We struggle to summon enthusiasm for the upcoming IPO of China Tower which appears financially engineered to exploit minority investors. The core problem is the conflicted position of the three Chinese telcos which will remain its controlling shareholders and only customers. Indeed, rental rates were cut just prior to the IPO, partially offset by a reduction in depreciation. Long-term pricing will be what the telcos decide to pay, while future capex may be higher than expected. Another major concern is China Tower’s exceptionally low profitability with returns on capital of about 2% well below its cost of capital, and we…
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