The three major telecom operators "converge" A shares influence geometry
Our reporter Ma Chunyang Zhou Lin
On August 9, China Telecom officially launched the subscription at an issue price of 4.53 yuan per share, marking that China Telecom is only one step away from entering the A-share market.
In addition, China Mobile also issued an announcement in May this year announcing its application for an A-share issuance and listing. In addition, China Unicom, which has been listed on A-shares for many years, is expected to gather the three major telecom operators in A-shares again.
Seize opportunities for industry development
According to China Telecom’s prospectus, the company intends to use all the funds raised for the company’s main business-related projects, including 5G industrial Internet construction projects, cloud-network integration new information infrastructure projects, and scientific and technological innovation research and development projects.
Regarding this return to A shares, China Telecom said that the current domestic 5G, big data center, industrial Internet and other new infrastructures are experiencing rapid development and popularization.
With the further integration of a new generation of information technology and manufacturing, domestic digital applications have achieved rapid development.
The fund-raising investment project can effectively expand China Telecom's 5G business penetration rate and operating income.
At the same time, it can promote the implementation of the company's "cloud to digital transformation" strategy, promote the rapid growth of the company's industrial digital business, and further enhance the company's revenue level and industry status.
"China Telecom's return to the A-share listing is driven by external catalysts and internal factors." Chen Li, chief economist of Chuancai Securities, said that external catalysts were mainly due to the "sanctions" imposed by the United States on my country's telecom operators last year. The New York Stock Exchange is delisted; in terms of internal factors, in recent years, with the gradual deepening of domestic capital market reforms, market construction has become more mature, and the return of Chinese concept stocks is also the general trend. At present, the domestic market has sufficient capacity to deal with overseas Chinese concept stocks return.
In December last year, the New York Stock Exchange said that it would initiate delisting procedures for three Chinese telecom operators listed on the exchange in accordance with an administrative order.
Although there was a reversal in the next few days, the original decision was ultimately maintained.
According to industry insiders, the number of ADRs issued by the three major operators in U.S. stocks accounts for a small proportion of the total number of issued shares, and the transaction volume is also small. The financing and operation of operators will not have a substantial impact.
The Everbright Securities report pointed out that with the impact of the "speed up and fee reduction" policy and the weakening of 5G capital expenditure pressure, operators have returned to A-shares. By introducing strategic investment and improving governance, they will accelerate corporate transformation and expand 5G industry applications.
“The construction of the current 5G-related layout requires a lot of funds. China Telecom's rapid return to A-share listing can help it obtain financing supplements.” Pan Helin, executive dean of the Institute of Digital Economy, Zhongnan University of Economics and Law, believes that 5G cloud network integration and industrial Internet are both It belongs to the infrastructure of 5G downstream applications. Through the construction of downstream infrastructure, China Telecom's user group or the number of access terminals can be greatly increased, thereby increasing the room for future performance growth.
The "White Paper on China's 5G Development and Economic and Social Impact (2020)" previously issued by the China Academy of Information and Communications Technology pointed out that from 2021 to 2023 will still be the introduction period for 5G industry applications, and industry applications will gradually be commercialized in batches.
From this point of view, China Telecom's return to A shares this time will be an important step for it to seize market opportunities.
Reduce the impact of stock price fluctuations
It is understood that China Telecom adopted the "green shoe mechanism" for this issuance, that is, granting the joint lead underwriters an over-allotment option that does not exceed 15% of the initial issued shares.
Previously, in the A-share market, many companies such as Industrial and Commercial Bank of China, Agricultural Bank of China, and SMIC used the "green shoe mechanism" in their IPOs, and these companies also raised more funds.
According to the prospectus, before the exercise of the over-allotment option, the number of shares issued by China Telecom in this A-share IPO was 10.396 billion shares, accounting for approximately 11.38% of the total share capital after the issuance; when the over-allotment option is fully exercised, the issue will be issued The total number of shares will be expanded to 11.956 billion shares, accounting for approximately 12.87% of the total share capital after the issuance.
All over-allotted stocks will be allotted to online investors.
