China Telecom Corporation Ltd (SEHK:0728) is one of the big three telecommunication companies in China. The company provides a wide range of telecommunications services in China, such as mobile and fixed-line broadband, GSM, fixed line, information and communications technology, data communications and other services. China Telecom is listed on the Hong Kong Stock Exchange.

STOCK INFORMATION

1
TICKER SYMBOL: SEHK:0728
MARKET CAP: HK$ 276.0 Billion (Updated 14 June 2016)
MARKET PRICE / SHARE: HK$ 3.41 (Updated 14 June 2016)
SECTOR: Utility
INDUSTRY: Telecommunications

THE BUSINESS

China Telecom is one of the main telecommunication companies in China. Majority owned by the State-owned enterprise, China Telecommunications Corporation, the company now has more than 200 million in mobile subscribers, out of whom 79.5 million are 4G subscribers. The company also served more than 116 million wireline broadband subscribers.

KEY STATISTICS (FY2015) 

Net Revenue: RMB 331.2 Billion
Net Income: RMB 20.1 Billion
Total Assets: RMB 629.6 Billion
Earnings per Share: RMB 0.25
Dividend per Share: RMB 0.16
Net Income Margin: 6.0%
ROE: 6.8%

KEY OPPORTUNITIES

1. Rise of Data
Data usage is growing fast in China. With a strong 4G network and the largest 4G customer base, the company is well positioned to capture the growth in data. In FY2015, revenue from data usage surpass those of voice revenue, the first in the company’s history. The company continues to see strong increase in mobile and wireline broadband subscribers.
Moreover, as technology advances, more and more appliances would require the internet to function. The internet-of-things industry is growing rapidly. With more and more usage and demand for internet access, telecommunication services is needed more than ever.

2. Government Support
The China government is very supportive of improving the infrastructure in China. Telecommunication is a key infrastructure pillar for China. The strong government support means that it is in the country’s interest to see the big three telco succeed.

KEY RISKS

1.High Penetration
Out of a country with 1.3 billion in population, the three telcos already served more than 1 billion customers. The market is turning to a saturation point, thus the growth might be slowing as well. Competition is also heating up and telcos are all trying to upsell their customers on the same product range.

2. Tariff
With more competition, the pricing of the telcos might be under pressure. As the market becomes more competitive, we might see more price competition among the three telcos, reducing margins for everyone.

VALUATION

China Telecom is currently trading around 13.0 times its earnings and offers a 2.8% dividend yield.

LISTED PEERS

1. China Mobile (HK:0941)
2. China Unicom (HK:0762)

INVESTOR RELATIONS

Investor Relation Material:
Annual Report
Financial Information
Investor Relations Department
China Telecom Corporation Limited
Ms. Lisa Lai / Ms. Angela Cheng
Tel: (852) 28779777
Fax: (852) 28770988
Email: ir@chinatelecom-h.com

Address: 38/F., Dah Sing Financial Center,
108 Gloucester Road,
Wanchai, Hong Kong

TOP SHAREHOLDERS DIRECT INTEREST (31 March 2016)

1. China Telecommunication Corporation – 70.90%
2. Guangdong Rising Asset Management – 6.94 %
3. Zhejiang Financial Development – 2.64%

FINANCIALS

China tele BS

Morningstar – Income Statement

China tele IS

Morningstar – Balance Sheet

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