Morgan Stanley lowered its target price for SmarTone Telecommunications (00315) to HK$7 from HK$9 and downgraded its rating to "equal-weight" from "overweight", reflecting cuts of 7% and 13%, respectively, in its 2020 and 2021 EPS forecast because of the intense competition in the mobile market.
The research house said since China Mobile HK has kept its prices low, mobile ARPU (average revenue per user) pressure is sustainable before any strategy changes from China Mobile HK. Morgan also thinks earnings growth will be challenging for SmarTone given the higher spectrum amortization cost in the next 2-3 years.
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