1、120305,120830,111130,120605,121130,EquityResearchReport/SectorResearch/Telecom,to,indices,沪深300,Telecom (CSI),-20%,-30%,-40%,2013E Annual Investment Strategy TelecommunicationsDifferentiation, structure, newopportunity,11 January 2013Investment HighlightsBusiness operation will be under pressure in
2、the short term,and attention to business differentiation is advised. Due to aslowdown in growth of the user base for telephone service, YoYgrowth in primary business for the first three quarters of this year isforecast at 9.2%, along with a QoQ slowdown in growth. However,noticeable changes are taki
3、ng place in the revenue model of theindustry with 3G and data service assuming prominence as theprimary driver of growth. Meanwhile, decline in 2G user base issignificant with fixed line service losing less subscribersnow. Differentiated business model has accelerated the businessdivergence among th
4、e big three telecom service providers, withChina Unicom growing faster than China Telecom and China,Operators: NEUTRAL(Reiterate)Equipment: NEUTRAL(Reiterate)CITIC Securities ResearchChen JianTel.: 010-60838585Email: Practicing license No.:S1010512120001Gong JuntaoTel.: 010-60838159Email: Practicing
5、 license No.:S1010510120037,Mobiles growth lagging that of China Telecom. As such, we expectthe proportion of China Unicoms 3G business income to increase to,Performance,relative,40% in the coming year, ushering in a period of high growth.Next years telecom investment will still be characterized by,
6、10%0%-10%,通信(中信),CSI 300,slow growth; we urge investors to pay attention to changes ininvestment structure. The short term will be dominated bythe weakened economy and sluggish global telecom spends. The,bright spot for investment will be the domestic market, of which the,Source: CITIC Securities Re
7、search,prospect of LTE service roll out on a massive scale in the comingyear will bring in approximately 40 bn in additional investment,making it the main driving force for investment. Nevertheless,investment in other areas may still contract, we project a mildcorrection in 3G investments, while we
8、expect more marked fall in2G investment. In the absence of a substantive push from nationalpolicy, investment growth of broadband infrastructure will slow to the10% levels. Furthermore, investment outlay for transmissionfacilities is likely to surpass investment input for the access facilities.Hence
9、, we forecast an overall 5% telecom investment growth in thecoming year.Please do read the Disclaimer at the end of the report,2013E Annual Investment Strategy TelecommunicationsAn improvement in the general environment for equipment manufacturing is the most criticalfactor for the industry to pull
10、itself out of the weakness. Judging by the current lacklustreincome growth in the telecom industry, pinning the hope on the telecom service providers to easethe pressure on equipment manufacturers will be difficult. A real improvement in the equipmentmanufacturers business performance would still de
11、pend on the change in the competitive strategyof the dominant players in this sector. As Huawei needs increased earnings to sustain its bonusincentive model and ZTE requires cash flow to come out its loss-making, there is some prospect fora reprieve in the fierce competition among the big players. H
12、owever, there may not be any let up inpressure on the equipment manufacturers, particularly when the big players are still shifting tocorporate enterprise networks. Besides, the end consumption “bleeding” the core business will likelyexacerbate the pressure on service providers earnings.Fresh opport
13、unity increased opportunity in mobile data service, as mobile dataconsumption generates an exponential growth. Compared to internet, there is markeddifference in the user base and user habits for the mobile internet. Targeting the correct users willhelp in creating an all-new internet access (platfo
14、rm), giving rise to new internet players ordifferentiated winners. We have summarised four major categories in mobile internet access portals:hardware access, operating system access, application access, and software access. The first twocategories have effectively formed a stronghold in the market,
15、 a significant part of the opportunitieslie with the latter two categories. We foresee clear investment opportunities in the application store,mobile assistant, intelligent voice assistant, and social media segments. Besides, areas like contentdelivery network (CDN), data mining that catalyze the ex
16、ponential growth in data streams will alsobe key beneficiaries.Risks: (i) 3G roll out coming in below expectations; (ii) intensifying competition in industryconsolidation; and (iii) lower-than-expected investments in telecom.Investment strategy: As growth in the telecom business is slowing and the g
17、eneral businessenvironment for the equipment manufacturers is yet to see clear signs of a turnaround, we maintain“neutral” rating for operators and equipment manufacturers. Investment opportunities will appear inthe local domain. The key focus on the telecom service providers will centre on differen
18、tiation inoperational results. With China Unicom expected to benefit from a significant increase in theproportion of 3G business income, a substantial uplift in its business performance can be expected.Regarding equipment manufacturers, attention should be directed to those firms benefiting frominve
