TD-SCDMA联通版iphone4s

2012年3月9日中国:电信服务证券研究报告关注3G回报率:因防御性和TD-LTE看好中移动;上调至买入(摘要)上调中移动评级至买入,因防御性/TD-LTE看好中移动;下调中电信评级至中性,因3G业务回报率偏低我们将中移动评级由中性上调至买入,并将12个月H股/ADR目标价格从84港元/54美元上调至95港元/61美元,主要因其对补贴的敏感性较低、TD智能手机供给改善、现金回报率稳定及TD-LTE带来的潜在上行空间,而且在我们看来,中移动的市场份额下降大部分已计入股价.
我们将中电信评级由买入下调至中性,并将12个月H股/ADR目标价格从5.
4港元/69美元下调至5.
1港元/66美元,因偏低的3G回报率及对iPhone4S的高补贴.
评估中联通和中电信的3G投资回报率我们预计随着移动业务收入增速放缓、LTE在2012年取代WCDMA成为最先进的网络,投资者将关注3G投资回报率.
我们的分析显示,中联通和中电信的3G回报率前景较差(内部收益率低于10%),部分原因在于高额的3G补贴.
运营商在2G时代很少进行手机补贴,但是补贴已经成为3G用户增长的推动力.
由于ARPU较低、资本开支较大及3G获益周期较短,我们认为中国大量的3G补贴是不利于可持续发展的.
2012年中国智能手机:更多型号、更多补贴我们预计智能手机的推广将推动3G用户/收入稳步增长.
中联通应会率先于2012年上半年推出超低价智能手机(人民币500-800元),而继联发科的TD解决方案推出之后,中移动将随后于2012年下半年推出超低价智能手机,从而推动低ARPU的3G用户数量加速增长.
在我们看来,中端(人民币1,500-2,000元)智能手机的增长应该最为迅速,从而令中联通和中电信双双受益.
高端智能手机方面,中电信的iPhone4S应可帮助公司从中联通和中移动处争夺部分市场份额.
我们预计2012年中联通和中电信的移动服务总收入将同比增长29%,较2011年的32%有所减速.
TD-LTE:频段和技术取得进展;等待具体实施近期的一个重大进展是工信部批准中移动使用F频段(1880-1920MHZ)在杭州和深圳建设TD-LTE试验网.
与之前的频段相比(~2.
5GHz),F频段的覆盖效果要好得多且建设成本更低.
宏达电最近推出一款采用高通MSM8960芯片的智能手机,其终端产品有望在2012年9月份支持TD-LTE和TD-SCDMA技术.
中移动最近宣布将在2012年和2013年分别建设2万和20万个TD-LTE基站.
我们等待项目的执行和实施.
风险:竞争、手机补贴和TD-LTE推出进展.
*全文翻译随后提供目标价格和评级概览注:股价截至2012年3月7日收盘.
资料来源:Datastream、高华证券研究预测中联通3G投资的12年内部收益率仅为7%中国新增移动业务服务收入市场份额资料来源:高华证券研究预测相关研究中国:电信服务:两大趋势影响2011-2013年竞争格局,2011年6月30日;全球:科技:TD-LTE:到2013年有望覆盖亚洲27亿人,2011年6月30日吕东风,PhD(联系人)执业证书编号:S1420110030005+86(10)6627-3123donald.
lu@ghsl.
cn北京高华证券有限责任公司北京高华证券有限责任公司及其关联机构与其研究报告所分析的企业存在业务关系,并且继续寻求发展这些关系.
因此,投资者应当考虑到本公司可能存在可能影响本报告客观性的利益冲突,不应视本报告为作出投资决策的唯一因素.
有关分析师的申明和其他重要信息,见信息披露附录,或请与您的投资代表联系.
胡玲玲(分析师)执业证书编号:S1420511100002+86(10)6627-3520lingling.
hu@ghsl.
cn北京高华证券有限责任公司北京高华证券有限责任公司投资研究上行空间下行空间中移动0941.
HK买入HK$95HK$79.
719%中移动(ADR)CHL买入US$61US$51.
6418%中联通0762.
HK中性HK$16.
2HK$13.
8617%中联通(ADR)CHU中性US$20.
8US$18.
0615%中电信(ADR)CHA中性US$66US$58.
812%中电信0728.
HK中性HK$5.
1HK$4.
5512%中联通-A股600050.
SS中性Rmb5.
4Rmb4.
6317%现价公司名称代码评级最新12个月目标价-15%-10%-5%0%5%10%15%-150.
00-100.
00-50.
000.
0050.
00100.
0020092011E2013E2015E2017E2019E2021E2023E内部收益率人民币十亿累计自由现金流内部收益率EBITDA利润率=35%0%10%20%30%40%50%60%70%80%90%100%20102011E2012E2013E2014E2015E2016E2017E2018E2019E2020E2021E2022E中移动中联通中电信2012年3月9日中国:电信服务高华证券投资研究2TableofContentsTimetopause:poor3GinvestmentreturnsforCUandCT3Rapidadoptionofsmartphonetodriverevenuegrowth8PreferCMfordefensivenatureandTD-LTEpotentialupside12ChinaMobile(0941.
HK):steadyprogress;catalystsahead,toBuy15ChinaTelecom(0728.
HK,Neutral):iPhone4Spricedin20PricesinthisreportareasofcloseofMarch7,2012unlessotherwisestated.
GaoHuaSecuritiesacknowledgestheroleofEvgenyTitelofGoldmanSachsinthepreparationofthisproduct.
Upcomingevents:March152012,ChinaMobile2011annualresultsMarch202012,ChinaTelecom2011annualresultsMarch222012,ChinaUnicom2011annualresultsExhibit1:ChinatelcovaluationcompsTargetpricesare12-monthbased.
Source:GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates,DatastreamValuation@GStargetpriceTargetMktcapCompanyTickerRatingprice(US$mn)2012E2013E2014E2012E2013E2014E2012E2013E2014E2012E2013E2014E2012E2013E2014E2012E2013E2014E2012E2012E2013E2014EChinaMobile941.
HKBuyHK$95.
0244,9845.
906.
076.
2513.
212.
812.
54.
94.
54.
12.
212.
011.
813.
3%3.
4%3.
9%6.
0%6.
6%7.
4%2.
217%16%15%ChinaUnicom762.
HKNeutralHK$16.
249,0620.
400.
580.
7032.
823.
019.
05.
44.
74.
21.
641.
471.
341.
5%2.
1%2.
6%-2.
6%2.
6%4.
7%1.
55%6%7%ChinaTelecom728.
HKNeutralHK$5.
153,0530.
190.
290.
4022.
014.
510.
44.
64.
13.
51.
721.
501.
301.
7%2.
1%2.
9%7.
3%7.
9%12.
1%1.
33%4%6%Average22.
716.
814.
05.
04.
43.
91.
861.
661.
492.
2%2.
5%3.
1%3.
5%5.
7%8.
1%1.
78%9%9%Valuation@currentpriceCurrentMktcapCompanyTickerRatingprice(US$mn)2012E2013E2014E2012E2013E2014E2012E2013E2014E2012E2013E2014E2012E2013E2014E2012E2013E2014E2012E2012E2013E2014EChinaMobile941.
HKBuyHK$82.
9213,6525.
906.
076.
2511.
511.
210.
94.
13.
83.
41.
841.
661.
483.
8%3.
9%4.
5%6.
8%7.
6%8.
5%1.
917%16%15%ChinaUnicom762.
HKNeutralHK$14.
042,3990.
400.
580.
7028.
419.
916.
44.
94.
23.
71.
471.
321.
201.
7%2.
5%3.
1%-3.
0%3.
0%5.
5%1.
35%6%7%ChinaTelecom728.
HKNeutralHK$4.
749,3080.
190.
290.
4020.
413.
59.
74.
43.
93.
31.
631.
411.
231.
8%2.
2%3.
1%7.
8%8.
5%13.
0%1.
23%4%6%Average20.
114.
912.
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93.
51.
651.
461.
302.
4%2.
9%3.
6%3.
9%6.
4%9.
0%1.
58%9%9%P/B(x)ROE(%)ROE(%)EPS(Rmb)EPS(Rmb)EV/EBITDA(x)EV/SalesEV/SalesDividendyield(%)Dividendyield(%)PER(x)PER(x)EV/EBITDA(x)P/B(x)OpFCFyield(%)OpFCFyield(%)2012年3月9日中国:电信服务高华证券投资研究3Timetopause:Poor3GinvestmentreturnsforCUandCTWeexpectinvestorstofocuson3GinvestmentreturnaswirelessrevenuegrowthstartstodecelerateandTD-LTEpre-commercialtrialkicksoffin2H2012.
Ouranalysisindicatesthat3GinvestmentreturnshaveapooroutlookwithIRR(internalrateofreturn)below10%atbothChinaUnicom(CU)andChinaTelecom(CT),partiallyduetoincreasing3Gsubsidy.
HandsetsubsidieswerelowinChinainthe2Gera,buthavebecomeamaindriverof3Gsubgrowthandamajorswingfactorof3Gprofitability.
Webelievethatuniversal3GsubsidyisunsustainableinChinaduetolowARPU,highcapex,andshort3Ginvestmentcycle.
Pooroutlookfor3GinvestmentreturnsinChinaCUandCTenjoystrong3Grevenuegrowthandmarginexpansionfromalowbaseandhavebeenrewardedbyinvestorsin2011.
Goingforward,aswirelessrevenuegrowthdeceleratesandTD-LTEpre-commercialtrialtakesoff,3Ginvestmentreturnshouldbecomeequallyimportantasthereturndetermineswhether3Gendeavorsareaccretiveordilutivetoshareholdervalue.
Basedonthe3Gcapex,3Gsubgrowthtrend,and3GARPU,weestimatetheIRRof3GinvestmentsatCTandCUwiththefollowingassumptions:1.
3Gsubgrowthstopsatapproximately120mnsubsforCUandCTin2013and2014,respectively.
CUandCThaveindicatedthattheir"sufficientscale"isabove100mn.
2.
40%and20%ofother(infrastructureandIT)capexisfor3GbusinessatCUandCTrespectivelyin2009-2012(usingreported3Gcapex).
3.
Capexiscappedat15%ofsaleswhensubgrowthstops.
Here,weassumeonlymoderate3GdatagrowthafterthepotentialLTElaunchby2014.
4.
3GARPUremainssteadyatRMB82andRMB71forCUafter2013andCTafter2014,respectively,assumingincreasingdatatrafficoffsetsdecreasingtariff.
5.
3GEBITDAmarginstabilizesat30%-40%.
OurbasecaseEBITDAmarginis35%duetosubsidyasexplainedbelow.
6.
Weestimate12-yearIRRfor2009-2021.
CUandCTdepreciatetheirequipmentovertenyears.
Inourbasecase,the12-year3GIRRisjust7.
1%and7.
4%forCUandCT,belowWACCof11.
