Morgan Stanley: If HKT-SS (06823) subsidiary has its US operating qualification revoked, the impact on fundamentals is expected to be manageable.

Morgan Stanley released a research report stating that the Federal Communications Commission (FCC) of the United States plans to revoke the operating qualifications of HKT-SS (06823)'s wholly-owned subsidiary HKT International in the United States, due to its connection with Hong Kong Telecommunications and China United Network Communications Americas (China Unicom Americas). Morgan Stanley believes that if the revocation process takes effect, the impact on the fundamentals of Hong Kong Telecommunications should be manageable, as its international business revenue (excluding Greater China) accounts for less than 7% of total revenue in 2024, with the US market accounting for only about 1%, and the profit margin of international business generally lower than that of local business. However, due to the uncertainty in the development of the situation, negative market sentiment may continue to escalate. The bank has set a target price of HK$13 for Hong Kong Telecommunications and a "hold" rating.