China Telecom Loses its Moat due to Continued Sub-WACC Returns, FVE Reduced to HKD 4.30
We downgrade China Telecom to a no-moat rating from a narrow moat rating given it has earned returns below its cost of capital over the past 10 years and we expect the same over the next 10 years. The company also reported its summarized third-quarter results and like its peers, it was negatively impacted by the removal of mobile data roaming from July 1. China Telecom reported service revenue growth of 4.1%, EBITDA decline of 5.6%, and NPAT decline of 8.5% after reporting 7%, 6.5%, and 8% growt...China Telecom is a full services integrated information service operator and wireline telecommunications and broadband services provider in the People's Republic of China. Co. offers wireline and mobile telecommunications services including wireline voice, mobile voice, internet, managed data and leased line, value-added telecommunications services, integrated information application services and other related services. As of Dec 31 2010, Co. had wireline access lines in service of approximately 175 million, wireline broadband subscribers of approximately 63 million and mobile subscribers of approximately 90 million.
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