4%and11.
4%,respectively;andcashbreakevenwouldtake9and10yearsrespectively,6to7yearsafterthepotentiallaunchofLTEby2014.
ThisindicatesthatunlessCUandCTcanboostARPUorEBITDAmargin,theywouldnotbeabletoofferattractivecashdividendyieldtoshareholders.
TD-SCDMA'sinvestmentreturnshouldbemuchworsethanthatofWCDMAandEVDOatCUandCTduetolimitedscale,highfrequencyspectrum,andlacklusterutilizationoutlook.
But,fortunatelyfortheCMlistco,CMparentcoispayingfortheTD-SCDMAradionetwork,whichrepresents60%-70%ofthetotalequipmentinvestments.
Inlightofitsverypoorprofitabilityandreturnoutlook,webelieveTD-SCDMAnetworkislikelytoremainonCMparentco'sbooksduringourforecastingperiod.
2012年3月9日中国:电信服务高华证券投资研究4Exhibit2:CU's3Ginvestmentgeneratesonly7.
1%12-yearIRR(2009-2021)andtakes9yearstobreakevenonfreecashflowunderourbasecaseassumptions.
CumulativefreecashflowandIRRatsteadystateEBITDAmarginsof30%,35%,and40%Source:Companydata,GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates.
Exhibit3:CT's3Ginvestmentgeneratesonly7.
4%12-yearIRR(2009-2021)andtakes10yearstobreakevenonfreecashflowunderourbasecaseassumptions.
CumulativefreecashflowandIRRatsteadystateEBITDAmarginsof30%,35%,and40%Source:Companydata,GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates.
-15%-10%-5%0%5%10%15%-150.
00-100.
00-50.
000.
0050.
00100.
0020092011E2013E2015E2017E2019E2021E2023EIRRRmbbnCumulativefreecashflowIRRBasecase:EBITDAmargin=35%-15%-10%-5%0%5%10%15%-150.
00-50.
0050.
00150.
00250.
0020092011E2013E2015E2017E2019E2021E2023EIRRRmbbnCumulativefreecashflowIRRBullcase:EBITDAmargin=40%-15%-10%-5%0%5%10%15%-150.
00-100.
00-50.
000.
0050.
00100.
0020092011E2013E2015E2017E2019E2021E2023EIRRRmbbnCumulativefreecashflowIRRBearcase:EBITDAmargin=30%-15%-10%-5%0%5%10%15%-150.
00-100.
00-50.
000.
0050.
00100.
0020092011E2013E2015E2017E2019E2021E2023EIRRRmbbnCumulativefreecashflowIRRBearcase:EBITDAmargin=30%-15%-10%-5%0%5%10%15%-150.
00-100.
00-50.
000.
0050.
00100.
0020092011E2013E2015E2017E2019E2021E2023EIRRRmbbnCumulativefreecashflowIRRBasecase:EBITDAmargin=35%-15%-10%-5%0%5%10%15%20%-150.
00-50.
0050.
00150.
00250.
0020092011E2013E2015E2017E2019E2021E2023EIRRRmbbnCumulativefreecashflowIRRBullcase:EBITDAmargin=40%2012年3月9日中国:电信服务高华证券投资研究5Exhibit4:3GIRRdependsonARPUandsteadystateEBITDAmarginCU12-yearIRRsensitivityanalysisExhibit5:3GIRRdependsonARPUandsteadystateEBITDAmarginCT12-yearIRRsensitivityanalysisSource:GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates.
Source:GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates.
Increasingsubsidytocap3GprofitabilityinChinaARPUandEBITDAmarginaretwokeydriversofIRR(Exhibits4and5).
Weattributethepoor3GreturnoutlooktolowEBITDAmarginsince3GARPUisaboveCM's2GARPUofRMB71in2011.
Ourbasecaseof3GEBITDAmarginis35%,wellbelowCM'sEBITDAmarginof47%in3Q11(thelastreportedquarter)forthreereasons.
(1)CM'sEBITDAmargindecreasedby260bpsyoyin3Q11duetoongoinginflation,stagnatingARPU,andincreasingretentionexpensesasaresultofintensifyingcompetition.
WeestimatethatCM'sEBITDAmarginshouldcontinuetodeclineto44%and43%in2012Eand2013E,respectively.
(2)CMhasasignificantscaleadvantage.
(3)Importantly,subsidyrepresentedonly3.
3%oftotalwirelessservicerevenueatCM,but6.
3%and22.
6%atCUandCTin2011E,respectively(Exhibit6).
ThedifferenceinsubsidylevelshouldbereflectedinEBITDAmargin.
Weexpecttotalhandsetsubsidytoincrease50%yoyin2012partiallydrivenbyCT'siPhone4Slaunch;andhencetotalsubsidyas%ofwirelessrevenueshouldalsoincreasefrom5.
7%in2011to7.
8%in2012.
WeexpectCTtoleadinsubsidyas%ofwirelessrevenueat27.
5%,followedbyCUat8.
7%andCMat4.
4%in2012.
WenotethatthiscomparisonisbasedonCU'sreportedsubsidy.
Onanapple-to-applecomparison,CU'ssubsidyshouldbe30-40%higherthanitsreportedsubsidyduetodifferentaccountingtreatment.
HandsetsubsidiesarerelativelynewtoChinesetelcos.
Inthe2Gera,evenwhenwirelessrevenuegrowthwas20%yoyin2005-2006,CM'ssubsidywasbelow4%ofitstotalrevenue.
However,nowasconsumersbecomeincreasinglyexpectantofsubsidies,weexpectsubsidiestoincreaseasconsumerswouldalwayslookfornewsubsidywhenrenewingtheir3Gcontracts.
Furthermore,bothCTandCUaresubsidizingiPhonehardwarealonewith45%grossARPU.
OnceApplesignsupwithCM,wedonotthinkthatCMwouldhesitatetosubsidizetheiPhoneaggressively.
7%30.
0%35.
0%40.
0%750.
8%5.
4%9.
3%802.
0%6.
6%10.
5%853.
0%7.
8%11.
8%904.
1%8.
9%13.
0%Steadystate3GEBITDAmarginSteadystateARPU(Rmb)IRRin12years7%30.
0%35.
0%40.
0%65-0.
4%5.
3%10.
3%701.
1%7.
0%12.
1%752.
6%8.
7%13.
9%804.
0%10.
3%15.
7%IRRin12yearsSteadystate3GEBITDAmarginSteadystateARPU(Rmb)2012年3月9日中国:电信服务高华证券投资研究6Exhibit6:WeexpecttotalhandsetsubsidytoincreaseabsolutelyandrelativetowirelessrevenueinChina,puttingpressureonoverallEBITDAmargin.
Handsetsubsidyandsubsidyas%ofservicerevenueatCM,CT,andCUSource:Companydata,GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates.
ChinacannotaffordauniversalsubsidyManycarriersprovideauniversalsubsidyandstillenjoygoodreturnindevelopedmarketssuchastheUS(alargecountry)andHK(asmallterritory).
WeanalyzewhyChinesecarrierscannotoffersimilarkindofsubsidy.
WeattributethedifferencetorelativelyhighcapexintensityandlowARPUinChina.
Exhibit7comparesthewirelesscoststructureofCM,Verizon,AT&T,SmarTone,andHutchinsonMobilein2011.
NoteweexcludeCTandCU(with2011EBITatbreakeven)astheyrampupwirelesssubscriberscalebutdonotgivespecificwirelessmargins.
CMstandsoutwithitshighdepreciation%despiteitsenormousscaleduetoitslargeterritory,mandatedruralcoverage,andlowARPU,inourview.
Forexample,CMhasmuchhighercapextosalesratiorelativetorevenuegrowththanothercarriers(Exhibit8).
Fortunately,CMalsohaslowsubsidysothatitstotalsubsidyanddepreciationas%ofrevenueiscomparabletoVerizonandAT&T.
Conversely,ifCM'ssubsidyincreasesto10%ofrevenue,itsEBITDAmarginwouldfalltoonly39%.
Underthisscenario,sinceCMhasmuchlargerscalethanCUandCT,thelattershouldhaveevenlowersteadystateEBITDAmarginthanCMaftertheirsubscriberbasereachessufficientscale.
Thisiswhywechose35%EBITDAmarginasourbasecasefor3GIRRanalysisofCUandCT.
Ouranalysisalsoindicatesthathighcapexintensitywouldrequirehighmarginforasimilarreturnoncapex.
SinceHKcarriers'capextosalesisonlyhalfthatofCM,theycanpotentiallygeneratesimilarreturnsathalftheEBITDAmarginasCM.
ThisexplainswhyHKcarrierstradeathigherEV/EBITDAthanChinesecarriersatsimilarEBITDAgrowthrate.
0%5%10%15%20%25%30%35%-20,00040,00060,00080,000100,000120,000140,00020092010E2011E2012E2013E2014E2015E2016E2017E2018E2019E2020E2021E2022EChinaMobileChinaUnicomChinaTelecomCMas%servicerevCUas%ofwirelessservicerevCTas%ofwirelessservicerevTotalsubsidyas%oftotalmobileservicerevenueRmbmn2012年3月9日中国:电信服务高华证券投资研究7Exhibit7:ChinaoperatorshavehighdepreciationtosalesratioandcannotaffordhighsubsidyCoststructurecomparisonforUS,HKandChineseoperatorsin2011EExhibit8:ChineseoperatorshavelowARPUandhighcapextosalesratioatsimilargrowthrateARPU,wirelesscapex/salesandrevgrowthcomparisonin2011ESource:Companydata,GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates.
Source:Companydata,GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimatesExhibit9:EBITDAmarginhasdeterioratedatChinesetelcosduetoinflation,competition,andsubsidyEBITDAmarginofCM,CT,andCU.
Exhibit10:ThesteadystatewirelessEBITDAmarginshouldtrendbelow40%forCM,CT,andCUWirelessEBITDAmarginofCM,CT,andCUSource:Companydata.
Source:Companydata,GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates.
-20.
0%0.
0%20.
0%40.
0%60.
0%80.
0%100.
0%AT&T(Wireless)VerizonWirelessSmarToneHutchison(Wireless)CMDepreciationSubsidyOthercostEBITmargin0.
0%5.
0%10.
0%15.
0%20.
0%25.
0%30.
0%35.
0%40.
0%45.
0%0.
010.
020.
030.
040.
050.
060.
0AT&T(Wireless)VerizonWirelessSmarToneHutchison(Wireless)CMCU(Wireless)CT(Wireless)US$WirelessserviceARPUWirelessCapex/sales2012wirelessservicerevgrowthyoy20.
0%25.
0%30.
0%35.
0%40.
0%45.
0%50.
0%55.
0%1Q092Q093Q094Q091Q102Q103Q104Q101Q112Q113Q11ChinaMobileChinaUnicomChinaTelecom(pre-leasingfee)TotalEBITDAmargin(withCTpre-leasingfee)ChinaMobileTotalEBITDAmarginChinaTelecomChinaUnicom0.
