Three Major Operators Bolster AI Token Initiatives; Mobile Maintains Buy Rating

Overview

This is Nomura’s summary of discussions between the management teams of China Mobile and China Telecom at the Nomura Asia Investors Forum (NIFA 2026). The core insights center on these two operators’ latest developments in AI token packages, cloud and computing businesses, as well as key operational metrics such as capital expenditure, ARPU, dividends, and the impact of value‑added tax (VAT). Overall, telecom operators are positioning AI tokens and computing/cloud services as new engines to counter slowing traditional‑business growth and stabilize ARPU, while capital spending remains on a downward trajectory but is structurally tilting toward computing and AI. Nomura maintains a Buy rating on China Mobile and a Neutral rating on China Telecom.

Core views

AI token packages: China Mobile has piloted AI token plans in select provinces including Beijing, Jiangsu, Guangdong, and Shanghai. Management attributes its competitive edge in this market to robust network infrastructure, its state‑owned status, and nationwide distribution channels. China Telecom’s token packages have been rolled out nationwide, integrating large language models from Zhipu, MiniMax, and DeepSeek; management believes these packages can simultaneously boost both AI cloud revenue and bandwidth utilization. The report also compiles a comparative overview of token packages offered by the three major operators (China Mobile, China Telecom, and China Unicom): China Telecom launched a nationwide commercial offering on May 17, providing six tiers tailored to developers, enterprises, individuals, and families; China Mobile introduced a Lite plan in Guangdong at CNY40 for 30,000 calls per month, a CNY1-for-400,000-tokens option in Shanghai, and a monthly plan at CNY24.99; China Unicom offers monthly packages in Sichuan, Shanghai, Hubei, and other regions, ranging from 6 million to 18 million tokens, alongside bundled plans priced between CNY7.5 and CNY359. Nomura views operators’ full‑stack resources across cloud, networks, edge nodes, and IDCs as their key advantage in the AI token market, with token packages expected to stabilize declining ARPU trends and serve as new growth drivers for all three carriers. Cloud and computing: China Mobile’s cloud revenue is projected to continue growing steadily in 2026, partly driven by demand for AI and computing power. China Telecom’s Q1 2026 cloud revenue demonstrated strong momentum, fueled by AI applications and computing needs, and this trend may persist through fiscal year 2026. China Telecom’s management also noted an improving competitive landscape in its core business, as rivals phase out low‑value plans. Capital expenditure and depreciation: China Mobile’s 2026 capital expenditure guidance is CNY136.6 billion, down 9.5% year over year, with CNY37.8 billion earmarked for the computing network (including AIDC and cloud infrastructure) and CNY8.9 billion for the AI network (covering intelligent agents, big data, and large‑model platforms). Management anticipates further declines in capital spending next year, with a rising share devoted to computing and AI. Fixed‑line broadband capital expenditure stood at CNY8.6 billion in 2025 and is projected to fall to CNY5.2 billion in 2026; management believes the peak of investment in broadband and mobile networks has passed. China Telecom’s fiscal 2026 capital expenditure guidance is CNY73 billion, down 9% year over year, with priorities centered on computing power and IDCs. Management expects the capital‑to‑revenue ratio to decline gradually over the next two years, while depreciation will see a slight uptick in 2026 before easing in the following year. ARPU, dividends, and VAT: China Telecom aims to stabilize ARPU in 2026, with next year’s performance contingent on the growth of the token economy. VAT exerts a negative impact on profitability and is difficult to pass on to consumers, though management anticipates a deceleration in its quarter‑over‑quarter decline in the coming quarters. For China Mobile, management expects the VAT effect to persist without significant deferral, while maintaining a steadily increasing dividend payout ratio. As part of the next five‑year plan, China Mobile’s leadership envisions steady growth in communications service revenue, with computing and AI services each doubling by 2030 (currently around CNY90 billion each in 2025). Satellite communications: China Telecom provides SMS services via geostationary satellites and collaborates with several firms on low‑orbit satellite development. These satellite services are available not only in China but also in select Southeast Asian countries.

