UBS has released a research note stating that CHINA TELECOM, CHINA UNICOM, and CHINA MOBILE have recently launched token-based plans, providing individual and enterprise customers with access to various mainstream large language models (LLMs). Among them, CHINA TELECOM has made the fastest progress, having rolled out a nationwide token plan, while CHINA UNICOM and CHINA MOBILE are primarily introducing their offerings gradually through regional pilot programs and provincial cloud platforms. The firm maintains a "Neutral" rating on these three major Chinese telecom stocks.
The report notes that Chinese telecom operators announced plans to expand token services during their March earnings briefings. UBS views the launch of these token plans as a significant step towards standardizing AI consumption in China, which is expected to further accelerate the growth in token usage. Leveraging their nationwide customer bases and extensive distribution networks, telecom operators can extend AI adoption from hyperscale cloud providers and large enterprises further to small and medium-sized enterprises (SMEs) and individual users.
The firm believes this approach will help gradually transform token consumption into a utility-like subscription model, similar to the evolution of mobile data pricing in the past, thereby further increasing AI token usage and ecosystem stickiness. Year-to-date, telecom stock performance has been subdued, primarily due to limited organic business growth and the negative impact of increased value-added taxes on traditional telecom services. UBS sees the token plans as a new growth driver. If telecom operators experience an acceleration in revenue and net profit recovery and are perceived by the market as part of the AI infrastructure theme, it could present a potential re-rating opportunity.
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