My Analysis: China Telecom

China Telecom plans to issue $7.3 bln domestic bond. Good way to get funding to upgrade its DSL and CDMA networks. My opinions are:

1. CDMA technology is relatively outdated compare to GSM and 3G. This may affect adoption rate. Having said that, how many subscribers in Singapore actually use 3G function? My concern may be trivial.

2. China Telecom Gearing of 48% is relatively high compare to SingTel 39% and China Mobile 34%. China Telecom current ratio is dangerously low at 0.31 compare to China Mobile 1.34 and SingTel 0.68. Bond issue may help to clean up their current account.

3. China Telecom PE is about 14, similar to SingTel but significantly lower than China Mobile (PE 24). It shows that investors are willing to pay a premium for China Mobile for its market share, growth potential and strong balance sheet.

4. China Telecom Price-to-NTA ratio is 1.43 compare to SingTel 2.66. So, China Telecom is cheaper than SingTel and China Mobile.

5. China Telecom earning growth is only 1.1% compare to SingTel 4.8% and China Mobile 31%. The problem lies on decreasing fixed line subscribers as more users switch to mobile line. The silver lining is the growth of its DSL (broadband) and CDMA (Mobile) businesses. My take is that China Telecom has more upside compare to other telecoms because it 43 million mobile subscribers base offer more growth potential than China Netcom (125 million) and China Mobile (399 million). Looking at the growth potential in China and current stock valuation, I think China Telecom is worth investing at current price.