China Telecom (CT; 728 HK) delivered a firm set of 3Q20 results. Mobile service revenue grew at an estimated 4.2% YoY, which we attribute to a 6% YoY sub growth and a narrowed ARPU decline at 2% YoY in 3Q20. This stands in contrast to the mobile service growth of +2.5% and -0.2% YoY registered for China Unicom and China Mobile, respectively.

Fixed-line service revenue grew 6.7% YoY in 3Q20. All-considered, PATMI grew at 6.2% YoY to RMB 4.8b; CT aims to maintain stable profitability this year.

CT’s 5G sub base has increased to 64.8mn as at 30th September, representing 18.5% penetration of its sub base. Both CT and China Unicom have completed their previous target of a combined deployment of 250k 5G base stations in 9M20, and look to co-deploy another 50k in 4Q20.

We continue to remain constructive on CT, given better-than-peers mobile service revenue growth. CT trades at 1.9x consensus FY21 EV/EBITDA, which is ~2 S.D. below the 5-year mean, and continues to represent good value. We maintain our forecasts and FV of HK$3.30 for now. Maintain BUY. .

Source: OCBC Research - 26 Oct 2020