Oppenheimer Discusses City Telecom

Oppenheimer & Co. has an Outperform rating on shares of City Telecom CTEL. In a note to clients, Oppenheimer writes, "In the past couple of weeks, CTEL has announced two new promotional initiatives: 1) a 1Gbps triple play bundle (which includes 1Gbps broadband, voice and pay-TV) priced at $20 per month in response to the incumbent's 200Mbps offer (priced at $21); 2) a VoIP offering at $1.30 per month, specifically targeting the incumbent's customers. Competition in the Hong Kong market is heating up but PCCW (8-HK, $3.04, Not Rated) has a lot more to lose given its larger market share. As a reminder, PCCW has 1.4M fixed line subs (vs. CTEL's ~400K) and about 900K residential broadband subs (vs. CTEL's 551K) In our view, the current promotional initiatives bode well for CTEL longer term, but in the short run, the ongoing price war could potentially hurt ARPUs and FCFs. Our positive view on the company remains intact and we continue to recommend the shares for longer-term focused investors." Shares of CTEL lost 68 cents on Friday to close at $12.47, a loss of 5.17%.