China Telecom Expects Continued Strong Growth in Cloud Services Revenue

China Telecom’s 2022 was highlighted by continued exceptional growth in cloud services revenue (which the company expects to continue in 2023) and a focus on industrial digitization. This drove 2022 services revenue growth of 8%, but with some margin contraction with EBITDA growing 3.4% and underlying earnings per share growing 3.8%. For traditional telecom services products, we estimate that 8% services revenue growth would likely drive over 20% earnings growth. The lower-margin industrial internet services are likely contributing to the lower consolidated margins. Fourth-quarter services revenue growth of 7.9% year on year was broadly in line with the full year, but industrial digitization grew 19% year on year in the fourth quarter with wireline and smart family growing 3.8% year on year and mobile service revenue declining 2.2% year on year.