2025-12-02 02:08Summary of China Telcos Conference Call Industry Overview - Industry: Telecommunications in China - Key Players: China Mobile, China Unicom, China Telecom Key Metrics Reviewed 1. Capex Spending: - Capital expenditures (capex) for China telcos are expected to decrease in 2025 due to reduced spending on traditional telecom networks, particularly 5G. However, there is a shift towards increased investment in AI and computing infrastructure to meet rising demand [2][3][6] - China Telecom's capex is guided at Rmb84 billion for 2025, down from Rmb94 billion in 2024, while China Unicom's capex is expected to be Rmb55 billion, down from Rmb61 billion [3] 2. Dividend Payout: - The dividend payout ratio for China telcos has increased to 60%-72% in 1H25, compared to 50%-67% in 2022. Management anticipates a gradual increase in payout ratios moving forward [6][9] 3. Subscriber Growth: - Total subscriber growth has been muted, with 5G penetration increasing from 59% in 1Q to 63% in 3Q25. The method of calculating 5G subscribers was revised, impacting the reported figures [12][15] 4. Cash Conversion Cycle (CCC) Days: - Average accounts receivable days increased from 34 days in 2018 to 47 days in 2024, indicating a focus on cash payments. Inventory days decreased to 8 days in 2024, while accounts payable days rose to 392 days [16] 5. Free Cash Flow (FCF): - The average FCF margin improved from 8% in 2018 to 11% in 2024, driven by higher operating cash flow and disciplined capex focused on AI infrastructure [24][26] 6. Average Revenue Per User (ARPU): - Mobile ARPU decreased from Rmb48.9 in 1H21 to Rmb47.9 in 1H25, while household ARPU increased from Rmb44.0 in 2018 to Rmb46.4 in 2024 [27][30] 7. EBITDA Margin: - The average EBITDA margin declined from 31% in 2018 to 28% in 2024, but there was a recovery in 1H25 due to disciplined operating expense management [33][35] 8. New Business Contributions: - Revenue from new business segments, including industrial internet and digitalization, rose to 26% in 1H25 from 19% in 2021, indicating a key growth driver supported by AI deployment [36][39] 9. IDC Business: - The number of IDC cabinets increased from 363k in 2022 to 400k in 2023, with a focus on upgrading to high-power IDC cabinets to enhance AI computing capabilities [40] 10. Valuation: - The average EV/EBITDA for China telcos ranges from 2.6x to 4.4x, with expectations of upside due to rising AI demand and comprehensive service offerings [43] Additional Insights - Investment Outlook: Despite traditional revenue growth challenges, China telcos are positioned as beneficiaries of AI and cloud growth, with a focus on value-added services [1] - Management Guidance: Companies are optimistic about future growth driven by new business segments and improved operational efficiencies [6][9][36]