Investment Rating - The report rates the communication industry as "Overweight," indicating that the industry index is expected to outperform the market index by more than 10% over the next six months [45]. Core Insights - The global mobile core network market is projected to grow by 15% year-on-year by 2025, with 5G core networks expected to capture approximately 50% of the market share, marking a turning point in the development of 5G Standalone (SA) technology [20][41]. - The industry is transitioning from network coverage construction to a "capability competition," focusing on end-to-end optimization and commercial monetization, with significant regional performance disparities [41]. - The report highlights the ongoing technological iteration and policy benefits, with new growth drivers emerging from AI, quantum communication, and low-altitude economy sectors [41]. Summary by Sections 1. Communication Industry Market Review - The communication sector has seen a cumulative increase of 4.39% over the past two weeks (February 13-26), outperforming the CSI 300 index by 4.24 percentage points, ranking fifth among 31 primary industries [12][13]. - The sector has recorded a year-to-date increase of 8.55%, surpassing the CSI 300 index by 6.46 percentage points [12]. 2. Industry News - The report mentions several key developments, including the upcoming release of AI glasses by Qianwen at the 2026 Mobile World Congress [17]. - A global report indicates that the 5G SA technology has moved beyond the "declaration" phase into a focus on practical execution [19]. - Dell'Oro Group forecasts a significant growth in the mobile core network market, driven by the expansion of 5G SA networks [20]. - Omdia reports that the deployment of AI infrastructure is impacting the telecommunications industry, leading to shortages in memory chips and copper materials [21]. 3. Company Announcements - Changying Tong announced a 29.53% year-on-year increase in net profit for 2025, driven by enhanced production capabilities [24]. - Guangxun Technology's application for a private placement has been approved by the Shenzhen Stock Exchange [25]. 4. Industry Data Updates - As of December 2025, the mobile phone user base is approximately 1.827 billion, reflecting a year-on-year increase of 2.04% [27]. - The length of optical cable lines reached about 74.99 million kilometers, with a year-on-year growth of 2.89% [30]. - By December 2025, the number of 5G base stations reached 4.838 million, accounting for 37.6% of the total mobile base stations [38]. 5. Communication Sector Weekly Perspective - The report suggests focusing on companies that align with the themes of "technology commercialization, policy catalysis, and earnings certainty," recommending stocks such as China Mobile, China Telecom, ZTE, and others [41][42].

Financial Data and Key Metrics Changes - The company reported an EBITDA growth of 2.4%, driven by operational expense improvements, despite a 1.1% decline in software revenues year-on-year [5][22] - Revenue decreased by 1.1%, translating to a decline of approximately CHF 8 million, primarily due to a drop in Fixed Subscription Revenue [22][25] - Free cash flow generated was close to CHF 14 million, lower than Q2, attributed to interest payments typically made in Q1 and Q3 [25][30] Business Line Data and Key Metrics Changes - Mobile segment saw 20,000 postpaid net additions, supported by B2B growth, while the internet segment experienced a decline of 7,000 net adds due to software trading impacts and UPC migrations [5][18] - Fixed business reported negative net adds of 7,000, attributed to the tail end of UPC migrations and higher churn rates [13][14] - Mobile ARPU increased, benefiting from price increases and improved inflow values, while Fixed ARPU declined due to promotional pressures and accounting impacts from the new mobile portfolio [19][22] Market Data and Key Metrics Changes - The company observed unchanged competitive intensity in the market, with a focus on three growth engines: main brand, flanker brands, and B2B [7][36] - The FMC share increased by 0.5 percentage points compared to the previous quarter, now at 59% [18] Company Strategy and Development Direction - The company reaffirmed its midterm outlook of increasing free cash flows and attractive shareholder returns, despite slower stabilization in the Fixed business [7][36] - New product launches, including Home Security and CHmobile, aim to capture market opportunities and enhance service offerings [8][11] - The company is executing a fast follower strategy in response to competitor activities, particularly