China telecom operators launch AI token packages, potentially opening valuation re-rating room

Overview

This report is UBS's China telecommunications industry First Read published on 2026-05-18, focusing on the progress and investment implications of AI token packages launched by China's three major telecom operators. The report notes that China Telecom, China Unicom, and China Mobile have recently launched token packages that provide access to multiple mainstream large models, targeting both individuals and enterprises, with China Telecom leading on nationwide rollout.

Core views

The core view is that token packages may become an important step toward standardizing AI consumption in China and further drive token usage growth. With broad customer bases and distribution networks, telecom operators have the ability to extend AI services from hyperscale cloud providers and large enterprises to SMEs and individual users. If token consumption gradually becomes a subscription model similar to mobile data plans, telecom operators' business stickiness and growth profile may improve, creating a valuation re-rating opportunity.

Analysis framework

The report adopts an industry event interpretation and inter-company progress comparison approach, focusing on differences among China Telecom, China Unicom, and China Mobile in token package launch methods, coverage, and commercialization stage, and analyzing the business in relation to operators' traditional telecom business growth, capex, dividend yield, and valuation re-rating logic.

Methodology notes

• industry event analysisFirst Read event commentary

  token package commercialization

  By tracking the token packages recently launched by the three major operators, the report assesses whether AI services may move from project-based or cloud-platform services to standardized, packaged, and subscription-based offerings.

• relative progress comparisonoperator horizontal comparison

  difference in launch pace among CT, CU, and CM

  The report argues that China Telecom is ahead in nationwide token packages, while China Unicom and China Mobile are still mainly advancing through regional pilots and provincial cloud platforms.

• valuation and risk frameworkdividend yield and re-rating logic

  reacceleration in growth and AI infrastructure positioning

  The report views token packages as a potential new growth driver; if they lead to reacceleration in revenue and net profit, the market may assign telecom operators AI infrastructure characteristics, while the roughly 5-6% 2026E dividend yield of H-shares provides some downside support.

Asset mapping & comparison

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

• China Telecom

  Core related company; launched token packages and is viewed as the leading roll-out operator

  Strengths

  Strong nationwide customer coverage and channel network; the report believes its nationwide token package rollout is relatively fast.

  Weaknesses

  Organic growth in traditional telecom business is limited, and it is also affected by factors such as rising VAT.

  Comparison

  Compared with China Unicom and China Mobile, China Telecom appears to be ahead in nationwide token package supply.

  Risks

  If token business growth is slower than expected, capex returns are insufficient, or price declines accelerate, the re-rating thesis may come under pressure.

• China Unicom

  Core related company; participating in token package pilots

  Strengths

  Can leverage operator channels and cloud platforms to serve enterprise and regional customers.

  Weaknesses

  The report says it is still mainly advancing through regional pilots and provincial cloud platforms, with a lower degree of scale than China Telecom.

  Comparison

  Compared with China Telecom, its nationwide product progress is relatively lagging.

  Risks

  Regional pilots may not scale nationwide as expected, or competition in the traditional business may intensify.

• China Mobile

  Core related company; participating in token package pilots

  Strengths

  Has a huge customer base and distribution network, with potential to broaden AI service reach.

  Weaknesses

  The report says it is still mainly advancing through regional pilots and provincial cloud platforms.

  Comparison

  Compared with China Telecom, the nationwide token package rollout pace is relatively slower.

  Risks

  AI-driven capex may be higher than expected but returns may be insufficient, or government-led price cuts may affect data and token pricing.

Key data

• Report date2026-05-18Published by UBS Global Research.
• Covered industryChina telecommunications industryThe report is classified as industry research and the asset class is equities.
• Companies involvedChina Telecom, China Unicom, China MobileAll three companies have launched or piloted AI token packages.
• China Telecom progressLeads in nationwide token package rolloutThe report says CT appears to be the most advanced nationwide token package launcher among the three major operators.
• China Unicom and China Mobile progressStill mainly focused on regional pilots and provincial cloud platformsThe report says CU and CM product rollout is still concentrated mainly on regional or provincial platforms.
• 2026E dividend yieldAbout 5-6%Refers to the implied 2026E dividend yield of operators' H-shares, which the report believes can provide downside support for share prices.

Impact & implications

The investment implication is that token packages may transform AI usage from fragmented large-model calls into a more standardized operator subscription service, expanding the AI user base and increasing token consumption. If scaled-up business drives revenue and profit growth, telecom operators may partly shift in investors' eyes from traditional high-dividend defensive assets to assets with AI infrastructure characteristics, thereby gaining a valuation re-rating.

Risks

• Intensifying competition in the traditional telecom business may revive investor concerns about the return-on-equity decline and valuation compression seen in the 4G era.
• AI, competition, government requirements, or customer data needs may drive capex above expectations, while industry digitalization returns fall short of expectations.
• Further government-driven price cuts may accelerate declines in data or token prices, or reduce enterprise telecom service prices.
• If token business growth is below expectations, the new growth driver and valuation re-rating thesis may weaken.

What to watch

• Whether China Telecom's token packages can continue to expand customers and usage nationwide.
• Whether China Unicom's and China Mobile's regional pilots can evolve into more standardized, nationwide products.
• Whether token packages can drive a reacceleration in operators' revenue and net profit.
• The scale of AI-related capex and its return on investment.
• Government policy direction on data, tokens, and enterprise communication prices.
• Whether telecom operators' H-share dividend yields continue to provide defensive support for share prices.