Central China: Three major telecommunications operators' eSIM mobile commercial trials approved, global telecommunications equipment revenue resumes growth.

Central China released a research report stating that from January to August 2025, China's telecommunications business volume continued to grow. By August 2025, the cumulative telecommunications business revenue reached 1.1821 trillion yuan, a year-on-year increase of 0.8%. As of October 13, 2025, the P/E ratio of the communication industry (TTM, excluding negative values) was 23.32, ranking at 71.09% percentile in the past five years and 35.62% percentile in the past ten years. Considering industry performance growth expectations and valuation levels, Central China maintains an investment rating of "stronger than the market" for the industry. It is recommended to focus on the optical communications, AI smartphones, and telecommunications operators sectors. Key points from Central China are as follows: In September 2025, the telecommunications industry index underperformed the Shanghai and Shenzhen 300 index. The telecommunications industry index rose by 0.96% in September, outperforming the Shanghai index (+0.64%) but underperforming the Shanghai and Shenzhen 300 index (+3.20%), the Shenzhen Component Index (+6.54%), and the Growth Enterprise Market Index (+12.04%). From January to August 2025, China's telecommunications business volume continued to grow. By August 2025, the cumulative telecommunications business revenue had reached 1.1821 trillion yuan, a year-on-year increase of 0.8%. As of August 2025, 5G mobile phone users from the three major operators and China Broadcast Network accounted for 63.4% of mobile phone users; the average monthly data usage per user (DOU) reached 20.87GB in August 2025, a year-on-year increase of 14.3%; and users with broadband access speeds of 1Gbps or higher accounted for 33.9% of the total number of users. Operators are focusing on key areas such as industrial manufacturing, digital government, healthcare, education, and energy, leveraging the integration advantages of cloud-network convergence and new-generation digital technologies to promote the close integration of digital technology with the real economy. In August 2025, China's communication equipment retail sales increased by 7.3% year-on-year. Canalys predicts that the global shipments of smartphones in 2025 are expected to reach 1.22 billion units, a year-on-year increase of 0.1%; the penetration rate of AI smartphones is expected to reach 34% in 2025, as the simplification of terminal models and the upgrade of chip computing power will further promote the penetration of AI smartphones in the mid-range price segment. Newly released flagship SoCs for 2025, such as Snapdragon 8s Gen4 and Dimensity 9400e, have the capability to smoothly run large models on endpoints, and the introduction of DeepSeek to a large extent reduces the chip computing power required for large models. With the combined effect of these two factors, AI smartphones are expected to maintain a high-speed penetration trend from 2025 to 2026. In August 2025, China's exports of optical modules declined by 29.7% year-on-year, while Thailand's exports of communication equipment, including optical modules, increased by 103.0% year-on-year. From January to August 2025, China's total exports of optical modules amounted to 24.69 billion yuan, a year-on-year decrease of 15.1%; in August 2025, the export value of Zhejiang province was 148 million yuan, an increase of 68.2% month-on-month; and the export value of Guangdong province was 542 million yuan, an increase of 24.0% month-on-month. In Q2 2025, the combined capital expenditure of the four major cloud operators in North America was 95.06 billion US dollars, a year-on-year increase of 66.6%. Cignal AI predicts that the data center optical component market will grow by over 60% in 2025, mainly due to the continued volume production of 400G/800G products. Operators will begin a large-scale transition to 1.6T optical modules and 800ZR coherent modules starting in H2 2025, and 800G data center optical modules for AI and general computing are expected to be the fastest-growing segment in the 2025 market. Maintain an investment rating of "stronger than the market" for the industry. As of October 13, 2025, the P/E ratio of the communication industry (TTM, excluding negative values) was 23.32, ranking at 71.09% percentile in the past five years and 35.62% percentile in the past ten years. Considering industry performance growth expectations and valuation levels, maintain an investment rating of "stronger than the market" for the industry. It is recommended to focus on the optical communications, AI smartphones, and telecommunications operators sectors. 1) Optical communications: The outlook for capital expenditure by top cloud operators in 2025 is optimistic, and overseas computing power is developing rapidly. The development of AI is driving the construction of large data centers, leading to continuous and stable growth in demand for optical components. The increasing reliability requirements and shortened iteration cycles of optical modules are significantly raising the industry's technological threshold, and the advantages of products from top optical module manufacturers will be further highlighted. Against the background of Sino-US trade friction, the substitution of domestically produced optical chips is strengthening, with a greater potential for performance elasticity. The continued development of domestic computing power will bring new increments to businesses such as switching chips, switches, and integrated training and recommendation machines. It is recommended to focus on: ZTE Corporation, Eoptolink Technology Inc., Huagong Tech, Accelink Technologies, Henan Shijia Photons Technology, and T&S Communications. 2) AI smartphones: Iterative upgrades in functionality and the innovation of AI-enhanced technologies may bring about a new user experience, and innovation and high-end development in AI smartphones are expected to increase average selling prices and improve profit margins. It is recommended to focus on: ZTE Corporation, Shenzhen Sunway Communication. 3) Telecommunications operators: The three major operators are quality dividend assets, with cash dividends twice a year at mid-year and year-end, with the dividend ratio expected to continue to increase, offering high-value dividend yields. The three major telecommunications operators have been approved for commercial trials of eSIM phones, which will help them expand their business scenarios and promote industry ecosystem upgrades. The improvement in the quality of traditional business revenue for operators and the expected decrease in capital expenditures are likely to reduce future depreciation and amortization costs, maintaining a stable operation. In addition, operators, leveraging their advantages in areas such as data centers, big data, and network infrastructure, are expected to use AI to restructure their business models. It is recommended to focus on: China Mobile Limited, China United Network Communications, China Telecom Corporation. Risk warning: Risks related to international trade disputes; risks related to supply chain stability; cloud operators or operator capital expenditures below expectations; digital China construction below expectations; AI development below expectations; intensified industry competition.