Morgan Stanley released a research report stating that it remains Bullish on mainland telecom operators maintaining dividends, while anticipating that the Industry could benefit from reduced capital expenditures after the 5G cycle and potential improvement in working capital conditions. Compared to telecom operators, Morgan Stanley is more Bullish on the development of Datacenter and tower companies in the Chinese market. Currently, Morgan Stanley's preferred ranking for the three major telecom operators is CHINA TELECOM (00728), China United Network Communications (00762), and CHINA MOBILE (00941), all rated as Shareholding.
The bank predicts that the revenue growth rate of the mainland telecom Industry will slightly rebound to 3.2% this year, compared to 2.7% in 2024, but still lower than the economic growth rate, mainly due to pressure on traditional businesses and the shift of new business focus to Cash / Money Market. It is expected that the dividend increase for CHINA TELECOM, China United Network Communications, and CHINA MOBILE this year will reach 9%, 20%, and 6%, respectively.
Morgan Stanley believes that CHINA TOWER (00788) has a more resilient growth outlook, with an average annual compound growth rate of dividends per share reaching 30.3% from 2023 to 2026, far exceeding the three major telecom operators. Therefore, the rating for CHINA TOWER is upgraded to Shareholding, with a Target Price of HKD 1.3. The firm is also optimistic about robust domestic demand for Datacenter and is more Bullish on GDS-SW (09698) and 21Vianet (VNET.US).