0%10.
0%20.
0%30.
0%40.
0%50.
0%60.
0%200920102011E2012E2013E2014E2015E2016E2017E2018E2019E2020E2021E2022EChinaMobile(pre-leasingfee)ChinaTelecom(pre-leasingfee)ChinaUnicomserviceEBITDAmargin2012年3月9日中国:电信服务高华证券投资研究8RapidadoptionofsmartphonetodriverevenuegrowthWehaveidentifiedthreesmartphonetrendsthatshouldaffectcompetitivelandscapeandARPUdynamicsin2012.
Overall,weexpecthealthytotalwirelessrevenuegrowthat10%and8%CAGRin2011-2013and2011-2016,respectively(Exhibit11).
WealsoforecastCM'sshareintheincrementalwirelessrevenuemarkettotroughin2012at37%,withCUandCTcapturing33%and30%marketshare,respectively(Exhibit12).
EvenafteritspotentialTD-LTElaunchinlate2013,CMislikelytocontinuetolosemarketsharetoCUandCTatamoderatepacefromahighbase,inourview.
However,webelievethisexpectationislargelypricedintothestock'scurrentvaluation.
1.
Ultra-low-costsmartphoneisgrowingassmartphoneBOM(billofmaterial)decreasesrapidly.
TheBOMofa3.
5"and600MHzsmartphonehasdecreasedfromUS$100in3Q11toUS$65-$70todayandexpectedtobe$50bytheendof2012.
TheretailpriceofthiskindofsmartphoneshouldreachUS$70-$75.
WCDMAshouldleadinthisultra-low-costcategory,benefitingfromthefiercecompetitionbetweenMediatekandQualcomm.
Theultra-low-costTD-SCDMAsmartphoneshouldcatchupwithWCDMAonesin3Q12afterMediatekandSpreadtrumstarttoshiptheirlow-costTD-SCDMAsmartphonesolutionsin2Q12.
WebelieveCDMAorEVDOwillfallbehindinthiscategoryunlessQualcommcutsitsCDMAroyaltyrate.
CUhasindicateditswillingnesstosubsidizeRMB500smartphonein2012.
CMseemsunwillingtosubsidizelowcostsmartphoneduetoconcernsoverexcessivesubsidyforitsmassivesubbase,butwebelieveCMcanleverageitsstrongsalesnetworktohelplowerthetransactioncost,whichcanbeashighas30%ofretailpriceandisthelargestcostcomponentinsecondandthirdtiercities.
Overall,ultra-low-costsmartphonesshouldsupportCU's3GsubgrowthattheexpenseofARPUdeterioration.
2.
Mid-rangesmartphoneisthefocusofmajorChinesehandsetmakersandshouldbecomethehighestgrowthsegmentinChina.
Sincelow-cost(belowRMB1,000)smartphoneshaveverylittleproductdifferentiationandofferverylowmargin,manyChinesehandsetmakershavefocusedondifferentiatingtheirbusinessmodels,forhardwareorsoftware,intheRMB1,500-RMB2,500mid-rangesmartphonesegment.
Forexample,XiaomihasbypasseddistributionchannelstosellitshighspecsmartphonewithitsownUIatattractiveprices;AlibabainvestedinTianyu;TencentiscollaboratingwithHuaweiinaQQsmartphone;BaiduisworkingwithDell;HTCwillshiponeRMB1,500-2,000smartphoneforeachChinesecarrierin2H12;HuaweiandZTEarenarrowingtheirgapwithgloballeadersincomputingspeed,batterylife,andthickness.
Weestimatethattheshipmentofthissegmenttoreach30mnto40mnin2012.
Inthissegment,atypicalpracticeofhandsetmakersistointroducetheWCDMAversionfirstandthentheEVDOphoneafterthreemonths.
ThepricedifferencebetweentheWCDMAandEVDOversionsislimitedandoftenwithinRMB100.
Carriersubsidyshouldbeanimportantdriverinthissegment.
CUhasalreadybenefitedfromthegrowthinthemid-rangesmartphonesegment;CTisexpectedtodososoon.
3.
CT'siPhone4SlaunchonMarch9likelytochangethecompetitivedynamicsinhigh-endsmartphonesegment.
AccordingtoarecentSINAonlinesurveyofover20,000respondents,40%ofthecorrespondentspreferCT'siPhoneversus18%forCU'siPhone.
CTplanstosell2.
5mniPhonesor250,000permonthin2012,atasimilarpaceasCU.
WebelieveCT'siPhone4SlaunchwouldhelpittocompetewithCUinthehigh-endandaccelerateCM'slossofveryhigh-endusers(aboveRMB300).
2012年3月9日中国:电信服务高华证券投资研究9Exhibit11:Weforecasthealthywirelessrevenuegrowthat10%and8%CAGRin2011-2013and2011-2016,respectively.
WirelessservicerevenuesofCM,CT,andCUSource:Companydata,GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates.
Exhibit12:CM'ssharetotroughinincrementalwirelessservicerevenuemarketin2012-2013IncrementalwirelessservicerevenuemarketshareExhibit13:CM'sshareinwirelessservicerevenuemarkettostabilizeat60%WirelessservicerevenuemarketshareSource:Companydata,GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates.
Source:Companydata,GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates.
0.
0200,000.
0400,000.
0600,000.
0800,000.
01,000,000.
01,200,000.
01,400,000.
02002200320042005200620072008200920102011201220132014201520162017201820192020RmbmnChinaMobileChinaUnicomChinaTelecom0%10%20%30%40%50%60%70%80%90%100%20102011E2012E2013E2014E2015E2016E2017E2018E2019E2020E2021E2022EChinaMobileChinaUnicomChinaTelecom0%10%20%30%40%50%60%70%80%90%100%2002200420062008201020122014201620182020ChinaMobileChinaUnicomChinaTelecom2012年3月9日中国:电信服务高华证券投资研究10TD-LTE:technologyandspectrumprogress;timeforexecutionThemostimportantdevelopmentofTD-LTErecentlywasMIIT'sapprovalforCMtouseFspectrum(1880MHz–1920MHz)forTD-LTEonDecember312011.
TheFspectrumofferssignificantlybettercoverageatlowercostthanthepreviousspectrumat2.
3GHz-2.
6GHz.
Meanwhile,CM'seffortsinLTEconvergencehavebornefruitandTD-LTEterminaldevelopmentshouldfacefarlesschallengesthanTD-SCDMA.
ThenextmilestoneinTD-LTEshouldbeexecutionbyCMwithitscontractfor20,000TD-LTEbasestations(pre-commercialtrial)in2012.
OurbasecasestillassumesCMlaunchingTD-LTEcommercialserviceinChinainlate2013.
BelowarekeyrecentTD-LTEdevelopments:AttheMWC(MobileWorldCongress)2012,Mr.
YueLi,theCEOofCM,announcedthatMIIT(MinistryofIndustryandInformationTechnology)hasapprovedtheupgradeofitsexistingTD-SCDMAbasestationstoTD-LTEattheFspectrum(1880MHz-1920MHz)inHangzhouandShenzhen(1880MHz-1900MHzoriginallyforTD-SCDMAand1900MHz-1920MHzforPHS).
MIIThadpreviouslyrequestedtheterminationofPHSservicebytheendof2011.
CMplanstoimplementcontinuouscoverageandstartpre-commercialtrialsinHangzhouandShenzheninJuly2012.
ThisdevelopmentisconsistentwiththecommentofanotherseniorexecutiveofCMthatspectrumisnolongeranissueforTD-LTEinChina.
CMplanstoinstallorupgradeover20,000TD-LTEbasestationsforscaletestsinninecitiesin2012.
Iftestresultsarepositive,CMplanstobuildorupgradeover200,000TD-LTEbasestationsin2013.
CMhas250,000TD-SCDMAbasestations,over50%ofwhichcanbeupgradedtoTD-LTE.
QualcommisontracktoaddTD-LTEandTD-SCDMAfunctionalitytoitsflagshipSnapdragonMSM8960inSeptember2012.
MSM8960supportsall2G,3G,and4Gstandardsintheworld(GSM/CDMA/WCDMA/EVDO/TD-SCDMA/FDD-LTE/TD-LTE).
WealsonotethatnewlydevelopedPAandRFcansupportupto10spectrumsandgreatlysimplifydesignmultimodephones.
HTCintroducedHTCOneX,thefirstsmartphoneadoptingMSM8960withupbeatreviewsattheMWC2012.
OnceMSM8960cansupportTD-LTEandTD-SCDMA,HTCshouldbeabletolaunchtheTD-LTEversionofOneXwithinthreemonthsbytheendof2012,inourview.
MarketanalysisindicatesthattheiPhone5isexpectedtouseaQualcommmodemsimilartothatinMSM8960,whichcansupportbothTD-LTEandTD-SCDMAintheory.
Softbankhasbuild4,027TD-LTEbasestationsandlaunchedTD-LTEserviceinJapan.
HuaweiandZTEsupplied75%and25%oftheTD-LTEequipmentrespectivelyforSoftbank.
WehavefactoredinminorTD-LTErelatedupsideinourCMestimatesbyassumingthatCM'sdecliningARPUtrendwillreversein2014E.
InourCMmodel,weforecastCM'sARPUincreasingto0.
5%yoyin2014afterdeclining3.
7%and1.
2%in2012and2013,respectively;andCM'ssubgrowthcontinuingtodeteriorateto3.
8%and3.
6%in2014and2015,respectively,from11.
2%in2011,asweexpectsomeoftheCMuserswithCUorCT3GSIMtodiscardtheirCMSIM.
Meanwhile,wehaveassumedthatCM'shandsetsubsidywillincreasesubstantiallyfrom3.
3%oftotalrevenuesin2011to6.
6%and8.
0%in2014and2015,duetointensifyingcompetitionandTD-LTElaunch.
Oursensitivityanalysisindicatesthattheimpliedvaluationwould12.
6%higherthanourbasecasevaluationifTD-LTEcanboostaverageARPUandsubgrowthratesof160bpsand200bpsfromourbasecaseof0.
4%and3.
7%yoyin2014-2015,respectively(Exhibit14).
WeexpectinvestorstofocusonLTEdevelopmentin2012becauseweexpectthelatestandtobelaunchedhigh-endsmartphoneandtabletstosupportLTEin2012,thus2012年3月9日中国:电信服务高华证券投资研究11potentiallydiminishingthecurrentpremiumofWCDMAnetwork.
Apple'snewiPad3featuresLTEtothesurpriseoftheStreet.
Verizon,AT&T,Rogers,Bell,andTeluswillbethefirstLTEcarrierstoofferiPad3,whichwillbeavailableonMarch16intheUSbutpre-orderinghasbegunafterthelauncheventonMarch7.
HTC'snewsmartphoneseries,OneX,usesMSM8960thatsupportsbothTDDandFDDLTE.
