China Mobile (Minutes): Maintains guidance of 'steady revenue growth, good profit growth' unchanged

The following are the minutes of China Mobile's 2025 first-half financial report conference call organized by Dolphin Research. For financial report interpretation, please refer to "China Mobile: Profitability Online, 'Cash Cow' Status Unchanged"

I.$CHINA MOBILE(00941.HK) Review of Core Financial Information

1. Profitability: Net profit reached 84.2 billion yuan, a year-on-year increase of 5.0%, maintaining the leading level of global top-tier operators in terms of profitability. EBITDA reached 186 billion yuan, a year-on-year increase of 2.0%. The EBITDA margin was 34.2%, an increase of 0.9 percentage points year-on-year.

2. Cash Flow: Cash flow remained healthy and abundant, with net cash inflow from operating activities at 83.8 billion yuan, and free cash flow reaching 25.5 billion yuan.

3. Future Outlook: The company's capital structure remains stable. In the second half of the year, efforts will focus on enhancing quality and efficiency, operational management, and risk control, continuously strengthening value creation capabilities to ensure high-quality, sustainable development.

II.$China Mobile(600941.SH) Detailed Content of the Financial Report Conference Call

2.1 Key Information from Executive Statements

1. Development Quality:

a. Significant achievements in expanding young customers, business customers, and international roaming segments.

b. Customer Scale and Value: The total number of mobile customers exceeded 1 billion. The value of mid-to-high-end customers remained stable with high retention rates.

c. Product Innovation: The total number of products with over 100 million customers reached 17. AI+DICT signed projects reached 1,485, and smart city signed projects nearly 1,300.

2. Results of the "Three Major Plans":

a. Capital Expenditure: Capital expenditure in the first half of the year was 58.4 billion yuan.

b. New Information Infrastructure:

- 5G Network: Over 2.59 million 5G base stations have been opened, achieving continuous coverage in regions above the county level nationwide, and deploying RedCap (lightweight 5G).

- Gigabit Broadband: Covered over 500 million households.

- Computing Power Network: Total computing power scale reached 613 billion FLOPS, with self-built computing power at 333 billion FLOPS.

- Capability Platform: Over 1,300 capabilities were launched, with a total of over 800 billion calls in the first half of the year.

c. New Information Service System: Released the "Three Billion Service Commitment," launched 10 specific service commitments, and opened a service supervision platform. The monthly active customers of the China Mobile APP exceeded 270 million, a year-on-year increase of nearly 50%.

3. Technological Innovation: AI+ Action Plan

a. Established China Mobile Jiutian Artificial Intelligence Technology Company and Jiutian Artificial Intelligence Research Institute.

b. Cutting-edge Technology: Built the world's first small-scale 6G test network; led the number of 5G-A and 6G international standard projects among global operators.

c. Progress in Large Models: Completed pilot experiments of trillion-parameter large models and launched embodied intelligent models. The Jiutian general large model matrix was newly upgraded, with over 50 industry large models deployed.

d. Ecosystem Construction: Released the "AI Renewal Community," aggregating the power of central enterprises and the industrial chain to build a national AI open-source platform.

e. Application Results: The "Lingxi" intelligent agent had over 60 million monthly active customers, with AI direct revenue achieving rapid growth.

4. Shareholder Returns:

a. Interim Dividend: Decided to distribute an interim dividend of HKD 2.75 per share, a year-on-year increase of 5.8%.

b. Full-year Dividend Commitment: The proportion of profits distributed in cash for the full year of 2025 will be further increased based on the previous year.

5. Opportunities and Challenges: The company is at a critical stage of "strategic opportunity period, reform breakthrough period, and momentum conversion period" intertwined.

a. Challenges and Pressures: Traditional communication demand is becoming saturated, market competition is intensifying, and new and old growth drivers need to be accelerated.

b. Broad Opportunities: AI development is advancing rapidly, with technology evolution and industrial implementation accelerating simultaneously, reshaping society. New development concepts such as "carbon-silicon integration" bring broad prospects to the industry.