Analysis framework

The report itself is a set of meeting minutes, systematically organizing management statements from the forum by business segment (AI tokens, cloud and computing, capital expenditure and depreciation, ARPU and dividends, VAT, satellite communications) and supplementing them with a cross‑operator comparison table of token packages. In terms of ratings and target prices, Nomura employs discounted cash flow (DCF) as the primary valuation method for all three companies, using multiples such as P/E, P/B, EV/EBITDA, and dividend yield to validate the reasonableness of its valuations. For example, China Mobile’s target price of HK$96.00 corresponds to a projected P/E ratio of 13.7x, a P/B ratio of 1.3x, an EV/EBITDA multiple of 3.7x, and a dividend yield of 5.5%, with DCF assumptions of WACC at 9.3%, a market risk premium of 7%, and a terminal growth rate of 0%. China Telecom’s target price of HK$5.50 aligns with a P/E ratio of 15.2x, a P/B ratio of 1.0x, an EV/EBITDA multiple of 2.9x, and a dividend yield of 5%, with a WACC of 8.8%. Logically, Nomura treats operators’ full‑stack capabilities in cloud, networks, edge nodes, and IDCs as a competitive barrier to entry into the AI token market, then assesses whether token packages can stabilize ARPU and drive cloud and bandwidth revenue, thereby identifying new growth momentum amid slowing traditional‑business expansion.

Methodology notes

• Valuation MethodDCF Discounted Cash Flow

  Using DCF to determine the target price and setting WACC and terminal growth rate

  DCF discounts a company’s future cash flows back to today at a specified discount rate (WACC) to estimate intrinsic value. For all three operators, the report assumes a terminal growth rate of 0% and a WACC between 8.6% and 9.3%; the higher the WACC, the more aggressively cash flows are discounted, resulting in lower valuations—a key factor behind differences in target prices.

• Valuation MethodEV/EBITDA valuation

  Cross‑validating valuations using multiple ratios such as P/E, P/B, and EV/EBITDA

  In addition to DCF, the report presents P/E, P/B, and EV/EBITDA multiples (e.g., China Mobile’s P/E of 13.7x, EV/EBITDA of 3.7x). EV/EBITDA strips out differences in capital structure and depreciation, making it particularly useful for heavy‑asset, highly depreciated industries like telecommunications. Examining multiple metrics together helps determine whether the target price is reasonable.

• Valuation MethodDividend Yield Approach

  Focusing on dividend yield and payout ratio as valuation and return benchmarks

  The report projects dividend yields of approximately 5%–6.1% for each operator, emphasizing that China Mobile’s payout ratio is steadily rising. For mature, cash‑flow‑stable operators, dividend yield serves as a common anchor for gauging investment returns and valuation attractiveness; marginal changes in dividend policy often directly influence stock prices.

• Competition and Strategy FrameworkMoat / competitive advantage

  Operators’ ‘full‑stack resources’ in cloud, networks, edge nodes, and IDCs constitute a competitive barrier

  The report identifies operators’ key advantage over pure AI model companies and cloud service providers as their possession of integrated cloud, network, edge node, and IDC capabilities. This framing, through the lens of ‘moat/competitive advantage,’ explains why operators confidently enter the AI token market and position it as a new growth driver.

• Industry/Industrial Analysis FrameworkVolume-price decomposition

  Using ARPU (average revenue per user) as the core metric to analyze revenue ‘price,’ with token packages driving both volume and unit price

  ARPU functions as the ‘unit price’ in a telecom operator’s business. The report examines whether token packages can stabilize ARPU’s downward trend, directly linking next year’s ARPU growth to the expansion of the ‘token economy.’ This approach essentially uses volume‑price decomposition to identify the sources of revenue growth.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China Mobile (00941.HK)

  The sole recipient of a Buy rating, benefiting from growth driven by AI tokens, mobile cloud, and computing demand, as well as a steadily increasing dividend payout ratio

  Strengths

  Robust network infrastructure, state‑owned status, nationwide distribution channels; mobile cloud shows continued steady growth; computing and AI services are targeted to double by 2030; dividend payout ratio is rising steadily

  Weaknesses

  Persistent VAT impact; capital expenditure remains on a downward trajectory

  Comparison

  Among the three, it is the only one receiving a Buy rating, with a target price of HK$96.00 corresponding to a 2026 P/E ratio of 13.7x—its valuation multiples fall between those of China Telecom (15.2x) and China Unicom (11x)

  Risks

  Intensified competition could erode EBITDA margins and market share; 5G capital expenditure exceeding expectations or deployment proceeding faster than anticipated; potential asymmetric regulatory risks

• China Telecom (00728.HK)

  Assigned a Neutral rating; the nationwide rollout of AI token packages is expected to boost both AI cloud revenue and bandwidth utilization, with cloud operations showing strong momentum in Q1 2026

