China Telecom Reports Slightly Slower Q3; Fair Value Estimate to HKD 4.80 Mainly on Currency

China Telecom’s third quarter showed some mild slowing from its recent high revenue growth. Continued high revenue growth in lower-margin industrial internet services also likely contributed to slightly lower consolidated margins. Third-quarter services revenue growth of 6.4% year on year was down from 8.8% in the first half while third-quarter EBITDA growth slowed to 2.0% from 5.2% in the first half. Third-quarter 2022 EBITDA margin of 28.5% fell 130 basis points from the same period in 2021. All revenue lines slowed in the third quarter, with growth still led by industrial digitization of 11.4% while wireline and smart family grew at 5% and mobile service revenue grew at 4.7%. We expect the economy may have had some impact on overall growth rates for China Telecom, as China Mobile’s service revenue growth also slowed mildly in the third quarter compared with its first half. Third-quarter net profit growth of 18.6% was largely due to reduced interest expenses as a result of the A share listing in 2021.