Goldman Sachs: AI Token Plans Boost ARPU, but Soft 5G Deployment; China Telecom, Unicom, Tower Downgraded to Sell
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Goldman Sachs notes that newly launched artificial intelligence token programs by Chinese telecommunications operators could bolster average revenue per user. However, sluggish 5G base station deployments and a higher value-added tax rate create significant headwinds. The firm subsequently downgraded China Telecom, China Unicom, and China Tower to Sell from Neutral.
New 5G base stations totaled 51,000 in April 2026, bringing cumulative additions to 171,000 through the first four months, representing a 9 percent year-over-year decline. Analysts project 540,000 new stations for the full year 2026, falling short of the 588,000 deployed in 2025. Simultaneously, the value-added tax rate increased from 6 percent to 9 percent starting in January 2026, pressuring corporate profitability. First-quarter 2026 results reflected these challenges; China Telecom revenue dropped 3 percent with net profit falling 17 percent, while China Unicom experienced similar declines.
Goldman Sachs subsequently cut its 2026 through 2028 earnings estimates across the board. Target prices were lowered accordingly: China Telecom was reduced to HK$4.2, China Unicom to HK$6.0, and China Tower to HK$8.1. While AI applications may eventually drive incremental revenue, broader penetration will require time, limiting the ability to offset immediate macroeconomic and operational pressures.
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