Core Viewpoint - China Telecom is fully embracing artificial intelligence (AI) and upgrading its corporate strategy from "cloud transformation" to "intelligent cloud transformation" to enhance digital transformation across various industries [3][4]. Group 1: AI Integration and Services - China Telecom aims to create an integrated intelligent cloud service system combining computing power, platforms, data, models, and applications to empower digital transformation in various sectors [3]. - The company is enhancing its AI safety governance capabilities by developing a comprehensive AI dynamic protection system [3]. - The "Xingchen Textile Intelligent Body" showcased at WAIC 2025 can intelligently adjust process parameters and inspect fabric quality during production, achieving a 99% on-time delivery rate [4][6]. Group 2: Performance Improvements - China Telecom has improved the efficiency of its reasoning engine and matched computing power with minimal latency through integrated computing and networking services, resulting in over a 40% increase in computing resource utilization and a 30% reduction in average reasoning latency [4]. - The company plans to launch terminal-as-a-service and intelligent agent-as-a-service systems to further promote AI application and empower industrial intelligent transformation [4]. Group 3: Industry Applications and Models - China Telecom has developed over 80 industry-specific large models and more than 20 intelligent agent applications targeting sectors such as industry, emergency response, and education [5]. - The company emphasizes the need for an end-to-end security assurance system that encompasses infrastructure, data, models, and applications to address the diverse safety risks associated with AI [5]. Group 4: Security Measures - To tackle security challenges in the AI era, China Telecom proposes a four-in-one security model comprising early warning, assessment, protection, and operation [5]. - The "Jianwei" security model has achieved a 98% accuracy rate in fault alert identification, and the foundational security measures for large models will be open-sourced domestically to enhance resistance against AI attacks [5].

Core Insights - The 2025 World Artificial Intelligence Conference showcased the importance of computing power as the foundation of artificial intelligence, with various domestic chip and server suppliers participating to highlight the localization of computing power [1][2] - Major hardware manufacturers like Huawei and Sugon presented their latest computing solutions, including Huawei's "Ascend 384 Super Node," which is the largest in the industry, and Sugon's "Large-Scale Intelligent Computing Cluster" aimed at addressing key industry bottlenecks [1][2] - The event featured over 20 AI chip companies, with significant advancements in integrated training and inference machines, as well as cloud solutions that enhance the accessibility and efficiency of AI applications [2] Group 1 - Computing power is recognized as the cornerstone of AI, with a focus on domestic chip and server suppliers at the conference [1] - Huawei unveiled the "Ascend 384 Super Node," which consists of 12 computing cabinets and 4 bus cabinets, representing the largest scale in the industry [1] - Sugon introduced its "Large-Scale Intelligent Computing Cluster," which aims to tackle high computing costs, insufficient data efficiency, and challenges in practical application [1] Group 2 - The exhibition featured a strong presence of AI chip companies, including Moore Threads and others, showcasing their latest innovations [2] - The "Integrated Training and Inference Machine" was a highlight, with significant improvements in computing and data transmission efficiency [2] - Baidu demonstrated its self-developed 30,000-card cluster and the "百舸 AI Heterogeneous Computing Platform," promoting the widespread adoption of domestic computing power [2]

