China Telecom Operators: 3Q26 Preview: Growth Deceleration Priced In; Focus Shifts to AI Capex and Dividend Yield Support

Citi's 3Q26 preview for China telecom operators. Based on MIIT data, China's telecom industry service revenue declined 2.2% YoY in the first 8 months of 2026, mainly reflecting the VAT-driven reset rather than a comparable deterioration in underlying demand. We believe this slowdown is largely priced in, shifting investor focus toward AI infrastructure monetization and dividend support. Despite declining aggregate capex, over one-third of operators' 2026 investment is being redirected toward computing infrastructure, and we estimate their combined data-center capacity could double from 8.7GW in 2024 to 17.5GW by 2028E. H-shares remain more attractive on valuation, offering an average dividend yield of approximately 7%, above the 10-year average of 5.8%;