On Thursday afternoon, March 20, $CHINA MOBILE (00941.HK)$ the annual performance report for 2024 will be announced.

In the face of increasingly saturated traditional communications demand and the adverse environment of increasing uncertainty in the foreign environment, the Chairman of CHINA MOBILE stated that the company's growth expectations are optimistic, as the national macroeconomic fundamentals are favorable. Economic development changes such as the rise of XINXINGCHANYE, Goods Economy, and Smart City, and most importantly, the technological revolution represented by AI and the industrial transformation have brought tremendous information service growth space to the entire industry.

The Chairman emphasized the importance of the AI+ era. He stated that ten years ago it was Internet+, five years ago it was 5G+, and now we have entered the AI+ era, which can bring tremendous growth space for the company. The Internet of Things has become a new source of training data for AI:

"Now everyone says that AI training data resources are somewhat scarce, and it seems like everyone has used them already. What will the data sources be next? The first is the Internet of Things, with real-time data generated at any time. The second is the automatic generation of data by AI, which also creates new data sources."

The management pointed out that the company's current development positioning is as an information service technology innovation company, aiming to operate in the AI field.$Taiwan Semiconductor (TSM.US)$Increase the scale of AI investment:

The information services have greatly expanded our entire development space. Our benchmarks are not only Global operators but also global Technology innovation companies. By 2025, CHINA MOBILE plans to invest 37.3 billion yuan in computing power, increasing the proportion of capital expenditures to 25%.

CHINA MOBILE stated that since the listing of DeepSeek, the company's GPU resource utilization has increased threefold. The management revealed:

"After the explosion of DeepSeek, overall customer demand is showing a geometric growth. Therefore, it is expected that next year, the overall AI-driven cloud computing business, including mobile cloud growth, will show good growth.

Regarding the return concerns of investors, management stated that CHINA MOBILE has been distributing dividends twice a year since 2002, with the dividend payout ratio increasing from 20% to the current 73%, and plans to raise it to over 75% by 2026.

The following is the full text of the Q&A.

Q1: The entire telecommunications Industry is experiencing a global slowdown. Could the company's management introduce the expectations for growth this year at mobile?

A1: In recent years, faced with an increasingly complex and changing external environment and situation, the company has consistently kept pace with the times, transforming and upgrading. Now, the company has actually entered a critical period, which is a period of strategic opportunities, momentum transformation, and reform collaboration. It is essential to observe the project development trends and expectations, as they are significantly related.

First, it is the strategic opportunity period. The company is currently facing a new round of high-quality development strategic opportunity, which is crucial for the company's progress. This can be viewed mainly from three aspects:

The first major aspect is that the basic macroeconomic situation of the country is improving, including our vast market scale, complete industrial system, and rich human talent resources. Additionally, there is currently vast incremental space for demand upgrading, structural optimization, and momentum transformation. Particularly, the current vigorous development of new productivity is driving high-quality development, along with a series of policies and measures to promote economic development to stimulate growth. So this is a significant fundamental context for the company's growth.

The second major aspect is that economic and social development has opened up new space for information services. Under the macro situation just introduced, there is a strong demand for our information services, reflecting three aspects:

1) Changes in economic quality. The country is vigorously promoting strategic emerging industries, future industries, and applying digital technology to transform traditional industries and promote the integration of digital and real sectors, thereby unleashing immense market space for information services;

2) Changes in consumer demand. Domestic demand has become the main driving force for economic growth. The silver economy, goods economy, and information consumption are increasingly on the rise;

3) Smart cities and digital government are continuously speeding up upgrades. The company has had many successful cases in this area over the past few years, working on provincial-level digital government construction. The overall planning, design, and integration present a new development space.

The third major aspect is that the technological revolution and industrial transformation represented by AI have also brought about immense new spaces and opportunities for information services. The AI+ era has fully arrived. Ten years ago it was Internet+, five years ago it was 5G+, and now we have entered AI+. The impact on all industries is significant. Company growth potential is also reflected in three aspects:

1. Reshaping the new way of intelligent digital life. The three new forms of information consumption mentioned have been clearly outlined in this year's government work report, and the demand for various information consumption is showing a very strong trend.

