Citi Research: Anticipated VAT Rate Change Could Affect Service Revenue of Three Major Telecoms by Approximately 3%
Tax Adjustment Announcement: Starting January 1, 2026, the tax for 'value-added telecommunication services' will be adjusted, increasing the VAT rate from 6% to 9% for services like mobile data, SMS, and internet broadband.
Impact on Revenue: Citi Research estimates that the tax change could lead to a 3% potential impact on service revenue for major telecom operators, as they may not pass the increased tax burden onto consumers due to market competition.
Trade with 70% Backtested Accuracy
Analyst Views on 00728
About the author
Citi Research: Anticipated VAT Rate Change Could Affect Service Revenue of Three Major Telecoms by Approximately 3%
Tax Adjustment Announcement: Starting January 1, 2026, the tax for 'value-added telecommunication services' will be adjusted, increasing the VAT rate from 6% to 9% for services like mobile data, SMS, and internet broadband.
Impact on Revenue: Citi Research estimates that the tax change could lead to a 3% potential impact on service revenue for major telecom operators, as they may not pass the increased tax burden onto consumers due to market competition.
CICC Anticipates Short-Term Pressure on Chinese Telecoms' Share Prices
VAT Increase on Telecom Services: China's Ministry of Finance and State Administration of Taxation have raised the VAT on telecommunication services, which is expected to impact operators' profits without passing the tax burden onto customers by 2026.
CICC's Earnings Forecasts: CICC has revised its earnings forecasts for China Mobile and China Telecom, maintaining 2025 estimates but lowering revenue and net profit projections for 2026 due to the VAT changes.
Market Impact: The share prices of Chinese telecom companies may experience short-term pressure as the market adjusts to the new tax policy and the lowered earnings outlook.
Target Price Adjustments: While CICC has kept its original ratings for the telecom companies, it has reduced its target prices in light of the anticipated financial impacts from the VAT increase.
<JPM Research> CN Telecom VAT Increase Expected to Affect CHINA MOBILE the Least
VAT Adjustment Announcement: Chinese telecom companies are increasing the value-added tax (VAT) on mobile data, SMS/MMS, and internet broadband services from 6% to 9%, which is expected to affect their net profits.
Impact on Net Profits: JPMorgan estimates that the profit impacts for CHINA MOBILE, CHINA TELECOM, and CHINA UNICOM will be 7.1%, 12.6%, and 11.9% respectively by 2026, with CHINA MOBILE likely facing the least damage due to its higher gross profit margin.
Dividend Yield Forecasts: JPMorgan predicts that the dividend yields for CHINA MOBILE, CHINA TELECOM, and CHINA UNICOM will be 7%, 5.7%, and 6.8% respectively in 2026, maintaining their attractiveness compared to the Hang Seng Index (HSI).
Investment Rating: Despite the VAT increase, JPMorgan has maintained an Overweight rating on the three telecom companies, indicating a positive outlook for their stock performance.
HSI Ends Day with a 611-Point Drop; Declines in Commodities, Telecoms, Chips, and Autos
Market Decline: Hong Kong stocks experienced significant losses, with the HSI dropping 611 points (2.2%) to close at 26,775, influenced by a volatile commodity market and declining resource stocks.
Precious Metals and Resource Stocks: Gold and silver prices fell sharply, with major companies like SD GOLD and ZHAOJIN MINING seeing declines of over 8%, while resource stocks like JIANGXI COPPER and CHALCO also reported significant losses.
Telecom Sector Impact: Telecom companies faced declines due to an increase in VAT from 6% to 9%, with CHINA UNICOM and CHINA TELECOM dropping over 6%, and CHINA MOBILE falling by 2.3%.
Automotive and Chip Sector Struggles: Automakers reported substantial sales declines, with BYD COMPANY and XPENG-W experiencing drops of 30% YoY and 34% YoY respectively, while the chip sector also faced losses, particularly for SMIC and HUA HONG SEMI.
M Stanley: CN Telecoms' EPS and DPS for 2026 Anticipated to Decline Due to VAT Rate Increase
VAT Rate Increase: China's Ministry of Finance and State Administration of Taxation have raised the VAT rate on basic telecom services, including mobile data and broadband, from 6% to 9%, which is expected to negatively impact the revenue and profits of major telecom companies.
Impact on Telecom Companies: Morgan Stanley estimates that China Telecom and China Unicom could see their earnings per share (EPS) affected by 14.1% and 15.2%, respectively, while China Mobile may experience a 7.8% impact due to its higher profit margin.
Future Earnings Forecast: The current earnings per share (EPS) and dividend per share (DPS) forecasts for Chinese telecoms do not account for the new tax rate, suggesting potential declines in EPS and DPS by 2026 if dividend payout ratios remain unchanged.
Industry Rating Downgrade: Morgan Stanley has downgraded the industry rating for Chinese telecoms to Neutral and adjusted the H-share ratings for the three major telecom companies to Equalweight in light of the VAT increase.
UBS Projects CN Telecom VAT Increase to Affect Earnings of China Mobile, China Telecom, and China Unicom by 9%, 18%, and Over 18% Respectively
VAT Adjustment Announcement: China's three major telecom operators will see a VAT increase from 6% to 9% for mobile data, SMS/MMS, and internet broadband services starting January 1, 2026.
Impact on Earnings: UBS estimates that this VAT hike will significantly affect the earnings of the telecom giants, as these services contribute 45-60% of their projected revenues in 2025.
Projected Revenue Decline: The VAT increase is expected to reduce service revenues by approximately 1.5-2%, leading to a projected net profit impact of around 9% for CHINA MOBILE, 17.9% for CHINA TELECOM, and 18.2% for CHINA UNICOM based on 2025 forecasts.