  Strengths

  Token packages have been deployed nationwide, with access to models from Zhipu, MiniMax, and DeepSeek; the competitive landscape in its core business has improved as rivals shed low‑value plans; it provides geostationary satellite SMS services and is developing low‑orbit satellite capabilities, serving China and select Southeast Asian countries

  Weaknesses

  VAT is difficult to pass on, impacting profitability; its 2026 objective is merely to stabilize ARPU, with next year’s growth contingent on the token economy

  Comparison

  Like China Mobile, it falls outside the scope of the Buy rating; its target price is HK$5.50, with a dividend yield of around 5%

  Risks

  Irrational pricing and handset subsidy competition; fierce rivalry with China Mobile in the broadband space; slower-than-expected progress in new business initiatives

• China Unicom (00762.HK)

  Given a Neutral rating; mentioned alongside the other two in the comparison of operator token packages, having also launched individual and bundled token plans

  Strengths

  Introduced monthly packages in Sichuan, Shanghai, Hubei, and other regions, offering 6 million, 12 million, or 18 million tokens, along with bundled plans priced between CNY7.5 and CNY359

  Comparison

  Like China Telecom, it received a Neutral rating; its current price is HK$7.46

Key data

• China Mobile’s 2026 Capital Expenditure GuidanceCNY136.6 billion, down 9.5% year over yearOf this, CNY37.8 billion is allocated to the computing network (including AIDC and cloud infrastructure), and CNY8.9 billion to the AI network; overall spending is declining, but the share devoted to computing and AI is increasing.
• China Mobile’s Fixed‑Line Broadband Capital ExpenditureCNY8.6 billion in 2025 → projected CNY5.2 billion in 2026Management believes the peak of investment in broadband and mobile networks has passed.
• China Mobile’s Computing and AI Service ScaleApproximately CNY90 billion each in 2025, with targets to double by 2030Management’s goal in the next five‑year plan is steady growth in communications service revenue.
• China Telecom’s Fiscal 2026 Capital Expenditure GuidanceCNY73 billion, down 9% year over yearInvestments are focused on computing power and IDCs; depreciation will see a slight increase in 2026 before easing in the following year.
• China Mobile’s ValuationTarget price HK$96.00 (Buy), current HK$84.75Corresponds to a projected P/E ratio of 13.7x, P/B of 1.3x, EV/EBITDA of 3.7x, and a dividend yield of 5.5%; DCF assumes WACC at 9.3%.
• China Telecom’s ValuationTarget price HK$5.50 (Neutral), current HK$5.02Corresponds to a projected P/E ratio of 15.2x, P/B of 1.0x, EV/EBITDA of 2.9x, and a dividend yield of 5%; DCF assumes WACC at 8.8%.

Impact & implications

The report concludes that AI token packages and computing/cloud businesses are becoming new growth engines for telecom operators amid slowing traditional‑business expansion, with potential to stabilize ARPU’s downtrend. Operators’ full‑stack capabilities in cloud, networks, edge nodes, and IDCs represent their key competitive advantage in entering the AI token market. While overall capital expenditure is declining, the shift toward computing and AI signals a structural realignment of investment priorities. China Mobile’s steady rise in the dividend payout ratio provides support for income‑oriented investors. VAT continues to weigh on profitability and remains difficult to pass on, but its quarter‑over‑quarter impact may be moderating. Based on these assessments, Nomura maintains a Buy rating on China Mobile and a Neutral rating on China Telecom.

Risks

• Irrational pricing and handset subsidy competition
• Fierce rivalry with China Mobile in the broadband space
• Slower-than-expected progress in new business initiatives
• Intensified competition could erode China Mobile’s EBITDA margins and market share
• 5G capital expenditure exceeding expectations or deployment proceeding faster than anticipated
• Potential asymmetric regulatory risks
• Persistent VAT impact on profitability, difficult to pass on to consumers

What to watch

• The growth of the AI token economy (directly affecting whether China Telecom can achieve ARPU growth next year)
• Whether the momentum in cloud revenue, driven by AI applications and computing demand, will carry through to fiscal year 2026
• The trajectory of capital expenditure and its structural shift toward computing, AI, and IDCs
• Whether the quarter‑over‑quarter decline in VAT impact moderates as management expects
• Progress and geographic coverage of satellite communication services (geostationary/low‑orbit)