China Mobile Performance Meeting: DeepSeek's demand adaptation has increased geometrically, and mobile cloud is expected to grow well next year

On Thursday afternoon, the 20th, China Mobile announced its annual performance report for 2024. Faced with the increasingly saturated demand for traditional communications and the adverse environment of increasing uncertainty in foreign conditions, the chairman of Mobile stated that the company's growth expectations are positive, as the national macroeconomic fundamentals are favorable. Changes in economic development, such as the rise of emerging industries, the millet economy, and smart cities, along with the most important factor being the technological revolution represented by AI, and industrial transformation, have brought significant growth space for information services in 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 AI+. AI can bring enormous growth space for the company. The Internet of Everything will become a source of more training data for AI in the future: “Now everyone says that AI training data resources are somewhat scarce, and they are all using similar data. What will the data sources be next? The first is the Internet of Everything, where real-time data is generated at any time. The second is AI automatically generating data, which creates new data sources.” Management pointed out that the company is now positioned as an information service technology innovation company, aiming to be the TSMC in the AI field, and increasing the scale of AI investment: “Information services have greatly expanded our entire development space. We are now benchmarking not only against global operators but also against global technology innovation companies. By 2025, China Mobile plans to invest 37.3 billion yuan in computing power, increasing the proportion of capital expenditure to 25%.” China Mobile stated that since the listing of DeepSeek, the company's GPU resource utilization has increased threefold. Management revealed: “After the explosion of DeepSeek, the overall demand from customers is showing geometric growth. Therefore, it is expected that next year, the entire AI-driven cloud computing business, including mobile cloud growth, will show good growth.” Regarding the return issues that investors are concerned about, management stated that China Mobile has been paying 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 Q&A: Q1: The entire telecommunications industry is experiencing a global slowdown. Could the company management introduce the growth expectations for Mobile this year? A1: In recent years, facing an increasingly complex and changing external environment and situation, the company has been keeping pace with the times and transforming and upgrading. Now the company has actually entered a critical period, which is the strategic opportunity period, momentum conversion period, and reform co-construction period. The development trend of projects and expectations are closely related to this. First is the strategic opportunity period. The company's development faces a new round of strategic opportunities for high-quality development, which is crucial for the company's growth. This can be viewed from three main aspects: The first major aspect is that the national macroeconomic fundamentals are favorable, including our super-large-scale market, complete industrial system, and rich human talent resources. At the same time, there is currently broad incremental space for demand upgrading, structural optimization, and momentum conversion. Especially now, there is a strong push for the development of new productive forces to promote high-quality development, along with a series of policy measures to stimulate economic growth. Therefore, this is a significant fundamental aspect, and the company's development must be placed in such a large environment The second major aspect is that economic and social development has opened up new space for information services. In the macro situation just introduced, there is a strong demand for our information services driven by economic and social development, which reflects three aspects: Changes in economic quality. The country is vigorously promoting strategic emerging industries, future industries, applying digital technology to transform traditional industries, and promoting the integration of digital and real sectors, thus stimulating a huge market space for information services; Changes in consumer demand. Domestic demand has become the main driving force for economic growth. The silver economy, millet economy, and information consumption are increasingly rising; The continuous acceleration and upgrading of smart cities and digital government. The company has had many successful cases in this area over the past few years, working on digital government construction for several provinces. The overall planning, design, and integration also represent a new development space. The third major aspect is that the technological revolution and industrial transformation represented by AI have also brought huge new space 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+. Everyone has already seen the significant impact it has brought to various industries. This is also reflected in three aspects of the company's new growth space: Reshaping new ways of digital life. People have seen the new three items of information consumption, which have been clearly written into this year's