China Mobile’s strategy is centered on communications, computing, AI

Investment Memorandum – China Mobile Limited

Executive Summary

China Mobile Limited (“China Mobile” or “the Company”) remains the world’s largest telecommunications operator by subscriber base and a leading integrated provider of communications, computing, and AI services. The Company demonstrates resilient financial performance, strong cash generation, and a clear strategic pivot toward high-growth digital infrastructure and AI-driven services.

While traditional telecom services show low growth, emerging segments (cloud, AI, computing) are becoming the primary drivers of long-term value creation. Near-term profitability is under pressure due to structural transition, but the Company is positioning itself to benefit from next-generation network technologies and digital transformation trends.

Investment Thesis

1. Stable Cash Flow with Strong Shareholder Returns

• FY2025 revenue reached RMB 1,050.2bn (+0.9% YoY).
• Net profit attributable to shareholders: RMB 137.1bn
• Dividend payout ratio: 75%, with total dividend of HK$5.27/share (+3.5% YoY).➡️ Implication: China Mobile offers a defensive, income-generating investment profile, attractive in volatile markets.

2. Transition to High-Growth Segments (Cloud & AI)

• Computing services revenue: RMB 89.8bn (+11.1% YoY).
• AI services revenue: RMB 90.8bn (+5.3% YoY).
• Intelligent computing demand surged (AI-related growth up to 279%).

➡️ Implication: Structural shift toward AI infrastructure and cloud computing positions China Mobile as a hybrid between a telecom operator and a digital infrastructure platform, supporting higher future valuation multiples.

3. Market Leadership and Scale Advantage

• Mobile subscribers: ~1.009bn (Q1 2026).
• 5G users: 668m, continuing expansion.
• IoT connections: 1.5bn+, world-leading scale.

➡️ Implication: Unmatched scale creates high entry barriers, strong pricing power, and cross-selling opportunities across digital services.

Financial Performance (Latest Update)

Q1 2026 Highlights

• Revenue: RMB 266.5bn (+1.0% YoY)
• Net profit: RMB 29.3bn (-4.2% YoY)
• EBITDA margin: 28.8% (declining)

➡️ Interpretation:

• Revenue stable, but profitability pressured by:
  • Investment in new technologies
  • Transition away from legacy telecom services
• “Other businesses” growing strongly (+12.7%), confirming shift toward non-traditional revenues

Strategic Positioning

China Mobile’s strategy is centered on:

• Three core pillars: communications, computing, AI
• Building integrated digital infrastructure
• Becoming a “world-class sci-tech service enterprise” by 2030–2035.pdf)

Key competitive advantages:

• Nationwide infrastructure dominance
• Deep integration of network + cloud + AI
• Strong government and industrial positioning

Key Growth Catalysts (Milestones – 2025)

The following milestones are critical in assessing future equity upside potential, as they reinforce technological leadership and new monetization avenues:

1. AI & Digital Platform Expansion

• Launch of MoMA (Mixture of Models and Agents) service engine
• Establishment of Jiutian AI Company

➡️ Impact: Accelerates transition into AI platform ecosystem, enabling:

• Enterprise AI monetization
• Industry-specific solutions
• Higher-margin digital services

2. Leadership in Next-Generation Internet Infrastructure

• Development of SRv6 (RFC9800) core Internet standard
• Launch of hollow-core optical fiber lines

➡️ Impact:

• Positions China Mobile at the forefront of next-gen global network standards
• Supports ultra-low latency use cases (AI, cloud, autonomous systems)
• Potential long-term pricing power in infrastructure

3. Breakthroughs in Quantum Communication

• Validation of QKD (quantum secure communication)

➡️ Impact:

• Strategic advantage in ultra-secure communications
• Potential application in:
  • Government networks
  • Financial institutions
• Long-term optionality with limited current valuation but high strategic importance

4. Satellite Communications License

• Granted license to operate satellite mobile communications

➡️ Impact:

• Entry into space-based connectivity market
• Expands coverage beyond terrestrial networks
• Aligns with global satellite competition (e.g., Starlink-type models)

5. Global Infrastructure Expansion

• Commercialization of 2Africa submarine cable (eastern segment)

➡️ Impact:

• Strengthens international bandwidth capacity
• Supports global cloud/data traffic growth
• Enhances competitiveness in international markets

6. ESG and Brand Strength

• Recognized among Top 10 Best Employers (2025)
• “ESG Model Demonstration Base”
• Top ESG ratings for three consecutive years

➡️ Impact:

• Supports institutional investor demand
• Enhances valuation through ESG premium

7. Nationwide Infrastructure Leadership

• Full dual gigabit coverage across all townships and villages

➡️ Impact:

• Reinforces monopoly-like infrastructure position
• Ensures long-term customer stickiness
• Enables monetization of advanced services nationwide

Risks

1. Declining Margins

• EBITDA and profit trending down in Q1 2026
• High investment requirements (AI, cloud, infrastructure)

2. Regulatory & Policy Risk

• VAT changes increasing tax burden.
• State influence on pricing and strategic priorities

3. Transition Execution Risk

• Legacy telecom revenues declining
• New businesses still scaling and less profitable

Valuation Perspective & Outlook

Short-Term Outlook

• Stable revenues but pressure on margins and earnings growth
• Continued heavy capex and innovation spending

Medium- to Long-Term Outlook

• Strong upside optionality driven by:
  • AI monetization
  • Cloud infrastructure
  • Next-gen networks (6G, quantum, satellite)

➡️ The Company is transitioning from a low-growth telecom utility to a technology-driven infrastructure platform, which could justify multiple expansion over time.

Conclusion

China Mobile represents a high-quality, defensive core holding with:

• Strong dividend yield
• Dominant market position
• Increasing exposure to structural growth themes (AI, cloud, connectivity)

Despite near-term profit pressure, the Company’s technological leadership and large-scale infrastructure platform create a compelling long-term investment case.