汇丰银行-韩国电信-korea telcos：downgrade lg uplus to hold national service looms-20170624-hsbc

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1、24June2017KoreaTelcosEQUITIESTELECOMSDowngradeLGUplustoHold:nationalserviceloomsSouthKoreaKoreanTelcostockshavehadagood2017,butanincreaseNealeAnderson*inthetariffdiscountrateisariskHeadofAsiaTelecomsResearchTheHongkongandShanghaiBankingCorporationLimit

2、edneale.anderson@hsbc.com.hkRaisingthetariffdiscountratefrom20%to25%seemsmost+85229966716likely:thiswouldimpactrevenueandprofitfrom4Q17AricHui*Analyst,AsiaTelecomsTheHongkongandShanghaiBankingCorporationLimitedNochangestoestimates,butdowngradeLGUplustoHol

3、donariccshui@hsbc.com.hk+85228223165valuation;reiterateHoldSKTelecomandBuyKTCorp*Employedbyanon-USaffiliateofHSBCSecurities(USA)Inc,andisStocksfaceuncertaintyoverthetimingandextentoftariffcuts.Telcosnotregistered/qualifiedpursuanttoFINRAregulationsbenefited

4、asinvestorscorrectedunderweightpositionsinKoreaearlythisyear:SKT’s17%riseYTDmatchestheKOSPI,whileKT’s12%risehasunder-performedthemarket.ThestandoutperformerhasbeenLGUplus,up48%sofarandoneofthebestperformingAsiatelcostocksinourcoverage.However,weexpectmoment

5、umtostallduetouncertaintyoverpotentialmeasurestoreducetelcobills.Aproposaltocutthebasicsubscriptionfeewasshelvedon19Juneasunworkable,butoneofthenewproposalsisanincreaseinthetariffdiscountfrom20%to25%.TheHandsetDistributionAct(HDA)providesaframeworktodothis,

6、althoughalikelylegalchallengefromthetelcosmakesthetiminguncertain.Otherproposedmeasurestohelptheelderlyandlow-incomegroupswillrequirenewlegislation.Potentialimpactuncertain.Wemakenochangestoourestimatespendingconfirmationofthemagnitudeoftheproposedchange.Ho

7、wever,wenotethata5%reductioninour2018ARPUestimatewouldresultina3/2/4%reductioninourEBITDAestimatesforSKT,KTandLGUplusrespectively.DowngradeLGUplustoHold.LGUplushashadatremendousrunin2017.Westilllikethebusinessoutlookoutsidewireless:weexpectgoodgrowthfromthe

8、eBizunit(particularlypaymentgateway)andlookforcontinuedsolidtrendsatallthreetelcosintheIPTVandbroadbandsegments.However,asLGUplusstockhasreachedourpricetargetwedowngradetoHold.Wemakenochangestoestimate