government work report, showing a very strong demand for various information consumption. Reshaping new modes of production and work. "AI+DICT" has become a new service, and new production modes like digital twins are also accelerating in popularity. In the future, this will form a new working model of deep collaboration between humans and AI. In the future, perhaps the boss is a carbon-based life form, and the employee is a silicon-based life form. He no longer needs to hire several digital people as in the past, and in the future, these digital people will be diverse and colorful, not just computers. Moreover, embodied intelligent robots may become carbon-based and silicon-based, all working together in the same team. All of these represent new development spaces brought by AI. Reshaping social governance models. The digital world and the physical world are integrated, and in the future, everything will be interconnected. Moreover, for AI to develop, it must truly achieve the interconnection of all things, which will become a source of more data in the future. Currently, people say that AI training data resources are somewhat scarce, as they have all been utilized. So what will the data sources be next? First, the interconnection of all things will generate real-time data at any time. Second, AI will automatically generate data, forming new data sources. In summary, these are the three major aspects of opportunities for the company's development. Secondly, it is a period of energy conversion. The company or industry is facing numerous pressures and challenges in development, and there is an urgent need for continuous transformation, upgrading, and energy conversion. We must be able to recognize this aspect clearly. This can be viewed mainly from two aspects: One from the macroeconomic perspective. Changes in the international external environment have brought some adverse effects and uncertainties. We can see that uncertainties have significantly increased compared to a few years ago, which may lead to new changes in the industrial chain and supply chain From a domestic perspective, the economic operation still faces many challenges and issues. For example, insufficient effective demand, sluggish consumption, and some enterprises facing operational difficulties and overdue accounts. As seen in our report, our accounts receivable have increased significantly compared to last year, which is an objective result of the overall environment. Secondly, from the perspective of industrial or sector development, we feel very deeply that traditional communication demand is becoming increasingly saturated, while the emerging information service market has vast potential, but the demand still needs to be continuously cultivated, explored, and created. The second curve and third curve truly require us to drive through continuous innovation. As we can see, the entire industry is currently welcoming a new wave of digital revolution with satellite internet, embodied intelligence, AI, etc. Therefore, if the company cannot keep up with this rhythm and trend, it will gradually face the risk of being eliminated or marginalized, and this issue is particularly prominent at this stage of development. Thus, our management team must constantly observe what new technologies, changes, and new models are emerging; this is essential for us. This is from the perspective of the entire industry. Furthermore, we see that traditional communication is facing homogeneous competition, with fierce competition at the bottom. Cross-industry competition has also presented a diversified and changing competitive environment. Therefore, we must recognize these changes and the need for transformation and upgrading. We need to have a clear understanding of the overall environment we are facing, recognizing both the favorable and unfavorable aspects. Thirdly, in the face of these opportunities and challenges, the company still has many areas of adaptation that urgently need to stimulate endogenous motivation, innovative vitality, and development potential through deepening reforms. In our internal meetings, we are also problem-oriented, addressing the shortcomings the company currently faces realistically. I believe these are three aspects we need to be clearly aware of from a developmental perspective. Of course, after years of development, the company has also established a solid foundation for growth. On one hand, the company's strategy is clear, the tactics are effective, and the execution is strong. On the other hand, after years of accumulation, a good foundation for development has been laid. As everyone can see, the overall development, including financial conditions, is very healthy and robust. Therefore, I would like to introduce the current situation we are facing from these aspects. In the face of such situations, opportunities, and challenges, the company's development is actually very clear. In simple terms, it is to implement the "One Two Two Five" strategic implementation approach, fully implement three major plans, continuously promote three deepening initiatives, and focus on implementing three major tasks. In fact, we have been discussing these contents over the past few years. I believe the key to "One Two Two Five" is our development positioning, which is to be an information service technology innovation company. Information services greatly expand our overall development space, and technological innovation