---
title: "China Mobile: Tax Reform Skimming? Payouts Need to Be More Generous"
type: "Topics"
locale: "en"
url: "https://longbridge.com/en/topics/40046950.md"
description: "China Mobile (600941.SH/00941.HK) released its Q1 2026 results after the HK close on Apr 20 (Beijing time), for the quarter ended Mar 2026. Highlights: 1) Operating metrics — revenue held up.Total revenue was RMB 266.4bn (+1% YoY). The company’s telecom service revenue dipped slightly YoY this quarter.Product sales and other businesses posted double-digit YoY growth for a second consecutive quarter. Operating profit was RMB 29.0bn (-11% YoY)..."
datetime: "2026-04-20T15:37:45.000Z"
locales:
  - [en](https://longbridge.com/en/topics/40046950.md)
  - [zh-CN](https://longbridge.com/zh-CN/topics/40046950.md)
  - [zh-HK](https://longbridge.com/zh-HK/topics/40046950.md)
author: "[Dolphin Research](https://longbridge.com/en/news/dolphin.md)"
---

# China Mobile: Tax Reform Skimming? Payouts Need to Be More Generous

China Mobile (600941.SH/00941.HK) released its Q1 2026 results (to Mar 2026) after Hong Kong market close on Apr 20 Beijing time. Key takeaways:

**1) Ops: revenue held up.** **Total revenue was RMB 266.4bn in Q1 2026, up 1% YoY.** Telecom services edged down YoY, while product sales and other lines posted a second straight quarter of double-digit growth. **Operating profit (OP) was RMB 29.0bn, down 11% YoY,** mainly on lower product GPM and higher opex.

**2) Core businesses: mobile and broadband subs kept growing.**

**a) Mobile:** $CHINA MOBILE(00941.HK) stopped disclosing per-user tariff metrics this quarter. Total mobile subs rebounded to 1.009bn, **up ~3.76mn QoQ.**

**Given telecom services fell 1.1% YoY, per-user spending likely still declined this quarter, implying ongoing price cuts to drive traffic.**

**b) Broadband: continued growth.** Broadband connections reached 333mn, up 3.9mn QoQ, extending the steady growth trend.

The company adjusted disclosure definitions this quarter, **replacing ‘fixed-line broadband subs’ with ‘broadband connections’, now covering home broadband, enterprise broadband, internet leased lines, and data leased lines.**

**3) Capex: continued pullback, more into compute power.** Q1 2026 capex was ~RMB 30.4bn, down RMB 6.0bn YoY.

**On guidance, 2026 capex is expected at RMB 136.6bn, down RMB 15–20bn YoY.** Cuts focus on telecom network capex, with increased spend on the computing power network. **Implied capex for the next three quarters is ~RMB 106.2bn, or ~RMB 35.4bn per quarter on Avg.**

**4) ROE and dividends:** $China Mobile(600941.SH) **TTM ROE was 10.1%, +0.3pct YoY.** Historically dividends are paid in Q2–Q3, and **the RMB 19.7bn paid this quarter essentially front-loads the Q2 distribution.**

**Given disclosed payout expectations, if Q2 dividends are ~RMB 28.0bn, the current payout ratio (dividends/post-tax cash OP) is ~73%, which is fairly ordinary.**

**All ROE and dividend estimates are based on post-tax cash operating profit, which was ~RMB 36.2bn this quarter. \[Post-tax cash OP = (OP + D&A − capex) × (1 − tax rate)\]**

**Dolphin view: absorb tax pain; with lower capex, the cash cow is purer.**

**Revenue growth stayed low single-digit,** while profit declined on weaker GPM and higher costs. With capex sharply lower, post-tax cash OP still grew 5% YoY this quarter. Telecom services remain the core (nearly 90% of revenue), and **mobile subs rose by ~3.76mn QoQ.**

As a leading domestic operator, China Mobile’s QoQ sub growth underscores its competitive strength. Beyond the steady print, the market focuses on three areas:

**a) Capex:** Q1 capex was RMB 30.4bn, down RMB 6.0bn YoY. **Against full-year capex of RMB 136.6bn, capex for the remaining three quarters totals ~RMB 106.2bn (~RMB 35.2bn per quarter).** With the 5G heavy investment cycle ending, capex keeps normalizing.

**b) Dividends:** Q1 dividends were RMB 19.7bn, whereas distributions historically concentrate in Q2–Q3. **Assuming RMB 28.0bn in Q2, the payout ratio would stay around 73%.**

**c) VAT policy change:** From Jan 1, 2026, data, SMS and MMS moved from ‘value-added telecom services’ to ‘basic telecom services’, lifting VAT from 6% to 9%. Given their revenue mix, **the VAT hike likely trims total revenue by ~1–2%.** Under the ongoing ‘price cuts for traffic’ strategy, pass-through to end users is tough, so profit impact is ~5–7%.

