China Telecom May Not Realize High Premium

China Telecom and China Mobile are coming back to a.

      On August 18, according to the information disclosed on the website of China Securities Regulatory Commission, China Mobile pre disclosed the A-share prospectus and planned to be listed on the Shanghai Stock Exchange. According to the prospectus, the company plans to issue no more than 964.813 million A-shares and 4.5% of the total number of shares issued after the offering. The main underwriters are CICC and CITIC Securities.

Also on the evening of August 18, China Telecom (00728. HK) announced that the company's A-share shares would be listed on the Shanghai Stock Exchange on August 20, 2021, at a price of 4.53 yuan per share. This also means that after the announcement on March 9 that it intends to apply for A-share issuance and listing on the main board of Shanghai Stock Exchange, China Telecom will officially step on A-share after nearly half a year.

After China Telecom and China Mobile return to a, together with China Unicom, which has been listed on the main board, the three operators will merge into a shares. Pan Helin, executive director of the Digital Economy Research Institute of Central South University of Finance and law, pointed out in an interview with the reporter of the 21st century economic report that the price of the telecom sector will be revalued after the return of a shares.

"Telecom operators are anti cyclical industries, with stable cash flow, and benefit from the general trend of Internet explosion, so the telecom industry has growth potential." Pan Helin believes that the future A-share Telecom plate is expected to become a representative plate.

The three major operators sounded the "assembly number" of a shares. Xinhua News Agency

Division A shares of three major operators' chambers of Commerce

Since the beginning of this year, the news that the three major operators gather in a share is frequent.

In March, it announced its intention to apply for A-share issuance and listing on the main board of Shanghai Stock Exchange. In April, it signed the IPO guidance agreement on the main board of Shanghai Stock Exchange and completed the guidance one month later. The IPO application was approved in July, and the IPO application was completed in August. China Telecom's A-share return rhythm can be said to be tight.

When China Telecom first announced the listing of A-shares in March, China Mobile also had relevant rumors. However, it was still early at that time, and China Mobile did not publicly confirm it. At that time, insiders admitted that China Mobile was considering A-share listing after delisting in the United States, but the listing plan was still at an early stage.

Recently, however, with only "the last kilometer" left for China Telecom's listing, China Mobile also has a more accurate signal. At the first half of 2021, China Mobile chairman Yang Jie said that China Mobile is expected to return to a smoothly within the year. Immediately after that, China Mobile pre disclosed the A-share prospectus and planned to be listed on the Shanghai Stock Exchange.

In the view of sun Yanbiao, President of the first mobile phone industry research institute, it is not surprising that the operator returns to a. Due to the impact of the epidemic, the global economic weakness will become normal, while China may become one of the few "safe havens" due to the relatively controllable epidemic situation. "From this perspective, the company's expectations and expectations will be improved from the overseas market to the domestic market."

Another background is that the three major operators have withdrawn from the U.S. stock market this year, and the three operators need new financing entry to hedge against this accident.

Previously, China's three major operators were listed in Hong Kong and New York at the same time, and China Unicom was also listed on the mainland's a shares. However, at the end of 2020, China Mobile, China Telecom and China Unicom received notice of being "expelled" from US stocks. In May this year, the NYSE maintained this decision. Then, the three major operators terminated the American Depository securities program (ADR) and officially delisted from the NYSE.

At the same time, the current high investment in 5g construction also makes operators have to expand financing. According to the pre disclosed prospectus of China Mobile, 50% of its raised funds will be invested in "5g boutique network construction project", which shows that 5g construction is the main purpose of the fund-raising.

"This means that telecom operators are seeking a new round of expansion. 5g will bring human society from the Internet to the Internet of things, and access devices will further explode. At this time, telecom operators need to invest more money in new business forms to carry out R & D and market expansion." Pan and Lin analysis said.

Sun Yanbiao also believes that from the perspective of the current 5g market explosion potential, there is still a huge space for development in the future, including smart home and other scenarios“ The future positioning of China's operators will not only be a single channel provider, but will give them more roles, such as smart home and other fields are likely to build their own brands around the 5g industrial chain. And it all needs to be supported by funds. "

China Telecom may be difficult to premium

Although both inside and outside the industry are excited about the merger of the three major operators A-share, the performance of China Telecom after returning to a remains to be seen.

Without considering the over allotment option of this A-share issue, China Telecom raised 47.094 billion yuan in total. If the over allotment option of this A-share issue is fully exercised, the net amount of funds raised by China Telecom in this issuance will be 53.727 billion yuan. This will make China Telecom the fifth largest IPO in A-share history.

However, the result of China Telecom's IPO application is not satisfactory. According to the results of China Telecom's new share issuance on August 12, a total of 86.3862 million yuan has been abandoned.

At the same time, China Telecom's back a process has been unable to get rid of the shadow of China Mobile. According to the latest pre disclosed prospectus of China Mobile, it may raise 56 billion yuan. Based on this calculation, China Mobile will surpass China Telecom and become the largest A-share IPO in recent 10 years.

In terms of financial data, it is difficult for China Telecom and China Unicom, which is listed in a shares, to compete with China Mobile. According to the latest medium-term financial reports released by the three major operators, in the first half of this year, China Mobile achieved revenue of 443.65 billion yuan, up 13.8% year-on-year. Compared with that, China Telecom and China Unicom achieved revenue of 219.2 billion yuan and 164.2 billion yuan respectively in the first half of this year, with growth rates of 13.1% and 9.2%, respectively, And the growth rate of revenue is not as fast as that of China Mobile.

In terms of profitability, China Mobile achieved a net profit of 59.12 billion yuan in the first half of this year, a year-on-year increase of 6%. China Telecom and China Unicom achieved a net profit of 17.7 billion yuan and 9.2 billion yuan respectively, which were also far from China Mobile.

In addition, as China's "first brother", China Mobile's market value is far higher than the other two. By the end of August 19, China Mobile's Hong Kong stock was at HK $51.45, with a total market value of HK $1.05 trillion, ranking 10th in the total market value of Hong Kong stocks. By comparison, the total market value of China Telecom and China Unicom Hong Kong shares were HK $237.1 billion and HK $136.2 billion respectively.

However, in addition to the market competitiveness, the IPO of China Telecom encountered a high amount of abandonment, which is also related to its higher issuance price. It is understood that China Telecom's A-share offering price was 4.53 yuan, while its Hong Kong stock price was HK $2.93 (about RMB 2.44 yuan) as of the closing of the 19th, with a premium rate of 86%.

"The issue price is 4.53 yuan per share, corresponding to a diluted P / E ratio of 20.18 times in 2020." Panhelin analysis said, "under the current background of interconnection, the final stock price positioning after the listing of the secondary market has attracted attention. Considering the volume of China Telecom, it is generally expected that the premium will not be too high after listing. "