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 (May 2011)

Business: broadband access service. The only operator that can provide FTTH to most Hong Kong families. Broadband access is a capital-intensive commodity business. But, 

1) it's very labor intensive and time-consuming to construct the last mile (it will take 4 or 5 years to cover most families of Hong Kong)
2) the business has a relatively high break-even point due to the capital intensive nature. 

Hence, I don't anticipate many new competitors will enter this market. The only legitimate competitor is PCCW but even PCCW seems not like to build up its FTTH network. It's unwise for PCCW, but it is the fact. 

Technology Disruptions

So far FTTH is the most cost-effective broadband access means and offer the highest speed. Even 4G wireless cannot provide similar service. (and 4G not rolled out commercially yet). So in mid term (3-5 years), technologically, Ctel is still safe. 

Growth potential

The need for more broadband is exploding. My guess is that, the number of customers will increase (Ctel grabs market share), price keeps stable, and add-on services such as Internet TV will extra provide opportunities. In sum, growth potential is good, but not great. 

Other investment highlights

1) best management teams
2) weak competitors (especially PCCW)
3) recurring revenues which makes good customer service valuable and might turn the commodity nature of the business into a non-commodity one. And Ctel is working aggressively at it. 


Ctel is applying for a TV license. TV business is fundamentally different from broadband access. I don't know how to judge it. But it is unlikely to drag down the whole company even if the TV initiatives fail. Also, the management's track record of starting business is good. 

Conclusion: Buy and hold, hopefully permanently.