Citi Research cited Chinese domestic media report saying that each of Chinese telcos in an MIIT teleconference mentioned they would ensure accomplishing their established 5G development goals for 2020 despite the COVID-19 impact, which indicates regulatory push for 5G spending.
However, the research house said the 5G BTS targets released by each telco of 500k 5G BTS adds in 2020 in China are lower than Citi's estimates and market expectations.
Citi believes this is positive for Chinese telcos and negative for 5G supply chain companies, indicating there is a downside risk to Citi's current estimates of 16% growth in industry total capex in 2020 including the addition of 600k-700k 5G BTS in aggregate in 2020.
Lower-than-expected 5G capex also indicates reduced pressure on network opex and tower rental costs for Chinese telcos. China Mobile's (00941) earnings could have more leverage than China Unicom (00762)/China Telecom (00728) on 5G capex/opex savings.
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