China Telecom Industry Service Revenue to Decline -4%

Date: 2015-08-19

For 2Q15E, we expect telecom industry service revenue to decline -4% YoY (vs -1% in 1Q), mainly on VAT impact, handset subsidy shifting to tariff subsidy, data/broadband tariff cut and real-name registration. We estimate service EBITDA margin to improve 0.9ppt QoQ to 40.2% on lower S&M cost offset by higher 4G network expense. We expect CM/CT/CU service revenue to decline -5%/-0.9%/-6% YoY and EBITDA to grow -2.8%/ 0.1%/2.9% YoY. We prefer CM for improving ARPU on strong 4G sub/data growth and CT for mobile share gains with solid 4G execution, and maintain Neutral for CU on continued share loss in both mobile/fixed-line.

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