TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED (2618.HK) Q3 2015 Results Presentation Hong Kong, 20 October 2015 AGENDA BUSINESS REVIEW & OUTLOOK FINANCIAL HIGHLIGHTS Q & A 2 BUSINESS REVIEW & OUTLOOK Q1-Q3 2015 OVERVIEW Q1-Q3 2015 RESULTS • Sales Volume: 55.4 million units, up 14% YoY (including 31.1 million units of smart devices, up 20% YoY) • Revenue: HK$20.3 billion, up 1% YoY • Q1-Q3 Net Profit: HK$772 million, up 4% YoY • Q3 Net Profit: HK$319 million, up 6% YoY • Basic EPS: Increased to 61.76 HK cents from 61.11 HK cents YoY BUSINESS OVERVIEW • Continuous revenue growth: Revenue growth continued despite challenging macroeconomic conditions and other foreign currency depreciation against US dollar • Healthy gross margin: Gross margin remained at a healthy level of over 19% • Outperforming global smartphone market: Recorded 19.8% YoY smartphone volume growth outpacing the market trend in Q2 2015 (Source: Gartner & Company Data) • Outpacing global tablet market: Ranked No. 6 global tablet player with the fastest YoY volume growth in Q2 2015 (Source: Gartner & Company Data) • Sustainable growth in internet applications In the first three quarters of 2015, cumulative number of activated users of mobile Internet application and service business: platform grew by almost 3 times YoY to 18.1 million; while the settlement amount of third party payment increased almost 2 times YoY to HK$2.6 billion 4 INDUSTRY RANKING - TOTAL PHONES NO.5 GLOBAL HANDSET BRAND + COMPANY DATA TOP 10 MOBILE PHONE BRANDS IN Q2 15 (Source: Gartner and Company Data) Q2 15 Q2 15 QoQ YoY RANK COMPANY SHIPMENTS MARKET SHARE GROWTH RATE GROWTH RATE (MILLION UNITS) (%) (%) (%) 1 Samsung 88.7 19.9 -9.4 -8.9 2 Apple 48.1 10.8 -20.1 +36.0 3 Microsoft-Nokia 27.7 6.2 -16.1 -36.8 4 Huawei 26.1 5.9 +40.5 +43.4 5 TCL-ALCATEL 18.0 4.0 +19.6 +12.3 6 LG 17.6 3.9 -10.3 -3.8 7 Lenovo-Motorola 16.6 3.7 -13.8 -13.7 8 Xiaomi 16.1 3.6 +9.0 +28.1 9 ZTE 14.6 3.3 +15.6 +15.3 10 Micromax 9.9 2.2 +21.2 +15.2 Others 162.4 36.5 +0.8 +0.2 TOTAL 445.8 100.0 -3.2 +0.4 5 INDUSTRY RANKING SMARTPHONES NO.8 GLOBAL SMARTPHONE BRAND + COMPANY DATA GROWTH OUTPACING OVERALL MARKET TOP 10 SMARTPHONE BRANDS IN Q2 15 (Source: Gartner and Company Data) Q2 15 Q2 15 QoQ YoY RANK COMPANY SHIPMENTS MARKET SHARE GROWTH RATE GROWTH RATE (MILLION UNITS) (%) (%) (%) 1 Samsung 72.1 21.9 -11.2 -5.3 2 Apple 48.1 14.6 -20.1 +36.0 3 Huawei 25.8 7.8 +42.7 +46.3 4 Lenovo-Motorola 16.4 5.0 -13.1 -14.0 5 Xiaomi 16.1 4.9 +9.0 +28.1 6 LG 14.5 4.4 -6.3 +4.5 7 ZTE 11.9 3.6 +21.7 +16.6 8 TCL-ALCATEL 10.1 3.1 +12.4 +19.8 9 Microsoft-Nokia 8.4 2.5 -2.0 -0.3 10 OPPO 8.2 2.5 +24.1 +90.1 Others 98.1 29.7 +4.8 +16.3 TOTAL 329.7 100.0 -1.9 +13.5 6 INDUSTRY RANKING - TABLETS NO.6 GLOBAL TABLET BRAND + COMPANY DATA YEAR-ON-YEAR FASTEST GROWING TABLET BRAND TOP 10 TABLET BRANDS IN Q2 15 (Source: Gartner and Company Data) Q2 15 Q2 15 QoQ YoY RANK COMPANY SHIPMENTS MARKET SHARE GROWTH RATE GROWTH RATE (MILLION UNITS) (%) (%) (%) 1 Apple 11.2 25.1 -18.3 -18.8 2 Samsung 7.0 15.7 -7.2 -10.4 3 Lenovo 2.4 5.4 -2.4 +3.4 4 Huawei 1.8 4.0 +72.8 -- 5 ASUS 1.3 2.9 -23.2 -43.2 6 TCL-ALCATEL 1.0 2.2 +37.3 +241.3 7 Microsoft 0.8 1.8 +5.6 +101.9 8 Acer 0.4 0.9 -38.4 -56.4 9 Amazon 0.4 0.9 -34.3 -65.2 10 Dell 0.3 0.7 -4.4 -31.6 Others 18.0 40.4 -14.5 -8.4 TOTAL 44.6 100.0 -11.8 -9.1 7 Q1-Q3 2015 