Goldman Sachs: Soft 5G Deployment to Weigh on Near-Term Growth; China Telecom and China Unicom Downgraded to Neutral
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Goldman Sachs downgraded both China Telecom (0728.HK) and China Unicom (0762.HK) from Buy to Neutral on January 7, 2026. The downgrades reflect slowing 5G deployments, which are constraining telecom services growth, alongside short-term macroeconomic uncertainties impacting innovation businesses such as artificial intelligence and cloud services.
The firm highlighted that China added 579,000 new 5G base stations during the first eleven months of 2025. This marks a notable decline from 814,000 during the same period in 2024 and represents only 83% of the previously expected 700,000 target. Historically, deployment reached 90% of expectations. This sluggish rollout indicates that subscriber and average revenue per user expansion are under pressure, leading to more moderate telecom revenue growth.
While AI-related solutions remain a vital long-term growth catalyst, macroeconomic headwinds are pushing companies to prioritize high-quality projects, thereby limiting near-term momentum. Goldman Sachs subsequently reduced its earnings forecasts for both entities. China Telecom's 2026 and 2027 estimated earnings per share were lowered by 6% and 7%, respectively, while China Unicom's EPS was reduced by 6% for both years.
The 12-month target price for China Telecom was cut from HK$7.9 to HK$6.0, based on 2.6 times 2026 enterprise value to EBITDA. China Unicom's target price was lowered from HK$11.5 to HK$8.8, based on 2.8 times 2026 EV/EBITDA. The firm notes the stocks offer approximately 9% upside, with risks stemming from intensifying competition and uncertain returns on computing investments.