Net Interest Income m -61 -61 -38 -38 Net Interest Income m -145 -122 -76 -69 Associates m 0 0 0 0 Associates m 0 0 0 0 Exceptionals m 0 0 0 0 Exceptionals m 0 0 0 0 Forex Gains / Losses m 0 0 0 0 Forex Gains / Losses m 0 0 0 0 Other Pre-Tax Income m 0 0 0 0 Other Pre-Tax Income m 0 0 0 0 Pre-Tax Profit m 512 512 542 542 Pre-Tax Profit m 663 1,024 1,084 1,122 Tax Expense m -84 -84 -89 -89 Tax Expense m -131 -169 -179 -185 Net Profit m 427 427 453 453 Net Profit m 532 855 906 937 Minority Interests m 0 0 0 0 Minority Interests m 5 0 0 0

Reported Earnings m 427 427 453 453 Reported Earnings m 537 855 906 937 Adjusted Earnings m 427 427 453 453 Adjusted Earnings m 537 855 906 937

EPS (rep) 0.41 0.41 0.43 0.43 EPS (rep) 0.52 0.82 0.87 0.90 EPS (adj) 0.41 0.41 0.43 0.43 EPS (adj) 0.52 0.82 0.87 0.90 EPS Growth yoy (adj) % 58.1 58.1 5.9 5.9 EPS Growth (adj) % -36.4 58.1 5.9 3.4 PE (rep) x 26.9 17.0 16.1 15.5 PE (adj) x 26.9 17.0 16.1 15.5

EBITDA Margin % 17.0 17.0 17.6 17.6 Total DPS 0.31 0.49 0.52 0.54 EBIT Margin % 6.9 6.9 6.7 6.7 Total Div Yield % 2.2 3.5 3.7 3.9 Earnings Split % 50.0 50.0 50.0 50.0 Basic Shares Outstanding m 1,046 1,046 1,046 1,046 Revenue Growth % 26.0 26.0 3.9 3.9 Diluted Shares Outstanding m 1,039 1,046 1,046 1,046 EBIT Growth % 41.9 41.9 1.3 1.3

Profit and Loss Ratios 2014A 2015E 2016E 2017E Cashflow Analysis 2014A 2015E 2016E 2017E

Revenue Growth % 9.8 26.0 3.9 3.9 EBITDA m 1,755 1,690 1,898 2,034 EBITDA Growth % -14.3 10.6 7.9 5.4 Tax Paid m -181 -131 -169 -179 EBIT Growth % -28.9 41.9 1.3 2.6 Chgs in Working Cap m 141 181 34 36 Gross Profit Margin % 100.0 100.0 100.0 100.0 Net Interest Paid m -28 -122 -76 -69 EBITDA Margin % 19.4 17.0 17.6 17.9 Other m 0 0 0 0 EBIT Margin % 6.1 6.9 6.7 6.6 Operating Cashflow m 1,688 1,619 1,687 1,822 Net Profit Margin % 4.1 5.1 5.2 5.2 Acquisitions m 0 0 0 0 Payout Ratio % 59.7 60.0 60.0 60.0 Capex m -824 -800 -780 -760 EV/EBITDA x 5.3 4.8 4.4 4.2 Asset Sales m 0 0 0 0 EV/EBIT x 16.8 11.8 11.7 11.4 Other m 0 0 0 0 Investing Cashflow m -824 -800 -780 -760 Balance Sheet Ratios Dividend (Ordinary) m -285 -323 -513 -543 ROE % 17.4 24.7 23.1 21.7 Equity Raised m 2 0 0 0 ROA % 8.3 12.0 12.1 11.9 Debt Movements m 0 0 0 0 ROIC % 20.7 32.7 34.4 34.9 Other m -172 144 -36 -130 Net Debt/Equity % -10.0 -25.5 -31.7 -37.5 Financing Cashflow m -455 -178 -549 -673 Interest Cover x 5.6 9.4 15.2 17.3 Price/Book x 4.6 3.9 3.5 3.2 Net Chg in Cash/Debt m 409 641 358 389 Book Value per Share 3.1 3.6 3.9 4.3 Free Cashflow m 864 819 907 1,062

Balance Sheet 2014A 2015E 2016E 2017E

Cash m 3,165 2,616 2,974 3,363 Receivables m 436 436 436 436 Inventories m 80 101 105 109 Investments m 5 5 5 5 Fixed Assets m 3,396 3,507 3,586 3,633 Intangibles m 0 0 0 0 Other Assets m 2,710 2,710 2,710 2,710 Total Assets m 9,792 9,376 9,817 10,256 Payables m 778 980 1,019 1,059 Short Term Debt m 101 101 101 101 Long Term Debt m 2,739 1,550 1,550 1,550 Provisions m 343 381 391 398 Other Liabilities m 2,581 2,581 2,581 2,581 Total Liabilities m 6,542 5,594 5,642 5,688 Shareholders' Funds m 3,193 3,725 4,117 4,511 Minority Interests m 57 57 57 57 Other m 0 0 0 0 Total S/H Equity m 3,250 3,782 4,174 4,568 Total Liab & S/H Funds m 9,792 9,376 9,817 10,256