2. Reshaping the new model of production work. "AI + DICT" has become a new service, and new production models like Digital Twin are also accelerating in popularity. In the future, this will form a new working model characterized by deep collaboration between humans and AI.

In the future, it is possible that the boss will be an entrepreneur, the boss being a carbon-based life form, while the employee will be a silicon-based life form. There is no need to employ several digital individuals like before, and in the future, these digital entities will become diverse and colorful, not just computers. Moreover, embodied intelligent robots may become carbon-based and silicon-based, all within the same team, and all of this represents new development opportunities brought about by AI.

3. Reshaping social governance models. The digital world and the physical world are merging, and in the future, everything will be interconnected. Moreover, for AI to truly develop, everything must be interconnected, which will become a source of more data. Currently, people say that the training data resources for AI are somewhat lacking; nearly all existing data has been used. So what will the future data sources be? First, everything interconnected can generate real-time data at any time. Secondly, AI will automatically generate data, creating a new data source.

Overall, these represent three major aspects of opportunities for the company's development.

Secondly, there is a period of kinetic energy transformation. Companies or industries are facing numerous pressures and challenges, and there is an urgent need for continuous transformation and upgrading, as well as kinetic energy conversion. We must recognize this aspect with some clarity.

From the perspective of the macro economy, changes in the international external environment are bringing about adverse effects and uncertainties. We can see that uncertainty has increased noticeably compared to previous years, which may lead to new changes in the industry chain and supply chain.

From a domestic perspective, the economic operation still faces numerous challenges, including insufficient effective demand, weak consumer spending, and difficulties faced by some enterprises in operations and account receivables. Notably, our accounts receivable have increased significantly compared to last year, which reflects the broader environment and leads to such conditions.

From the perspective of Industry or development, it is deeply felt that traditional demand for Communications is becoming increasingly saturated while the market space for emerging information services is vast. However, demand needs continuous cultivation, exploration, and creation. The second and third curves really require continuous innovation to drive them.

Now we see that Satellite Internet, embodied intelligence, AI, etc., are leading the entire sector into a new wave of digital revolution. If the company cannot keep pace with this trend, it will gradually face the risk of being eliminated or marginalized, and at this stage of development, this problem is particularly prominent. Therefore, our management team must observe daily what new technologies, changes, and new models have emerged; this is essential for us. This is from the perspective of the entire Industry.

Furthermore, in traditional communications, homogeneous competition is rampant. Cross-border competition also presents a diversified and varied competitive environment. Therefore, we must observe these changes and the need for transformation and upgrading. We need to clearly understand the larger environment we are facing, seeing both the favorable and unfavorable aspects.

Thirdly, in the face of these opportunities and challenges, the company still has many areas of inadequacy and urgently needs to stimulate internal motivation, innovative vitality, and development potential through deepening reforms. In our internal meetings, we are also problem-oriented, and we must realistically address the shortcomings the company is facing. I believe there are three aspects we need to clearly recognize from a developmental perspective.

Of course, after years of development, the company has also built a good foundation. On one hand, the company's strategy is clear, the strategy is effective, and execution is strong. On the other hand, years of accumulation have also laid a solid base for development. Everyone can see that the overall development, including financial conditions, is very healthy and stable.

Therefore, I would like to introduce the current situation we are facing from these several aspects. We are facing certain situations, opportunities, and challenges, and the company's development is actually very clear. In simple terms, it involves implementing the "One Two Two Five" Global Strategy, comprehensively implementing three major plans, continuously promoting three deepening initiatives, and focusing on three major tasks.

In fact, we have been discussing this content continuously over the past few years. I believe the most critical part of the "One Two Two Five" is our development positioning, which is to be an information service and Technology innovation company. Information services have greatly expanded our overall development space, and Technology innovation addresses the power issue and drives innovation. Our benchmarking now is not only against Global operators, but also against Global Technology innovation companies, from investment in Technology innovation to product development and management.