WeexpectiPhone5touseMSM8960aswell.
HuaweiandSamsungElectronicsareintroducingtheirMSM8960-basedsmartphonesinAprilorMay.
Infact,weexpectoverhalfofhigh-endsmartphonemodelstosupportLTEin2012.
Previously,almostallhigh-endsmartphonemodelswouldsupportWCDMAfirst,andthenEVDOandLTEandthemarkethasaccordedvaluationpremiaforcarrierswithWCDMAnetworkbecausetheyarealwaysthefirstonestogetthebestsmartphone.
Goingforward,asshowninthecaseofiPad3,carrierswithLTEnetworkwouldbethefirsttogetthemostadvanced/superiorphones.
WeexpectthepremiumofWCDMAcarrierstodiminishandthatofLTEcarriersorpotentialfirstLTEcarrierstoincreasein2012.
Exhibit14:Oursensitivityanalysisindicatesthatimpliedvaluewouldincreaseby12.
6%ifTD-LTEcanboostaverageARPUandsubgrowthratesby160bpsand200bpsfromourbasecaseof0.
4%and3.
7%yoyin2014-2015,respectively.
CMvaluationsensitivityanalysisSource:GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates.
Sensitivityanalysis(1.
0%)-0.
4%1.
0%2.
0%1.
7%848992951002.
7%859193961023.
7%879295981044.
7%8893961001065.
7%899598101107Sensitivityanalysis(1.
0%)-0.
4%1.
0%2.
0%1.
7%-11.
6%-6.
3%-3.
2%0.
0%5.
3%2.
7%-10.
5%-4.
2%-2.
1%1.
1%7.
4%3.
7%-8.
4%-3.
2%0.
0%3.
2%9.
5%4.
7%-7.
4%-2.
1%1.
1%5.
3%11.
6%5.
7%-6.
3%0.
0%3.
2%6.
3%12.
6%AvgyoygrowthofARPUin2014and2015Avgyoygrowthofmobilesubsin2014and2015AvgyoygrowthofARPUin2014and2015Avgyoygrowthofmobilesubsin2014and2015ImpliedvaluechangefrombasecaseImpliedvalue(HK$)2012年3月9日中国:电信服务高华证券投资研究12PreferCMfordefensivenatureandTD-LTEpotentialupsideWeseethreecatalystsforChinesetelcostocksin2012.
(1)Weexpectinvestorstopayincreasingattentionto3GinvestmentreturnsofCUandCTafterwirelessrevenuegrowthstartstodecelerateandTD-LTEpre-commercialtrialtakesplacein2H12.
(2)Weexpectmostnewhigh-endsmartphonesincludingiPhone5tosupportLTEin2H2012,thusgraduallydiminishingthepremiumofWCDMAnetwork.
(3)BenefitingfromiPhone4Sandmid-rangesmartphones,CTshouldbecomemorecompetitiveinmid-rangeandhigh-endsegmentsandputARPUpressureonCMandCU.
Meanwhile,increasingsubsidyshouldcompressCT'sprofitabilityin2012-2013.
WhileCMislosingmarketshareandsufferingfromcontinuedmarginpressure,itislesssensitivetoapotentialsubsidyincrease(Exhibit20),andofferssustainablecashdividendyieldof3.
8%.
VerizonsharesoutperformedAT&TsharesoneyearbeforeitsiPhoneandLTElaunch(VZshareshaveoutperformedvs.
AT&Tsharesby16%sinceSeptember2010to-date).
WeexpectCMsharestooutperformin2012beforeitspotentialTD-LTEcommerciallaunchinlate2013.
WebelieveCMsharesofferagoodandreliablecashdividendyieldandexpectapotentialre-ratingfromtheTD-LTElaunch.
WeupgradeCMfromNeutraltoBuy.
Welowerour2011E/12E/13EEPS1.
9%/2.
3%/2.
4%toRmb6.
10/5.
90/6.
07duetointensifyingcompetitionandpressureonhigh-endmarketshareandintroduce2014EEPSofRmb6.
25.
FortheADR,weraiseour2011E/12E/13EEPSbyabout30%toUS$4.
84/4.
68/4.
81asweupdatetheUS$/Rmbexchangeratetothespotrateof6.
3andintroduce2014EEPSofUS$4.
96.
Weraiseour12-mtargetprice(DCF-basedSOTP)fromHK$84(ADR:US$54)toHK$95(ADR:US$61)with19%(18%)upsidepotentialasweraiseour2011E-2020ErevenuegrowthCAGRfrom3.
6%to4.
2%toreflectpotentialbenefitsfromTD-LTE.
WebelievethatthemarkethaspricedingoodwirelessrevenuegrowthatCTandCU,butdoesnotfullyappreciatetheirpotentiallypoor3Greturnsandlackofcapabilitytoofferattractivecashdividendyieldinthefuture,yet.
WedowngradeCTfromBuytoNeutralrating.
Welowerour2012E/13EEPS27%/17%toRmb0.
19/0.
29duetopotentialmarginpressureafteriPhone4Slaunchandintroduce2014EEPSofRmb0.
40.
FortheADR,weadjustour2011E/11E/13EEPSby-6%/21%/13%toUS$3.
35/3.
02/4.
56toreflectanupdatedexchangerateandintroduce2014EEPSofUS$6.
37.
Consequently,welowerour12-mtargetprice(DCFbasedSOTP)fromHK$5.
4(ADR:US$69)toHK$5.
1(ADR:$66)with12%(12%)potentialupside.
WemaintainourNeutralratingand12-mtargetprice(DCFbasedSOTP)ofHK$16.
2(ADR:US$20.
8)forCUbutreviseour2011E/12E/13EEPSby4%/-15%/-17%toRmb0.
25/0.
40/0.
58forthelocalshareandby13%/-7%/-12%toUS$0.
40/0.
64/0.
92fortheADRtoreflectanupdatedexchangerateandpotentialhighersubsidies,implyingmarginpressure.
WemaintainourNeutralratingonChinaUnitedNetworkCommunicationsbutlowerour12-mtargetprice(DCFbasedSOTP)fromRmb5.
9toRmb5.
4toreflectanarrowedA-sharepremiumagainstredchips(ChinesecompanieslistedontheHKEx)givencurrentmarketconditions.
Welower2012E/13EEPSestimatesby12%/15%toRmb0.
15/0.
22duetopotentialhighersubsidies,implyingmarginpressure.
Weintroduceour2014EEPSofRmb0.
26.
Keyrisks–Upside:slower-than-expected3GARPUerosion;Downside:intensifyingcompetition.
2012年3月9日中国:电信服务高华证券投资研究13Exhibit15:WelowerourestimatesofCM,CUandCTinlightofCT'siPhone4Slaunch,andCU'sincreasingcapexandsubsidy.
GSearningsrevisionforCM,CU,andCTSource:GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates.
Exhibit16:OurearningsestimatesaremostlybelowconsensusComparisonofGSandconsensusearningsestimatesSource:GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates,I/B/E/S.
ChinaMobile(0941.
HK)NewOldDiff.
NewOldDiff.
NewOldDiff.
Revenue(Rmbmn)522,788526,956-0.
8%550,732556,312-1.
0%576,453584,426-1.
4%EBITDA(Rmbmn)244,768248,135-1.
4%244,414248,335-1.
6%251,487256,457-1.
9%EBITDAmargin46.
8%47.
1%-27bps44.
4%44.
6%-26bps43.
6%43.
9%-26bpsNetincome(Rmbmn)122,299124,826-2.
0%118,411121,085-2.
2%121,705124,701-2.
4%EPS(Rmb)6.
106.
22-2.
0%5.
906.
04-2.
2%6.
076.
22-2.
4%ChinaUnicom(0762.
HK)AllrecurringexupfrontconnfeeNewOldDiff.
NewOldDiff.
NewOldDiff.
Revenue(Rmb,mn)211,597213,261-0.
8%244,945245,144-0.
1%272,767267,0422.
1%EBITDA(Rmbmn)66,33365,9620.
6%74,16975,214-1.
4%85,81486,566-0.
9%EBITDAmargin31.
3%30.
9%42bps30.
3%30.
7%-40bps31.
5%32.
4%-96bpsNetincome(Rmbmn)5,9215,6245.
3%9,53810,978-13.
1%13,59516,544-17.
8%EPS(Rmb)0.
250.
245.
3%0.
400.
47-13.
1%0.
580.
70-17.
8%ChinaTelecom(0728.
HK)AllrecurringexupfrontconnfeeNewOldDiff.
NewOldDiff.
NewOldDiff.
Revenue(Rmb,mn)242,676242,2580.
2%269,531267,1590.
9%296,446289,3962.
4%EBITDAbeforeleasingfee(Rmbmn)95,34197,208-1.
9%100,789108,422-7.
0%108,509117,821-7.
9%EBITDAmargin39.
3%40.
1%-84bps37.
4%40.
6%-319bps36.
6%40.
7%-411bpsEBITDA(Rmbmn)76,55376,1480.
5%75,59882,356-8.
2%108,509115,192-5.
8%EBITDAmargin31.
5%31.
4%11bps28.
0%30.
8%-278bps36.
6%39.
8%-320bpsNetincome(Rmbmn)17,06417,176-0.
7%15,39220,757-25.
8%23,26928,605-18.
7%EPS(Rmb)0.
210.
21-0.
7%0.
190.
26-25.
8%0.
290.
35-18.
7%ChinaUnitedNetworkcommunicationsAllrecurringexupfrontconnfeeNewOldDiff.
NewOldDiff.
NewOldDiff.
Revenue(Rmb,mn)211,597213,261-0.
8%244,945245,144-0.
1%272,767267,0422.
1%EBITDA(Rmbmn)66,33365,9620.
6%74,16975,214-1.
4%85,81486,566-0.
9%EBITDAmargin31.
3%30.
9%42bps30.
3%30.
7%-40bps31.
5%32.
4%-96bpsNetincome(Rmbmn)1,9861,8875.
3%3,2003,683-13.
1%4,5615,550-17.
8%2011E2012E2013E2011E2012E2013E2011E2012E2013E2011E2012E2013EChinaMobile(0941.
HK)GSConsensusDiff.
GSConsensusDiff.
GSConsensusDiff.
Revenue(Rmbmn)522,788523,441-0.
1%550,732558,506-1.
4%576,453598,517-3.
7%EBITDA(Rmbmn)244,768251,183-2.
6%244,414262,028-6.
7%251,487271,000-7.
2%EBITDAmargin46.
8%48.
0%-117bps44.
4%46.
9%-254bps43.
6%45.
3%-165bpsNetincome(Rmbmn)122,299124,632-1.
9%118,411127,229-6.
9%121,705130,768-6.
9%EPS(Rmb)6.
106.
17-1.
2%5.
906.
34-6.
9%6.
076.
54-7.
2%ListcoCapex(Rmbmn)131,469132,400-0.
7%129,249130,400-0.
