China Telecom's revenue and profit both faced pressure in the first quarter, reflecting the reality of saturated growth in traditional telecommunications services and intensifying industry competition.
On Thursday, China Telecom released its first-quarter report for 2026. During the reporting period, the company achieved operating revenue of 131.4 billion yuan, a decrease of 2.32% year-on-year. Net profit attributable to shareholders of the listed company was 7.4 billion yuan, down 17.08% compared to the same period last year.
However, beneath the surface of declining profits, a positive signal emerged in the company's operational quality. Net cash flow from operating activities reached 23.2 billion yuan, a significant increase of 114.44% year-on-year, nearly doubling. The company attributed this primarily to intensified efforts in collecting accounts receivable and strict adherence to contractual payment schedules, demonstrating proactive management in cash flow.
Simultaneously, the company's strategic emerging businesses maintained strong momentum. Revenue from eCloud grew by 6.8% year-on-year, while Smart business revenue surged by 39.4% year-on-year. The number of 5G package subscribers exceeded 314 million, with the penetration rate rising to 71.3%. These figures indicate that China Telecom is accelerating its transformation from a traditional operator towards an "AI service provider," with the shift in growth drivers becoming increasingly clear. The report explicitly stated the future strategic direction as "aiming to build a leading AI service provider, with Token services as the main operational focus."
**Revenue and Profit: Under Pressure, Declines Warrant Attention** In Q1 2026, China Telecom reported operating revenue of 131.4 billion yuan, down 2.32% year-on-year. Service revenue was 122.7 billion yuan.
Pressure on the profit side was more pronounced: total profit was 9.3 billion yuan, a decrease of 17.62% year-on-year. Net profit attributable to shareholders was 7.4 billion yuan, down 17.08%. Net profit after deducting non-recurring gains and losses was 6.6 billion yuan, falling sharply by 25.28% year-on-year.
Basic earnings per share were 0.08 yuan, down 20% from 0.10 yuan in the same period last year. The weighted average return on equity was 1.58%, a decrease of 0.36 percentage points year-on-year.
Regarding non-recurring items, the total for the period was approximately 776 million yuan. This included a contribution of about 671 million yuan from fair value changes of cash-settled share-based payments and about 268 million yuan from government grants. However, gains/losses on the disposal of non-current assets dragged down results by about 381 million yuan. The approximately 776 million yuan difference between net profit after non-recurring items and net profit indicates that the decline in the company's core operational profitability was actually greater, requiring investor attention.
**Cost Control: Multiple Expenses Reduced, R&D Investment Bucks the Trend** Against the backdrop of revenue pressure, the company demonstrated strong cost control capabilities.
* Operating costs: 94.4 billion yuan, down 0.5% year-on-year. * Selling expenses: 13.4 billion yuan, down 1.6% year-on-year. * Administrative expenses: 10.1 billion yuan, down 2.6% year-on-year. * Financial expenses: 17 million yuan, a significant decrease of 80.4% year-on-year, indicating effective compression of interest expenses. * R&D expenses: 1.8 billion yuan, an increase of 1.7% year-on-year, the only expense category that grew against the trend, reflecting the company's strategic intent to accelerate building a technology-leading enterprise and continuously increase investment in core technology R&D.
Notably, credit impairment losses reached 3.737 billion yuan, a substantial increase of approximately 1.07 billion yuan compared to 2.665 billion yuan in the same period last year, representing a rise of about 40%. The rapid climb in this item was a significant factor dragging down profits and aligns with the context of intensified accounts receivable collection efforts—the expansion of the accounts receivable scale brought higher impairment pressure.
**Operating Cash Flow: A Standout Doubling, Slight Adjustments in Balance Sheet Structure** Net cash flow from operating activities was 23.2 billion yuan, up 114.44% year-on-year, the highlight of the quarterly report. Details from the cash flow statement show that cash paid for goods and services decreased significantly to 51.4 billion yuan from 65.1 billion yuan in the same period last year, a drop of about 21%, which was the core driver of the cash flow improvement.
On the asset side, total assets reached 879.1 billion yuan, an increase of 0.97% from the end of the previous year. Accounts receivable increased from 50.1 billion yuan to 67.3 billion yuan, a rise of about 34%, echoing the significant increase in credit impairment losses. Financial assets at fair value through profit or loss increased from 11.7 billion yuan to 27.3 billion yuan, indicating more active short-term fund utilization. Fixed assets decreased from 415.7 billion yuan to 401.4 billion yuan, while construction in progress increased from 56.5 billion yuan to 63.6 billion yuan, showing continued progress in capital expenditure.
On the liability side, total current liabilities amounted to 329 billion yuan, a slight increase from the end of the previous year. Employee benefits payable increased from 20 billion yuan to 27.6 billion yuan, showing clear seasonal characteristics (Q1 is typically a peak period for accrued salaries). Lease liabilities decreased from 25.1 billion yuan to 20.8 billion yuan, continuing the deleveraging trend. Net assets attributable to shareholders of the listed company were 468.3 billion yuan, an increase of 1.63% from the end of the previous year.
**User Data: 5G Penetration Rises, Growth Slows** As of March 31, 2026, China Telecom's mobile subscriber base reached 441 million, an increase of approximately 11.08 million year-on-year. However, the net addition in the first quarter was only 1.9 million, significantly slower than the net addition of 4.95 million in the same period last year, indicating a saturation trend in the mobile user market.
The number of 5G package subscribers reached 314 million, an increase of approximately 47.92 million year-on-year. Net additions in Q1 were 12.32 million, also lower than the 15.48 million net additions in the same period last year, but the penetration rate has risen to 71.3%, remaining at a high level. Total mobile internet traffic increased by 17.7% year-on-year, and average mobile internet data usage (DOU) reached 23GB, up 12.6% year-on-year, indicating continued value release from data traffic.
The number of wired broadband subscribers reached 202 million, with a net addition of 440,000 in Q1, lower than the 670,000 net additions in the same period last year. The penetration rate of gigabit broadband subscribers is about 34%, suggesting room for further growth.
**Strategic Emerging Businesses: eCloud and Smart Revenue Become Core Growth Poles** Against the backdrop of slowing growth in traditional businesses, the company's strategic emerging businesses performed notably well.
Revenue from eCloud grew by 6.8% year-on-year, and Smart business revenue surged by 39.4% year-on-year, becoming the core engine driving the optimization of the overall business structure.
The company continues to deepen its integrated intelligent cloud system encompassing "computing power, platform, data, models, and applications," and is fully advancing its "AI+" initiative. Notably, the report for the first time explicitly proposed "Token services as the main operational focus," concretizing the commercialization path for AI services. This strategic statement signifies that China Telecom is operationalizing large model inference services as a new revenue stream, gradually aligning with the AI commercialization logic of major domestic internet firms.
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