during the Black Friday sales period [11][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a slower than expected stabilization of the Fixed business, with expectations for improvement during 2026 [36] - The company is taking countermeasures to address challenges in the Fixed segment, including loyalty initiatives and operational execution improvements [16][48] - Management remains optimistic about the liquidity in Q4 and the potential for growth through new product offerings [36] Other Important Information - The company confirmed its guidance for 2025, including a 2.7% year-on-year growth in dividends per share [6][32] - The termination of the Class A ADS program is expected to conclude on November 13, with a significant percentage of shares already converted [34][35] Q&A Session Summary Question: B2B interest in 5G services and EU vendor replacement risks - Management noted slow movement in B2B interest for 5G services, with no major inflow of new demands [41] - There is no immediate need for action regarding EU vendor replacement risks in Switzerland [41][42] Question: Black Friday sales and Fixed ARPU weakness - Management observed early promotional activities from competitors but noted no significant changes in aggression compared to previous years [46] - The stabilization of Fixed ARPU is delayed, with several actions being taken to improve the situation [48] Question: Brand strategy and fiber rollout focus - The launch of CHmobile is seen as a completion of market coverage rather than a shift in strategy, addressing gaps in the budget segment [58] - Management plans to enhance marketing efforts in fiber rollout areas to capture more customers [60] Question: Expectations for CHmobile and cost savings - No specific market share targets for CHmobile, but the aim is to participate in the growing budget segment [76] - Cost savings are expected from operational efficiencies, AI implementation, and effective marketing spending [77]

Investment Rating - The report maintains an "Overweight" rating for the communication industry, expecting the industry index to outperform the market index by more than 10% in the next six months [2][41]. Core Viewpoints - In the first half of 2025, China's telecommunications business revenue reached CNY 905.5 billion, showing a year-on-year growth of 1% [20]. - The communication industry is experiencing a period of technological iteration and policy dividends, with growth drivers from AI, quantum communication, and low-altitude economy [38]. - The report suggests focusing on companies that align with the themes of "technology commercialization + policy catalysis + performance certainty" [38]. Summary by Sections 1. Industry Market Review - The communication sector index increased by 6.78% from July 11 to July 24, outperforming the CSI 300 index by 3.31 percentage points, ranking 7th among 31 sectors [11]. - Year-to-date, the communication sector has risen by 17.04%, surpassing the CSI 300 index by 11.60 percentage points [11]. 2. Industry News - Dell'Oro report indicates a 6% CAGR for the global 5G core network market from 2024 to 2029, driven by accelerated deployment of 5G SA architecture [16]. - China Mobile's procurement for data center switches includes major players like Huawei and ZTE, with an estimated procurement of approximately 33,300 units [18]. - The Ministry of Industry and Information Technology reported that the number of mobile phone users reached 1.81 billion, with 5G users at 1.118 billion, accounting for 61.8% of mobile users [20]. 3. Company Announcements - Zhongji Xuchuang expects a net profit increase of 53%-87% for the first half of 2025, driven by strong demand for high-end optical modules [22]. - New Yisheng anticipates a net profit growth of 328%-385% for the same period, benefiting from AI-related investments [24]. - StarNet Ruijie forecasts a net profit increase of 43.81%-91.75% due to accelerated orders for data center switch products [26]. 4. Industry Data Updates - As of June 2025, the length of optical cable lines reached approximately 73.77 million kilometers, a year-on-year increase of 9.91% [29]. - The total number of 5G base stations reached 4.549 million, with a net increase of 298,000 from the end of the previous year [34]. 5. Weekly Perspective on the Communication Sector - The report emphasizes the stable operation of the communication industry, with ongoing growth in telecommunications business volume and new infrastructure construction [38]. - It recommends focusing on companies such as China Telecom, FiberHome, and Changfei Fiber for potential investment opportunities [39].