9%123,368125,500-1.
7%as%ofrevenue25%25%-15bps23%23%12bps21%21%43bpsChinaUnicom(0762.
HK)GSConsensusDiff.
GSConsensusDiff.
GSConsensusDiff.
Revenue(Rmb,mn)211,597211,6230.
0%244,945246,460-0.
6%272,767278,021-1.
9%EBITDA(Rmbmn)66,33365,4631.
3%74,16974,821-0.
9%85,81487,168-1.
6%EBITDAmargin31.
3%30.
9%41bps30.
3%30.
4%-8bps31.
5%31.
4%11bpsNetincome(Rmbmn)5,9215,6125.
5%9,5389,3651.
8%13,59514,184-4.
2%EPS(Rmb)0.
250.
239.
3%0.
400.
401.
2%0.
580.
61-5.
4%Totalcapex(Rmbmn)72,80073,800-1.
4%97,46780,00021.
8%83,80480,0354.
7%as%ofrevenue34%35%-47bps40%32%733bps31%29%194bpsChinaTelecom(0728.
HK)GSConsensusDiff.
GSConsensusDiff.
GSConsensusDiff.
Revenue(Rmb,mn)242,676244,645-0.
8%269,531267,6420.
7%296,446289,3962.
4%EBITDA(Rmbmn)76,55377,801-1.
6%75,59881,010-6.
7%108,509100,8007.
6%EBITDAmargin31.
5%31.
8%-26bps28.
0%30.
3%-222bps36.
6%34.
8%177bpsNetincome(Rmbmn)17,06417,581-2.
9%15,39219,619-21.
5%23,26923,1440.
5%EPS(Rmb)0.
210.
22-4.
2%0.
190.
24-20.
8%0.
290.
282.
7%ListcoCapex(Rmbmn)50,48150,0001.
0%50,13950,800-1.
3%75,63158,63429.
0%as%ofrevenue21%20%36bps19%19%-38bps26%20%525bps2011E2012E2013E2011E2012E2013E2011E2012E2013E2012年3月9日中国:电信服务高华证券投资研究14Exhibit17:CMsharesaretradingatlowestEV/EBITDAratio,themostconsistentvaluationmetricforChinesetelcosChinatelcocompsheetSource:GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates,Datastream.
Exhibit18:CM,CUandCThavesimilargrowthadjusted2012EEV/EBITDA2012EEV/EBITDAvs.
EBITDAgrowthofCM,CU,andCTExhibit19:CThasslightlylowergrowthadjusted2013EEV/EBITDA2013EEV/EBITDAvs.
EBITDAgrowthofCM,CU,andCTSource:GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates,DatastreamSource:GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates,DatastreamExhibit20:CMistheleastsensitivetohandsetsubsidyamongthethreetelcooperatorsCM,CUandCTsensitivityanalysisonsubsidySource:GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates.
Valuation@GStargetpriceTargetMktcapCompanyTickerRatingprice(US$mn)2012E2013E2014E2012E2013E2014E2012E2013E2014E2012E2013E2014E2012E2013E2014E2012E2013E2014E2012E2012E2013E2014EChinaMobile941.
HKBuyHK$95.
0244,9845.
906.
076.
2513.
212.
812.
54.
94.
54.
12.
212.
011.
813.
3%3.
4%3.
9%6.
0%6.
6%7.
4%2.
217%16%15%ChinaUnicom762.
HKNeutralHK$16.
249,0620.
400.
580.
7032.
823.
019.
05.
44.
74.
21.
641.
471.
341.
5%2.
1%2.
6%-2.
6%2.
6%4.
7%1.
55%6%7%ChinaTelecom728.
HKNeutralHK$5.
153,0530.
190.
290.
4022.
014.
510.
44.
64.
13.
51.
721.
501.
301.
7%2.
1%2.
9%7.
3%7.
9%12.
1%1.
33%4%6%Average22.
716.
814.
05.
04.
43.
91.
861.
661.
492.
2%2.
5%3.
1%3.
5%5.
7%8.
1%1.
78%9%9%Valuation@currentpriceCurrentMktcapCompanyTickerRatingprice(US$mn)2012E2013E2014E2012E2013E2014E2012E2013E2014E2012E2013E2014E2012E2013E2014E2012E2013E2014E2012E2012E2013E2014EChinaMobile941.
HKBuyHK$82.
9213,6525.
906.
076.
2511.
511.
210.
94.
13.
83.
41.
841.
661.
483.
8%3.
9%4.
5%6.
8%7.
6%8.
5%1.
917%16%15%ChinaUnicom762.
HKNeutralHK$14.
042,3990.
400.
580.
7028.
419.
916.
44.
94.
23.
71.
471.
321.
201.
7%2.
5%3.
1%-3.
0%3.
0%5.
5%1.
35%6%7%ChinaTelecom728.
HKNeutralHK$4.
749,3080.
190.
290.
4020.
413.
59.
74.
43.
93.
31.
631.
411.
231.
8%2.
2%3.
1%7.
8%8.
5%13.
0%1.
23%4%6%Average20.
114.
912.
34.
43.
93.
51.
651.
461.
302.
4%2.
9%3.
6%3.
9%6.
4%9.
0%1.
58%9%9%P/B(x)ROE(%)ROE(%)EPS(Rmb)EPS(Rmb)EV/EBITDA(x)EV/SalesEV/SalesDividendyield(%)Dividendyield(%)PER(x)PER(x)EV/EBITDA(x)P/B(x)OpFCFyield(%)OpFCFyield(%)3.
03.
23.
43.
63.
84.
04.
24.
44.
64.
85.
00%2%4%6%8%10%12%14%16%18%2012EEV/EBITDA2012-2013EBITDAgrowth2012EEV/EBITDAvs.
EBITDAgrowthChinaMobileChinaUnicomChinaTelecom3.
03.
23.
43.
63.
84.
04.
24.
44.
64.
85.
00%2%4%6%8%10%12%14%16%18%2013EEV/EBITDA2013-2014EBITDAgrowth2013EEV/EBITDAvs.
EBITDAgrowthChinaMobileChinaUnicomChinaTelecomAnnualsubsidychangevs.
basecaseafterY2013-10%-5%0%5%10%Impliedvalue(HK$)98.
096.
095.
093.
091.
0Impliedvaluechangevs.
basecase3.
2%1.
1%0.
0%-2.
1%-4.
2%AggregateEPSfrom2013to2022(Rmb)75.
474.
072.
571.
069.
5AggregateEPSchangevs.
basecase4.
1%2.
0%0.
0%-2.
0%-4.
1%Impliedvalue(HK$)17.
416.
816.
215.
615.
0Impliedvaluechangevs.
basecase7.
4%3.
7%0.
0%-3.
7%-7.
4%AggregateEPSfrom2013to2022(Rmb)12.
812.
311.
811.
310.
8AggregateEPSchangevs.
basecase8.
6%4.
3%0.
0%-4.
3%-8.
6%Impliedvalue(HK$)5.
55.
35.
14.
94.
7Impliedvaluechangevs.
basecase7.
8%3.
9%0.
0%-3.
9%-7.
8%AggregateEPSfrom2013to2022(Rmb)7.
06.
86.
76.
56.
3AggregateEPSchangevs.
basecase5.
2%2.
6%0.
0%-2.
6%-5.
2%ChinaMobileChinaUnicomChinaTelecom2012年3月9日中国:电信服务高华证券投资研究15ChinaMobileisonourGSSustainFocuslistTheGSSUSTAINframeworkseekstodeliverlong-termoutperformancebyidentifyingthecompaniesineachsectorbestpositionedtosustainleadingreturnsoncapitalandlong-termgrowthasaresult.
Weidentifythesecompaniesthroughcomparisonofcompanies'forecastreturnsoncapitalandobjectivemeasuresoftheirindustrypositioningandmanagementquality–gaugedthroughtheirengagementwith,andmanagementof,theenvironmental,socialandgovernance(ESG)issuesfacingtheirsector.
ChinaMobilewasaddedtotheGSSUSTAINFocusListonApril292011,andsincethenhasoutperformedtheMSCIACWIndexby20.
9%(asofMarch82012).
ChinaMobilestandsoutonallthreepillarsofGSSUSTAINanalysisforglobaltelecoms,withreturnsoncapital(measuredasCROCI)andindustrypositioningscoresbothinthetopdecileoftheglobalpeergroup.
Forindustrypositioninganalysisintelecoms,weapplyfourobjectivemeasuresoflong-termcompetitiveadvantage:exposuretogrowthregions,exposuretoconsolidatedmarkets,clarityofregulationincountriestowhichexposedandinvestmentefficiency.
ChinaMobilestandsout,particularlyonitsexposuretothefastgrowingandrelativelyconsolidatedChinamarket,andhassubstantiallyhigherscoresoninvestmentefficiency(measuredaschangeinEBITDAtolaggedcapex)thanotherChineseoperators.
Exhibit21:Winners'circle---TelecommunicationsSource:GoldmanSachsResearchestimates.
ManagementqualityIndustrypositioningReturnoncapitalChinaMobileMTNTelstraBouyguesSingaporeTelecomPortugalTelecomSKTelecomKTCorpSwisscomTeliaSoneraTelekomAustriaRoyalKPNTelefonicaBTBhartiAirtelVimpelComm.
AmericaMovilMarocTelecomTelekomunikasiChinaUnicomPhilippineLongDist.
AdvancedInfoTurkcellZainRogersComm.
TaiwanMobileMobileTelesystemsSoftbankTIMBrazilVivoKDDIChinaTelecomTelenorVerizonFranceTelecomAT&TSprintNextelChunghwaTelecomDeutscheTelekomTELUSBCETelecomItaliaVodafoneManagementquality–ESG(basedon2009data)abovesectormedianIndustrypositioning:leadersonacombinationof:–Regionalgrowth–Regionalmarketstructure–Regulatoryexposure–OperatingcostpositionReturnoncapital–CROCI(2011-13E)abovesectormedianMaxisBerhardDISHNIIHoldingsCUNCDIRECTVVodacomRostelecomAxiataGroupTele2QtelCable&WirelessCablevisionCenturyLinkVirginMediaComcastTimeWarnerCableTurkTelecomBelgacomTelespOi(Telemar)Cable&WirelessWorldwideNipponTelegraph2012年3月9日中国:电信服务高华证券投资研究16Exhibit22:CROCIprogressionovertimeofthreeChinesetelcosSource:Companydata,GoldmanSachsResearchestimates,GaoHuaSecuritiesResearchestimates0.
0%5.
0%10.
0%15.
0%20.
0%25.
0%30.
0%35.
0%40.
0%200920102011E2012E2013E2014EChinaMobileChinaUnicomChinaTelecom2012年3月9日中国:电信服务高华证券投资研究17ChinaMobile(0941.
