Telecommunications

Who we work with

Telecommunications is a sector made up of several business types, each bringing their own features and accounting problems. It spans everything from a regional fixed-line provider, to a mobile network operator, to a business that owns and leases physical infrastructure. Each has a different revenue model, a different cost base, and a different set of regulatory obligations, and we work across all of them.

Specialist accountants for every kind of telecommunications business

• Internet service providers and altnets. Alternative fibre network builders, balancing infrastructure investment against subscriber revenue.
• Mobile network operators and MVNOs. Full network operators and virtual operators reselling capacity, each with a distinct cost and revenue structure.
• Managed service providers. IT and connectivity providers billing on a recurring, often bundled, basis.
• VoIP and unified communications providers. Software-driven telecoms businesses with usage-based and subscription revenue.
• Wholesale carriers. Businesses selling network capacity to other telecoms providers rather than end users.
• Telecoms infrastructure and tower companies. Capital-intensive businesses where infrastructure accounting and capital allowances are central.
• Satellite and connectivity businesses. Emerging connectivity models with their own funding and regulatory considerations.

The accounting and tax issues specific to telecoms

How should telecoms businesses account for bundled contracts?

Under IFRS 15, a contract that bundles a device with airtime or a service must be divided into distinct performance obligations, each recognised separately rather than as one combined revenue line.

Nearly all telecoms contracts bundle more than one element, this could be a handset alongside an airtime plan, or a router alongside a broadband subscription. IFRS 15 requires each of those elements to be identified as a distinct performance obligation, and revenue allocated between them based on standalone selling price, not the bundled price actually charged.

That allocation affects how much revenue is recognised up front against the device, and how much is deferred over the life of the contract against the service. Activation fees and contract modifications, such as a mid-contract upgrade, each need their own treatment within that framework.

Getting this wrong can alter how much revenue appears to have been earned in a given period, which in turn, impacts everything from investor reporting to loan covenants.

Worked example: handset plus airtime

Illustrative figures. £600 handset and £20/month airtime, both at standalone selling price, allocated pro-rata against the £40/month, 24-month bundle price.

How is VAT treated on bundled telecoms supplies?

VAT on a bundled telecoms supply generally follows the liability of the principal supply. However, where a bundle contains separate elements which must be treated differently for tax, HMRC can require an apportionment between them.

A device sold alongside a service contract, or multiple services bundled into one package, raises the question of whether VAT should be charged on the bundle as a single supply, or apportioned across its component parts. The answer depends on the specific facts of the bundle and HMRC’s guidance on multiple and composite supplies, and getting it wrong creates a VAT exposure that can be significant given the transaction volumes involved in telecoms billing.

Can telecommunications companies claim R&D tax relief?

Telecoms businesses developing network software, 5G-related technology, or proprietary connectivity solutions are often eligible for R&D tax relief, provided the work resolves actual technical uncertainty.

Network operators, MSPs, and infrastructure businesses frequently assume R&D relief is the preserve of pure software or biotech companies, and miss claims on network optimisation software, custom integration work, or 5G deployment challenges that qualify. Our dedicated R&D team can produce claims, with detailed supporting reports that reduce the risk of HMRC enquiry.

• Read more about R&D tax relief.

Capital allowances and full expensing on network infrastructure

With telecoms being one of the most capital-intensive sectors in the economy, getting capital allowances right on network and infrastructure spend is crucial for cash flow. Fibre, cabling, and network equipment are generally treated differently to towers, masts, and data centre buildings for allowance purposes, and getting that classification right, particularly for structures that sit somewhere between plant and building, changes both how much relief is available and when.

Rates and thresholds for capital allowances change frequently, so we work through the current position with every client rather than relying on a fixed rule of thumb.

Managing cash flow, working capital and payments

Telecoms businesses carry a specific working capital profile: infrastructure and network costs are often paid well ahead of subscriber revenue, and altnets in particular face sustained cash outflow during a build phase before revenue catches up.

Additionally, late payment from business customers, regulatory obligations around service continuity, and the sheer scale of upfront network investment all put pressure on cash flow. We build forecasting and cash flow management around that reality.

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Why telecoms businesses choose Price Bailey

Price Bailey’s technology team has a deep understanding of the complexities facing a telecoms business, we provide:

• Telecoms sector expertise: Advising businesses across the full range of the sector, from altnets to network operators to infrastructure companies, where the accounting and the regulation are both unusually specific.
• Technical depth the specialist SME firms in this space assert but rarely demonstrate: In revenue recognition on bundled contracts, capital allowances on network infrastructure, and VAT on bundled supplies, the detail that gets missed by a generalist accountant.
• Corporate finance capability: Supporting funding, M&A, valuations, and exit across a sector that is consolidating quickly, particularly among altnets.

What our clients say

“Over the last two years, we have developed an excellent working relationship with the Price Bailey team. They have effectively become an integral part of the business, and have always been very responsive and on hand to offer guidance or advice when needed. During our restructure, the Price Bailey teams worked seamlessly together to enable us to complete the process in a timely and tax-efficient manner.”

Julian O’Donnell
Managing Director, Quatro Tech

Speak to our technology team

The accounting issues in telecommunications, bundled revenue, capital-intensive infrastructure, and a regulatory deadline reshaping the sector, need an adviser who has worked with telecoms businesses before.

Use the button below to get in touch, and we will arrange a conversation with the right specialist for your business.