addresses the issues of driving force and innovation. Our benchmarks are not only against global operators but also against global technology innovation companies, including investments in technological innovation, product research and development, and management. I will not repeat the three major plans, as they have already been introduced. The three deepening initiatives are deepening reform and tackling challenges, innovative breakthroughs, deepening transformation and upgrading, and energy conversion, and deepening refined operations and lean management. The three major tasks are digital intelligent living, digital intelligent production, and digital intelligent governance This reflects the company's full coverage of the four major sectors of CHBN. Under such a large development strategy, we clearly aim to steadily increase revenue growth and achieve good profit growth this year. For the next two to three years, we will seek progress while maintaining stability, striving to achieve good growth in revenue and profit, keeping our revenue scale at the forefront among global operators, and maintaining our profitability at a leading level among major global operators. Q2: What measures does the company have to ensure growth? Recently, artificial intelligence DeepSeek has been a very important topic. I would like to understand the company's positioning and development strategy in AI, and how the growth target is defined? The positioning and development strategy of AI is a very important part of the company's overall strategy and layout, and it is the most important driving force for the company to become a world-class information service technology innovation company. First, regarding AI's positioning, the company sees AI as three roles: provider, aggregator, and operator. The provider accelerates the forging of core AI capabilities, providing comprehensive computing power, data, and algorithm supply capabilities. The aggregator promotes the integration of AI and industries, enhancing the aggregation platform capabilities of the AI ecosystem, and creating three major AI bases for large model training, evaluation, and industrial innovation. The operator deepens AI+ application empowerment, providing integrated services and applications to thousands of industries, households, cities, and regions. This is the positioning of the three roles. The core of the AI development strategy is the "AI+ Action Plan." In the AI era, with technological advancements, it mainly reshapes the following four aspects: reshaping digital and intelligent lifestyles; reshaping production and operation models; reshaping social governance forms; 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 the AI+ capability layout, mainly reflected in four aspects: First, strengthen the construction of new artificial intelligence infrastructure, such as building two ten-thousand-card clusters. Second, hone core AI capabilities, mainly by creating the "Jiutian" general large model, which has been selected as one of the top ten national treasures of central enterprises. Third, gather a high-quality artificial intelligence industrial ecosystem, mainly by constructing the "Jiutian" ecological aggregation platform, opening large model training bases, evaluation bases, and industrial innovation bases. Fourth, forge a high-level artificial intelligence talent team, with the "Jiutian" large model team comprising hundreds of PhDs, and the "Jiutian" AI team being selected as a model for central enterprises in 2024. The second aspect of AI application innovation is flourishing in multiple areas: In the public sector, 24 AI+ application products have been launched. In the government and enterprise sector, 39 AI+DIC applications have been launched, accelerating the comprehensive upgrade to intelligent services. As for future strategies and layouts, the company closely revolves around the aforementioned three roles and the "AI+ Action Plan," adhering to an open and win-win cooperative ecosystem to promote common development in the AI field, providing strong growth momentum for the company's high-quality development Q3: In 2024, the company has seen rapid growth in computing power reserves, with self-built computing power reaching 29 EFLOPS and third-party schedulable computing power at 30 EFLOPS. After the outbreak of Deepseek this year, has the scheduling situation of computing power resources changed marginally for China Mobile, leveraging its leading technological strength and substantial funding? How is the current demand for computing power from customers? How does the company view the profitability of this business in the future? Regarding future computing power planning, how will the CAPEX (capital expenditure) plan for 2025 be arranged? What characteristics will the overall CAPEX structure present? Since the listing of Deepseek, a new phase of technological innovation, computing power development, and scenario applications has begun, gradually revealing the scale effects of technology and economics. Based on this, China Mobile actively embraces the market and works with customers to promote various configurations and adaptations of Deepseek. In this process, since the listing of Deepseek, our GPU resource utilization has increased threefold, the sales power of cloud resources has doubled, and this trend is actively changing every week. In terms of the second layout of computing power resources, on one hand, we have