2025-10-19 15:58Summary 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].