[ET Net News Agency, 7 June 2018] Credit Suisse lifted its target price for China
Telecom (00728) to HK$4.6 from HK$4.35, and maintained its "outperform" rating.
The research house said both China Unicom and China Telecom grew faster than China
Mobile in FY2017 and it expects this trend to continue in FY2018. This should not be
surprising given their much smaller scale and lower base effect, together with the fact
that their network resources are close to nationwide and therefore now comparable with
China Mobile's.
By December 2017, China Telecom had 1.2 mn 4G BTS in place, also covering 99% of the
population (given roll-out at the lower, 1800MHz band).
Lack of scale in the cellular market (16.9% share as at FY2017), together with downward
pressure on fixed broadband revenue per line, means that China Telecom does not currently
make a return greater than WACC (Weighted Average Cost of Capital).
However, China Telecom's relatively efficient 3G and 4G cellular roll-out, as well as
some fully depreciated fixed line assets, allowed it to generate a consolidated ROIC
(Return On Invested Capital) of 5.1% in FY2017. (KL)