moderately advanced the layout of computing power resources. Since 2021, China Mobile has increased its computing power investment scale despite a decline in the compound growth of overall capital expenditure, reaching 130 billion yuan, with a compound growth rate of 13%. By 2024, the intelligent computing power scale of China Mobile's entire network has reached 29.2 EFLOPS, achieving industry-leading levels. On the other hand, we continue to increase our investment in computing power. In 2025, China Mobile plans to invest 37.3 billion yuan in the computing power field, raising the proportion of capital expenditure to 25%. At the same time, the company will dynamically adjust the structure of computing power 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 will accelerate the construction of a new type of intelligent computing resource layout, with a significant increase in comparative investments, as the over 34 billion EFLOPS announced this year mainly focuses on pre-training resources, while inference resources will have no upper limit based on market demand, which pertains to this investment. Thirdly, we will continue to increase the scale of AI investment. The company's direct investment in AI over the past two years has exceeded 12 billion yuan, with a year-on-year growth of over 10 times in 2024. In 2025, the company's direct investment scale and proportion in AI will continue to increase, which reflects the resource situation. Q4: At the end of February, the Premier conducted research at the China Mobile Innovation Center. What requirements did the Premier propose during this research? In February, the Premier conducted research on China Mobile and two other telecommunications companies and held a symposium at the company. The focus was to report to the Premier on the development of 6G, the research and development of computing power networks, and the research and use of artificial intelligence. The Premier has put forward clear requirements for our industry, which can be summarized in 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 promote new quality productivity. The third is to promote the integration of digital and real economies. The fourth is to build a more solid information infrastructure. The fifth aspect is specific work instructions, including specific requirements for the development of artificial intelligence. In fact, these requirements from the Prime Minister are completely consistent with the company's development focus, such as the three major plans, three deepening initiatives, and three major tasks. So we often joke that the entire company's development should be placed in the larger macro environment, focusing on the national development priorities and the needs of the people. This is market-oriented, so the entire company's development is to meet such needs. Therefore, everyone has seen the new three aspects of information consumption. I mentioned last year in different occasions that we need to continuously promote the implementation of the new three aspects of information consumption. Everyone has also seen that this time the government work report has already included these three aspects in the government report, which aligns with our development focus and the upcoming market space. Q5: Regarding the cloud computing business, I see that in 2024, China Mobile achieved over 100 billion in revenue from mobile cloud and realized over 20% good growth. I would like to ask, what is the growth target for 2025? Especially after the emergence of DeepSeek, do you see a trend of accelerated growth in demand? In terms of cloud computing business, China Mobile achieved significant growth in 2024, mainly from the following three aspects: One is the construction of intelligent computing IDC, the second part is the provision of intelligent computing services, which mainly target three types of customers, providing different service contents. The first part of customers is small and medium-sized enterprises, mainly providing a large number of high-quality applications. The second part of customer models includes manufacturers and startup enterprises, mainly providing computing power and platform services. The third part of customers includes central state-owned enterprises and large corporate clients, providing integrated services from computing power platforms, model development, data applications to basic operations and maintenance. In addition to these two parts, there is also a part of standardized products, which has also seen revenue growth. Since the launch, we have also done some data statistics. In the first week after the launch, the daily Token call volume almost doubled, and from the second week onwards, the weekly call volume doubled. The overall GPU utilization rate increased from the original 20% to 68%, and the overall resource sales rate reached 77%, an increase of more than 40 percentage points. The customers are divided into three parts: 60% of customers choose to deploy through hyper-converged integrated deployment, 30% choose bare metal deployment, and 10% choose public cloud calling. From this set of data, it can be seen that the overall demand from customers is showing exponential growth. Therefore, for the entire AI-driven cloud computing business next year, including the growth of mobile cloud, we expect good growth. Chairman’s Supplement: Regarding what you just mentioned about cloud computing, the development of cloud, because