瑞银：中国电信产业研究报告：

CREDIT SUISSE - CHINA TELECOMS SECTOR - BUY FIXED LINE ON HIGHER M&A CHANCES

5 March 2007，56 pages 英文

Buy fixed line on higher M&A chances

The chances of M&A activity have increased significantly from the wide support by fixed-line operators and regulators. We believe M&A will be a more pressing issue than 3G licensing, and that it could happen soon. Further TD-SCDMA testing is likely to be led by China Mobile. This should lower the risk for China Netcom and China Telecom . our top picks.

■ Key takeaways from meetings with industry players. 3G licensing is likely to be pushed back to 4Q07 at the earliest, due to further testing on TD-SCDMA. China Mobile is widely believed to be in the lead and may commercially roll out service by October 2007. This implies a higher chance that it would adopt TD-SCDMA. Potential M&A (i.e., break-up of China Unicom) looks more likely now, with most industry players agreeing that it is logical and could happen as soon as 2Q07.

■ Higher chance of restructuring. We believe China Netcom and China Telecom have formed a consensus now on which network they would like to acquire from Unicom, and this is backed by the SASAC - this is the biggest change from your previous view. The recent separation of Unicom’s GSM and CDMA operations should make M&A easier to execute, and an agreement between Netcom and China Telecom to limit competition could also indicate that they want to accelerate M&A. As such, we have raised the probability of the M&A scenario to 50% (from 20%). Whilst this is probably the best outcome for the fixed-line operators, we have not assigned 100% probability, as this requires government approval and involves high execution risk.

■ Investment conclusion . still prefer Netcom and China Telecom. We have upgraded our target prices across the board, mainly to reflect our new probability-weighted 3G scenarios, and have formally applied a tax reduction to 25% from FY08 and onwards and a renminbi appreciation forecast of 5-6% p.a. in FY07E and FY08E. Our new target prices are HK$26.5 for China Netcom, HK$5.1 for China Telecom, HK$13.7 for China Unicom and HK$89.5 for China Mobile. China Netcom and China Telecom remain our top picks. We also upgraded Unicom to OUTPERFORM on the higher M&A chance. In the near term, China Mobile’s share price should be supported by potentially strong FY06 results, but we retain a NEUTRAL rating, due to its lower upside.

[此贴子已经被vbbill于2007-3-12 19:51:32编辑过]