I believe that's from a broader perspective. The three major plans will not be repeated as they have just been introduced. The three deepening initiatives are deepening reform breakthroughs, innovation breakthroughs, the second is deepening transformation and upgrading, and the third is deepening refined operation and lean management. The three major tasks are digital life, digital production, and digital governance, which actually reflect the full coverage of the company’s four major sectors CHBN.

Under such a large development strategy, the expectation for this year is to steadily achieve an increase in revenue and to ensure good growth in profits. For the next two to three years, with both development and opportunities coexisting, the company seeks progress while maintaining stability, striving to achieve good growth in revenue and profits, keeping the revenue scale at the forefront among global operators, and maintaining a leading level of profitability among major global operators.

Q2: What measures does the company have in place to ensure growth? Recently, AI DeepSeek has been an important topic, and I would like to understand the company's positioning and development strategy in AI, as well as what the growth goal looks like.

The positioning and development strategy for AI is a very important part of the company's overall strategy, serving as the main driving force for the company to become a world-class information service and technology innovation company.

First, regarding AI positioning, the company's position on AI is threefold: supplier, aggregator, and operator. As a supplier, it accelerates the forging of core AI capabilities, providing comprehensive computing power, data, and algorithm supply capabilities. As an aggregator, it promotes the integration of AI+ industries, enhancing the aggregation platform capabilities of the AI ecosystem, and creating three major AI bases for large model training, evaluation, and industrial innovation. As an operator, it deepens AI+ application empowerment, providing integrated services and applications across various sectors, households, cities, and regions. This defines the threefold positioning.

The core of the AI development strategy is the "AI+ Action Plan." With technological advancements in the AI era, it primarily reshapes the following four aspects: reshaping digital intelligence lifestyles; reshaping production operation models; reshaping social governance forms; and reshaping technological innovation paradigms.

As a technology innovation company, CHINA MOBILE has made the following layouts and explorations in the AI field under the "AI+ Action Plan," achieving certain results. The first is to continuously deepen AI+ capability layouts, which is mainly reflected in four aspects:

First, strengthening the construction of new artificial intelligence infrastructure, such as creating two 10,000-card clusters.

The second is honing core artificial intelligence capabilities, primarily by creating the "Nine Heavens" general model, which has been selected as one of the top ten national key instruments of state-owned enterprises.

The third is to gather a high-quality AI industry ecosystem, mainly to build the "Nine Heavens" ecological aggregation platform, which opens up large model training bases, evaluation bases, and industry innovation bases.

The fourth is to forge a high-level AI talent team, with the "Nine Heavens" large model team having over a hundred doctoral candidates, and the "Nine Heavens" AI team being selected as a model central enterprise for the year 2024.

The second aspect of AI application innovation is blooming in multiple areas: in the public sector, 24 AI + application products have been launched. In the government and enterprise industry sector, 39 AI + DIC applications have been launched, accelerating the comprehensive upgrade to intelligent services.

In terms of future strategy and layout, the company closely revolves around the three aforementioned positions and the "AI + Action Plan," adhering to an open and win-win cooperative ecosystem to promote joint development in the AI field, providing strong growth momentum for the company's high-quality development.

Q3: In 2024, the company has a rapid growth in computing power reserves, with self-built computing power reaching 29 EFLOPS and third-party schedulable computing power also at 30 EFLOPS. After the explosion of Deepseek this year, with its leading technological strength and strong funding, has there been a marginal change in the scheduling of computing resources for CHINA MOBILE? How is the current demand from customers for computing power? How does the company view the profitability of this business in the future?

In terms of future computing power planning, how will the CAPEX (capital expenditure) plan for 2025 be arranged? What characteristics will the overall CAPEX structure present?

Since Deepseek went public, it has opened a new phase of technological innovation, computing power development, and scene applications, while also allowing the scale benefits of technology and economy to gradually manifest. Based on this, CHINA MOBILE actively embraces the market and promotes various configurations and adaptations of Deepseek together with customers.

In this process, since Deepseek went public, our GPU resource utilization rate has increased threefold, the selling power of cloud resources has doubled, and this trend is actively changing every week.