HK):Steadyprogress;catalystsahead,toBuySourceofopportunityWeupgradeChinaMobiletoBuyfromNeutralandraiseour12-mlocal/ADRtargetpricefromHK$84/US$54toHK$95/US$61,implying19%/18%upsidepotential.
(1)Weexpectinvestorstoturnfocusto3Ginvestmentreturnsaswirelessrevenuegrowthdecelerates,andbelievethatCMistheonlyChinesetelcothatcanpotentiallyoffersustainablecashdividendyield,hencethemostdefensivenameinthecaseofasubsidywar;(2)WeareencouragedbythesteadyprogressofTD-LTEinspectrumallocation,globalrolloutandtechnologydevelopment.
WeexpectCMtostartpre-commercialtrialofTD-LTEatFspectruminHongzhouandShenzheninJuly2012andinsixothermajorcitiesin2H2012.
WestillforecastCMtolaunchnationwideTD-LTEcommercialservicebytheendof2013afterthepre-commercialtrialandbasestationupgradestartingin2H2012.
WelikeCMsharesfortheirreliablecashdividendyieldof3.
8%andexpectapotentialre-ratingonthebackoftheTD-LTElaunch.
Catalyst(1)CM'sTD-LTEpre-commerciallaunchatFspectruminJulyshouldincreasemarketconfidenceonTD-LTEtechnologyandsupplychainsupport.
(2)Weexpectmostnewhigh-endsmartphonesincludingiPhone5tosupportLTEin2H2012,thusgraduallydiminishingthepremiumofWCDMAnetworkandestablishingLTEasthepremiumnetworkintheworld.
(3)QualcommisontracktoaddTD-LTEandTD-SCDMAfunctionalityonitsflagshipSnapdragonMSM8960inSeptember.
(4)WeexpectmuchfasterandcheaperTDsmartphonesempoweredbyMediatek'snewTDsolutionin2H2012.
ValuationWelowerourrevenue/EPSestimatesby1%-2%in2011E-13Eduetointensifyingcompetitionandpressureonhigh-endmarketshareafterCTiPhone4Slaunchbutraiseour2011E-2020ErevenuegrowthCAGRfrom3.
6%to4.
2%.
However,weraiseour2011E-13EEPSestimatesfortheADRbyabout30%duetoanupdatedUS$/Rmbspotexchangerateof6.
3.
Weraiseour12-mtargetprice(DCFbasedSOTP)fromHK$84toHK$95(ADRfromUS$54toUS$61)duetothelongtermgrowthCAGRupwardrevision,implying4.
6X2013EwirelessEV/EBITDA,thelowestamongthreeChineseoperators.
Ourrevenueandearningsforecastsfor2011E-13Earebelowconsensus,whichwethinkhasdownsiderevisionpotential.
Keyrisks(1)Fasterthanexpectedhigh-endmarketsharelossafterEVDOiPhone4Slaunch;(2)Later-than-expectedTD-LTEcommercialrolloutduetoregulatoryissues.
INVESTMENTLISTMEMBERSHIPAsiaPacificBuylistGSSUSTAINFocusListCoverageView:NeutralGrowthReturns*MultipleVolatilityVolatilityMultipleReturns*GrowthInvestmentProfileLowHighPercentile20th40th60th80th100th*Returns=ReturnonCapitalForacompletedescriptionoftheinvestmentprofilemeasurespleaserefertothedisclosuresectionofthisdocument.
ChinaMobile(HK)(0941.
HK)AsiaPacificTelecomsPeerGroupAverageKeydataCurrentPrice(HK$)79.
7012monthpricetarget(HK$)95.
00Marketcap(HK$mn/US$mn)1,597,501.
5/205,777.
4Foreignownership(%)--12/1012/11E12/12E12/13EEPS(Rmb)5.
966.
105.
906.
07EPSgrowth(%)3.
92.
2(3.
2)2.
8EPS(diluted)(Rmb)5.
896.
025.
835.
99EPS(basicpre-ex)(Rmb)5.
966.
105.
906.
07P/E(X)10.
910.
611.
010.
7P/B(X)2.
32.
01.
81.
7EV/EBITDA(X)4.
64.
13.
93.
5Dividendyield(%)4.
04.
13.
94.
1ROE(%)22.
120.
017.
416.
3CROCI(%)32.
027.
323.
621.
4404550556065707580687072747678808284Mar-11Jun-11Sep-11Dec-11PriceperformancechartChinaMobile(HK)(L)MSCIChina(R)Sharepriceperformance(%)3month6month12monthAbsolute5.
0(1.
5)7.
1Rel.
toMSCIChina(3.
7)(6.
3)20.
5Source:Companydata,GoldmanSachsResearchestimates,FactSet.
Priceasof3/07/2012close.
2012年3月9日中国:电信服务高华证券投资研究18ChinaMobile(HK):SummaryfinancialsProfitmodel(Rmbmn)12/1012/11E12/12E12/13EBalancesheet(Rmbmn)12/1012/11E12/12E12/13ETotalrevenue485,231.
0522,788.
0550,732.
2576,452.
9Cash&equivalents292,346.
0329,466.
6377,559.
5436,057.
1Costofgoodssold(25,783.
0)(28,317.
2)(30,678.
9)(32,003.
3)Accountsreceivable15,001.
016,162.
117,026.
017,821.
1SG&A(222,402.
0)(251,225.
4)(277,285.
1)(294,574.
3)Inventory4,249.
04,361.
34,594.
44,809.
0R&DOthercurrentassets10,286.
011,082.
111,674.
512,219.
7Otheroperatingprofit/(expense)2,336.
01,522.
11,645.
81,611.
9Totalcurrentassets321,882.
0361,072.
2410,854.
5470,907.
0EBITDA239,382.
0244,767.
5244,413.
9251,487.
2NetPP&E440,164.
0472,846.
7497,521.
5512,026.
4Depreciation&amortization(86,292.
0)(94,295.
2)(100,533.
7)(105,036.
2)Netintangibles37,707.
037,707.
037,707.
037,707.
0EBIT153,090.
0150,472.
3143,880.
2146,451.
1Totalinvestments40,252.
044,759.
649,663.
355,127.
9Interestincome5,658.
06,253.
57,047.
58,076.
3Otherlong-termassets21,930.
021,930.
021,930.
021,930.
0Interestexpense(902.
0)(836.
2)(772.
1)(772.
8)Totalassets861,935.
0938,315.
51,017,676.
31,097,698.
3Income/(loss)fromuncons.
subs.
540.
04,507.
64,903.
75,464.
6Others685.
0738.
0777.
5813.
8Accountspayable112,148.
0117,695.
0123,986.
1129,776.
6Pretaxprofits159,071.
0161,135.
2155,836.
8160,032.
9Short-termdebt5,551.
0594.
8623.
0648.
9Incometax(39,047.
0)(38,447.
2)(37,049.
4)(37,941.
7)Othercurrentliabilities137,931.
0143,882.
3149,417.
6154,241.
6Minorities(384.
0)(389.
0)(376.
2)(386.
3)Totalcurrentliabilities255,630.
0262,172.
1274,026.
7284,667.
1Long-termdebt28,615.
028,678.
028,678.
028,678.
0Netincomepre-preferreddividends119,640.
0122,299.
0118,411.
2121,704.
8Otherlong-termliabilities287.
0344.
1348.
7351.
4Preferreddividends0.
00.
00.
00.
0Totallong-termliabilities28,902.
029,022.
129,026.
729,029.
4Netincome(pre-exceptionals)119,640.
0122,299.
0118,411.
2121,704.
8Totalliabilities284,532.
0291,194.
2303,053.
4313,696.
5Post-taxexceptionals0.
00.
00.
00.
0Netincome119,640.
0122,299.
0118,411.
2121,704.
8Preferredshares0.
00.
00.
00.
0Totalcommonequity576,157.
0645,486.
3712,611.
8781,604.
3EPS(basic,pre-except)(Rmb)5.
966.
105.
906.
07Minorityinterest1,246.
01,635.
02,011.
22,397.
5EPS(basic,post-except)(Rmb)5.
966.
105.
906.
07EPS(diluted,post-except)(Rmb)5.
896.
025.
835.
99Totalliabilities&equity861,935.
0938,315.
51,017,676.
31,097,698.
3DPS(Rmb)2.
582.
642.
562.
63Dividendpayoutratio(%)43.
343.
343.
343.
3BVPS(Rmb)28.
7232.
1735.
5238.
96Freecashflowyield(%)8.
26.
97.
18.
0Growth&margins(%)12/1012/11E12/12E12/13ERatios12/1012/11E12/12E12/13ESalesgrowth7.
37.
75.
34.
7CROCI(%)32.
027.
323.
621.
4EBITDAgrowth4.
52.
2(0.
1)2.
9ROE(%)22.
120.
017.
416.
3EBITgrowth2.
9(1.
7)(4.
4)1.
8ROA(%)14.
813.
612.
111.
5Netincomegrowth3.
92.
2(3.
2)2.
8ROACE(%)39.
035.
632.
031.
4EPSgrowth3.
92.
2(3.
2)2.
8Inventorydays57.
355.
553.
353.
6Grossmargin94.
794.
694.
494.
4Receivablesdays9.
410.
911.
011.
0EBITDAmargin49.
346.
844.
443.
6Payabledays1,477.
81,481.
31,437.
71,447.
1EBITmargin31.
528.
826.
125.
4Netdebt/equity(%)(44.
8)(46.
5)(48.
9)(52.
0)Interestcover-EBIT(X)NMNMNMNMCashflowstatement(Rmbmn)12/1012/11E12/12E12/13EValuation12/1012/11E12/12E12/13ENetincomepre-preferreddividends119,640.
0122,299.
0118,411.
2121,704.
8D&Aadd-back86,292.
094,295.
2100,533.
7105,036.
2P/E(analyst)(X)10.
910.
611.
010.
7Minoritiesinterestsadd-back384.
0389.
0376.
2386.
3P/B(X)2.
32.
01.
81.
7Net(inc)/decworkingcapital21,335.
05,189.
25,650.
94,343.
6EV/EBITDA(X)4.
64.
13.
93.
6Otheroperatingcashflow4,674.
0(5,401.
6)(7,161.
9)(8,964.
1)EV/GCI(X)1.
51.
21.
00.
8Cashflowfromoperations236,344.
0221,010.
3222,296.
2227,222.
8Dividendyield(%)4.
04.
13.
94.
1Capitalexpenditures(124,300.
0)(131,469.
0)(129,249.
2)(123,368.
2)Acquisitions0.
00.
00.
00.
0Divestitures0.
00.
00.
00.
0Others(34,143.
4)6,253.
57,047.
58,076.
3Cashflowfrominvestments(158,443.
4)(125,215.
5)(122,201.
7)(115,291.
9)Dividendspaid(common&pref)(51,818.
0)(52,969.
6)(51,285.
8)(52,712.
3)Inc/(dec)indebt(235.
0)(4,868.
3)56.
351.
8Commonstockissuance(repurchase)0.
00.
00.