Based on the issue price of 4.53 yuan per share, China Telecom’s A-share IPO is expected to raise a total of 47.09 billion yuan before the over-allotment option is exercised; when the over-allotment option is exercised in full, the estimated total amount of funds raised is 54.159 billion yuan.
After the “green shoe mechanism” is fully implemented, China Telecom’s IPO fundraising scale will exceed SMIC’s 53.230 billion yuan, ranking No. 5 in A-shares, ranking in Agricultural Bank of China (68.529 billion yuan) and China National Petroleum Corporation (668.29 billion yuan). 100 million yuan), China Shenhua (66.582 billion yuan), and China Construction Bank (58.05 billion yuan).
"For large companies to go public, in order to avoid the impact of sharp stock price fluctuations on the market, the'green shoe mechanism' can be used to achieve listing. The'green shoe mechanism' acts as a'stabilizer' for the stock price. If the stock price is higher than If the stock price falls below the issue price, the company will issue additional stocks to increase market supply and curb excessively rapid growth; if the stock falls below the issue price, the underwriters will use the additional funds to undertake to prevent the stock price from falling and stabilize the stock price.” Chen Li explained road.
It is worth mentioning that the three major operators have all been listed on the Hong Kong Stock Exchange, and China Telecom will become the second listed operator of A+H shares after China Unicom.
Chen Mengjie, chief strategy analyst at Yuekai Securities, believes that the listing of operators in two places is conducive to the company's fund-raising and will push China Telecom to move from "pipeline infrastructure" to a new era of "cloud-network integration".
Enhance the attractiveness of Chinese assets
Looking forward to the development of the next three years, China Telecom stated in its prospectus that the company's technological innovation capabilities and talent innovation vitality have been significantly enhanced, the industrial digital expansion capabilities have been significantly improved, the business structure has been further optimized, and the proportion of industrial digital revenue has increased year by year.
The layout of strategic emerging industries has been further strengthened, the development model and growth mode have been effectively transformed, the company's operating income has grown steadily, the income margin has been steadily improved, and the value of the company has been newly improved.
"China Telecom actively embraces digital transformation opportunities and builds differentiated and integrated intelligent information services advantages with innovation, integration, and security." The relevant person in charge of China Telecom quoted annual report data as saying that in 2020, the digital revenue of China's telecom industry will reach 84 billion yuan, a year-on-year increase. Increased by 9.7%, revenue scale and market share continued to maintain industry leadership.
During the same period, China Telecom's operating income was 393.561 billion yuan.
According to statistics from Guotai Junan Securities, in the first half of 2021, the three domestic operators' telecommunication business revenues totaled 753.3 billion yuan, a year-on-year increase of 8.7%, and the growth rate increased by 2.2 percentage points from the first quarter.
This shows that the competitive environment in the industry is getting better, and IT services such as 5G, broadband services, and cloud computing are all on an upward path.
Guotai Junan Securities analyst Wang Yanlong said that the return of domestic telecom operators to A shares may change in several aspects in the future.
At present, the major trend of change is that from the perspective of top-level positioning, policy support and endogenous changes of operators, more innovative services will be undertaken, and the business structure will change rapidly. Operators are rapidly changing from the label of “telecommunications operator” to The direction of "service providers" changes, and the valuation system may undergo qualitative changes in the future.
"For a long time, the H-shares of the three major operators have been affected by factors such as insufficient understanding of the fundamentals of overseas investors, weak liquidity, and uncertainties in overseas investment regulatory policies. There is still a lot of room for repairing the valuation of H-shares of major operators," said Zhang Tian, an analyst at Huaan Securities.
Deng Haiqing, chief investment officer of AVIC Fund, said that more high-quality companies are listed on A-shares, which will help investors discover more value investment stocks instead of focusing on a few popular stocks. It will also help attract international capital to invest in A-shares and increase China. The attractiveness of assets and the demand for holding RMB, Chinese assets are priced in RMB and endorsed by RMB are conducive to promoting the internationalization of RMB.
Ma Chunyang Zhou Lin