GEOGRAPHICAL REVENUE BREAKDOWN FEATURE PHONES & OTHER PRODUCTS SMART DEVICES CHINA CHINA 3% APAC APAC 8% 2% 3% MEA NORTH AMERICA 8% MEA 23% NORTH AMERICA 11% 33% EUROPE 28% EUROPE 24% LATIN AMERICA LATIN AMERICA 31% 26% 8 REGIONAL BUSINESS REVIEW NORTH AMERICA Revenue (HK$ Billion) +30% • Sales volume: 10.6 million units, almost doubled YoY; Revenue: HK$4.8 billion, up 30% YoY 6.0 • Sales volume of smart devices: 4.6 million units, up 25% YoY • Q2 2015 sales volume ranking (Source: IDC & Company data): North America: No. 4 (Total phones); No. 6 (Smartphones) 4.0 • Consolidated operator channels and expanded open market, enhanced tablet sales growth • Q4 business plan: Strengthen promotion on entry to mid-level 4G products, further enhance 4.8 2.0 3.7 user experience 0.0 Q1-Q3 Q1-Q3 2014 2015 LATIN AMERICA Revenue • Sales volume: 17.6 million units, down 10% YoY; Revenue: HK$6.0 billion, down 9% YoY (HK$ Billion) 9.0 -9% • Sales volume of smart devices: 10.7 million units, up 17% YoY • Q2 2015 sales volume ranking (Source: IDC & Company data): LATAM: No. 2 (Total phones); No. 3 (Smartphones) 6.0 Chile: No. 2 (Total phones); No. 2 (Smartphones) Mexico: No. 2 (Total phones); No.4 (Smartphones) 3.0 6.6 6.0 • Continued to monitor exchange rate movements and reinforced collaboration with operators and distributors to stabilise sales • Q4 business plan: Implement stringent cost and credit control policies, focus on entry to mid- 0.0 Q1-Q3 Q1-Q3 level products in response to market changes 2014 2015 9 REGIONAL BUSINESS REVIEW Revenue EUROPE (HK$ Billion) +2% • Sales volume: 13.5 million units, up 31% YoY; Revenue: HK$5.0 billion, up 2% YoY 6.0 • Sales volume of smart devices: 7.5 million units, up 31% YoY • Q2 2015 sales volume ranking (Source: IDC & Company data): Europe: No. 4 (Total phones); No. 6 (Smartphones); No.5 (Tablets) 4.0 Eastern Europe (excl. Russia): No. 3 (Total phones); No. 7 (Smartphones); No. 4 (Tablets) 4.9 5.0 • Secured mid-range market share with IDOL 3 sales 2.0 • Q4 business plan: Introduce a range of cost-effective 4G products to broaden open market 0.0 Q1-Q3 Q1-Q3 2014 2015 THE MIDDLE EAST AND AFRICA Revenue (HK$ Billion) +13% • Sales volume: 7.2 million units, up 17% YoY; Revenue: HK$2.2 billion, up 13% YoY 3.0 • Sales volume of smart devices: 4.4 million units, up 35% YoY • Q2 2015 sales volume ranking (Source: Gartner & Company data): 2.0 Middle East and Africa: No. 6 (Total phones); No. 4 (Smartphones); No. 3 (Tablets) • 2015 Q2 sales volume ranking (Source: IDC & Company data): South Africa: No. 4 (Total phones); No. 3 (Smartphones); No. 1 (Tablets) 1.0 2.0 2.2 • New markets: Saudi Arabia and Nigeria • Q4 business plan: Continue to develop new markets, refine entry-level product strategy 0.0 Q1-Q3 Q1-Q3 2014 2015 10 REGIONAL BUSINESS REVIEW Revenue APAC (HK$ Billion) • Sales volume: 1.6 million units, down 37% YoY; Revenue: HK$ 700 million, down 44% YoY 2.0 -44% • Sales volume of smart devices: 1.1 million units, down 29% YoY 1.5 • Embarked on various measures to streamline operations • Q4 business plan: Focus on e-commerce and operator channels, reinforce digital marketing 1.0 capability 1.2 0.5 0.7 0.0 Q1-Q3 Q1-Q3 2014 2015 CHINA Revenue • Sales volume: 4.9 million units, up 5% YoY; Revenue: HK$ 1.6 billion, down 6% YoY (HK$ Billion) -6% • Sales volume of smart