Summary of China Telecom Sector Conference Call Industry Overview - **Industry**: China Telecom Sector - **Recent Performance**: China telco operators' H shares have underperformed the Hang Seng Index (HSI) over the last three months, with declines of 1-5% compared to HSI's increase of 5% [1][5][6]. Core Insights - **Investment Recommendation**: Investors are encouraged to accumulate shares of China telco operators, viewed as quality laggards with attractive dividend yields [1][5]. - **Dividend Yields**: Projected 2025 dividend yields for major telcos are 6.3% for China Mobile-H (CM-H), 5.4% for China Telecom-H (CT-H), and 5.6% for China Unicom-H (CU-H), which are favorable compared to HSI's 3.0% yield and the China 10Y bond yield of 1.8% [1][6]. - **Revenue Growth Trends**: Traditional telecom revenue growth has slowed, with MIIT data indicating a deceleration in year-over-year growth from 1.3% in Q2 2025 to 0.2% in Q3 2025 [5][6]. This slowdown is attributed to a decline in average revenue per user (ARPU) and stable mobile subscriber numbers [5]. Key Arguments - **Market Dynamics**: The underperformance of telco operators is linked to a market preference for growth stocks over value stocks, as evidenced by HSTECH's 12% rise compared to HSI's 5% [5]. - **Cloud Revenue Concerns**: Cloud revenue growth for telco operators has slowed to 5-10% in the first half of 2025, compared to 22% for internet companies like Alibaba, raising concerns about market share loss [5][6]. - **AI Investment Commitment**: The big three telcos are committed to increasing AI investments, with China Mobile planning to double its AI investment by 2028 and China Unicom focusing on domestic suppliers for its server tenders [6]. Additional Insights - **Shareholder Returns**: All three major telcos are expected to enhance shareholder returns by increasing cash dividend payout ratios over the next 2-3 years, projecting a 9% average dividend per share (DPS) compound annual growth rate (CAGR) from 2025 to 2027 [6]. - **Long-term Growth Outlook**: The long-term growth outlook for AI and cloud services is positive, with expectations that increased state-owned enterprise (SOE) investment in AI/cloud will benefit the telcos' cloud and data center businesses in the coming years [6]. Conclusion - **Top Pick**: China Telecom-H (CT-H) is highlighted as the top pick due to its significant exposure to cloud services and resilient traditional mobile/broadband offerings [1].

Investment Rating - Industry Rating: Recommended [4] Core Insights - The report emphasizes the importance of information communication as a critical infrastructure for the new round of technological upgrades, focusing on three major infrastructure networks: AI computing power infrastructure, integrated space-ground communication networks, and high-speed data circulation infrastructure [1][34] - The report highlights the rapid development of satellite internet and low-altitude economy, with a focus on the integration of satellite communication networks and the establishment of low-altitude economic networks [3][19] - The data element construction is crucial for building high-speed interconnected data circulation infrastructure, with significant growth expected in the data industry [24][27] - AI empowerment is seen as a key driver for industrial upgrades, with applications in various sectors including advanced manufacturing and smart manufacturing [29][30] Summary by Sections 1. Investment in Computing Power Infrastructure - Significant capital expenditure growth in computing power infrastructure, with major telecom operators increasing their investments [12][14] - Key beneficiaries include companies involved in AI chips, optical communication, and data center services [2][14][15] 2. Satellite and Low-Altitude Communication Infrastructure - The rapid deployment of satellite internet and the establishment of low-altitude economic networks are highlighted, with various companies benefiting from this trend [16][19][21] - Key beneficiaries include companies involved in satellite communication and low-altitude network equipment [6][23] 3. Data Element Construction - The data industry is projected to grow significantly, with a focus on building a robust data infrastructure to support data circulation [24][25][26] - Key beneficiaries include telecom operators and companies providing data platforms and security solutions [27][28] 4. AI Empowerment for Industrial Upgrades - AI is driving the transformation of traditional manufacturing into smart manufacturing, with a focus on enhancing productivity and efficiency [29][30][31] - Key beneficiaries include companies involved in AI applications across various sectors [35][36]

