China Mobile: Facing tax reform impacts head-on, is the dividend policy still unchanged?

Ask AI · How Will the New VAT Policy Affect China Mobile’s Profit Structure?

China Mobile (600941.SH/00941.HK) released its 2025 annual report and Q4 financial results (for the period ended December 31, 2025) after the close of trading on the Hong Kong market on the evening of March 26, 2026, Beijing time. Key points are as follows:

1, Operating data: revenue up slightly, operating profit trending steadily higher. $China Mobile (00941.HK) reported total operating revenue of RMB 255.5 billion in Q4 2025, up 2.5% year over year. The company’s communications business grew slightly year over year in the quarter, and businesses such as product sales have posted year-over-year growth of around 14% for two consecutive quarters. China Mobile’s operating profit in Q4 2025 was RMB 25.6 billion, up 8% year over year, mainly benefiting from a decline in operating expense ratio;

2. Core business performance: “rate cuts to attract traffic,” steady broadband growth.

a) Traffic business: still the largest item in the company’s revenue, accounting for 40% of total revenue. In the second half, the traffic business generated revenue of RMB 173.6 billion, down 4% year over year. Within this, traffic usage volume still increased by 10% year over year, but the average unit price of mobile data plans fell by as much as 13%; the company still hopes to win users by lowering rates;

b) Broadband business: steady growth. In the second half, the company’s broadband business generated revenue of RMB 73.0 billion, up 8.6% year over year, driven by the growth in broadband subscriber numbers and the dual boost from higher average monthly charges per customer.

c) Other business: voice calling and SMS are both declining, while information services remain in growth.

3. Capital expenditures: cut investment in communications networks, increase investment in computing power. $China Mobile (600941.SH) reported Q4 2025 capital expenditures of approximately RMB 39.8 billion, roughly flat year over year.

Based on the company’s outlook, it expects 2026 capital expenditures of RMB 136.6 billion, down RMB 15–20 billion year over year. It will mainly reduce capital expenditures for communications networks and continue increasing capital expenditures for computing power networks (around RMB 37.8 billion).

4. ROE and dividend situation: the company’s TTM ROE for this quarter is 10%, flat year over year. Total dividends and share buybacks in Q2 and Q3 combined reached RMB 104.2 billion; the company’s current dividend payout ratio continues to stay at 72% or above.

Dolphin Jun’s overall view: “Higher tax” still means high dividends—the “computing power” is the growth hope

China Mobile’s performance this quarter largely met expectations. On the revenue side, growth mainly came from areas such as product sales, while the core communications business saw only slight growth. The sharp decline on the profit side was mainly due to other income and expenses, while operating profit grew 8% year over year.

In terms of the specific businesses: ① the traffic business continues to carry out the strategy of “cutting rates to attract traffic.” In the second half, the average traffic price fell by 13%, and the company’s mobile user base continued to show a modest increase; ② broadband business maintained growth of around 8% in the second half, with both subscriber numbers and tariffs/charges improving; ③ information services, product sales, and other businesses showed growth performance, with growth mainly driven by services such as computing power.

Compared with the steady business data, the market is paying more attention to the following:

a) Capital expenditure profile: the company’s capital expenditures this quarter were RMB 39.8 billion, roughly flat year over year. The capital expenditure outlook provided by the company suggests that in 2026 capital expenditures will be RMB 136.6 billion, down 9.5% year over year. The company plans to cut capital expenditures for communications networks and continue increasing capital expenditures for computing power networks (around RMB 37.8 billion).

With the end of the high-investment period for 5G, China Mobile’s capital expenditures have already fallen noticeably. Since the company’s capital expenditures are gradually declining, while depreciation and amortization remain relatively high, then the company’s cash-based operating profit will be higher than the operating profit shown in the financial statements—meaning the company is actually making more money. Dolphin Jun estimates that the company’s after-tax cash-based operating profit for this quarter was RMB 25.5 billion, up 6% year over year.

b) Dividend situation: Since the company typically pays dividends in Q2/Q3, total dividends for 2025 were around RMB 104.2 billion, and it is estimated that the dividend payout ratio remains above 72%.