6. Specific Performance in the Four Major Markets (CHBN)

a. Personal Market (C): Revenue in the first half of the year was 244.7 billion yuan, remaining stable. The mobile customer base reached 1.005 billion, with a net increase of 46.91 million 5G network customers. The mobile ARPU value reached 49.5 yuan, maintaining industry leadership. The "Lingxi" intelligent agent's smart service calls in personal scenarios exceeded 1 billion times.

b. Home Market (H): Revenue in the first half of the year was 75 billion yuan, a year-on-year increase of 7.4%. Home broadband customers reached 284 million, with a net increase of 6.23 million; comprehensive ARPU value increased by 2.3% year-on-year.

Gigabit broadband customer growth was 19.4%, and FTTR customer growth achieved an explosive increase of 264%.

c. Government and Enterprise Market (B): Revenue in the first half of the year was 118.2 billion yuan, a year-on-year increase of 5.6%. Government and enterprise customers reached 34.84 million, with a net increase of 2.25 million. Mobile cloud revenue grew by 11.3%, and 5G private network revenue grew by 57.8%. The number of signed AI industry model projects reached 130, with market influence continuing to rise.

d. Emerging Market (N): Revenue in the first half of the year was 29 billion yuan, a year-on-year increase of 9.3%. International business revenue reached 14 billion yuan, growing by 18.4%. The scale of industrial chain financial business grew by 24.5%, and equity investment income reached 7.2 billion yuan, growing by 17%.

7. Operational Highlights:

a. Strong growth in key segments. Business customer income grew by 15.4%, and income in specific segments of the personal market grew by as much as 54.2%.

b. New growth curves were successfully activated. Fixed connection income grew by 8.8%, and internet and information service income grew by 23.9%.

c. Digital operation results were prominent. Digital connections of home devices grew by 17.1%, and the customer activity rate of the company's equity platform increased by 16.9 percentage points.

2.2 Q&A

Q: The company's communication service revenue only achieved slight growth in the first half of the year. How does management evaluate the overall operating performance in the first half of the year? What are the company's outlook and confidence for full-year and medium- to long-term performance growth?

A: In the first half of the year, despite a complex and volatile environment, the company continued to make steady progress. Our core performance remained stable, with net profit maintaining a 5% growth; the results of digital transformation were significant, with revenue accounting for more than one-third; the company's value was also recognized by the capital market.

Of course, we are also clearly aware that multiple factors, such as the saturation of traditional communication demand, intensified market competition, and macroeconomic transmission, have led to a slowdown in the growth rate of our communication service revenue. Meanwhile, new growth drivers represented by AI are still in the cultivation period, and our proactive pursuit of high-quality development and abandonment of inefficient businesses have also had a certain impact on revenue scale in the short term.

Despite the heavy pressure, we remain full of confidence in the future. This confidence comes from the favorable macroeconomic environment, the company's solid strategy and execution, and most importantly, the historic development opportunities that AI and the digital economy bring to our industry.

Therefore, for the full year and the next two to three years, we maintain the target guidance of "steady revenue growth and good profit growth" unchanged. We will explore new demands through deeper market innovation, seize opportunities amid challenges, and ensure high-quality, sustainable development of the company.

Q: The capital expenditure in the first half of the year accounted for less than 40% of the annual plan. In which areas will the nearly 100 billion capital expenditure in the second half of the year be mainly invested? The growth rate of the mobile cloud business in the first half of the year slowed compared to the past. Is this related to the investment pace of capital expenditure? How does management view the future growth trend of mobile cloud and AI businesses, and what specific revenue growth opportunities are there?

A: The execution progress in the first half of the year is in line with industry patterns. We usually conduct project demonstration and reserve in the first half of the year and accelerate construction and implementation in the second half. Therefore, we are confident in controlling the annual capital expenditure within the budget of 151.2 billion yuan.

As for the focus of investment in the second half of the year, our investment focus has clearly shifted from "connection" to "computing power," especially in the AI-centric computing power field. Last year, our AI investment exceeded 10 billion yuan, and this year we will further increase investment. This is the company's core strategy, aiming to create a new growth curve and build core competitiveness for future development.