Stock Market Reactions: Following the announcement, UBS downgraded CHINA MOBILE to Neutral and adjusted its target price, while short selling activity increased for all three telecom companies.
Citi Research: Anticipated VAT Rate Change Could Affect Service Revenue of Three Major Telecoms by Approximately 3%
Tax Adjustment Announcement: Starting January 1, 2026, the tax for 'value-added telecommunication services' will be adjusted, increasing the VAT rate from 6% to 9% for services like mobile data, SMS, and internet broadband.
Impact on Revenue: Citi Research estimates that the tax change could lead to a 3% potential impact on service revenue for major telecom operators, as they may not pass the increased tax burden onto consumers due to market competition.
CICC Anticipates Short-Term Pressure on Chinese Telecoms' Share Prices
VAT Increase on Telecom Services: China's Ministry of Finance and State Administration of Taxation have raised the VAT on telecommunication services, which is expected to impact operators' profits without passing the tax burden onto customers by 2026.
CICC's Earnings Forecasts: CICC has revised its earnings forecasts for China Mobile and China Telecom, maintaining 2025 estimates but lowering revenue and net profit projections for 2026 due to the VAT changes.
Market Impact: The share prices of Chinese telecom companies may experience short-term pressure as the market adjusts to the new tax policy and the lowered earnings outlook.
Target Price Adjustments: While CICC has kept its original ratings for the telecom companies, it has reduced its target prices in light of the anticipated financial impacts from the VAT increase.
<JPM Research> CN Telecom VAT Increase Expected to Affect CHINA MOBILE the Least
VAT Adjustment Announcement: Chinese telecom companies are increasing the value-added tax (VAT) on mobile data, SMS/MMS, and internet broadband services from 6% to 9%, which is expected to affect their net profits.
Impact on Net Profits: JPMorgan estimates that the profit impacts for CHINA MOBILE, CHINA TELECOM, and CHINA UNICOM will be 7.1%, 12.6%, and 11.9% respectively by 2026, with CHINA MOBILE likely facing the least damage due to its higher gross profit margin.
Dividend Yield Forecasts: JPMorgan predicts that the dividend yields for CHINA MOBILE, CHINA TELECOM, and CHINA UNICOM will be 7%, 5.7%, and 6.8% respectively in 2026, maintaining their attractiveness compared to the Hang Seng Index (HSI).
Investment Rating: Despite the VAT increase, JPMorgan has maintained an Overweight rating on the three telecom companies, indicating a positive outlook for their stock performance.
HSI Ends Day with a 611-Point Drop; Declines in Commodities, Telecoms, Chips, and Autos
Market Decline: Hong Kong stocks experienced significant losses, with the HSI dropping 611 points (2.2%) to close at 26,775, influenced by a volatile commodity market and declining resource stocks.
Precious Metals and Resource Stocks: Gold and silver prices fell sharply, with major companies like SD GOLD and ZHAOJIN MINING seeing declines of over 8%, while resource stocks like JIANGXI COPPER and CHALCO also reported significant losses.
Telecom Sector Impact: Telecom companies faced declines due to an increase in VAT from 6% to 9%, with CHINA UNICOM and CHINA TELECOM dropping over 6%, and CHINA MOBILE falling by 2.3%.
Automotive and Chip Sector Struggles: Automakers reported substantial sales declines, with BYD COMPANY and XPENG-W experiencing drops of 30% YoY and 34% YoY respectively, while the chip sector also faced losses, particularly for SMIC and HUA HONG SEMI.
M Stanley: CN Telecoms' EPS and DPS for 2026 Anticipated to Decline Due to VAT Rate Increase
VAT Rate Increase: China's Ministry of Finance and State Administration of Taxation have raised the VAT rate on basic telecom services, including mobile data and broadband, from 6% to 9%, which is expected to negatively impact the revenue and profits of major telecom companies.
Impact on Telecom Companies: Morgan Stanley estimates that China Telecom and China Unicom could see their earnings per share (EPS) affected by 14.1% and 15.2%, respectively, while China Mobile may experience a 7.8% impact due to its higher profit margin.
Future Earnings Forecast: The current earnings per share (EPS) and dividend per share (DPS) forecasts for Chinese telecoms do not account for the new tax rate, suggesting potential declines in EPS and DPS by 2026 if dividend payout ratios remain unchanged.
Industry Rating Downgrade: Morgan Stanley has downgraded the industry rating for Chinese telecoms to Neutral and adjusted the H-share ratings for the three major telecom companies to Equalweight in light of the VAT increase.
UBS Projects CN Telecom VAT Increase to Affect Earnings of China Mobile, China Telecom, and China Unicom by 9%, 18%, and Over 18% Respectively
VAT Adjustment Announcement: China's three major telecom operators will see a VAT increase from 6% to 9% for mobile data, SMS/MMS, and internet broadband services starting January 1, 2026.
Impact on Earnings: UBS estimates that this VAT hike will significantly affect the earnings of the telecom giants, as these services contribute 45-60% of their projected revenues in 2025.
Projected Revenue Decline: The VAT increase is expected to reduce service revenues by approximately 1.5-2%, leading to a projected net profit impact of around 9% for CHINA MOBILE, 17.9% for CHINA TELECOM, and 18.2% for CHINA UNICOM based on 2025 forecasts.
Stock Market Reactions: Following the announcement, UBS downgraded CHINA MOBILE to Neutral and adjusted its target price, while short selling activity increased for all three telecom companies.
