China Telecom is an integrated telecom service provider of China offering both mobile and landline services. It faces stiff competition from market leader China Mobile and also from China Unicom.
The company makes money primarily from its mobile business as well as value added services like SMS, MMS, ringtones and mobile Internet in particular. The company sells mobile phones at highly subsidized rates as mobile business and broadband Internet are expected to be the big growth drivers for the company.
As part of our expanding international coverage and to round out our coverage of the biggest three telecom operators in China, we launch coverage of China Telecom with a $68 Trefis price estimate, which is a little over the market price.
For a sense of perspective among the three, we estimate that China Telecom and China Unicom are worth about the same in value at just over $50 billion while China Mobile is about 5x bigger and worth around $230 billion.
See the full Trefis analysis for China Telecom.
China Telecom at a Glance
The present structure of the company emerged after the restructuring in the Chinese telecom industry in 2008. The company bought the CDMA business from China Unicom, and a series of acquisitions between 2003 and 2008 led to the formation of the company as we know today.
With this convergence of mobile and landline businesses, China Telecom hopes to achieve long term growth by increasing its subscriber base, establishing its market position as well as gaining competitive advantage.
The 3 main sources of value for China Telecom are:
Mobile Service and Phones (53% of value)
Broadband Internet (30% of value)
Landline Phone Services(13% of value)
Key Growth Drivers
The mobile services and phones division accounts for the bulk of the value because of the growing subscriber base and also the emphasis placed by the company on the promotion and development of customer specific mobile applications.
Moreover, with increasing substitution of landlines with mobile phones and smartphones gaining greater popularity, this division promises high growth for the company.
Revenues from the sale of mobile phones have increased from $0.1 million in 2008 to $0.9 million in 2010. This is because the company has launched more than 300 varieties of 3G models at extremely low prices in 2010 and has also taken various marketing initiatives like customer experience and customer relationship management for the promotion of products. These are expected to continue in the future and expand the mobile business of the company.
Source:cn-c114