00.
0Otherfinancingcashflows(902.
0)(836.
2)(772.
1)(772.
8)Cashflowfromfinancing(52,955.
0)(58,674.
2)(52,001.
6)(53,433.
3)Totalcashflow24,945.
637,120.
648,092.
958,497.
5Note:Lastactualyearmayincludereportedandestimateddata.
Source:Companydata,GoldmanSachsResearchestimates.
2012年3月9日中国:电信服务高华证券投资研究19Exhibit23:Weraiseour12-mtargetpricetoHK$95,implying4.
6X2013EwirelessEV/EBITDAOurSOTPvaluationsummaryforCMSource:GaoHuaSecuritiesResearchestimates,GoldmanSachsResearchestimates.
Exhibit24:CMistradingat1standarddeviationbelowhistoricalaverage12mforwardP/ECM12-mforwardconsensusP/EExhibit25:CMistradingnear1standarddeviationbelowhistoricalaverage12mforwardEV/EBITDACM12mforwardconsensusEV/EBITDASource:Datastream,I/B/E/SSource:Datastream,I/B/E/SCMredchipSOTPvaluationImplied12EImplied13ENetdebtandMIEquityvalueEquityvalueGSSOTPEV(Rmbm)EV/EBITDAEV/EBITDA(Rmbm)(Rmbm)/share(HK$)/share(HK$)CMmobile1,180,3044.
84.
6(346,247)1,526,55192.
892.
820%stakeinSPDB32,02232,0221.
91.
7Total1,212,3264.
94.
8(346,247)1,558,57394.
795.
0103050709011013015017005101520253035404550Jan-06Mar-06May-06Jul-06Oct-06Dec-06Feb-07May-07Jul-07Sep-07Dec-07Feb-08Apr-08Jun-08Sep-08Nov-08Jan-09Apr-09Jun-09Aug-09Nov-09Jan-10Mar-10May-10Aug-10Oct-10Dec-10Mar-11May-11Jul-11Oct-11Dec-11Feb-1212mthFwdP/E(lhs)FP/EMean+Stdev-StdevPrice(rhs)(X)HK$ChinaMobile12mthFwdP/E305070901101301501702.
02.
53.
03.
54.
04.
55.
05.
56.
06.
57.
0Jan-06Mar-06May-06Jul-06Oct-06Dec-06Feb-07May-07Jul-07Sep-07Dec-07Feb-08Apr-08Jun-08Sep-08Nov-08Jan-09Apr-09Jun-09Aug-09Nov-09Jan-10Mar-10May-10Aug-10Oct-10Dec-10Mar-11May-11Jul-11Oct-11Dec-11Feb-1212mthFwdEV/EBITDA(lhs)Mean+Stdev-StdevPrice(rhs)(X)HK$CM12mthFwdEV/EBITDA2012年3月9日中国:电信服务高华证券投资研究20ChinaTelecom(0728.
HK,Neutral):iPhone4SpricedinWhathappenedWedowngradeChinaTelecomtoNeutralfromBuyandlowerour12-mSOTP-basedtargetpricefromHK$5.
4(ADR:US$69)toHK$5.
1(ADR:US$66)duetopotentialmarginpressureafteriPhone4Slaunch,implying12%(12%)upsidepotential.
CTlocal/ADRshareshaverisen9.
1%/10.
1%sinceweaddedthestocktoBuyonJanuary6,2011vs.
MSCIChinaindexdown12.
9%.
Currentview(1)CTwilllaunchiPhone4SonMarch9.
iPhone4SwouldhelpCTgainmarketshareinhigh-endsubsfromCUandCM,andaccelerateitswirelessrevenuegrowth,butwouldaffectCT'searningsnegativelyin2012-2013duetoitsheavysubsidyburden,asthehandsetsubsidyaloneaccountsfor45%oftotalcommittedgrossARPU;(2)EVDOsmartphonesupplyhasbeencatchingupwithWCDMAonesinthemid-range(RMB1,5000-RMB2,500),butisstilllaggingbehindintheultra-low-end(RMB500–RMB800)segmentunlessQualcommcutsitsCDMAroyaltyrate.
WebelieveCTshouldgainmid-rangeandhigh-endusersbutwilllagbehindinlow-end3Gaddsin2012.
(3)Withwirelessrevenuegrowthdecelerating,investorsshouldturntheirfocuson3Ginvestmentreturns.
OuranalysisindicatesthatCT's3Ginvestmenthasmuted12-yearIRRofjust7.
4%,wellbelowitsWACCof11.
4%.
Inaddition,itwouldtake10yearsafteritsinitial3Ginvestmentforitscumulativefreecashflowtobreakevenin2019,fiveyearsafterthepotentialTD-LTElaunchin2014.
Welowerour2012-13EEPSestimates17%-27%forthelocalshareand0.
6%-26%for2011E-13EfortheADRduetopotentialmarginpressureafteriPhone4Slaunch.
Hence,welowerour12-mSOTPbasedtargetpricefromHK$5.
4(ADR:US$69)toHK$5.
1(ADR:US$66).
Keyrisks:Upside–ARPUimprovementduetohigherdatausage.
Downside:higher-than-expectedhandsetsubsidyandintensifyingcompetition.
INVESTMENTLISTMEMBERSHIPNeutralCoverageView:NeutralGrowthReturns*MultipleVolatilityVolatilityMultipleReturns*GrowthInvestmentProfileLowHighPercentile20th40th60th80th100th*Returns=ReturnonCapitalForacompletedescriptionoftheinvestmentprofilemeasurespleaserefertothedisclosuresectionofthisdocument.
ChinaTelecom(0728.
HK)AsiaPacificTelecomsPeerGroupAverageKeydataCurrentPrice(HK$)4.
5512monthpricetarget(HK$)5.
10Marketcap(HK$mn/US$mn)368,242.
3/47,434.
0Foreignownership(%)18.
412/1012/11E12/12E12/13EEPS(Rmb)0.
190.
210.
190.
29EPSgrowth(%)15.
011.
8(9.
8)51.
2EPS(diluted)(Rmb)0.
190.
210.
190.
29EPS(basicpre-ex)(Rmb)0.
190.
210.
190.
29P/E(X)19.
617.
519.
412.
9P/B(X)1.
31.
21.
21.
1EV/EBITDA(X)4.
14.
35.
63.
7Dividendyield(%)2.
01.
91.
92.
3ROE(%)6.
77.
26.
28.
9CROCI(%)10.
39.
68.
610.
840455055606570758085904.
04.
24.
44.
64.
85.
05.
25.
45.
65.
86.
0Mar-11Jun-11Sep-11Dec-11PriceperformancechartChinaTelecom(L)MSCIChina(R)Sharepriceperformance(%)3month6month12monthAbsolute(3.
0)(8.
8)(2.
2)Rel.
toMSCIChina(11.
0)(13.
3)10.
0Source:Companydata,GoldmanSachsResearchestimates,FactSet.
Priceasof3/07/2012close.
2012年3月9日中国:电信服务高华证券投资研究21ChinaTelecom:SummaryfinancialsProfitmodel(Rmbmn)12/1012/11E12/12E12/13EBalancesheet(Rmbmn)12/1012/11E12/12E12/13ETotalrevenue219,367.
0242,676.
2269,531.
5296,446.
4Cash&equivalents27,792.
024,873.
813,463.
121,832.
4Costofgoodssold(47,288.
0)(52,436.
0)(58,928.
9)(39,425.
9)Accountsreceivable17,328.
018,926.
520,751.
522,527.
2SG&A(42,130.
0)(46,959.
4)(58,958.
1)(64,573.
9)Inventory3,170.
03,506.
83,894.
94,283.
8R&DOthercurrentassets6,955.
07,694.
08,545.
59,398.
8Otheroperatingprofit/(expense)(54,635.
0)(66,728.
0)(76,046.
9)(83,937.
4)Totalcurrentassets55,245.
055,001.
246,654.
958,042.
3EBITDA75,314.
076,552.
975,597.
7108,509.
3NetPP&E289,693.
0289,020.
4400,158.
0404,263.
9Depreciation&amortization(51,656.
0)(51,154.
1)(51,001.
4)(71,525.
3)Netintangibles9,968.
09,968.
09,968.
09,968.
0EBIT23,658.
025,398.
824,596.
336,984.
0Totalinvestments1,977.
01,977.
01,977.
01,977.
0Interestincome373.
0294.
1263.
2142.
5Otherlong-termassets50,472.
055,835.
062,013.
968,206.
5Interestexpense(3,973.
0)(3,246.
3)(4,662.
9)(6,350.
2)Totalassets407,355.
0411,801.
6520,771.
8542,457.
7Income/(loss)fromuncons.
subs.
0.
00.
00.
00.
0Others353.
0481.
2484.
2488.
7Accountspayable40,366.
044,655.
249,596.
854,549.
5Pretaxprofits20,411.
022,927.
920,680.
831,265.
0Short-termdebt31,027.
026,986.
0120,160.
0121,073.
0Incometax(5,031.
0)(5,732.
0)(5,170.
2)(7,816.
2)Othercurrentliabilities55,530.
060,922.
071,013.
579,963.
1Minorities(118.
0)(131.
9)(119.
0)(179.
9)Totalcurrentliabilities126,923.
0132,563.
1240,770.
4255,585.
6Long-termdebt42,549.
029,288.
017,853.
05,505.
0Netincomepre-preferreddividends15,262.
017,064.
015,391.
623,268.
8Otherlong-termliabilities5,919.
06,470.
58,935.
811,686.
4Preferreddividends0.
00.
00.
00.
0Totallong-termliabilities48,468.
035,758.
526,788.
817,191.
4Netincome(pre-exceptionals)15,262.
017,064.
015,391.
623,268.
8Totalliabilities175,391.
0168,321.
6267,559.
2272,777.
0Post-taxexceptionals0.
00.
00.
00.
0Netincome15,262.
017,064.
015,391.
623,268.
8Preferredshares0.
00.
00.
00.
0Totalcommonequity231,468.
0242,852.
0252,465.
6268,753.
8EPS(basic,pre-except)(Rmb)0.
190.
210.
190.
29Minorityinterest496.
0627.
9746.
9926.
8EPS(basic,post-except)(Rmb)0.
190.
210.
190.
29EPS(diluted,post-except)(Rmb)0.
190.
210.
190.
29Totalliabilities&equity407,355.
0411,801.
6520,771.
8542,457.
7DPS(Rmb)0.
070.
070.
070.
09Dividendpayoutratio(%)38.
833.
937.
530.
0BVPS(Rmb)2.
863.
003.
123.
32Freecashflowyield(%)12.
26.
57.
98.
6Growth&margins(%)12/1012/11E12/12E12/13ERatios12/1012/11E12/12E12/13ESalesgrowth5.
410.
611.
110.
0CROCI(%)10.
39.
68.
610.
8EBITDAgrowth1.
11.
6(1.
2)43.