At a current mkt cap of ~RMB 1.6tn, implied 2026 P/E is ~10x (assuming 1% revenue growth, 58.6% GPM, 22.3% tax rate). **Versus its historical 7–13x P/E range, valuation sits near the midpoint.**

**Overall, revenue and subs grew this quarter, but earnings were hit by the VAT change.** OP fell nearly 11% on higher materials costs for customized handsets and higher operating expenses. **Weaker operating results could weigh on shareholder returns.** As capex is cut, management aims to offset via higher dividends and payout.

**Per the announced FY2025 dividend plan, total dividends are guided at RMB 48.2bn, ~RMB 1.0bn below last year.** While management highlighted intentions to lift payout to compensate shareholders, the absolute amount still declines, leaving uncertainty over 2026 dividends given VAT-driven earnings pressure.

**Based on the last two distributions, cumulative dividends would be ~RMB 104.0bn, implying a ~6.7% yield on the current HK mkt cap (~RMB 1.55tn).** Under VAT pressure and potential dividend headwinds, a ~6% yield may struggle to attract new buyers.

Below is Dolphin Research’s detailed read of China Mobile’s results:

**I. Core metrics: capex cuts, higher payout ratio**

**a) Capex:** Q1 capex was RMB 30.4bn, down RMB 6.0bn YoY. **With full-year capex at RMB 136.6bn, the remaining three quarters imply ~RMB 106.2bn (~RMB 35.2bn per quarter), with 2H being seasonally higher.**

As the 5G spend peak fades, capex has clearly rolled over. **With capex trending down while D&A remains high, cash operating profit exceeds reported OP (post-tax ~RMB 20.7bn),** indicating stronger cash generation. **Dolphin estimates post-tax cash OP at RMB 36.2bn in Q1, +5% YoY.**

**On this basis, TTM ROE is estimated at 10.1%, continuing to trend up.**

**b) Dividends:** Q1 dividends were RMB 19.7bn, while payouts are typically in Q2–Q3. Assuming RMB 28.0bn in Q2, the payout ratio would remain ~73%.

**II. Quarterly performance: mainly impacted by VAT change**

**2.1 Revenue**

**Total revenue was RMB 266.48bn in Q1 2026, +1% YoY.** By segment, **telecom services revenue was RMB 219.8bn, -1.1% YoY,** while product sales and others were RMB 46.6bn, +12% YoY, the main growth driver. VAT changes this quarter reduced reported revenue by ~1–2%. Ex-VAT effect, underlying growth would be ~2–3%.

**The 1.1% YoY decline in telecom services reflects VAT changes.** Disclosure also changed: per-user spending is no longer provided, and the broadband sub metric was redefined.

**Total mobile subs reached 1.009bn, up 3.76mn QoQ.** In a saturated market, continued sub gains highlight competitive strength.

**2.2 Gross margin**

**GPM was 54.5% in Q1 2026, down 1.3pct YoY.** Dolphin classifies ‘network operation and support costs’ and ‘cost of products sold’ as COGS to derive GP and GPM. Compared with product sales, telecom services carry higher GPM. **The GPM decline mainly reflects higher component costs for customized devices, including memory.**

**2.3 Operating expenses**

**Opex was RMB 116.2bn in Q1 2026, +1.5% YoY.** Dolphin groups ‘selling expenses’, ‘employee benefits’, ‘D&A’, and ‘other operating expenses’ under opex.

**1) Selling expenses: RMB 14.6bn, +1.3% YoY,** broadly stable. **2) Employee benefits: RMB 37.6bn, +1.1% YoY,** in line with revenue growth.

**3) D&A: RMB 47.7bn, -0.5% YoY.** Employee costs are relatively rigid within opex. **With the 5G capex peak past, capex is trending down, driving a continued decline in D&A.**

**4) Other operating expenses: RMB 16.4bn, +8.8% YoY,** the main driver of opex growth this quarter.

**2.4 Net profit**

Net profit was RMB 29.4bn in Q1 2026, -4% YoY. **With D&A exceeding capex, post-tax cash OP was ~RMB 36.2bn (ex non-op items),** up ~RMB 1.7bn YoY on a cash basis. **For 2026, GAAP earnings will be eroded by the VAT change, while post-tax cash OP should still benefit from lower capex after the high-investment phase.**

<End here\>

China Mobile archive by Dolphin Research:

Mar 26, 2026 earnings flash: [中国移动：直面税改冲击，分红底色依然不变？](https://longportapp.cn/zh-CN/topics/39546859)

Oct 20, 2025 earnings flash: [中国移动：稳如 ‘压舱石’，现金奶牛不 ‘掉链’！](https://longportapp.cn/zh-CN/topics/35402458)

Aug 7, 2025 call Trans: [中国移动（纪要）：维持 ‘收入稳健增长，利润良好增长’ 指引不变](https://longportapp.cn/zh-CN/topics/32749983)

Aug 7, 2025 earnings flash: [中国移动：赚钱能力在线，‘现金奶牛’ 底色不变](https://longportapp.cn/zh-CN/topics/32749613)

Apr 22, 2025 earnings flash: [刚需扛把子！中移动才是真股王？](https://longportapp.cn/zh-CN/topics/29067474)

Risk disclosure and disclaimer: [海豚君免责声明及一般披露](https://support.longbridge.global/topics/misc/dolphin-disclaimer)

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