德银-中国-电信行业-十月统计数据：所有人的更大的蛋糕-20171120-Deutsche_Bank-Chinese_telecom_sectorOct_stats-bigger_pie_for_all_12页_532kb

Summary of the Chinese Telecom Sector Analysis (20 November 2017)

Core Content

This document provides an industry update and valuation analysis for the Chinese telecommunications sector, focusing on three major players: China Telecom (CT), China Unicom (CU), and China Mobile (CM). The analysis is conducted by James Wang, a Research Analyst at Deutsche Bank, and includes market trends, subscriber growth, financial metrics, and investment recommendations.

Market Trends and Subscriber Growth

• October 2017 Performance: The telecom sector saw increased growth in October, with CT emerging as the strongest gainer. CT added 4.2 million new mobile subscribers, significantly above the monthly average of 7.5 million in FY17 YTD.
• Industry Revenue Growth: The industry as a whole experienced revenue growth of approximately 7% in 3Q17, driven by the migration towards large data plans.
• Subscriber Growth Across Operators:
  • CT: Strong mobile subscriber growth, with 4.2 million net adds in October.
  • CU: Broadly flat fixed broadband subscriber growth.
  • CM: Continued growth in mobile subscribers, adding 9.8 million in October, with a 4% YoY run-rate.
• Fixed Broadband Competition: The competition in the fixed broadband segment remains intense. CM added 3.6 million fixed broadband subscribers in October, while CT added 0.8 million.

Key Viewpoints

• CT's Strategy: CT's promotion of "unlimited" local data plans priced at RMB100/mth has contributed to its strong subscriber growth.
• CM's Position: CM is losing market share in the mobile segment due to its lack of aggressive promotion of large data plans. However, it still grows above the market, and it appears to be focusing on retaining its high-value customers.
• Risk of Retaliation: There is a potential risk that CM may retaliate against CT's market share gains, but this is offset by CM's continued growth and focus on customer retention.

Valuation and Risks

Valuation Methodology

• Discounted Cash Flow (DCF) analysis is used for valuation.
• WACC Assumptions:
  • CT and CM: 7.5%
  • CU: 8.4%
• Perpetual Growth Rates: 0–0.5% to reflect market share gains.
• Terminal Growth Rates:
  • CT: 0.5%
  • CU: 0.5%
  • CM: 0%

Key Risks

• Downside Risks:
  • For CT: Higher spending on subsidies and marketing, more intense price competition, deteriorating ARPU, higher capital expenditures, slower mobile net adds, and negative policy measures.
  • For CU: Worse-than-expected mobile net adds or ARPU recovery, negative regulatory policies, and mixed ownership being less favorable.
  • For CM: More intensive price competition, deteriorating ARPU and declining margins, higher spending on subsidies and marketing, negative policies and regulatory measures, and asymmetric regulation.
• Upside Risk: Cost cuts for all three operators.

Investment Recommendations

Company	Ticker	Price (HKD)	Recommendation
China Telecom	0728.HK	3.85	Buy
China Unicom	0762.HK	11.66	Buy
China Mobile	0941.HK	78.15	Buy

Key Financial Metrics

Metric	CT (2016A)	CT (2017E)	CT (2018E)	CU (2016A)	CU (2017E)	CU (2018E)	CM (2016A)	CM (2017E)	CM (2018E)
P/E (x)	14.6	13.4	12.4	291.6	70.3	32.1	14.2	11.9	11.2
EV/EBITDA (x)	3.7	3.6	3.3	4.2	3.9	3.3	4.4	3.3	3.1
Price/Book (x)	0.8	0.8	0.8	0.8	1.0	1.0	1.5	1.3	1.3

Key Charts

• Figure 1: Overall market growth boosted by large data plans.
• Figure 2: CT aggressively pushing unlimited data plans.
• Figure 3: Mobile net adds.
• Figure 4: 4G net adds.
• Figure 5: 4G penetration by telcos.
• Figure 6–8: Mobile net adds for CT, CU, and CM.
• Figure 9–11: Fixed broadband subscriber growth for CT, CU, and CM.
• Figure 12–14: Market share in mobile and fixed broadband segments.

Equity Rating Key

• Buy: Based on a 12-month view of total shareholder return.
• Sell: Based on a 12-month view of total shareholder return.
• Hold: Neutral view, no recommendation for Buy or Sell.

Additional Information

• The report includes important disclosures regarding Deutsche Bank's ownership, potential conflicts of interest, and regulatory compliance in various jurisdictions.
• Historical Recommendations are provided for all three operators, showing past target prices and ratings.
• The report is not an offer or solicitation to buy or sell any financial instruments and does not take into account individual investment objectives or financial situations.
• Derivative and FX Risks: The report highlights the risks associated with derivative transactions, foreign exchange fluctuations, and fixed-income instruments.
• Legal and Regulatory Compliance: The report is compliant with the regulations of multiple jurisdictions, including the US, Germany, UK, Hong Kong, India, Japan, Qatar, Russia, Saudi Arabia, UAE, and Australia.