Growing Wireless And Broadband Subscriber Base Drives China Telecom’s Q1

China Telecom (NYSE:CHA), the third largest Chinese wireless carrier, published its Q1 2017 results on April 27, reporting continued revenue growth amid strong wireless subscriber adds and an expanding wireline broadband business. Below, we provide some of the key takeaways from the carrier’s Q1’17 earnings release.

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

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• Revenues grew by about 0.4% year-over-year in dollar terms, driven by service revenue growth, although this was partially offset by lower equipment sales. Moreover, the depreciation of the RMB (down by 5% vs USD) also hurt results in dollar terms.
• Net profits saw a slight improvement in RMB terms, as service revenue growth outpaced the expansion of operating costs, there was a slight decline in dollar terms.
• Net wireless subscriber adds improved by 160% sequentially to 6.53 million, as Q1 is typically the strongest quarter for Chinese telecom companies in terms of subscriber acquisition activity, due to the Chinese New Year holiday.
• 4G net adds for the quarter stood at 15.7 million, marking an improvement of 9.7% sequentially, driven by improving coverage. The carrier has been improving its 4G footprint, with plans to add another 270k base stations this year.
• The carrier noted that ARPU for mobile subscribers saw an improvement amid a growing 4G uptake (63% of overall subscriber base) as well as increasing data consumption (monthly handset data traffic up 23.5% sequentially)
• China Telecom’s broadband subscriber base increased by about 2.7 million over the last quarter, with FTTH adds coming in at 6.07 million. However, the net adds number is still well below China Mobile, which added about 8 million new broadband subscribers over the first quarter.

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