China imposing VAT on telecom services


The imposition of a value-added tax (VAT) , part of a broader tax reform push by the Chinese government, is expected to hurt the bottom lines of China Mobile (CHL), China Unicom (CHU), and China Telecom (CHA).

The announcement comes less than three months after the government issued MVNO licenses to 11 companies (inc. Alibaba) looking to offer mobile services using the networks of incumbents, and at a time when voice/SMS revenue streams are already being pressured by mobile messaging apps (most notably Tencent's WeChat).

Bernstein's Chris Lane thinks China Mobile's net profit could be hurt by 7%, and Unicom and Telecom's net profit by 25%, assuming an 11% VAT replaces a current 3% business tax.

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Comments (5)
  • 1gdanka
    , contributor
    Comments (113) | Send Message
     
    Me thinks CHL et al. will pass the tax on to customers?
    5 Mar 2014, 12:39 PM Reply Like
  • samuel_liu
    , contributor
    Comments (2753) | Send Message
     
    there is already an 1200 RMB signage fee for 3g/LTE, none for 2.5g
    5 Mar 2014, 12:56 PM Reply Like
  • 1gdanka
    , contributor
    Comments (113) | Send Message
     
    Samuel,

     

    If they add a small vat do you think that will affect CHL sales in a material way?
    6 Mar 2014, 12:04 PM Reply Like
  • samuel_liu
    , contributor
    Comments (2753) | Send Message
     
    Cn Mobile has so many users because of its GSM 2.5 service. I use that. Cn Unicom used the EU's 3g std which was the most superior to the other two.

     

    Cn Mobile subscribers are bottom feeders, no, I don't think the VAT will change Cn Mobile's sales, as most won't upgrade.
    6 Mar 2014, 12:09 PM Reply Like
  • 1gdanka
    , contributor
    Comments (113) | Send Message
     
    Thanks, good to speak to someone on the ground!
    7 Mar 2014, 10:28 AM Reply Like
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