China Telecom (NYSE:CHA), the smallest of the three Chinese carriers, is expected to publish its Q1 2019 results towards the end of April, reporting on another quarter that likely saw the company lead the market in terms of wireless subscriber growth. Below we take a look at some of the trends we will be watching when the company publishes earnings.
What will drive the company’s results?
- China Telecom’s revenues could benefit from a stronger wireless and wireline broadband subscriber base, as well as a larger 4G mix.
- The bottom line could benefit from lower equipment related costs.
How will the wireless business fare?
- Over January and February 2019, the company added a total of 7.22 million users, down 22% y-o-y.
- However, this is ahead of market leader China Mobile, which added just about 3.5 million subscribers in the same period.
- Growth is likely to be driven by larger data packs for heavy data users, as well as improving coverage (1.38 million base stations at the end of Q4’18, up 17% year-over-year).
How will wireless ARPU trend?
- Major Chinese carriers have been seeing declining ARPUs, on account of the government’s move to slash long-distance and roaming charges, while limiting data pricing.
- Over FY’18 China Telecom’s ARPU declined 8% year-over-year to RMB 50.5 (~$7.50) and it’s possible that trend will continue in Q1.
What about 5G upgrades?
- Like other Chinese players, China Telecom is betting big on 5G, outlining ~RMB 9 billion of its 2019 CapEx budget for expanding 5G-related trials.
- Over 2018, China Telecom was carrying out outdoor 5G trials in 17 cities, with a total of over 1,000 base stations, and the number is likely to have expanded over Q1.
Our interactive dashboard on What’s Driving China Telecom’s Valuation details our forecasts and expectations for the carrier. In addition, you can see more Trefis data for Telecommunications companies here.
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