Core Insights - The data center industry is experiencing robust growth driven by emerging technologies such as 5G, cloud computing, and artificial intelligence, with the market size reaching 507.83 billion yuan in 2023 [6]. Policy Support - The development of the data center industry is supported by various policies at both national and local levels, focusing on layout optimization, green development, technology upgrades, and financing channels [4]. - Key policies include the "2030 Carbon Peak Action Plan" aimed at promoting energy-saving and carbon reduction in data centers [5], and the "New Type Data Center Development Three-Year Action Plan (2021-2023)" which outlines six key tasks for quality upgrades [5]. Market Structure - The competitive landscape of the data center industry is diverse, with major players including Alibaba Cloud, Tencent Cloud, and Huawei Cloud in the first tier, and third-party service providers like GDS Services, Century Internet, and DataPort in the second tier [8]. - The industry is characterized by a multi-tier structure, with significant contributions from both cloud service providers and telecommunications operators [8]. Industry Growth - The data center market is projected to continue its growth trajectory, supported by the increasing demand for digital services and the ongoing digital transformation across various sectors [6]. - The industry is moving towards a more integrated, large-scale, green, and intelligent development model [4]. Company Strategies - Major companies are expanding their data center footprints across key regions, with Century Internet and GDS Services actively developing data centers in first-tier cities and strategic locations [10]. - Companies like Alibaba Cloud and Tencent Cloud are establishing large-scale data centers in multiple regions, enhancing their service capabilities [10].

Core Insights - The three major telecom operators in China have officially launched eSIM mobile services, marking a significant advancement in the eSIM technology for smartphones and creating new growth opportunities for the eSIM industry chain [1] Industry Overview - The global eSIM chip shipment reached 446 million in 2023, with predictions of 1 billion eSIM smartphone connections by the end of 2025 and 6.9 billion by 2030, accounting for three-quarters of total smartphone connections [1][6] - The eUICC chip is central to eSIM technology, enabling remote SIM configuration and management, which enhances user experience and positions the industry chain for growth [2] Market Dynamics - The demand for eUICC chips is expected to surge due to the commercial launch of eSIM services by telecom operators, with 3.62 million eSIM users in China as of 2023, predominantly in smartwatches [3] - The eSIM technology is anticipated to drive supply chain optimization within the telecommunications industry [1] Company Developments - New Henghui, a semiconductor packaging and testing company, has the capability to adapt its existing IoT eSIM packaging technology for smartphones and other devices, indicating a broad application potential [1][5] - Huada Electronics has developed an eSIM operating system in collaboration with a global eSIM service provider, achieving GSMA eUICC Security Assurance certification, which enhances its market position [2] Technical Advancements - The etching lead frame is a critical material for eSIM chip packaging, with significant potential for domestic substitution as eSIM applications accelerate [4] - The WLCSP (Wafer-Level Chip Scale Package) technology is crucial for miniaturizing eSIM chips and is already adopted by major international manufacturers like Apple and Samsung [5] Future Outlook - Companies that proactively invest in technology development and establish strong ties with terminal manufacturers and telecom operators are likely to gain competitive advantages in the evolving eSIM industry [6]

本报记者 许林艳 如果将数字经济比作一座高速运转的"智慧城市"，算力就相当于这座"城市"里必不可少的"自来水"。如今，"城市"里的"用 水需求"急速攀升，但"供水管网"还不具备"精准调度""随用随取"的能力。随着"智慧城市"的规模不断壮大，这一"供水管网"也 就是"全国一体化算力网"的建设迫在眉睫。 10月16日，行业迎来重磅利好消息。当日，工业和信息化部办公厅发布的《关于开展城域"毫秒用算"专项行动的通知》提 出，构建高速大容量、确定低时延、泛在广覆盖的城域网络，在城域内提供毫秒级算力资源网络通达能力。 这是一场算力网络的"速度革命"，专项行动将算力通达时延压缩至毫秒级，将使算力资源如水电般随取随用。"专项行动 将通过技术升级、网络优化、场景落地和资源整合，为全国一体化算力网建设提供坚实的网络基础，加速算力资源的跨区域协 同和行业应用，最终实现'算力即服务'的普惠化目标。"南开大学金融学教授田利辉对《证券日报》记者说道。 为高质量发展注入动能 在数字经济与实体经济深度融合的背景下，算力已成为驱动全球创新的核心引擎。我国正以"东数西算"工程为战略支点， 加速构建全国一体化算力网，通过优化资源配置和强化技术协同 ...

