Investment Rating - The report maintains a "Strong Buy" rating for China Telecom [2][6] Core Views - In the first half of 2025, China Telecom's operating performance improved steadily, with revenue of 269.4 billion yuan, a year-on-year increase of 1.3%, and a net profit attributable to shareholders of 23 billion yuan, up 5.5% year-on-year [1][5] - The company has significantly enhanced its role in technological innovation, leading to improved shareholder returns [1][5] - The growth in basic business revenue is stable, with a notable increase in users and maintained user value [5][6] Summary by Sections Financial Performance - In H1 2025, China Telecom achieved revenue of 269.4 billion yuan, with service revenue at 249.1 billion yuan, reflecting a year-on-year growth of 1.2% [5] - For Q2 2025, the company reported revenue of 134.9 billion yuan, a 2.6% increase year-on-year, and a net profit of 14.2 billion yuan, up 7.1% from the previous quarter [5] - Mobile business revenue reached 106.6 billion yuan in H1 2025, with a year-on-year growth of 1.3% and a net user increase of 3.24 million in Q2 [5] Strategic Developments - The company is accelerating the development of strategic emerging industries, with significant achievements in cloud, AI, quantum, and satellite technologies [5] - The revenue from the Tianyi Cloud business reached 57.3 billion yuan in H1 2025, growing 3.8% year-on-year [5] - AI-related revenues surged by 89.4% year-on-year, reaching 6.3 billion yuan, with over 160 AI applications developed [5] Cost Management and Shareholder Returns - Operating costs increased by only 0.9% year-on-year, which is lower than the revenue growth rate, leading to a net profit margin increase to 9.2% [5] - The company has prioritized shareholder returns, continuing to distribute interim dividends of 0.1812 yuan per share, an increase of 8.4% year-on-year, with a payout ratio of 72% [6] - Capital expenditures in H1 2025 were 34.2 billion yuan, a decrease of 27.5% year-on-year, with a full-year budget of 83.6 billion yuan [5][6]