In terms of the second computing resource layout, on one hand, we are moderately ahead in laying out computing resources. Since 2021, CHINA MOBILE has increased its computing power investments despite a decline in overall capital expenditure compound growth, with the investment scale reaching 130 billion yuan and a compound growth rate of 13%. By 2024, the overall intelligent computing power scale of CHINA MOBILE reached 29.2 EFLOPS, reaching an industry-leading level.

On the second front, we continue to increase investment in computing power. In 2025, CHINA MOBILE plans to invest 37.3 billion yuan in the computing power field, increasing its capital expenditure ratio to 25%. At the same time, the company will dynamically adjust the structure of computing resource construction according to business development needs, continuously promoting the integration of public computing resources and focusing on improving the efficiency of existing resource usage.

Additionally, we are accelerating the construction of a new type of intelligent computing resource layout, with a significant increase in investment in comparative aspects expected, since the announced investment of more than 3.4 billion EFLOPS this year is mainly based on pre-training resources, while inference resources will have no upper limit based on market demand. This pertains to this investment area.

The third point is the continued increase in AI investment scale, with the company’s direct AI investments in the past two years exceeding 12 billion yuan, growing more than tenfold year-on-year by 2024. In 2025, the direct investment scale and proportion in AI will continue to rise, reflecting the resource situation.

Q4: At the end of February, the Premier surveyed the CHINA MOBILE Innovation Center. What requirements did the Premier propose during this survey?

In February, the Premier conducted an investigation into CHINA MOBILE and two other telecommunications companies, holding a symposium at the company. The main focus was to report on the situation of 6G R&D, computing network R&D, as well as the development and use of AI to the Premier. The Premier has put forward clear requirements for our industry, which overall includes several aspects.

One is to vigorously promote technological innovation, hoping that state-owned enterprises can play a greater role in driving technological innovation. The second is to vigorously develop new industries and new productive forces. The third is to promote the integration of digital and real aspects. The fourth is to build a more solid information infrastructure. The fifth aspect includes specific work instructions, including specific requirements for the development of AI. In fact, these requirements from the Premier align perfectly with the company’s development priorities, such as three major plans, three deepening initiatives, and three major tasks.

Therefore, we often joke that the current company development has to be placed in a larger macro environment, with the key focus of the entire country. What are the demands of LBX Pharmacy Chain Joint Stock? This is market-oriented, and thus the overall company development needs to satisfy such demands. Therefore, everyone has seen the new three aspects of information consumption. I mentioned last year in various settings that we need to continuously implement the new three aspects of information consumption. You can also see that these three aspects have already been written into the government report, which aligns perfectly with our development focus and the upcoming market space.

Q5: Regarding the Cloud Computing business, I see that in 2024, mobile cloud achieved revenue exceeding 100 billion, with over 20% good growth. What is the growth target for 2025? Particularly after the emergence of DeepSeek, is there an observed trend of accelerated growth in demand?

In the Cloud Computing business, CHINA MOBILE achieved significant growth in 2024, with the growth mainly coming from the following three areas:

One is the construction of intelligent computing IDC, and the second part is the provision of intelligent computing services, targeting three types of customers with different service content.

The first type of customers is small and medium-sized enterprises, mainly providing a large number of high-quality applications.

The second type of customer is model vendors and startup clients, mainly providing computing power and platform services.

The third type of customers is central state-owned enterprises and large corporate clients, providing integrated services from computing power platforms, model development, data application, to basic operation and maintenance.

In addition to these two parts, there is also a section for standardized products, which also achieved revenue growth.

Since this was launched, we have also done some data statistics, and in the first week after launch, the daily Token call volume nearly doubled, and from the second week onwards, the weekly call volume doubled. Overall GPU utilization rate increased from 20% to 68%, and the overall resource sales rate reached 77%, with an increase of over 40 percentage points.

The connected customers are divided into three groups: 60% of customers choose hyper-converged integrated deployment, 30% choose bare metal deployment, and 10% choose public cloud invocation.

From this data, it can be seen that the overall demand of customers is showing exponential growth. Therefore, for the entire cloud computing business driven by AI next year, including the growth of mobile cloud, we expect good growth.

