Jinwu Financial News | UBS recently pointed out in a research report on China's telecom industry that according to data from China's Ministry of Industry and Information Technology, the telecom industry's service revenue increased 2.6% year on year in October 2024, up from 1.8% in the third quarter, but it is still moderate compared to 1.6% in the same period last year. As mentioned in the report, mobile data revenue and fixed data revenue increased by 1.7% and 5.2%, respectively, compared with 2.0% and 1.1% in September. Revenue from traditional telecom services increased 2.1% year over year, while revenue from value-added services increased 4.2%, which is a slowdown from 5.0% in the third quarter and 10.6% in the same period last year.
UBS analysts conducted an in-depth analysis of industry data and predicted future prospects. Despite macroeconomic headwinds, the telecom industry showed signs of a moderate recovery. Corporate revenue growth has further slowed, and although IDC demand has recovered, overall digital demand is showing signs of slowing in the face of macroeconomic headwinds. UBS believes that despite the steady increase in the number of 5G users and the 1000M+ fixed broadband penetration rate, changes in consumer business competitiveness and capital expenditure (capex) expectations will still be key factors affecting the future growth of the industry.
UBS anticipates that telecom companies will pay more attention to the profitability and cash flow of corporate business rather than just pursuing revenue growth. Furthermore, UBS believes that despite the slowdown in industry service revenue growth, telecom companies are expected to achieve full-year profit guidance, thanks to improved operating leverage, demand-driven capital expenditure investments, and making profitability a top priority for corporate business. UBS maintains a positive review of China's telecom industry and specifically recommends China Mobile (00941) as the preferred stock because it faces less pressure to grow its mobile market share.
