Telco troika to see gradual recovery, but Unicom continues to lose ground on larger rivals
After weathering lower tariffs imposed by the regulator, China’s three largest operators now appear to be dialling up the right numbers
Industry analysts expect earnings by China’s three telecommunication service providers to gradually recover this year, but the gap between the smallest operator and its two rivals will continue to widen.
The domestic market is dominated by China Mobile, China Telecommunication, and China Unicom, in that order, but all have been hit hard in recent years after being forced into massive cuts in tariffs by the regulator, in an effort to make 3G and 4G services more affordable to subscribers.
“That mission by the regulators is almost completed, and the risk of any further tariff intervention is diminishing,” Jefferies equity analyst Elaine Lai wrote in a note.
She now expects the market leader, China Mobile, to deliver the strongest cash flow trajectory of the three, as it starts to reap the benefits of huge investment in 4G.
With a 54 per cent market share by revenue, the analyst expects China Mobile to report 701.32 billion yuan (HK$812.0 billion) in revenue this year, up 4.9 per cent year on year, whereas net profit may dip 9.7 per cent to 108.54 yuan.
That mission by the regulators [to make 3G and 4G services more affordable to subscribers] is almost completed, and the risk of any further tariff intervention is diminishing
Lai’s note suggests the company’s performance will certainly be boosted by what she described as largely benign competition.