Investment Rating - The report maintains an "Overweight" rating for the telecommunications sector [6] Core Insights - The global telecommunications industry is experiencing steady demand growth, driven by emerging markets and increasing ARPU in regions like North America. AI is expected to bring transformative opportunities to the industry by enhancing operational efficiency and customer insights [1][4][12] Summary by Sections Global Telecommunications Development - The global telecommunications industry achieved a total revenue of 8.8 trillion RMB in 2024, with a year-on-year growth of 3.0%. The net profit attributable to shareholders was 834.2 billion RMB, reflecting a decline of 8.4% [12] - Revenue by region includes: Europe (2.2 trillion RMB, +4.9%), North America (2.4 trillion RMB, +2.7%), China (1.95 trillion RMB, +3.4%), Asia-Pacific (1.6 trillion RMB, -0.2%), Africa and Middle East (0.7 trillion RMB, +4.9%) [12] Market Observations - In North America and Europe, leading telecom operators are seeing steady user growth, while mobile penetration rates are high, resulting in low single-digit growth rates. In contrast, regions like India and Africa are experiencing rapid growth [2][17] - Fiber business is a significant growth driver, with AT&T's fiber revenue growing by 19% year-on-year in Q1 2025 [2] Profitability Trends - Profitability varies across regions, with Middle Eastern and North American operators showing strong profitability. The average ROE for major global telecom operators in 2024 was 15.66% [3][17] - Domestic operators in China have slightly lower ROE compared to the global average, but as 5G investments enter the recovery phase, profitability is expected to improve [3][17] AI Impact on the Industry - AI is transforming the telecommunications sector by reducing operational costs and enhancing customer service capabilities. For instance, Deutsche Telekom uses AI to monitor network performance and improve fiber deployment efficiency [4][22] - Companies like T-Mobile are leveraging AI to predict customer needs and enhance service offerings, improving customer satisfaction [4][22] Domestic Telecommunications Dynamics - In China, the telecommunications business revenue for the first five months of 2025 reached 748.8 billion RMB, a year-on-year increase of 1.4%. The average mobile internet access traffic per user reached a record high of 21.3 GB/month, up 14.9% year-on-year [5][57] - The three major operators in China are expanding their intelligent computing capabilities, with China Mobile achieving a computing power scale of 43 EFLOPS [5] Key Recommendations - The report recommends focusing on major Chinese telecom operators: China Mobile, China Telecom, and China Unicom, all rated as "Buy" or "Overweight" [9]

Core Insights - China Telecom reported a revenue of 529.4 billion yuan for 2024, representing a year-on-year growth of 3.1% [1] - The company achieved a net profit of 33 billion yuan, up 8.4% year-on-year, with an EBITDA of 140.8 billion yuan, reflecting a growth of 2.9% [1] - The strategic focus on AI and quantum technology is highlighted as a key area for future growth [4][5] Revenue Performance - Operating revenue reached 529.4 billion yuan, with service revenue at 482 billion yuan, marking a growth of 3.7% [1] - Mobile communication service revenue was 202.5 billion yuan, up 3.5%, while mobile value-added and application revenue grew by 16.1% [3] - The digital industry revenue increased by 5.5%, contributing to 30.4% of service revenue [3] Emerging Business Growth - Tianyi Cloud revenue reached 113.9 billion yuan, growing by 17.1% [3] - Intelligent revenue surged by 195.7% to 8.9 billion yuan, indicating strong potential in AI business [3] - Security revenue increased by 17.2% to 16.2 billion yuan, and video network revenue grew by 40.1% [3] Capital Expenditure and Cash Flow - Capital expenditure for 2024 was 93.5 billion yuan, down 5.4% year-on-year [2] - Free cash flow reached 22.2 billion yuan, reflecting a significant increase of 70.7% [2][8] - The company plans to gradually increase the cash dividend payout ratio to over 75% within three years [2][8] Strategic Focus on AI and Quantum Technology - The company has established a comprehensive AI strategy, launching over 50 industry models and serving more than 10,000 clients [4] - In quantum technology, China Telecom is advancing quantum security infrastructure and has developed a new password system [5] - The intelligent computing resources reached 62 EFLOPS, enhancing competitiveness in the intelligent computing sector [6] Infrastructure Development - The company is enhancing digital infrastructure, with 5G base stations totaling 1.375 million, achieving nationwide coverage [7] - The deployment of 10G PON ports reached 9.29 million, with urban residential coverage exceeding 95% [7] - The company is committed to green development, reducing carbon emissions by 19.2% year-on-year [7][8]