Overall, China Mobile’s operating front remains steady this quarter. As for the decline in net profit this quarter, it was mainly due to other gains and losses. Considering the impact of the new VAT policy starting in 2026 (effective January 1, 2026), the company will upgrade traffic, SMS, and和彩信 (short messages and multimedia messaging services) from “value-added telecommunications services” to “basic telecommunications services,” and accordingly the VAT will increase from 6% to 9%.

Based on the proportion of traffic, SMS, and multimedia messaging services in the company’s revenue, market expectations are that the increase in VAT will affect the company’s total revenue by roughly 1–2%. Under the current strategy of “cutting prices to attract users,” it is still difficult to pass the costs down to downstream end consumers; the impact on the profit side is around 5–7%.

Considering the company’s current market cap (1.5 trillion), the implied expected net profit for 2026 corresponds to roughly an 11x PE (assuming revenue growth of 1%, gross margin of 58.6%, and tax rate of 22.3%). Referencing the company’s historical valuation range, most of the time it has been between 7x and 13x PE, and the current valuation is close to the middle of that range.

**In this earnings report, the company continues to reduce capital expenditures, ROE% keeps rising steadily, and the dividend yield also remains at a relatively high level. The company still has two attributes: “steady performance” and “high dividends.” As for the adjustment to VAT, it will create an “industry-level impact” for all three mobile, telecom, and unicom companies. It will also bring a “one-off” impact to the growth rate of 2026 earnings and weaken the company’s dividends (with an impact level of about 5%). **

As a traffic provider, China Mobile’s total annual traffic usage has continued to rise steadily, making it a very reliable business. The VAT increase is an industry-level issue that operators face; it will weaken performance to some extent, but it remains controllable. With data centers and AI not yet showing high growth, even if some of the dividend distribution is weakened, China Mobile still has a dividend yield of over 6%. It remains an option for investing in “dividend stocks.”

Below is Dolphin Jun’s detailed analysis of China Mobile’s financial report:

I. Operating data: steady growth

1.1 Revenue side

China Mobile’s total operating revenue in Q4 2025 was RMB 255.5 billion, up 2.5% year over year. By segment, revenue from communications services was RMB 212.4 billion, up slightly by 0.5% year over year; revenue from product sales and others was RMB 43.1 billion, up 14% year over year.

This quarter’s communications services revenue grew slightly year over year, while the personal communications business declined again by 4% in the quarter; meanwhile, family and government-enterprise businesses continued to grow by around 9%.

For the personal communications business, which accounts for more than half of total revenue, in detail: ① number of mobile business customers: the company’s total user base remains above 1 billion, with a slight decline quarter over quarter; ② mobile ARPU: the company’s average monthly charge per user this quarter was RMB 43.2, down 4.5% year over year. Over the past year, the company’s personal average monthly charges on the mobile side have shown a downward trend.

2.2 Gross margin

China Mobile’s gross margin in Q4 2025 was 51.4%, down 3.8 percentage points year over year. Dolphin Jun categorizes “network operations and support costs” and “cost of product sales” as operating costs, and then calculates the company’s gross profit and gross margin.

Compared with the product sales portion, the communications business has a relatively higher gross margin. However, in this quarter, the share of product sales-related activities increased, which “dragged down” the overall gross margin.

2.3 Operating expense side

China Mobile’s operating expenses in Q4 2025 were RMB 105.9 billion, down 4.9% year over year (a decline). Dolphin Jun places four items—“selling expenses,” “employee compensation expenses,” “depreciation and amortization,” and “other operating expenses”—under operating expenses;

1) Selling expenses: RMB 15.2 billion this quarter, up 21.5% year over year. The company increased its marketing investment in existing operations and customer service;

2) Employee compensation expenses: RMB 36.9 billion this quarter, up 2.2% year over year, increasing its tilt toward core backbone and frontline personnel;

3) Depreciation and amortization: RMB 48.0 billion this quarter, down 2.7% year over year. With the end of the peak period of 5G investment, the company’s capital expenditures have been gradually decreasing—this is the main reason why the amount of depreciation and amortization has continued to decline.**

2.4 Net profit

China Mobile’s net profit in Q4 2025 was RMB 21.8 billion, down 21% year over year, mainly due to the impact of other gains and losses. Because the company will be affected by the VAT increase starting in 2026, it made a “tax adjustment related to splitting package revenue for taxation” in this quarter.

