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Malaysia Prepaid 6% GST : the Impact To Telecommunication Stocks

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Telecommunications 6% Government Service Tax No Longer Absorbed From 15 Sep 2011Service Tax. As anticipated, the telcos are passing on the 6% service tax to prepaid users effective 15 Sep. The move is positive given the positive earnings impact (already imputed into our earnings forecasts) as the telcos would no longer absorb the tax. We believe the telcos may want to preempt any further potential increase in the service tax, as Budget 2012 is due to be tabled by the Prime Minister on 7 Oct.  click the image above to enlarge

In a press release, Maxis said yesterday the 6% service tax will be charged for purchases of prepaid reloads and prepaid starter/SIM packs for all telcos. DiGi’s management also  indicated yesterday during an informal luncheon that the telcos would no longer absorb the tax from 15 Sep. We gather that Celcom will do the same. No surprises since it is an industry-wide decision.
Impact on prepaid users. Going forward, with the charging of the 6% service tax o…