China Telecom and Technology:Digest from telcos’results and guidance

Post China Mobile (941 HK, Buy, CM), China Unicom (762 HK, Buy, CU)and China Telecom’s (728 HK, Buy, CT) 2016 annual results and analystbriefings, we highlight the following industry trends:· China Telecom industry capex is set to decline 10% y-y in 2017. Besidesthe 16% y-y cut in 4G capex, we also expect to see a 23% y-y cut in capexfor the access network, while transmission capex should continue to bestrong at 16% y-y growth, in our view.

    All three operators exceeded their FY16 targets for 4G base station (BTS)net adds leveraging from TowerCo’s (unlisted) asset; hence, we forecastFY17 industry 4G BTS net adds are set to decline 21% y-y, relatively inline with the 4G capex guidance (-16% y-y).

    Meanwhile, the three Chinese telcos’ handset subsidies and selling andmarketing expenses are set to remain relatively flat in 2017.

    TowerCo is already breaking even thanks to the 4G rollout, and thecompany’s chairman still expects it to be listed by end-2017 or 1H18.