China Telecom: 2017 Earnings Review And 2018 Outlook

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China Telecom

China Telecom (NYSE:CHA) published its full-year 2017 results on Wednesday, March 28, reporting stronger than expected net profits, driven by its growing wireless and broadband subscriber base. In this note, we take a look at the company’s performance over 2017 and what to expect in 2018.

We have also created an interactive dashboard analysis that allows users to modify key drivers and arrive at their own price estimate for China Telecom. While China Telecom reports its results in RMB, we have converted the metrics into USD using monthly average exchange rates for the purpose of this analysis.

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  3. A Closer Look At China Telecom’s Key Revenue Streams
  4. How Has China Telecom’s Wireless Business Fared Versus Rivals?
  5. What To Expect As China Telecom Reports Q1 Results
  6. Key Takeaways From China Telecom’s 2018 Results

China Telecom’s wireless subscriber base grew by 35 million users in 2017, with 4G net additions/migrations coming in at 60 million. While subscriber growth is expected to slow down in 2018 due to increasing saturation in the Chinese market, it’s possible that its ARPU could increase, for a few reasons. For one, China Telecom’s 4G mix as a percentage of the overall subscriber base is growing (up by ~16% year-over-year to 73%) while data consumption is also soaring (up 96% in 2017). As 4G ARPU is about 20% higher compared to overall ARPU, it could help push the metric higher. Separately, a stronger RMB could also help the ARPU metric in dollar terms.

 

The carrier’s Landline business will see continued declines, as users migrate to mobile/ OTT based voice services. However, other revenues such as Integrated Communication Technologies (ICT) could trend higher.

While the company’s Broadband subscriber base grew by 8.5% to 133.5 million, the mix of Fiber to the Home (FTTH) subscribers rose at a faster pace, approaching about 95% of the user base. While ARPU has been seeing some pressure, partly due to the government’s move to regulate pricing and stronger competition in the broadband space, we believe that the growing FTTH availability and stronger RMB could help ARPU improve over 2018.

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