devices: 2.8 million units, up 8% YoY 2.0 • Continued growth in 4G smartphones sales volume, particularly in Guizhou, Zhejiang and Jiangsu 1.5 • - 1.0 level market share 1.6 1.6 0.5 0.0 Q1-Q3 Q1-Q3 2014 2015 11 STEP-UP PRODUCT STRATEGY 2.8 - Display 7 - Wearable devices Android L Firefox Windows - Cloud applications - 4G Octa-core CPU Metal casing Android 4.4 - Quad-core CPU 6.45mm Thickness Android 4.2 - 4.5 Firefox 650MHz-1.5GHz Multi-screen Dual-core CPU Wifi display on TV Android 4.0 - 4.1 Windows - 500MHz-600MHz Android 2.1 - 2.3 3G EDGE Qwerty keypad Multi-touch display Entry-level Multi-touch Panel Technology GPRS, Ultra-low cost Qwerty key pad 2007-08 2009 2010 2011 2012 2013 2014 2015 Entry-level Advanced EDGE Phone Entry-level Advanced Smart Connectivity 4G / Tablet / 2 in 1 / Feature Phone Feature Phone Smartphone Smartphone Device Cloud Terminal Wearable Device / 12 Multiple OS / IoT PRODUCTS SELECTED BY GLOBAL MAINSTREAM OPERATORS & DISTRIBUTORS NORTH AMERICA EUROPE LATIN AMERICA CHINA APAC MEA 13 EME A NEW PRODUCTS Quad Core 1.2 GHz CPU Display 8 Mpxl Rear Camera (Underwater Photos & Videos) Long-lasting Battery: 500 hours Standby Time Robust design: Water-Dust-Shockproof IP 67 Technology 8 Colours with Matchable Headsets Octa Core 1.5 GHz CPU FHD IPS Display Slim Body: 9.1 mm Stainless Steel Handle & Stand 3-Watt JBL Stereo Dual Speakers Hands-free Gesture Control Compatible with Android 4.3 or above & iOS 7 or above Long Battery Life: 2-5 days (6) Robust design: Water-Dust-Shockproof IP 67 Technology Emotion Pulse Sharing to Social Network Connectivity: Bluetooth 4.0 or above Changeable Front Casings & Wrist Bands 14 NEW PRODUCTS Octa Core 1.4 GHz CPU 5 HD IPS Display Full Lamination 13 Mpxl Rear Camera with F2.0 aperture Dual SIM Dual Standby Premium Design: Metal Frame & Glass Hard Key Quad Core 1 GHz CPU IPS Display Full Lamination 8 Mpxl Rear Camera with EIS Dual SIM Dual Standby (6) Numerous Colourful Covers Awards 15 BRAND BUILDING ACTIVITIES IFA Berlin 2015 LA Galaxy Sponsorship First Digital Product Launch - Flash Plus Smartphone Germany The United States The Philippines TCL 2015 Autumn New Product Presentation 2015 Eletrolar Show 2015 Tianyi (E-surfing) Terminal Expo & Summit Forum China Brazil China 16 OUTLOOK CHALLENGES A challenging macroeconomic environment with soft consumer spending Currency fluctuations pose a continued headwind for sales growth Acceleration of competitive pricing pressures and average selling price erosion EXECUTION PLANS Continue to implement stringent credit control and hedging policies to mitigate currency fluctuation impact Increase sales focus on user-centric and cost-competitive mid-high end products Streamline the portfolio with the completion of mass-market smartphones to sustain smartphone volume growth Remain as the market leader in feature phone market Allocate resources to projects with high-growth opportunities Focus on balancing growth and profitability amid stiff global competition GOALS & FORECAST 4G smartphones and tablets will continue to be the main growth drivers in Q4 2015 2015 full-year revenue growth: Maintain the target of 10% YoY 17 FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS Revenue Income Statement (HK$ Million) (HK$ Million) Q3 Q3 Q1-Q3 Q1-Q3 YOY (%) YOY (%) 2015 2014 2015 2014 20,283 Total Sales Vol.