Since the company’s depreciation and amortization is higher than its capital expenditures, from the cash flow perspective, the company’s after-tax cash-based operating profit this quarter was RMB 25.5 billion (excluding the impact of non-operating factors), up 6% year over year.

II. Performance by segment: “cutting rates to attract traffic”—still the main strategy

China Mobile’s revenue mainly comes from two parts: communications services and product sales. Since communications services have long accounted for more than 80%, when analyzing changes in the company’s revenue and business, the focus is mainly on the operating condition of communications services.

Within communications services, the largest source of business revenue is currently wireless data traffic services, accounting for 40.5%. Under the strategy of “cutting data charges to attract traffic,” the revenue share of the traffic business has shown a downward trend. Other components include broadband services, voice calling services, SMS services, and application and information services.

2.1 Wireless data traffic business

China Mobile’s wireless data traffic business revenue in the second half of 2025 was RMB 173.6 billion, down 4% year over year. Driven by demand such as short-form video, data usage volume continues to increase, but unit tariffs still decline, which ultimately leads to further decline in the traffic business.

Breaking it down, in the second half of the year, the total amount of wireless data traffic used by China Mobile’s users reached 96.1 billion GB, up 10.3% year over year; meanwhile, the average data traffic tariff was RMB 1.8/GB, down 13% year over year. Although data traffic demand continues to increase, the company still continues to implement measures to lower users’ data traffic charges.**

2.2 Broadband business

China Mobile’s broadband business revenue in the second half of 2025 was RMB 73.0 billion, up 8.6% year over year. The company’s broadband business continues to maintain its growth momentum, mainly benefiting from an increase in the company’s broadband market share.

As of the end of December 2025, the number of broadband subscribers grew to 324 million, up 3% year over year. Based on this, it can be inferred that the company’s current average monthly broadband charge per user was RMB 37.6, up 4.6% year over year.

2.3 Other businesses

1) Voice calling business: in the second half of 2025, the company achieved revenue of RMB 32.44 billion, down 4% year over year. The company’s voice calling business is in a stable downward trend, mainly because video/voice and other methods are gradually replacing traditional voice calling.

2) Short and multimedia messaging services: in the second half of 2025, the company achieved revenue of RMB 13.5 billion, down 7.6% year over year. Short and multimedia messaging services are no longer a mainstream communications exchange method in the market; the company’s customer base for short and multimedia messaging services is mainly b-end customers such as banks.

3) Application and information services: in the second half of 2025, the company achieved revenue of RMB 122.1 billion, up 6% year over year. This business segment mainly includes personal digital content and applications (entertainment and lifestyle), smart home services (digital home center), enterprise digital services (government and enterprise information services), and other areas.

As a traditional operator, the company also wants to upgrade its business by implementing applications and information services on the ground, and it expects to transition from connection services to value services. The biggest change currently is that cloud, 5G, and AI are serving as strategic anchors, driving the business structure to jump to high-tech services.

The company’s growth rate in application and information services is currently only around 6%. Going forward, focus on growth in data centers and cloud-related businesses to bring more “potential” growth opportunities to the company’s service business.

Dolphin Jun’s historical back-references on China Mobile:

October 20, 2025—Earnings report review: “China Mobile: As steady as a ‘ballast stone,’ cash cow doesn’t ‘break the chain’!”

August 7, 2025—Earnings call (minutes): “China Mobile (minutes): Maintain the guidance of ‘steady revenue growth, good profit growth’ unchanged”

August 7, 2025—Earnings report review: “China Mobile: Earning power is online, the ‘cash cow’ base color unchanged”

April 22, 2025—Earnings report review: “A must-have hard-carry! Is CMIG the real stock king?”

Risk disclosure and statement in this article: Dolphin Jun disclaimer and general disclosure