The chairman added: Regarding the cloud computing you just mentioned, the development of the cloud has become the foundation of the digital economy and is the information infrastructure that supports various information technology applications. This is from the perspective of the country's large environment, and our company has also made the cloud a key component of its Global Strategy and a major focus of its business, as well as the most important infrastructure of the company.

Everyone remembers that in 2019, the revenue we announced for the cloud was 1.9 billion, and last year we exceeded 10 billion. This change in revenue shows how much the company values the cloud, and today we have kept up with the times. So before this, during our internal meetings, I mentioned whether we could upgrade cloud computing to a new concept called Cloud Intelligence. What does this concept mean? It combines various technologies of traditional cloud computing with the current intelligent computing and AI technologies, forming Cloud Intelligence, which can provide comprehensive information services related to computing power, models, data, ecosystems, applications, tools, and more.

To put it simply, we are upgrading the traditional three-layer architecture of cloud computing (IaaS, PaaS, SaaS) to AI + IaaS, AI + PaaS, and AI + Saas, and introducing a fourth model called MaaS (Model as a Service).

Therefore, CHINA MOBILE has four key development directions for Cloud Intelligence, specifically in several areas. The first is to integrate computing power infrastructure; it was originally mainly for traditional computing, but now we will include intelligent computing into the overall computing power infrastructure, integrating various computing resources so that computing services operate on one platform.

Actually, we have a good foundation in this regard. In the first two years, we promoted this computing power network and the Computing Network Brain, which can undertake the tasks mentioned earlier. We can coordinate various computing power, edge computing, general computing, supercomputing, quantum computing, etc., through the algorithm brain, enabling on-demand use and flexible scheduling. This is the infrastructure of computing power, equivalent to the original IaaS.

The second is the AI-powered tool platform. Research and development, testing, operation, and the intelligent computing service-related learning framework that can continue to advance, which is equivalent to our AI PaaS. Of course, we are also considering how it can collaborate with AI, so we hope to transform it into a structure similar to T-PaaS (Technology Platform as a Service). I won’t elaborate much on the technical content of the T-PaaS structure.

Third, we provide one-stop model services that integrate and aggregate various development services, breaking down the barriers of traditional AI applications, making technology easier to apply across various Industries. The large model aims to address this issue, including the research on the decision-making role of the "Jiu Tian" large model in AI development.

At that time, we proposed to apply and learn many technologies from Deepseek, including Moe, which is a multi-expert system. What do we want to do? We want to become the Taiwan Semiconductor of the AI field. Of course, today we don’t have media, so I can speak more vividly, right? Everyone knows that Taiwan Semiconductor makes chips; they purchase ASML's Lithography Equipment and various devices for chip production, and they also have some core equipment. They integrate and combine these devices well in their factories and companies, and operate them effectively. Therefore, now Taiwan Semiconductor is the leader in the chip field, with a very high yield rate.

In the AI field, can we learn from Taiwan Semiconductor's practices in chips? Of course, we also need to have our core AI capabilities. If you have DeepSeek this year, no problem; if users want to access DeepSeek, no problem, I will help you connect and solve it. But now we are providing services to clients, not just simply solving it with AI; we also have other information technologies. Therefore, in this regard, can we push this work forward?

The fourth is the intelligent application, similar to Saas, AI SaaS, AI services applicable to various intelligent scenarios, and other cloud services, capable of meeting the rich intelligent demands of different Industries. Therefore, I think in terms of cloud development, we hope to promote the development of the cloud according to this development model, forming the cloud intelligence calculation model.

Q6: Regarding the revenue target for the personal customer market. I see that the goal for 2025 is to maintain stability and reverse the decline trend of 2024. I would like to ask, what are the main driving forces behind this?

Regarding the development of the personal market, the personal market is crucial for the company's development. I see it as the foundational line, lifeline, and supply line of the company. The current challenges faced include insufficient scale-driven momentum and a gradually saturated demand for traditional Communications Services. The homogenization of competition within the Industry and cross-sector competition is constantly intensifying.

In this context, if we still follow the original development model for the personal market, it will not be possible to grow. We are also summarizing some of our past development models, such as increasing growth through incremental drives, relying on volume for value, and depending on sales for Operation.

