China Telecom Q1 Preview: ARPU, Unicom Collaboration In Focus

China Telecom (NYSE:CHA), the third largest Chinese wireless carrier, is expected to publish its Q1 2016 earnings on April 28, reporting on a quarter that saw the company make strong progress with its wireless subscriber and 4G additions. Here’s a quick review of what to expect and what we will be watching when the carrier publishes its numbers Thursday.

We have a $59 price estimate for China Telecom, which is roughly 20% ahead of the current market price.

See our complete analysis of China Mobile | China Unicom | China Telecom

• China Telecom posted relatively strong subscriber growth over the first two months of the year, adding about 2.7 million users, taking its total subscriber base to about 201 million users as of February. The carrier’s 4G mix also rose to about 35% in the same period from levels of under 30% at the end of December 2015. The recent subscriber adds should help to drive revenue growth.

• There is a possibility that the carrier’s ARPUs could face some pressure, despite a higher mix of high-speed users and increasing data consumption. The Chinese government has asked carriers to upgrade speeds and cut tariffs for data services, in addition to requiring carriers to implement an unused data carry-forward policy in late 2015. For instance, during 2015, while monthly data consumption per user rose by about 70%, 3G/4G ARPUs actually declined by about 2.5%.

• Earlier this year, China Telecom signed a multi-pronged strategic agreement with China Unicom (NYSE:CHU) to share resources, enabling the two carriers to cut costs and better compete with larger and better capitalized rival China Mobile (related: China Unicom And Telecom Deepen Cooperation With 4G Resource Sharing Agreement). Notably, the two carriers will team up for their rural 4G network build out, allowing them to save on network equipment and operation costs. We will be looking for updates on how the collaboration is progressing.

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