According to a research report from Citigroup, China Mobile (00941), China Telecom (00728), and China Unicom (00762) have announced that, effective January 1, 2026, the tax category originally applicable to value-added telecommunications services will be adjusted. The affected services include mobile data services, SMS, multimedia messaging services (MMS), and internet broadband connection services utilizing wired networks, mobile internet, satellites, or the internet. These services will be reclassified as basic telecommunications services, and their applicable value-added tax (VAT) rate will be correspondingly increased from 6% to 9%.

Citigroup believes that, considering market competition and the need for stability, telecom operators are unlikely to pass the increased tax burden on to consumers by adjusting data plan pricing. Consequently, this adjustment could potentially impact their service revenue—which constitutes the majority of their total revenue—by approximately 3%. Citigroup posits that a decline in service revenue could lead to a certain degree of deleveraging effect.

However, these companies still need to meet key performance indicators for state-owned enterprises by year-end. The bank considers it premature to draw conclusions about the potential impact on dividend distributions at this stage and anticipates gaining more information from the financial reports to be released in March.