How to transform now? The chairman put forward the guiding principles for our Operation, summarized in three sentences: segmentation is the market foundation, existing customer management, and value management are the long-term, strategic tasks of the company, significantly increasing product supply and product innovation.

How do we approach the implementation of the three sentences proposed by the director in the personal market? We need to further clarify the new paradigm of customer first and demand-driven, which is mainly highlighted in several changes:

The first change is to increase length. We need to further strengthen operations on the customer's entire lifecycle value, which means enhancing customer relationship management and customer experience management, referred to as lifetime value.

The second aspect is to broaden. We have previously mentioned this, shifting from 'one person, one face' to 'one person, a thousand faces.' Now we realize that demand represents the customer, and in addition to providing functional value, we must also offer experiential value and emotional value to our customers, which requires further broadening.

The third aspect is to become smarter, referring to wisdom. In light of the rapidly changing technology landscape, we will implement upgrades to our existing products, such as traditional mobile cloud storage, video ringtones, and 5G messaging, in order to enhance Business value and experience value, making it easier and more beneficial for customers.

Additionally, we need to increase our innovative product layout, such as 5G new calling. The AI creations we are using in video, including the embodied robots that the company will vigorously deploy in the future, will significantly drive the company's growth. The chairman proposed increasing product supply and innovation, which represents the third change.

The fourth change is to further refine operations, which should be lean, meticulous, and precise, focusing on four transformations: customer integration, platform AI enhancement, operational platformization, and effective marketing. Based on these four transformations, we will further refine our intelligent operations through the empowerment of digital intelligence and technology.

The fifth aspect is to strengthen customer experience management and relationship management. I am not sure how to express this in Cantonese, but in the mainland, it translates to becoming iron, by enhancing our service and brand to foster a more harmonious relationship with customers, allowing them to better recognize and accept CHINA MOBILE's services and products.

The final change is to become stronger. We have also discussed channels and capacity. Currently, in personal community operations, we are increasing the construction of six major hubs and 6+1, which include community hubs, government and corporate hubs, rural hubs, and school hubs.

Additionally, there needs to be a strong community building, as we are currently transitioning from Communications Services to Information Services. We must further enrich our products and applications in collaboration with our ecosystem partners. Customers now require not just a function, but a solution. In this situation, we need to enhance our cooperation with ecosystem partners, among other things. Through these Operations, I believe we can achieve our guiding goals for the individual market, and we remain confident in this.

Q7: Is the company considering increasing a part of the buyback, or is there a recent incentive plan for some shares to repurchase those authorized parts? Is there such a plan, or is there a plan for the future?

So, after discussing so much today, we now understand how the company is transforming. Our Chairman analyzes the situation; what is our strategy? It is to build a strong company and present an outstanding CHINA MOBILE to investors. This is our most important objective, and it is the first point.

The second point is that we certainly value dividends. I think CHINA MOBILE is quite generous in this regard. Since 2002, CHINA MOBILE has been issuing dividends twice a year, with the payout ratio increasing from 20% to 73% now. In 2002, I recall the dividend was 30 cents or so, and now it has risen to 5.09 yuan this year. The dividend strength is significant, and we have clear guidance for the future, aiming to reach over 75% by 2026, having reached 73% this year. What will happen after 2026? I believe that CHINA MOBILE should maintain a sustainable and predictable dividend policy, which I also believe will be relatively stable, so please have confidence in this.

Regarding the buyback or increase Stake & Buy Back, CHINA MOBILE has had some buybacks in recent history, specifically in 2022 and 2024, likely totaling over 1 billion Hong Kong dollars. These buybacks benefit investors, as the shares repurchased will be retired, increasing the remaining shares and enhancing the earnings of US stocks, so we might employ this buyback strategy while making comparisons.

Of course, when considering this buyback, many factors come into play. One is whether the buyback meets regulatory or legal requirements, as we genuinely consider the rights of our long-term Shareholders and their interests. During this process, we also need to consider the company's financial situation and the prevailing market environment in the Capital Markets, as well as the deviation of our stock price. We will aim to time the buyback appropriately based on these observations.

Editor/Rocky