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Earnings boost for China's 'big three' telecommunication operators

21/07/2016 by James Kavanagh


China's "big three" telecommunication network operators have secured an agreement ensuring lower tower leasing fees, in a move analysts predict will boost this year's earnings.

According to the SCMP, China Mobile, China Unicom and China Telecom Corp have disclosed the details of their five-year lease deals on "telecommunications towers and related assets from China Tower Corp, the infrastructure-sharing joint venture they formed two years ago, in separate filings on Friday with the Hong Kong Stock Exchange."

The analyst forecasts that as a result of the lowered lease fees and the adoption of a new pricing formula, all three companies will see a substantial boost in overall annual earnings before interest, tax, depreciation and amortisation (EBITDA) – a measure of corporate performance.

The updated rates take into account depreciation and maintenance costs, co-sharing discounts and mark-up costs.

Nomura analyst Huang Leping has calculated the estimated savings for China Mobile, Unicom and China Telecom for this year as "2.4 billion yuan, 1.9 billion yuan and 1.8 billion yuan, respectively."

Huang has also predicted that in terms of EBITDA, China Mobile will see a yearly increase of 1% whereas Unicom and China Telecom may see as much as a 2% gain.

Chris lane, a senior analyst at Bernstein, reported that China Tower had agreed to "a slightly lower rate" in comparison to "what was being accrued by the three operators since November."

He continued: "China Telecom indicated the rate was reduced by about 10 per cent while Unicom said it was between 10 and 15 per cent," and that "the end result is an average site lease fee of roughly 26,000 yuan per tower."

China Tower is the brainchild of the "big three" launched in July 2014. It was established with the intention of handling all of the construction, maintenance and operations of the telecommunication network towers as well as auxiliary infrastructure across China. 


telecommunications, China

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