19、stment in transmission infrastructure. Perhaps, the greatest investment opportunity lies withinthe new arena of mobile data consumption. We recommend picking Anhui USTC iFLYTEK andNetDRAGON, with business focus on network access, while paying some attention toLongmaster Information & Technology, and
20、 Wangsu Science & Technology which areexpected to benefit from the exponential growth in data stream.Earnings forecast and investment rating of major companies,Company,Price(Rmb),EPS (Rmb)11A 12E,13E,14E,PER (x)11A 12E,13E,14E,Rating,China Unicom (600050)Iflytek (002230)Wangsu Science and Technology
21、 (300017)Star-net Communication (002396)Sunsea Telecommunications (002313),3.1724.3614.4312.8413.9,0.070.350.350.510.61,0.120.490.530.70.81,0.210.800.760.871.03,0.351.451.121.051.26,4570412523,2650271817,1530191513,917131211,BUYBUYBUYBUYOVERWEIGHT,Please do read the Disclaimer at the end of the repo
22、rt,2013E Annual Investment Strategy Telecommunications,Company,Price(Rmb),EPS (Rmb)11A 12E,13E,14E,PER (x)11A 12E,13E,14E,Rating,Longmaster Information and Technology (300288)ZTE (000063),52.497.75,1.090.60,1.60.01,2.140.60,2.770.73,4813,33775,2513,1911,OVERWEIGHTOVERWEIGHT,Source: Wind, CITIC Secur
23、ities Research,Note: Closing prices as of 30 Nov 12,Please do read the Disclaimer at the end of the report,1,2013E Annual Investment Strategy - Telecommunications,Contents,Investment focus .1Industry review: Revenue growth retreats .2Revenue growth of the operators declined . 2Operators: Substantial
24、 divergence in earnings among operators.8The sector will still grow slowly in the short run . 8Clear pattern of competition in the near term . 9Watch for investment opportunities from differentiated growth in earnings .11Equipment sector: Focusing on structural opportunities amid slow investmentgrow
25、th .14Investment will be characterized by slow growth in the near term . 14,Equipment manufacturers shrinking strategy may ease decline in sector profits . 19,Looking for substantial gain in mobile data service .20Mobile data consumption becomes increasingly mature . 20The biggest opportunity in mob
26、ile data consumption comes from access control. 21Opportunities lie in services supporting data consumption . 29Risks associated with investing in the sector .31Investment Strategy and Key Companies .31Industry valuation . 31Industry ratings . 33Investment strategy . 34Analysis of key companies . 36
27、,Please do read the Disclaimer at the end of the report,2,2013E Annual Investment Strategy - Telecommunications,Figures,Fig. 1: Growth in revenue from primary telecom business (2000-12) . 2Fig. 2: Monthly telecom revenue advanced 9.2% YoY in Sep 12 . 2Fig. 3: Quarterly growth in operating revenue of
28、 three major operators eased . 3Fig. 4: Overall net profit of three major operators posted slow growth . 3Fig. 5: Number of 3G users in China has reached 202mn by Sep 12 . 3Fig. 6: The number of new 3G subscribers accounted for 82.3% of total new users in Sep12 . 3Fig. 7: Number of new mobile subscr
29、ibers in China (2001-12) . 4Fig. 8: Growth in mobile subscribers in 2012 declined from 2011 . 4Fig. 9: New fixed-line subscribers in China (2001-12) . 4Fig. 10: Growth in new fixed-line subscribers since 2011. 4Fig. 11: Annual cumulative new broadband subscribers . 5Fig. 12: New broadband subscriber
30、s since 2011 . 5Fig. 13: Domestic telecom FAI in 2002-12 . 5Fig. 14: Telecom investment advanced 8.6% YoY in Jan-Sep 12 . 5Fig. 15: Penetration rate of mobile phones increased to 80.6% (as of Sep 12) . 8Fig. 16: Mobile phone ARPU of the three major operators (Rmb). 8,Fig. 17: NTT Docomos ARPU . 8Fig
31、. 18: Decline in KDDIs ARPU slowed down . 8,Fig. 19: ARPU of AT&T wireless service showed signs of recovery and stabilization . 9Fig. 20: Data service helped Verizon ARPU to rally . 9Fig. 21: The three major operators market share in the mobile subscriber market . 10,Fig. 22: The three major operato
32、rs share of 3G users . 10Fig. 23: The three major operators share of annual cumulative new users . 10Fig. 24: The three major operators share of annual cumulative new 3G users .11Fig. 25: CMs vast 2G user base becomes a target for CU and CT (data as of Sep 12) . 12Fig. 26: CUs percentage of 3G reven
33、ue grew rapidly . 12Fig. 27: CTs percentage of mobile service revenue rose markedly. 12Fig. 28: CTs revenue from fixed-line service stopped declining and rallied . 12,Fig. 29: Growth forecast of domestic 3G users . 13,Fig. 30: A majority of CUs new users are 3G users . 14,Fig. 31: Mobile data traffi
34、c forecast . 16Fig. 32: 3GPP network coverage forecast . 16Fig. 33: Forecasting market space for different LTE standards . 16Fig. 34: LTE market space forecast by region . 16,Fig. 35: CMs TD-LTE construction plan . 17,Fig. 36: Telecom investment growth forecast . 18,Please do read the Disclaimer at
35、the end of the report,3,2013E Annual Investment Strategy - Telecommunications,Fig. 37: Global market size of smart handset in 2006-15E. 21,Fig. 38: Forecasting Chinas smart handset shipment . 21,Fig. 39: Global mobile data traffic (2008-15E) . 21Fig. 40: Mobile internet traffic access . 22Fig. 41: F
36、our type of participants in the application store market . 24Fig. 42: User population of 91 Assistant and Android market of NetDragon . 25Fig. 43: Wireless service revenue of NetDragon . 25Fig. 44: Siri is potentially capable of controlling the Web service access. 25Fig. 45: Company profile for USTC Iflytek . 27Fig. 46: Business model of professional CDN service provider . 30Fig. 47: Growth in per customer (website) traffic and user base rapidly help CDN market. 30Fig. 48: Market size forecasts of CDN service provider in 2006-2013E . 31,
