China’s state telcos cut back investments, braces for 6G

China’s state-owned telecommunications giants are scaling back their capital expenditures while increasing shareholder dividends to follow government directives to improve market value and prepare for 6G development. The companies are prioritizing financial flexibility ahead of the next major technological upgrade.

China Telecom, China Mobile, and China Unicom, the country’s three largest telecom operators, have all announced steep reductions in capital spending for 2024 and 2025.

Capital spending goes down across tele-carriers

According to news outlet Nikkei Asia, China Telecom reported on Tuesday that its capital expenditure for 2024 totalled 93.51 billion yuan ($12.9 billion), down 5% from the previous year. The company expects to reduce it further to 83.6 billion yuan in 2025, an 11% decline that brings spending levels back to pre-5G expansion years. 

Chairman Ke Ruiwen confirmed that the overall investment trend would continue downward, except for emerging demands such as artificial intelligence (AI) infrastructure and 6G.

China Mobile, the country’s largest carrier with over 1 billion subscribers, has also implemented significant budget cuts. The company slashed its 2024 capital expenditure by over 9% to 164 billion yuan and plans to trim another 8% in 2025 to 151.2 billion yuan. 

The reductions bring spending close to 2012 levels when China Mobile invested 127.4 billion yuan. According to Chairman Yang Jie, the next major investment cycle is expected to focus on 6G and is unlikely to begin before 2028. Until then, the company will trickle more investments in AI and computational infrastructure.

China Unicom, the smallest of the three, recorded the sharpest drop in spending. The company cut its capital investment by 17% to 61.37 billion yuan in 2024 and will further reduce it to 55 billion yuan in 2025. 

“Our investment emphasis has already shifted away from mobile broadband to computing network capabilities for internet data centres and cloud,” said Tang Yongbo, Unicom’s vice president. 

Across the three operators, total capital spending for 2024 stood at 319 billion yuan, with projections for 2025 dropping to 289.8 billion yuan. When including China Tower, the state-backed tower infrastructure company, the total capital investment for 2024 was 351 billion yuan, marking one of the lowest levels in decades.

Share price upticks are now the focus

All three companies are reportedly increasing dividend payouts in accordance with government policies encouraging higher returns for shareholders.

China Mobile has pledged to push its payout ratio beyond 75% by 2026. The 2024 dividend per share increased 5.4% to 5.09 Hong Kong dollars, with total payouts exceeding 100 billion yuan for the first time. Chairman Yang mentioned that the company has distributed over 1.3 trillion yuan in dividends since its 1997 listing.

China Telecom followed suit, raising its 2024 annual dividend by 11% to 0.2598 yuan per share, amounting to a total payout of 23.77 billion yuan. The company has committed to maintaining this trend, targeting a dividend payout ratio of over 75% by 2026.

China Unicon reported the most substantial dividend increase, with a 20% rise to 0.4043 yuan per share, bringing its total payout to 12.37 billion yuan, more than four times the amount distributed in 2012. The company has also increased its interim dividend by 22.2% while maintaining a payout ratio of 55%.

Government calls for investment-focused strategies 

The business strategy change toward higher dividends and lower capital spending follows a directive from China’s State-owned Assets Supervision and Administration Commission (SASAC). 

Since 2022, the government has pushed state enterprises to improve market value and corporate governance and boost shareholder returns.

SASAC has instructed central enterprises to ensure “stability, durability, and predictability” in their financial policies, especially on increasing dividend payouts. The directive is part of a larger plan to strengthen China’s stock market and attract investment in state-owned companies.

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