Citigroup 花旗：中国电信类上市公司(ADR)研究

22页 英文 09.24 Sep 24, 2007

Telecommunications Industry China Telecoms - Mobile the Place to Be: Growth Outweighs

Regulatory Overhang

➤ Positive on mobile operators — Our base-case thesis continues to expect industry
restructuring decisions in a 3-5-month window – the shape and form of eventual decisions
are unclear, though. At current levels, we see risk-reward favouring the mobile plays:
earnings for 2007 are almost in the pocket, and we see even higher growth potential for
2008 driven by mobile demand and tax breaks.
➤ Operational trends favor mobile — Both China Mobile and China Unicom reported revenue
per minute (RPM) of $0.03 in 1Q07, the first time that China's mobile tariffs were lower
than fixed! We expect fixed-line operators to lose 7% local voice traffic every year for the
next three years, and mobile usage to rise 29% per year over 07-09. Rapid growth in usage
should more than offset drops in RPM.
➤ China Mobile upgraded and now our top Buy — Our $75 target is set at FY08E P/E of 20x,
on par with HSCEI though growth should be far higher for CM •which we see dominating
China's telecoms space over the next 2-3 years. Downside from an industry restructuring
will be protected by premium branding, lowest overall tariffs and the largest network, and
by far the largest capex and margin reserve.
➤ China Unicom rated Buy with $21 target price — China Unicom offers an appealing
combination of potential upside from industry restructuring