What is Growth Strategy and Future Prospects of China Telecom Company?

In 2024, China Telecom strategically reoriented its capital expenditure towards AI infrastructure and research and development. The company allocated CNY36.9 billion (US$5.1 billion) to 'strategic emerging businesses', representing 38.5% of its total capital expenditure of CNY96 billion ($13.3 billion).

China Telecom has developed a sophisticated '1+1+1+M+N' artificial intelligence system. This framework includes foundational elements like an AI Computing Cloud Foundation, a General AI Model Foundation, and a Data Foundation, complemented by numerous internal AI models and extensive Large Industrial Models.

Tianyi Cloud, China Telecom's cloud computing arm, is recognized as the 'National Cloud' and holds the position of the nation's largest cloud service provider by revenue. In 2024, its revenue reached 113.9 billion yuan, with ambitions to evolve into a world-class intelligent cloud platform.

The company has successfully built a fully self-reliant cloud stack, featuring its distributed cloud operating system, CTyunOS. Furthermore, China Telecom has open-sourced its 'Xingchen' (Star-Ocean) large language model, a significant development with trillions of parameters.

China Telecom is actively accelerating the integration of AI and 5G technologies. This synergy enhances network intelligence and expands its 'AI+Cloud+5G' ecosystem, fostering the development of new AI-powered applications and services.

The company has deployed over 160 AI applications across 21 functional domains, including network operations and customer service, achieving substantial cost efficiencies and service quality improvements. They have also developed more than 80 industry-specific large models and over 20 intelligent agent applications.

Operating revenues of RMB529.4 billion, up 3.1%. Net profit of RMB33.0 billion, up 8.4%. Service revenues of RMB482.033 billion, up 3.7%.

Industrial digitalization revenue reached RMB146.6 billion, a 5.5% increase. Tianyi Cloud revenue grew by 17.1% to RMB113.9 billion. AI and intelligent computing services revenue surged by 195.7%.

Capital expenditure on strategic emerging businesses and industrial digitalization expected to rise by 2.5% in 2024, totaling CNY36.9 billion.

Recommended cash distribution of 72% of 2024 profit, with a plan to increase it to over 75% within three years.

Revenue forecast to grow at an average of 3.6% per annum over the next three years.

Overall telecom and pay-TV service revenue in China projected to grow at a CAGR of 0.5% (2024-2029). Mobile data service revenue expected to grow at a five-year CAGR of 5%.

The telecommunications sector in China is highly competitive. While China Mobile holds a dominant position in the mobile market, China Telecom and China Unicom are actively increasing their market share, necessitating continuous innovation and investment.

Regulatory shifts, particularly concerning AI and digital markets, present a significant challenge. While China is piloting foreign investment in value-added telecom services, these changes introduce new compliance complexities.

The rapid advancement of AI and the inherent security risks in hybrid multi-cloud environments pose ongoing challenges. Ensuring data compliance and preventing leakage are critical in complex digital ecosystems.

Continuous heavy investment in infrastructure, such as 5G networks, can strain capital expenditure. However, the company has strategically shifted its investment focus towards AI and other emerging businesses following substantial 5G deployments.

The Chinese government's substantial ownership in major telecom operators means policy changes can directly influence strategic direction and operational flexibility, impacting China Telecom's business strategy.

Despite these obstacles, China Telecom emphasizes technological innovation, aiming for breakthroughs in core technologies to foster self-reliance and drive new economic momentum.