According to a new research report from Goldman Sachs-China, the three major, state owned telecom operators (China Mobile, China Telecom, China Unicom) are quietly becoming the core beneficiaries of China’s AI boom. One reason is that, thanks to their deployment of China’s most extensive cloud infrastructure, they can serve other cloud companies as well as provide their own cloud services to their end user customers. They also enjoy the cost and scale advantages of owning their own data centers and bandwidth. For some IaaS companies, data center and connectivity together account for as much as 60% of total expense, according to Goldman-China.
Goldman analysts believe that telecom operators’ cloud businesses have obvious cost advantages compared to other cloud companies. Those are the following:
- The big 3 Chinese network operators have built their own Data Centers (DCs) and so do not rely on external DC service providers. They even provide DC services to other cloud companies such as Alibaba, which makes the IDC expenses of their cloud business lower.
- The bandwidth cost of operator cloud business is significantly lower than that of other cloud companies because operators use their own network infrastructure, while other cloud companies need to pay operators for bandwidth and private network fees connecting different data centers.
- For the IaaS cloud business, if external DC and bandwidth are used, data center costs (DC services and bandwidth) will account for a considerable proportion of the total cost of the cloud company. Goldman cites QingCloud Technology as an example, its data center costs (including cabinets, bandwidth, etc.) account for 50%-60% of its total costs.
Looking ahead, the telcos are strongly placed to take advantage of the DeepSeek AI boom, thanks to their early embrace of DeepSeek and the government’s push to promote AI among the state-owned enterprises that account for about 30% of operator revenue, Goldman argues. The report states, “the state-owned enterprise background makes the deployment of AI/Deepseek by government agencies and state-owned enterprises more beneficial to telecom operators.”
In the past two weeks, China’s three major operators have begun to help important customers deploy DeepSeek models. China Mobile supports PetroChina in deploying a full-stack Deepseek model; China Telecom provides the same service to Sinopec; and China Unicom cooperates with the Foshan Municipal Bureau of Industry and Information Technology. More importantly, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) launched the “AI+” action plan on February 21 to encourage Chinese state-owned enterprises to accelerate the development and commercial application of AI. According to Goldman Sachs research, government-related customers account for about 30% of telecom operators’ cloud revenue. Therefore, the deployment of AI/DeepSeek by government agencies and state-owned enterprises will clearly benefit telecom operators.
Separately, China Mobile announced at Mobile World Congress 2025 in Barcelona that it is leveraging artificial intelligence to transform telecommunications networks and drive unprecedented data growth while positioning itself at the forefront of AI-Native network innovation. China Mobile Executive Vice President Li Huidi outlined the company’s ambitious “AI+NETWORK” strategy in a keynote address titled “AI+NETWORK, Pioneering the Digital-Intelligent Future” during the Global MBB Forum Top Talk Summit on Sunday.
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Li Huidi, executive vice president of China Mobile, speaks at the Global MBB Forum Top Talk Summit at Mobile World Congress in Barcelona, Spain, March 2, 2025. (Photo/China Mobile)
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References:
https://wallstreetcn.com/articles/3741901 (Chinese)
https://www.telecoms.com/partner-content/china-mobile-unveils-ai-network-strategy-at-mwc
https://www.lightreading.com/ai-machine-learning/china-telcos-rush-to-embrace-deepseek
China Telecom’s 2025 priorities: cloud based AI smartphones (?), 5G new calling (GSMA), and satellite-to-phone services