Industry status
The three major operators released January operation data. January China Telecom Corporation Limited(601728) mobile users increased by 3.07 million, with an annualized growth rate of 9.89%, and 5g users accounted for 52.21% of the total users. Broadband users increased by 1.54 million, with an annualized growth rate of 10.89%. In January, China Mobile’s mobile users increased by 4.5 million, with an annualized growth rate of 5.64%, and 5g customers accounted for 41.74% of the total users. Broadband users increased by 3.84 million, with an annualized growth rate of 19.2%. January China United Network Communications Limited(600050) mobile users increased by 1.13 million, with an annualized growth rate of 4.28%, and 5g users accounted for 50.43% of the total users. Broadband users increased by 1.04 million, with an annualized growth rate of 13.08%.
Core view
The C-end business of telecom operators grew steadily. It can be seen from the operation data in January that the number of users of operators and enterprises has maintained a steady and low-speed growth. From the perspective of per capita user revenue (ARPU), we believe that since the “fee reduction and growth rate” policy was put forward in 2015, according to statistics, by 2020, the average tariff of mobile traffic and broadband has decreased by more than 90% compared with 2015, while the average network rate has increased by more than 6 times, and telecom operators have greatly transferred profits to the real economy and users, The demand for further fee cuts has slowed. Superimposed on the three-year action plan for the reform of state-owned enterprises implemented in 2020, the assessment direction of “two benefits and four rates” has been established, requiring state-owned enterprises to pay more attention to the performance of the profit side. ARPU of leading operator enterprises shows signs of month on month improvement. We judge that the improvement momentum will continue. First, there is no “killer application” in the current 5g network environment, and the driving force of 5g technology on traffic revenue has not been fully realized. Second, at the broadband end, the current trend of “broadband Gigabit upgrade” is accelerating. By 2021, China’s “Gigabit broadband” home users have reached more than 20 million, with a penetration rate of less than 10%. A large number of home users still have the potential demand to upgrade broadband, which will continue to promote the business growth of operators and enterprises in this regard.
Digital industry has become a very important growth end. During the 14th Five Year Plan period, the state has planned to vigorously develop new infrastructure, among which “cloud computing” is the top priority of the digital economy in the next stage. The Ministry of industry and information technology proposed in the “14th five year plan” for the development of information and communication industry that “the computing power of China’s data center should reach 27% from 2020 to 2025”. Data center (IDC) is the “infrastructure” of the cloud computing industry. At present, telecom operators occupy a leading share in the IDC market and will continue to benefit from the high growth of data center business. At the same time, in the future, we judge that due to the dominant position of telecom operators in network traffic end and IDC end, they have considerable potential in the field of subsequent cloud computing (IAAs, PAAS and SaaS) and edge computing.
Investment advice
We believe that the valuation of leading telecom operators listed in Hong Kong stocks is relatively low, below the 20% quantile of the 10-year average, and industry leaders have successively launched actions to repay investors, such as repurchase or increasing dividends. In terms of business, the number of C-end users maintained a slow and steady growth, and ARPU entered an upward cycle. In terms of digital business in b-end industry, telecom operators have achieved a leading position in IDC construction and have great potential in the field of cloud computing and edge computing. To sum up, we believe that the telecom operator enterprises in Hong Kong stocks deserve the continuous attention of investors.
Risk tips
ARPU fell more than expected, industry policies exceeded expectations, and the competition pattern in the field of industrial digitization deteriorated
