Tag Archives: China Telecom

China Telecoms Forced to Drop Prices and Increase Coverage

Big Three ordered to reduce mobile data tariff by 30%.

China Telecoms can’t catch a break.  In 2017, the beleaguered telecoms were forced to stop charging headset long-distance and roaming fees and to reduce the internet prices for small and medium enterprises.  This year, as they struggle to increase 4G implementation and add Broadband customers, they’re being told to lower prices and increase coverage and speed.  Per the Hong Kong Filings of the China Mobile 941 hk, China Unicom 762 hk, and China Telecom 728 hk..

Presented in the Government Work Report presented in the first session of the 13th National People’s Congress of the People’s Republic of China convened on 5 March 2018,

  • increase efforts in implementing network speed upgrade and tariff reduction measures;
  • achieve full coverage of high-speed broadband in cities and rural areas;
  • expand the coverage of free Wifi Internet access in public areas;
  • substantially reduce the tariffs of household broadband, corporate broadband and dedicated leased line;
  • cancel data “roaming” fee;
  • reduce mobile data tariff by at least 30% in this year.

The three declined on March 5th, along with the HSI and HSCEI indexes but have under-performed year to date and on a monthly basis.  Based on this edict, the stocks will face more declines.


While they haven’t submitted annual reports for 2017 yet, the third quarter showed minimal growth in terms of revenue, profits and Customers.

Telecoms Customers

Despite migrations to 4G and new Broadband customers for China Mobile and China Telecom, revenues increased less than 5% or even decreased in the case of China Unicom,  for the 9 months ending in September.

Telecom 3Q

These less than stellar numbers will be negatively impacted by the new government regulation as well as the uncertainty regarding the continuously changing tower leasing agreements following the 2015 spin-off.



China Telecoms Ring Up Gains on BNP Paribas Upgrade


All three Chinese Telecoms rose in Hong Kong after BNP Paribas rated China Telecom, HK 728 AND China Mobile, HK 941 as buys.  China Unicom, HK 762 rose in empathy but this struggling competitor warranted only a cautious hold.  China Telecom was seen as the top pick thanks to its integrated strategy.  China Mobile, the monster in terms of size and customers, got a buy due to market leadership and cross-selling opportunities between broadband and mobile. All three outperformed the Hang Seng on a daily basis with China Telecom and China Mobile beating it on a year to date basis.

Last quarter comparisons illustrates the poor performance of China Unicom and the numbers as 4G continues to roll-out.

telecom q1

telecoms mobile cust


Shanghai Hang Seng Update

All Sectors go for Chinese Indexes, buoyed by oil prices.


Telecom: Telecoms reversed losses with China Mobile, 941 hk, leading the way up 3.6%. (HSI component). China Unicom, 762 hk, trailed up 1.06% (also on Hang Seng), while China Telecom,    728 hk, rose .74% (component of HSCEI).  China Mobile’s results were announced after yesterday’s bell, with net revenue of .5% Per AA Stocks, newest ratings were mostly positive:

China Mobile Ratings


BAIC , 1958  hk,  suspended on 1st quarter results.  Finally released annual earnings report along with 1st quarter report.  BAIC, which has become increasingly reliant on sales of Mercedes Benz vehicles, saw a quarterly sales revenue increase of 30% but a decline in net profit of 25%.(HK Filing). More on this later today.



China Indexes Go Red

China Indexes slipped after yesterday’s exuberant rise. The drop left traders scratching their heads.


Given that the indexes are still above the start of the last 30 days, it could be a short-term correction.

Sh HK 1 mo Chart

(1 month – Shanghai Comp Orange; Hang Seng Index Blue)

The decline was felt pretty much across the board.  For the Hang Seng, 76% of its members dropped.  The small positive group of 18% consisted  mainly of property related companies. The HSCEI, which declined 1.19% also had negative members dominate at 88%. The four positive movers were: Wanda Commercial, hk 3699, China Vanke, hk 2202, PICC 2328 and Air China, HK 753. The only one of these linked to news was PICC, with UBS expecting a positive improvement in the Property and Casualty Financial Service Industry  in China, lifting its target price of PICC to 17.2 and rating it a buy.

Telecoms – Telecoms continued yesterday’s slide despite the biggest, China Mobile, announcing that its 1st quarter saw a net addition of 7.61 million mobile customers. Net profit was up only .5% and the company noted the growth rate for the whole year would be challenged, ” in the first quarter of 2016, ARPU of mobile customers was RMB57.6 and recorded a slight increase compared to last year. “China Mobile, 941 HK, down .949%; China Unicom,  762 HK, down 2.977% with UBS noting its profits are under a lot of pressure and cooperation with rival China Telecom is minimal. China Telecom, 728 HK, down 3.118.