Q: The company has ranked among the top in the central enterprise assessment for four consecutive years, with remarkable achievements. In the face of new requirements from the State-owned Assets Supervision and Administration Commission to improve the quality of listed companies and strengthen market value management, what specific measures will the company take to maintain its leading position and further enhance company value?

A: Market value management is crucial, and we have always attached great importance to it. We have achieved excellent results in the market value management assessment of the State-owned Assets Supervision and Administration Commission, thanks to our comprehensive strength in market performance, shareholder returns, technological innovation, and company fundamentals. In the future, we will continue to manage market value from the following aspects:

1. Consolidate fundamentals: This is fundamental. We will do our utmost to develop the company well.
2. Enhance shareholder returns: Continue to provide attractive dividends, with a year-on-year increase of 5.8% in dividends in the first half of the year, and a highly competitive dividend yield.
3. Make good use of capital tools: Take decisive measures such as increasing holdings and repurchasing when necessary to maintain company value.
4. Strengthen market communication: Enhance investors' understanding of the company through high-quality information disclosure and multi-level communication.
5. Reshape valuation logic: We hope the market recognizes that China Mobile has transformed into an information service technology innovation company with "high dividend, high technology, and AI empowerment" attributes, and its valuation should surpass the traditional telecom operator category.

We are actively guiding the market to use a new valuation model to assess the company's value.

Q: How does the company define AI's "direct revenue"? What products or services does it mainly include? What is the current revenue scale and future growth trend? Besides direct revenue, how does AI empower the company's traditional businesses (to C/H/B), and what specific cost reduction and efficiency improvement contributions has it brought to the company's internal operations?

A: Precisely breaking down AI's direct revenue is indeed challenging because it is deeply integrated with various businesses, just as it was difficult to separately account for 5G revenue in the past.

However, AI's revenue contribution mainly comes from four sectors: AI computing power services, data services, model and platform services (such as the "Jiutian" large model and the newly released "MoMA" platform), and AI applications for C/H/B markets.

I can reveal a magnitude: Currently, revenue strongly related to AI has reached a scale of several billion yuan, and considering that AI commercialization has just begun, this growth momentum is very strong.

The company's AI strategy is very clear, positioning itself as a "provider, aggregator, and operator" of AI capabilities. The current development focus is "one core, two transformations": One core: Building core technical capabilities based on the "Jiutian" large model. Two transformations: Promoting the scale and commercialization of AI applications, which is our current core task and the key to realizing AI value.

Q: In the first half of the year, the home broadband business achieved "volume and price increase" in both user numbers (growth of 9.3%) and revenue (growth of 7.4%), with outstanding performance. What are the main reasons for the strong growth of this business? What are the company's future market strategies and growth drivers?

A: The home business is our "main force" for revenue growth and a new engine for value growth.

Our core strategy is to fully build the "Mobile Home" brand, aiming to become the industry choice within 1-2 years. To this end, we have launched five "new" operational initiatives:

1. New Products: Provide one-stop home solutions around "one line (ultra-fast all-optical), one network (home intelligent computing), one home (rich scenarios)."
2. New Operations: Achieve rights, equipment, and service sharing among family members through the "Mobile Home Family Bucket" model.
3. New Entry: Integrate "Lingxi AI" into home services, providing intelligent services covering multiple scenarios such as communication, education, and elderly care.
4. New Services: Form a professional "Mobile Home Engineer" team to provide high-quality, reassuring on-site services.
5. New Ecosystem: Establish the "Mobile Home Cooperation Alliance," which has gathered over 600 partners to enrich products and services together.

Q: In the first half of the year, the company's depreciation and amortization and capital expenditure both showed a downward trend. As the company's capital expenditure enters a downward cycle, how should we view the future trend of depreciation and amortization? How much positive impact will this have on the release of company profits?

A: First, regarding cost control. The profit growth in the first half of the year was partly due to improved revenue quality and partly due to effective cost control. Management attaches great importance to "grasping costs is grasping profits," and we have mainly achieved cost reduction and efficiency improvement through six measures: implementing zero-based budgeting, strictly controlling personnel and capital expenditure sources, strengthening project whole-process management, focusing on key cost items, establishing a benchmark system, and deepening AI empowerment. Second, regarding depreciation. Depreciation slightly decreased in the first half of the year, not due to policy adjustments, but because capital expenditure decreased, resulting in new assets being less than expired assets.

