| BEIJING, March 5
BEIJING, March 5 China will trial a new
value-added tax for telecommunication services providers as a
replacement for business tax, Premier Li Keqiang said on
Wednesday at the opening of the annual meeting of parliament, a
change which could hit the companies' profits.
The trial is part of a set of reforms aimed at state-owned
enterprises such as China Telecom Corp Ltd, China
Unicom Hong Kong Ltd and China Mobile Ltd,
the world's biggest mobile carrier by subscribers.
Li did not provide details, but some analysts expect VAT of
around 11 percent and a start date in the first half of this
year - just as China's three carriers are increasing spending on
fourth-generation mobile and broadband networks.
Consumers could be the main beneficiary of any tax reform as
carriers could offer free or discounted handsets with service
contracts to avoid high taxation, KPMG wrote in June.
VAT will certainly have a negative impact on the carriers'
bottom line, said Neil Juggins, a Hong Kong-based regional
telecoms analyst at JI Asia, an affiliate of Societe Generale.
"What they are saying they don't know is just how negative
it will be," he said.
China Mobile's shares were down 0.34 percent in afternoon
trade on Wednesday versus a 0.31 fall in the Hang Seng Index
. China Unicom was down 1.92 percent and China Telecom was
up 0.3 percent.
"We have discussed this for a while, but we haven't received
any official notice from the government," said Zhou Xiaoke, a
Hong Kong-based spokesman for China Unicom.
"We support the government and we will promote the policy,
but since we haven't received the official notice it is too
early to talk about (the financial impact)," Zhou said.
China Telecom declined to provide immediate comment while
China Mobile was not available for immediate comment.
The government is also encouraging greater non-state
participation in state-owned enterprises.
In December, China issued licenses for private companies,
including e-commerce giant Alibaba Group Holding Ltd
to act as mobile virtual network operators (MVNOs),
who can lease excess network capacity from carriers and offer
services under their own brands.
"We will formulate measures for non-state capital to
participate in investment projects of central government
enterprises, and allow non-state capital to participate in a
number of projects in areas such as banking, oil, electricity,
railway, telecommunications, resources development and public
utilities," Premier Li said in his speech.
China will also permit non-public enterprise participation
in franchising, Li said.
In a report also released on Wednesday, the National
Development and Reform Commission (NDRC) highlighted its plans
to "strengthen the country's infrastructure for broadband and
"We will implement China's broadband strategy, support
efforts to build 4G mobile communications networks and develop
4G businesses, and advance the delivery of telecommunications,
radio and television, and Internet access over a single
broadband connection," the NDRC said.
China's leadership flagged the growing importance of
information technology development and Internet security last
week when state media announced President Xi Jinping would helm
an Internet security body, with the goal of turning China into a
Among the body's aims would be to coordinate Internet
security among different sectors, and to draft national
strategies, development plans and major policies, Xi was quoted
as saying by the official Xinhua news agency.
(Additional reporting by Beijing Newsroom; Editing by