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Last year, the total capital investment by three Chinese state telecom operators reached a peak, with a greater focus on dividend payments following government encouragement. In 2023, China Mobile, China Telecom, China Unicom, and their affiliate, China Tower, collectively invested 385 billion yuan (USD 53.3 billion)—a 2% increase from the previous year. However, their combined investment plans for 2024 amount to 366 billion yuan, a 5% decrease.

The reason for this decline can be attributed to the peak in 5G investment. China already has 3.5 million 5G base stations, serving 851 million 5G subscribers, as of February. China Telecom's capital spending in 2023 was 98.8 billion yuan, up 7%, but is expected to decrease by 3% in 2024. The main reason for this decline is a shift in investment focus from mobile networks to industry digitalization.

China Mobile, the largest carrier, saw its investment peak in 2022 and is expected to decrease by 4% in 2024. Notably, the overall investment in 5G will decrease in the coming years. Contrastingly, investment in computing power to support AI and cloud computing is expected to increase by over 20% in 2024.

Moreover, China Unicom's network investment has reached a turning point, with a slight decrease in capital spending in 2023 and a more significant reduction planned for 2024. In light of this, the company has partnered with China Telecom to save on capital spending for 5G investment. While investment in computing power is expected to rise, overall investment will be lower than network investment.

Unless a notable strategic opportunity emerges, there's a persistent downward trajectory in investments. Meanwhile, as capital expenditures decrease, dividends are slated for an increase.

A Strategic Focus

The decision by China Mobile, China Telecom, and China Unicom to ramp up their cash dividend payouts carries profound implications both for these telecommunications behemoths and the broader economic landscape of China. Firstly, it signals a pivotal shift in the strategic priorities of central companies, as they pivot towards a more market-oriented approach under the government's directive. By prioritizing market values and investor returns, these companies are acknowledging the imperative to adapt to evolving market dynamics and investor expectations.

Moreover, the increased emphasis on cash dividends underscores a fundamental recognition of the importance of shareholder value maximization. By providing direct returns to investors through dividends, these companies aim to cultivate investor confidence, attract new capital, and bolster their standing in the competitive telecommunications sector. This move also serves to align the interests of shareholders with those of the company, fostering a mutually beneficial relationship that incentivizes long-term investment and sustainable growth.

Furthermore, the decision to enhance cash dividends reflects a broader trend towards financial transparency and accountability within China's state-owned enterprises. By increasing dividend payouts, these companies are demonstrating their commitment to efficient capital allocation and prudent financial management, thereby enhancing overall corporate governance standards and investor trust.

Overall, the decision by China Mobile, China Telecom, and China Unicom to bolster their cash dividend payouts signifies a strategic realignment towards market-driven practices and investor-centric policies. As these telecommunications giants navigate the complexities of an ever-evolving market landscape, their commitment to providing direct returns to investors underscores a forward-thinking approach aimed at driving sustainable growth and maximizing shareholder value in the years to come.

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