For the future, two points need to be clarified: ① We will never use depreciation as a tool to adjust profits. Effective investment, although it increases depreciation in the short term, will bring longer-term returns. ② The lower capital expenditure in the first half of the year was because some large projects (such as intelligent computing centers) were in the preparation period. Construction and capitalization will accelerate in the second half of the year. Therefore, we expect depreciation for the full year and the next few years to remain basically stable.

Q: The company may face certain pressures in accounts receivable and operating cash flow. What specific control measures and strategies has the company adopted to address these challenges?

A: Accounts receivable (105.8 billion yuan) did indeed increase in the first half of the year, mainly due to three reasons:

1. Business Structure Change: High-growth government and enterprise businesses generally adopt a "service first, payment later" model, extending the account period.
2. Seasonal Factors: Government and enterprise project payments are mostly concentrated at the end of the year, resulting in a higher mid-year balance.
3. Macroeconomic Environment Impact: The payment cycle of some enterprise customers has been extended.

In response, we have taken a series of strong control measures, including: adhering to only doing businesses with cash flow, strengthening customer credit source management, reinforcing process collection, and strict performance assessment. These measures have already shown results, with the mid-year increase in accounts receivable significantly narrowing compared to the same period last year. We are confident in continuing to improve in the second half of the year and expect the accounts receivable scale to be significantly lower than the current level by the end of this year.

Q: The company's equity investment income achieved a good growth of 17% in the first half of the year. What are the main sources of this growth? What is the company's strategic layout in the investment sector in the future?

A: The growth in equity investment income mainly comes from the profits contributed by companies we have invested in, such as Shanghai Pudong Development Bank. This income is recognized in accordance with accounting standards.

Q: It seems to be an excellent time for stock repurchase. How does management view this opinion, and will it seriously consider initiating a repurchase to enhance shareholder returns?

A: At the beginning of the year, the company had already made it clear that it would comprehensively consider market conditions and implement repurchases at an opportune time to protect shareholder interests. We have an internal plan for this. In the second half of the year, we will take corresponding actions based on market changes, with the ultimate goal of enhancing company value and shareholder returns.

Q: Mobile cloud revenue grew by 11.3% in the first half of the year. In the context of the current AI era, how does the company plan to further develop the cloud business?

A: Mobile cloud and AI are symbiotic, and our development strategy can be summarized as follows:

Mobile cloud achieved an 11.3% growth in the first half of the year, maintaining double-digit growth on a trillion-level base, with strong momentum. AI direct revenue is growing at a multiple rate. AI call volume and GPU utilization have both increased significantly, indicating strong market demand. We believe that AI is the second growth curve for the cloud business (about 75% of cloud revenue growth is driven by AI), and the essence of both cloud and AI is computing power services. Based on this, our strategy is "grasp both ends, drive the middle":

1. Grasp Computing Power: Leverage policy advantages (state-owned enterprises prioritize using operator computing power), reduce costs through the "electricity-computing synergy" model, and optimize the "training-push" resource ratio to provide the market with cost-effective centralized computing power services.
2. Grasp Applications: Seize the market trend from "large models" to "intelligent agents," empower government and enterprise customers with our digital experience, and use AI to solve practical business problems.
3. Drive the Middle: Through the development of computing power and applications, naturally drive the growth of our most advantageous network connection business.

Future Outlook: Customer demand is clearly shifting towards "large-scale, centralized" computing power services, which is highly consistent with our strategy. We expect mobile cloud to maintain good growth in the second half of the year, and AI direct revenue to maintain high-speed growth.

Q: As long-term investors, we are pleased to see the company's dividend continue to grow by 5.8% in the first half of the year. Does management have confidence in maintaining this continuous growth momentum in dividends in the future?

A: The company's goal is to continue to promote "steady progress" in revenue and profit growth in the next two to three years. As for how much it can grow specifically, it depends on the joint efforts of all our employees.

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