[ET Net News Agency, 20 January 2020] Morgan Stanley expects 5G ARPU lift and improved
competition in China will benefit the whole industry. Hence, it upgraded its industry view
to "attractive" from "in-line".
The research house elevated China Mobile (00941) to the top pick in Asia and added it to
its Asia ex-Japan Telecom Portfolio at a 25% weighting.
Morgan assumed 5G ARPU lift will drive industry mobile services revenue to grow at 2.6%
2019-22 CAGR. Meanwhile, competition has been intense throughout the 3G/4G cycle due to
market share gain opportunities created by the difference in technologies for 3G and the
timing of service launch for 4G.
It believes this is the first time in the past decade when none of the three operators
has the incentive to gain market share aggressively, as evidenced by the removal of
unlimited data plans, muted promotions upon nationwide implementation of mobile number
portability (MNP) and the announcement of 5G network sharing between China Unicom (00762)
and China Telecom (00728) right before 5G launch.
Morgan maintained its "overweight" call and HK$85 target price on CM. It forecast CM's
earnings and dividend to grow at 5% 2019-22 CAGR, and believes the current 5% 2020
dividend yield offers downside support, but earnings/dividend upside is not priced in at
2020 P/E of 11x. (KL)