cloud has become the foundation of the digital economy and is the information infrastructure that supports various information technology applications This is under such a large national environment, our company has also made cloud computing the most important strategy, as well as the most important key business, and the most important infrastructure of the company. Everyone remembers that in 2019, the revenue we announced for cloud was 1.9 billion. Last year, we saw that we exceeded 100 billion. From this change in revenue, we can see how much the company values cloud computing, and as we develop to today, we have kept pace with the times. So before this, during our internal meeting, I mentioned whether we could upgrade cloud computing to what we call cloud intelligence computing. What does this concept mean? It means integrating the various technologies of traditional cloud computing with current intelligent computing and AI technologies, and after forming cloud intelligence computing, we can provide comprehensive information services related to computing power, models, data, ecology, applications, tools, etc. To put it simply, we are fully upgrading the original so-called three-layer architecture of cloud computing (IaaS, PaaS, SaaS) to AI + IaaS, AI + PaaS, AI + SaaS, and introducing a fourth model, MaaS (Model as a Service). Therefore, China Mobile has four key development directions in cloud intelligence computing, specifically including several aspects. The first is to integrate computing power infrastructure. Originally, it was mainly general computing, but now we are incorporating intelligent computing into the overall computing power infrastructure, integrating various computing resources to ensure that computing power services run on a single platform. We actually have a very good foundation in this area. In the first two years, we promoted this computing power network and the computing network brain, which can undertake the tasks mentioned earlier. Through the computing network brain, we can coordinate various computing powers, including cloud-edge-end computing power, general computing power, supercomputing power, quantum computing power, and various heterogeneous computing powers, all managed through the algorithm brain, allowing for on-demand use and flexible scheduling. This is the computing power infrastructure, which is equivalent to the original IaaS. The second is the AI-enabled tool platform. Research and development, testing, operations, and also 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 turn it into something similar to T-PaaS (Technology Platform as a Service). The T-PaaS structure has some technical content, so I won't elaborate on that. The third is that we provide one-stop model services, integrating and aggregating various development services, breaking down the barriers of traditional AI applications, making technology easier to apply across various industries. For large models, we aim to solve this problem, including researching the decision-making role of the "Nine Heavens" 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 be the TSMC of the AI field. Of course, today we don't have media here, so I can be a bit more vivid in my description, right? Everyone knows that TSMC makes chips; they purchase ASML's lithography machines and various equipment for chip production, and they also have some core equipment. They integrate, fuse, and combine these devices well within their TSMC factories and companies, and then operate them So now TSMC is the leader in the chip field, and its yield rate is very high. In the AI field, can we learn from TSMC's practices in chips? Of course, we also need to have our core capabilities in AI. This year, if you have DeepSeek, no problem; if your users want to connect to DeepSeek, no problem, I can help you connect and get it done. However, the services we provide to customers are not solely solved by AI; we also have other information technologies, so can we push this work forward in this regard? The fourth aspect is intelligent applications, similar to SaaS, AI SaaS, applicable to various intelligent scenarios of AI services, and other cloud services that can meet the rich intelligent needs of different industries. Therefore, I hope that in the development of the cloud, we can promote the development of the cloud according to this development model, forming a cloud intelligence computing model. Q6: Regarding the revenue targets for the personal customer market. I see that the goal for 2025 is to maintain stability and reverse the downward trend of 2024. I would like to ask, what are the main driving forces? The development of the personal market is crucial for the company's growth. I understand the personal market as the company's baseline, lifeline, and supply line. Currently, we are facing challenges, such as insufficient scale-driven momentum and the traditional communication demand becoming increasingly saturated. The homogenization of competition within the industry and cross-industry competition is intensifying. In this situation, if we continue to follow the original development model for the personal market, there will be no way to grow. We are also summarizing some of our past development models, such as driving growth through increments, relying on value-added through increased volume, and operating based on sales. How do we transition now? The chairman has proposed our operational guidance principles