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Morningstar | China Telecom is making the most of the telecom reorganisation by developing its business.

China Telecom benefited from the 2008 Chinese telecom reorganisation, and has made the most of the changes. With the reorganisation, the firm received 29 million wireless subscribers from China Unicom that were using the CDMA standard. Since then, the firm has increased its wireless base more than eightfold, to 282 million. This growth has enabled the business to become more profitable, as the network’s fixed costs are spread over a much larger customer base. We anticipate China Telecom will continue to increase its subscriber base, but at a slower rate. Likewise, in that time frame, the firm more than doubled its broadband base to over 141 million as it worked hard to cross-sell additional services to its existing fixed-line customer base. While it slowed the loss of traditional customers that have been cutting the cord and just going wireless, this loss rate increased again in 2014 and 2015, and is an issue China Telecom will continue to deal with for years. However, to help encourage broadband users, the firm has been rolling out fibre into its fixed-line network to provide its customers with faster speeds with 95% of its broadband customers on FTTH by end-2017 and over 220 million homes passed with FTTH. However, increasing competition from China Mobile in fixed broadband since 2016 is posing a threat to pricing with broadband ARPU down by 14.5% in the three years to 2017. At the end of 2012, China Telecom acquired its 3G network from its parent, which it has now largely upgraded to 4G. This helped its margins, as it no longer had to pay a leasing fee. While the firm initially obtained a TD LTE license, it was also granted an FDD LTE license in February 2015. The ability to share mobile towers via the Tower Company joint venture should help to speed up the 5G network rollout and lower its overall costs. The company had 1.17 million 4G base stations at the end of 2017 and plans to launch 5G service in 2020 although detailed capital expenditure plans for this have yet to be released.