China Telecom 2025 Annual Report Interpretation: Operating Cash Flow Decreased 14.3%, Financial Expenses Increased 70.5%

Operating Revenue: Flat Scale, Optimized Structure

In 2025, China Telecom’s operating revenue reached 523.925 billion yuan, up only 0.1% year-over-year, with revenue scale remaining stable. From a business structure perspective, the dual-driven development of basic and digital services has shown results:

• Personal Customers: Mobile communication service revenue of 204.528 billion yuan, up 1.0%, with mobile users reaching 440 million and ARPU at 45.1 yuan. 5G-A network commercialization and AI application upgrades drive value enhancement.
• Home Customers: Fixed-line and smart home service revenue of 125.979 billion yuan, up 0.2%, with broadband users reaching 200 million. Smart home business revenue of 23.8 billion yuan, up 7.6%. Gigabit fiber upgrade and FTTR+X products promote home services toward full optical AI networks.
• Enterprise & Government Customers: Digital industry service revenue of 147.307 billion yuan, up 0.5%. Total self-owned and connected intelligent computing capacity reaches 91 EFLOPS, with over 110 industry large models and 350 industry AI agents serving more than 37,000 clients.
• International Business: Revenue of 19.26 billion yuan, up 14.1%, becoming a growth highlight. Expanding global cloud-network infrastructure and ecosystem to develop markets along the “Belt and Road.”

Net Profit: Slight Increase of 0.5%, Non-recurring Profit More Resilient

In 2025, net profit attributable to shareholders of the listed company was 33.185 billion yuan, up 0.5%. Non-recurring net profit was 31.329 billion yuan, up 1.9%, significantly outpacing net profit growth, indicating stronger core profitability. The impact of non-recurring gains and losses on net profit decreased; in 2025, non-recurring profit attributable to parent company shareholders was 1.856 billion yuan, down from 2.27 billion yuan in 2024, mainly due to increased gains/losses from asset disposals and reduced government subsidies.

Earnings Per Share: Flat, Non-recurring Earnings Improve

Basic earnings per share in 2025 were 0.36 yuan, unchanged from 2024. Non-recurring EPS was 0.34 yuan, up 1.9%, consistent with non-recurring net profit growth, reflecting stronger support from core business profitability.

Expenses: Structural Differentiation, Increased R&D Investment

Total operating expenses in 2025 amounted to 10.629 billion yuan, up 0.7%. Expense structure shows differentiation:

• Sales Expenses: 53.897 billion yuan, down 2.9%, mainly due to ongoing efforts to strengthen online-offline synergy, accelerate AI-driven marketing transformation, and improve sales efficiency.
• Management Expenses: 36.413 billion yuan, down 1.9%, benefiting from active cost reduction and efficiency improvements enabled by AI.
• Financial Expenses: 0.388 billion yuan, up 70.5%, mainly due to optimized capital structure—replacing bank deposits with higher-yield, low-risk structured deposits, with investment income recognized, leading to decreased bank interest income.
• R&D Expenses: 15.594 billion yuan, up 7.3%, mainly to accelerate building a tech-oriented enterprise, focusing on network, cloud, AI, quantum/security, and key core technology breakthroughs.

R&D Personnel: Workforce Expansion, Structural Optimization

In 2025, R&D staff numbered 47,164, accounting for 16.97% of total employees, up 1.39 percentage points from last year. The R&D team has a high educational level, with 442 PhDs and 15,353 master’s degree holders, making up 33.5%. The age structure is younger, with 72.9% under 30 and aged 30-40, providing talent support for technological innovation. The number of newly authorized invention patents was 2,863, up 14.8%, and 73 international standards were completed, up 6%, improving R&D output efficiency.

Cash Flow: Operating Cash Flow Under Pressure, Significant Changes in Investment & Financing

• Net cash from operating activities: 124.519 billion yuan, down 14.3%, mainly due to longer receivables collection periods in digital industry services and active social responsibility efforts supporting supply chain development, with timely payments per contracts.
• Net cash from investing activities: -97.84 billion yuan, a 3.4 percentage point narrowing decline, mainly due to precise investment and reduced capital expenditure cash outflows. Capex in 2025 was 80.4 billion yuan, focusing on computing infrastructure and network construction.
• Net cash from financing activities: -47.387 billion yuan, an expanded outflow by 10.5%, mainly due to increased debt repayments and interest-bearing liabilities.

Potential Risks

2. Economic and Policy Environment Risks: Intense industry competition, challenging transformation of new and old drivers, need to enhance reform and policy synergy, accelerate transition to service-oriented, tech-driven, and secure enterprise models.
3. Technological Innovation Risks: Explosive growth of large models, intensified competition in AI, computing services, and cloud business. The company must continuously improve innovation capacity, open up R&D results, and focus on four key areas—original innovation and core technology breakthroughs.
4. Network and Data Security Risks: Lower attack thresholds and larger scale increase security risks. New technologies and scenarios complicate security monitoring, requiring further strengthening of cybersecurity and data protection systems.
5. Emerging Business Risks in Strategic New Industries: Rapid tech updates, frequent policy changes, and fierce market competition demand enhanced R&D and application capabilities. Deep customer insight, ecosystem cooperation, and scenario-based solutions are essential.
6. International Business Risks: Global upheavals and complex geopolitical dynamics create uncertainties in policies of host countries/regions. Close monitoring of international developments, strengthening overseas compliance and risk management are necessary.

Senior Management Compensation: Stable Core Leadership

• Chairman Ke Ruiwen: Pre-tax total compensation of 751,100 yuan during the reporting period, plus 367,500 yuan in 2024 annual bonus and 837,200 yuan in 2022-2024 incentive.
• President Liu Guiqing: Pre-tax total of 732,600 yuan, plus 338,800 yuan in 2024 bonus and 753,500 yuan in 2022-2024 incentives.
• Executive Vice President Tang Ke: Pre-tax total of 682,400 yuan, plus 332,400 yuan in 2024 bonus and 750,800 yuan in 2022-2024 incentives.
• Executive Vice President & CFO Li Yinghui: Pre-tax total of 675,700 yuan, plus 328,800 yuan in 2024 bonus and 703,700 yuan in 2022-2024 incentives.
• Executive Vice President Liu Ying: Pre-tax total of 571,700 yuan, plus 164,400 yuan in 2024 bonus and 124,200 yuan in 2022-2024 incentives.

Executive compensation is closely linked to company performance and aims to motivate key management. The structure includes annual salary, annual bonus, and long-term incentives, balancing short-term results and long-term growth.

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