China's Subsidy Crackdown

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3Q 2014 | IN-1020095

The Chinese Government’s Subsidy Reduction Directive Bites


China Mobile has announced that it will be cutting handset subsidies by US$2 billion over the next three years in response to the State-owned Assets Supervision and Administration Commission directive to carriers to cut costs by 40 billion yuan (US$6.5 billion) in three years because they are deemed to have overspent on subsidies and marketing. The two other state-owned carriers are similarly obliged to follow suit with rumors of another US$2 billion reduction in subsidies collectively.

All three carriers have outlined their reduction plans to the financial markets in 2Q 2014:

  • China Mobile will spend 21 billion yuan (US$3.4 billion) to offset phone prices for customers in 2014, compared with the 34 billion yuan (US$5.53 billion) it had planned, Chief Financial Officer Xue Taohai said in August 2014. The decrease was announced as the world’s largest carrier by users posted its fourth-str...

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