5ROE(%)6.
77.
26.
28.
9EBITgrowth6.
37.
4(3.
2)50.
4ROA(%)3.
74.
23.
34.
4Netincomegrowth15.
011.
8(9.
8)51.
2ROACE(%)6.
37.
05.
87.
5EPSgrowth15.
011.
8(9.
8)51.
2Inventorydays22.
423.
222.
937.
9Grossmargin78.
478.
478.
186.
7Receivablesdays28.
927.
326.
926.
6EBITDAmargin34.
331.
528.
036.
6Payabledays289.
8295.
9291.
9482.
1EBITmargin10.
810.
59.
112.
5Netdebt/equity(%)19.
812.
949.
339.
0Interestcover-EBIT(X)6.
68.
65.
66.
0Cashflowstatement(Rmbmn)12/1012/11E12/12E12/13EValuation12/1012/11E12/12E12/13ENetincomepre-preferreddividends15,262.
017,064.
015,391.
623,268.
8D&Aadd-back51,656.
051,154.
151,001.
471,525.
3P/E(analyst)(X)20.
418.
220.
213.
4Minoritiesinterestsadd-back118.
0131.
9119.
0179.
9P/B(X)1.
31.
31.
21.
2Net(inc)/decworkingcapital5,218.
02,126.
46,346.
05,248.
9EV/EBITDA(X)4.
14.
55.
83.
8Otheroperatingcashflow3,317.
0166.
91,909.
22,193.
3EV/GCI(X)0.
40.
50.
50.
4Cashflowfromoperations75,571.
070,643.
374,767.
2102,416.
2Dividendyield(%)1.
91.
91.
92.
2Capitalexpenditures(43,037.
0)(50,481.
5)(50,139.
0)(75,631.
2)Acquisitions0.
00.
0(112,000.
0)0.
0Divestitures0.
00.
00.
00.
0Others(2,697.
0)0.
00.
00.
0Cashflowfrominvestments(45,734.
0)(50,481.
5)(162,139.
0)(75,631.
2)Dividendspaid(common&pref)(5,608.
0)(5,778.
0)(5,778.
0)(6,980.
6)Inc/(dec)indebt(32,347.
0)(17,302.
0)81,739.
0(11,435.
0)Commonstockissuance(repurchase)0.
00.
00.
00.
0Otherfinancingcashflows(816.
0)0.
00.
00.
0Cashflowfromfinancing(38,771.
0)(23,080.
0)75,961.
0(18,415.
6)Totalcashflow(8,934.
0)(2,918.
2)(11,410.
8)8,369.
4Note:Lastactualyearmayincludereportedandestimateddata.
Source:Companydata,GoldmanSachsResearchestimates.
2012年3月9日中国:电信服务高华证券投资研究22Exhibit26:ChinaTelecomsharepriceperformanceversuspeergroupSharepricesasofMarch7,2012Note:Pricesasofmostrecentavailableclose,whichcouldvaryfromthepricedateindicatedabove.
Thistableshowsmovementinabsolutesharepriceandnottotalshareholderreturn.
Resultspresentedshouldnotandcannotbeviewedasanindicatoroffutureperformance.
Source:Factset,QuantumdatabaseCompanyTickerPrimaryanalystPriceasof03/07/12Priceperformancesince01/06/113monthpriceperformance6monthpriceperformance12monthpriceperformanceAsiaPacificTelecomsPeerGroupChinaTelecom0728.
HKDonaldLu,Ph.
D4.
559.
1%-3.
0%-8.
8%-2.
2%ChinaTelecom(ADR)CHADonaldLu,Ph.
D58.
8010.
1%-1.
9%-9.
7%-1.
0%AdvancedInfoServiceADVA.
BKSachinSalgaonkar160.
5084.
0%12.
6%34.
9%98.
8%AxiataGroupBhdAXIA.
KLPiyushMubayi5.
125.
8%0.
6%8.
0%3.
2%BhartiAirtelBRTI.
BOSachinSalgaonkar329.
55-6.
7%-12.
7%-18.
0%1.
7%ChinaCommunicationServices0552.
HKDonaldLu,Ph.
D3.
78-19.
3%5.
0%-1.
2%-26.
0%ChinaMobile(HK)0941.
HKDonaldLu,Ph.
D79.
702.
9%5.
0%-1.
5%7.
1%ChinaMobile(HK)(ADR)CHLDonaldLu,Ph.
D51.
644.
0%6.
5%0.
9%8.
5%ChinaUnicom0762.
HKDonaldLu,Ph.
D13.
8624.
6%-16.
7%-17.
1%5.
8%ChinaUnicom(ADS)CHUDonaldLu,Ph.
D18.
0627.
0%-15.
1%-16.
3%8.
4%ChinaUnitedNetworkCommunications600050.
SSDonaldLu,Ph.
D4.
63-13.
3%-9.
9%-6.
7%-23.
2%ChunghwaTelecom2412.
TWPiyushMubayi92.
003.
5%-9.
4%-8.
5%4.
0%ChunghwaTelecom(ADR)CHTPiyushMubayi30.
970.
1%-7.
2%-11.
2%3.
9%Digi.
comDSOM.
KLPiyushMubayi4.
0762.
8%12.
4%30.
8%47.
4%FarEasToneTelecommunications4904.
TWPiyushMubayi58.
6040.
0%-0.
5%23.
4%37.
2%HutchisonTelecommunicationsHongKongHoldi0215.
HKPiyushMubayi3.
3238.
3%16.
1%4.
7%17.
7%IdeaCellularIDEA.
BOSachinSalgaonkar93.
6034.
5%2.
2%-5.
9%56.
4%IndosatISAT.
JKSachinSalgaonkar5,300.
00-5.
4%-5.
4%-11.
7%6.
5%KTCorp030200.
KSSeungShin32,300.
00-28.
0%-14.
7%-14.
1%-18.
2%KTCorp(ADR)KTSeungShin14.
57-28.
5%-12.
0%-17.
0%-23.
2%LGUPlus032640.
KSSeungShin6,200.
00-13.
3%-10.
4%26.
4%12.
7%MahanagarTelephoneNigamMTNL.
BOSachinSalgaonkar29.
95-47.
3%10.
9%-18.
8%-26.
6%MahanagarTelephoneNigam(ADR)MTESachinSalgaonkar1.
13-54.
8%5.
6%-31.
9%-37.
9%MaxisBerhadMXSC.
KLPiyushMubayi5.
9410.
8%8.
0%10.
2%7.
6%M1LtdMONE.
SIPiyushMubayi2.
483.
3%2.
1%-2.
7%2.
9%PCCWLimited0008.
HKPiyushMubayi2.
95-15.
7%4.
2%-16.
0%-14.
5%PhilippineLongDistanceTEL.
PSSachinSalgaonkar2,760.
009.
3%11.
3%14.
0%22.
9%PhilippineLongDistance(ADR)PHISachinSalgaonkar64.
0710.
7%13.
7%12.
5%23.
2%PTXLAxiataEXCL.
JKSachinSalgaonkar4,500.
00-23.
1%-0.
6%-18.
9%-22.
4%RelianceCommunicationsRLCM.
BOSachinSalgaonkar92.
30-34.
0%15.
0%4.
0%2.
5%SingaporePostSPOS.
SIPaulLian0.
98-18.
8%2.
6%-7.
1%-16.
7%SingaporeTelecommunicationsSTEL.
SIPiyushMubayi3.
080.
0%-3.
4%-2.
2%5.
1%SKTelecom017670.
KSSeungShin142,000.
00-17.
4%-5.
3%-8.
1%-12.
3%SKTelecom(ADR)SKMSeungShin13.
94-23.
9%-4.
8%-11.
4%-23.
5%SmarTone0315.
HKPiyushMubayi16.
60103.
2%21.
2%3.
8%29.
7%StarHubSTAR.
SIPiyushMubayi2.
9413.
1%3.
5%2.
4%13.
5%TaiwanMobile3045.
TWPiyushMubayi89.
8018.
2%-6.
1%2.
6%18.
5%TataCommunicationsTATA.
BOSachinSalgaonkar229.
55-11.
0%17.
5%12.
3%10.
8%TataCommunications(ADR)TCLSachinSalgaonkar9.
06-20.
6%18.
6%1.
5%-1.
3%TelekomMalaysiaTLMM.
KLPiyushMubayi5.
2257.
6%16.
0%18.
9%40.
7%TelekomunikasiIndonesiaTLKM.
JKSachinSalgaonkar7,000.
00-9.
1%-4.
1%-11.
4%-4.
8%TotalAccessCommunicationsDTAC.
BKSachinSalgaonkar71.
50102.
2%11.
3%21.
3%113.
2%ChinaTelecom(ADR)CHADonaldLu,Ph.
D58.
8010.
1%-1.
9%-9.
7%-1.
0%HKTTrust6823.
HKPiyushMubayi5.
59NA23.
1%NANAMSCIChina59-12.
9%9.
1%5.
1%-11.
1%2012年3月9日中国:电信服务高华证券投资研究23Appendix:KeyterminologyLTE–LongTermEvolution,isoneofthefourthgeneration(4G)cellulartechnologies.
TherearetwoversionsofLTE,TD-LTE(TimeDivisionDuplex)andFDD-LTE(FrequencyDivisionDuplex)thatdifferfromeachotherintermsoftheirradiotransmissionscheme.
WithFDD,thetransmission(uplink)andreception(downlink)ofsignalsareusingtwodifferentchannelsseparatedbyaguardbandtopreventinterference.
Incomparison,TDDusesonlyonesinglefrequencyforbothuplinkanddownlinkwhichareseparatedbytimeintervals.
TD-SCDMA–TimeDivisionSynchronousCodeDivisionMultipleAccess,oneofthethirdgeneration(3G)cellulartechnologiesandisaself-developedtechnologybyChina.
ChinaMobile's3GstandardisTD-SCDMA.
WCDMA–WidebandCodeDivisionMultipleAccess–oneofthethirdgeneration(3G)cellulartechnologies.
ChinaUnicom's3GstandardisWCDMA.
CDMAEVDO–CodeDivisionMultipleAccess-Evolution-DataOptimized,oneofthethirdgeneration(3G)cellulartechnologies.
ChinaTelecom's3GstandardisCDMAEVDO.
OtherdisclosureResearchwrittenbyDonaldLuoncompanieslistedinTaiwaniswrittenbyhiminhiscapacityasconsultanttoGoldmanSachs(Asia)L.
L.
C.
.
AnyotherresearchiswritteninhiscapacityasemployeeofBeijingGaoHuaSecuritiesCompanyLimited.
2012年3月9日中国:电信服务高华证券投资研究24信息披露附录申明我们,吕东风,PhD、胡玲玲,在此申明,本报告所表述的所有观点准确反映了我们对上述公司或其证券的个人看法.
此外,我们的薪金的任何部分不曾与,不与,也将不会与本报告中的具体推荐意见或观点直接或间接相关.