InsuranceChina Life, 2628 hk, down 1.837%, announced its first quarter profit could decrease by 55% – 65% due to a decline in investment income an a change in accounting methods. China Life has had a dismal run, down 49.6% over the last 12 months and 12.19% year to date.

china life hsi

China Life H2628 HK, Orange; Hang Seng Blue

Overcapacity and Cement

Asia Cement, 743 hk, up 2.9%, one of the smaller players in the cement industry, continues to produce despite negative earnings and government edicts to decrease production in cement nationwide. Today’s filing revealed an 11% decline in revenue, coupled with a drop in gross margin from 16% to 9.9%.  First quarter NOI losses after Taxes were -62.8 million rmb from NOI of 1.4 million rmb the prior year. The company continues to churn out product despite obvious declines in demand, upping sales tonnage by 17% while prices dropped by 24%. The pledged decline in overcapacity industries in China appears to be a myth.

Asia Cement

Ping An, 2318 HK, released its 1st quarter financial statements for its banking subsidiary. At first pass, results are impressive with net interest income, commission and fees all up. As noted in the filing, these increases were due to an emphasis on Mega: “This is to establish a platform for “mega investment banking, mega asset management and mega transaction” supported by the four engines of growth, namely “corporate banking, retail banking, interbank banking and investment banking”.

However, while revenues were up 33% year on year, net income after tax was up only 8.1% thanks mainly to a doubling of asset impairments.

ping an income

Not surprisingly, the NPL ratio and Loan loss provision increased dramatically.

ping an npl.PNG

It’s interesting to note that despite interest rate drops by the Central Bank, Ping An has actually increased its net interest margin, thanks to a slight drop in yield on interest earning assets more than offset by a decline in interest rates on liabilities.

ping an interest income.PNG



China Indexes Rise On Oil and Output


With oil prices currently up thanks to a Kuwaiti strike, production surging in steel mills, and gains in residential prices in top tier cities, indexes rose in China.  All sectors benefited despite a lack of major, company-specific news with the exception of Telecom: China Telecom, HK 728 down 1.418%; China Unicom, HK 762, down 1.913% & China Mobile, HK 941, down .5%.  China Unicom took the sector down as it expected first quarter profit to tumble 85% yearly to RMB480 million. It blamed the loss on higher selling and costs.  The three telecoms transferred their tower assets to a separate entity, state-owned China Tower, in October of 2015 with lease-back costs still under negotiation. Ownership after the October transfer was split:

27.90% China Telecom
28.10% China Unicom
38.00% China Mobile
6.00% China Reform Corp*

*China Reform Corp. is a full subsidiary of State Owned Assets and Supervisory Committe and Administrations, SASAC

(Per Bloomberg, China Tower would then be pushing a private placement  IPO in 2017 potentially worth $10 Billion US. )

China Eastern Airlines, HK 670, down 2.48% in Hong Kong, announced that its controlling shareholder would not sell the 700M shares following its  lock-up expiration. “In view of the optimism on the long-term prospect of the company’s investment value, CEA Holding has undertaken that it will not dispose of their unlocked shares of the company within 24 months from 18 April 2016.” This would be better than the market perception, with the stock losing 21.5% in Hong Kong, 16.03% in Shanghai, SH 600115 over the last 12 months.

China Eastern chart

(China Eastern HK 670 Orange; SH 600115 Blue)

Steel News Irony – Conflicting Reports of Production Inside China & Out

Today’s report by the China Iron and Steel Association, CISA, showed that first quarter Chinese production of steel smashed all previous records.  Maintaining the 70.65 million tons produced in March, would result in an annual production of 834 million tons.  (Total China steel production for 2015 was reported at 803.8 million tons).  This would mean about a 3.4% production increase annually.

Meanwhile, in an interview with the National Bureau of Statistics, NBS commissioner Ning Jizhe said the changes in China’s economic trend in the first quarter of 2016 had shown its reform efficiency. As to trimming capacity, he said iron and steel and coal showed negative growth, with crude steel production dropping 3.2% yearly, while crude coal production dropped 5.3%.

Regardless of whether overall Chinese steel production has increased or decreased, the CISA reports show that steel exports have definitely increased, despite China’s recent disparagement through PRC mouthpiece Xinhua, of Western threats as a lame and lazy excuse for protectionism.  (Not content with deriding the West, the same edition chastised India for promoting anti-dumping and urged it to honor WTO rules .) While Xinhua stated that steel production declined by 90 million tons over the past 3 years, the CISA reported that China’s steel exports jumped 30 percent to 9.98 million tonnes in March from a year ago despite a slew of anti-dumping measures globally.

The over-capacity and export growth was noted in the annual report by steel giant Arcelor Mittal, MT NYX, which stated that for 2015, China exported 112 million tons of steel, up 18 million tons from the year before. It indicated that the exports were done to offset the 4.5% decline in Chinese consumption.  Despite the increase, Arcelor reported that the CISA assumed that the exports were being sold below cost, as large and medium sized mills lost RMB 53 billion ($8.6 billion) from January through November 2015), negatively impacting prices and therefore margins in many regions.