in three sentences: segmentation is the market foundation, stock operation, and value operation are long-term and strategic work for the company, and we should vigorously increase product supply and innovation. Based on implementing the three sentences proposed by the chairman, how do we operate in the personal market? We need to further clarify a customer-first, demand-led new paradigm. This new paradigm mainly highlights several changes: The first change is to extend. We need to further strengthen operations on the customer’s full lifecycle value, which means enhancing customer relationship management and customer experience management, which we refer to as lifetime value. The second aspect is to broaden. Previously, we proposed moving from "one person, one face" to "one person, a thousand faces." Now we believe that demand is the customer; in addition to providing functional value to customers, we also need to provide experiential value and emotional value, which requires further broadening. The third aspect is to become intelligent. The so-called intelligence refers to wisdom, as we are currently facing rapid technological advancements. We need to upgrade our existing products, such as traditional mobile cloud drives, video ringtones, and 5G messages, to further enhance business value and experiential value, making it easier and better for customers to use In addition, we need to strengthen our product innovation layout, such as the new 5G calling. The AI-driven innovations we use in our videos, including the embodied robots that the company will vigorously deploy in the future, I believe these will bring significant momentum to the company's growth. The chairman mentioned the need to increase product supply and enhance product innovation, which is the third change. The fourth change, I believe, is to further refine our operations, focusing on lean, meticulous, and precise operations. We need to revolve around the four transformations: customer integration, platform AI, operational platformization, and marketing efficiency. By leveraging digital intelligence and technology, we aim to further refine our intelligent operations. The fifth aspect is to strengthen customer experience management and relationship management. I am not sure how to say this in Cantonese, but in mainland China, we refer to it as "变铁" (transforming into iron). We aim to enhance our services and brand to foster a more harmonious relationship with our customers, ensuring they recognize and accept China Mobile's services and products. The final change is to become stronger. We have also proposed channels and capacity. In our current personal social operations, we are enhancing the construction of six major positions and 6+1. These six positions include community, government and enterprise, rural areas, schools, etc. Additionally, we need to build strong networks because we are transitioning from communication services to information services. This requires us to further enrich our products and applications in collaboration with our ecological partners. Customers now need not just a function but a solution. In this context, we will strengthen our cooperation with our ecological partners, and I believe that through these operations, we can achieve our guiding goals in the personal market with confidence. Q7: Is the company considering increasing share buybacks or recently implementing some stock incentive plans to repurchase some of the authorized shares? Is there such a plan? Or is there a plan for the future? So, after discussing so much today, we understand how the company is transforming, the chairman's analysis of the situation, and our strategies. The goal is to build a great China Mobile to present to investors, which is our most important point. Secondly, we certainly value dividends. I believe China Mobile has been quite generous. Since 2002, China Mobile has paid dividends twice a year, with the payout ratio increasing from 20% to 73% now. In 2002, I remember it was around 30 cents or so, and now it has risen to 5.09 yuan this year, indicating a significant increase in dividend strength. We have clear guidance for the future, aiming to reach over 75% by 2026, and this year we achieved 73%. What will happen after 2026? I believe that China Mobile's dividends are sustainable, predictable, and relatively stable, so everyone should have confidence in this As for share buybacks or increasing buybacks, it should be noted that China Mobile has had some buybacks in the past two years, specifically in 2022 and 2024, with a high probability of continuing to repurchase over HKD 1 billion. We have conducted some buybacks, which are beneficial for investors because after the buyback, the shares will be canceled, and once canceled, it will increase and enhance the earnings per share in the US market. Therefore, when we compare, we will adopt this buyback method. Of course, we consider many aspects for this buyback. One is whether the buyback meets regulatory requirements or legal regulations, as we do take into account the rights and interests of our long-term shareholders. During this process, we may also need to consider the company's financial situation, the market environment at that time, what kind of environment the capital market is in, and also consider the deviation of our stock price. There is a grasp of timing, and at this time, we will choose the right time and opportunity to conduct the buyback