Group 1 - The company Tianyi Co., Ltd. has been selected as one of the successful bidders for the centralized procurement project of China Telecom's embedded micro smart set-top box products for the years 2025-2026, with an expected transaction amount of 45.8 million yuan (including tax) [1]

Group 1 - The company Tianyi Co., Ltd. (300504.SZ) has been selected as one of the successful bidders for China Telecom's (601728) centralized procurement project for embedded micro smart set-top box products for the years 2025-2026 [1] - The expected transaction amount for this project is 45.8 million yuan (including tax) [1]

Core Insights - The global AI toy market is experiencing rapid growth, with major state-owned enterprises entering the sector [1] - The Palace Museum's AI toy, "Fudun," developed in collaboration with China Telecom's Tianyi IoT, represents a new paradigm of "AI + cultural creativity" [1] - The AI toy can interact intelligently, understand emotions, and provide cultural storytelling, enhancing the digital transformation of the cultural industry [1] Company Developments - Tianyi IoT, a subsidiary of China Telecom, is actively promoting the integration of AI and IoT technologies in various industries, particularly in cultural creativity [2] - The AI toy is equipped with a domestically developed RISC-V architecture cloud AI module, ensuring secure and reliable data processing [2] - The Tianyi IoT platform supports over a billion devices for online perception and intelligent control, enhancing the interactive capabilities of the AI toy [2]

Core Insights - The launch of eSIM services by China's three major telecom operators marks a significant breakthrough in domestic communication technology, positioning China among the leaders globally in this field [1] - The adoption of eSIM technology is expected to reshape user habits and the competitive landscape of the telecom market, simplifying processes like number portability and enhancing device security [3][4] Group 1: eSIM Technology Overview - eSIM technology allows for the embedding of SIM functionality directly into device chips, eliminating the need for physical SIM cards, which enhances device design and user experience [1][2] - The global market for eSIM-enabled smartphones is projected to reach approximately 1 billion by the end of this year, with an expected growth to 6.9 billion by 2030, indicating a significant market opportunity for telecom operators [2] Group 2: Competitive Landscape - The strategic decision by Apple to exclusively offer eSIM versions of its iPhone Air globally, without a physical SIM card option for the Chinese market, has pressured Chinese telecom operators to accelerate their eSIM rollout [2] - The introduction of eSIM is anticipated to simplify the process of switching carriers, potentially transforming the market competition that has traditionally focused on package pricing [3] Group 3: User Experience and Market Implications - While many users currently prefer physical SIM cards for perceived security, the convenience of eSIM is expected to shift user preferences over time, similar to the transition from traditional banking to mobile banking [3] - eSIM technology integrates most functionalities into the device chip, enhancing security features such as anti-theft tracking and enabling users to manage multiple accounts easily [3][4]

Core Viewpoint - The launch of eSIM services by China's three major telecom operators marks a significant breakthrough in domestic communication technology, positioning China among the leaders globally in this field [1][2]. Group 1: eSIM Technology Overview - eSIM technology allows for the embedding of SIM cards directly into device chips, eliminating the need for physical SIM cards, which enhances convenience and security [1][2]. - The advantages of eSIM include space-saving, improved security, increased freedom in switching operators, and support for IoT infrastructure, driving mobile devices towards being lighter, smarter, and offering better user experiences [2][3]. - According to GSMA, approximately 1 billion eSIM smartphones are expected to be connected globally by the end of this year, with projections of growth to 6.9 billion by 2030 [2]. Group 2: Market Dynamics and Competition - The strategic decision by Apple to exclusively offer eSIM versions of the iPhone Air globally, without a physical SIM card option for the Chinese market, has pressured Chinese telecom operators to accelerate their eSIM commercialization efforts [2]. - The shift towards eSIM is expected to reshape user habits and the competitive landscape, simplifying the process of switching operators and potentially altering the focus from package pricing to service quality [3][4]. Group 3: Challenges and Considerations - While eSIM offers numerous benefits, concerns remain regarding potential high fees for switching numbers and the implications of losing the exclusivity of relationships with operators, which could affect service quality [4]. - The transition to eSIM is anticipated to face challenges, but ongoing market competition and technological advancements are expected to address these issues over time [4].