All figures in HKD unless noted. Source: Company data, Macquarie Research, September 2015

1 September 2015 6 Macquarie Research SmarTone Telecommunications Important disclosures: Recommendation definitions Volatility index definition* Financial definitions Macquarie - Australia/New Zealand This is calculated from the volatility of historical All "Adjusted" data items have had the following Outperform – return >3% in excess of benchmark return price movements. adjustments made: Neutral – return within 3% of benchmark return Added back: goodwill amortisation, provision for Underperform – return >3% below benchmark return Very high–highest risk – Stock should be catastrophe reserves, IFRS derivatives & hedging, expected to move up or down 60–100% in a year IFRS impairments & IFRS interest expense Benchmark return is determined by long term nominal – investors should be aware this stock is highly Excluded: non recurring items, asset revals, property GDP growth plus 12 month forward market dividend speculative. revals, appraisal value uplift, preference dividends & yield minority interests Macquarie – Asia/Europe High – stock should be expected to move up or Outperform – expected return >+10% down at least 40–60% in a year – investors should EPS = adjusted net profit / efpowa* Neutral – expected return from -10% to +10% be aware this stock could be speculative. ROA = adjusted ebit / average total assets Underperform – expected return <-10% ROA Banks/Insurance = adjusted net profit /average Medium – stock should be expected to move up total assets Macquarie First South - South Africa or down at least 30–40% in a year. ROE = adjusted net profit / average shareholders funds Outperform – expected return >+10% Gross cashflow = adjusted net profit + depreciation Neutral – expected return from -10% to +10% Low–medium – stock should be expected to *equivalent fully paid ordinary weighted average Underperform – expected return <-10% move up or down at least 25–30% in a year. number of shares Macquarie - Canada Outperform – return >5% in excess of benchmark return Low – stock should be expected to move up or All Reported numbers for Australian/NZ listed stocks Neutral – return within 5% of benchmark return down at least 15–25% in a year. are modelled under IFRS (International Financial Underperform – return >5% below benchmark return * Applicable to Asia/Australian/NZ/Canada stocks Reporting Standards). only Macquarie - USA Outperform (Buy) – return >5% in excess of Russell Recommendations – 12 months 3000 index return Note: Quant recommendations may differ from Neutral (Hold) – return within 5% of Russell 3000 index Fundamental Analyst recommendations return Underperform (Sell)– return >5% below Russell 3000 index return

Recommendation proportions – For quarter ending 30 June 2015 AU/NZ Asia RSA USA CA EUR Outperform 46.23% 58.36% 47.27% 44.20% 60.65% 43.01% (for US coverage by MCUSA, 9.68% of stocks followed are investment banking clients) Neutral 37.67% 25.65% 29.09% 49.29% 34.19% 40.93% (for US coverage by MCUSA, 5.53% of stocks followed are investment banking clients) Underperform 16.10% 15.99% 23.64% 6.52% 5.16% 16.06% (for US coverage by MCUSA, 1.38% of stocks followed are investment banking clients)

315 HK vs HSI, & rec history

(all figures in HKD currency unless noted)

Note: Recommendation timeline – if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, September 2015

12-month target price methodology 315 HK: HK$16.00 based on a DCF methodology

Company-specific disclosures:

Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/disclosures.

Date Stock Code (BBG code) Recommendation Target Price 19-Feb-2015 315 HK Outperform HK$15.00 19-Jun-2013 315 HK Neutral HK$13.50 12-Mar-2013 315 HK Neutral HK$13.00 05-Sep-2012 315 HK Neutral HK$14.40

Target price risk disclosures: 315 HK: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures.

Analyst certification: The views expressed in this research accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. The analyst principally responsible for the preparation of this research receives compensation based on overall revenues of Macquarie Group Ltd ABN 94 122 169 279 (AFSL No. 318062) (MGL) and its related entities (the Macquarie Group) and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations. General disclaimers: Macquarie Securities (Australia) Ltd; Macquarie Capital (Europe) Ltd; Macquarie Capital Markets Canada Ltd; Macquarie Capital Markets North America Ltd; Macquarie Capital (USA) Inc; Macquarie Capital Securities Ltd and its Taiwan branch; Macquarie Capital Securities (Singapore) Pte Ltd; Macquarie Securities (NZ) Ltd; Macquarie First South Securities (Pty) Limited; Macquarie Capital Securities (India) Pvt Ltd; Macquarie Capital Securities (Malaysia) Sdn Bhd; Macquarie Securities Korea Limited and Macquarie Securities (Thailand) Ltd are not authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia), and their obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL) or MGL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of any of the above 1 September 2015 7 Macquarie Research SmarTone Telecommunications mentioned entities. 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