Biographical Details of Directors, Supervisors and Senior Management
|
|
|
|
|
Mr. Gao Tongqing
Age 53, is an Executive Vice President of the Company. Mr. Gao graduated from the Changchun Institute of Posts and Telecommunications with a major in
telecommunications engineering and received a doctorate degree in business administration from the Hong Kong Polytechnic University. Mr. Gao served as Deputy Director General of Xinjiang Uygur Autonomous Region Posts and Telecommunications
Administration, Deputy General Manager and General Manager of Xinjiang Uygur Autonomous Region Telecom Company and General Manager of China Telecom Jiangsu branch. He is also a Vice President of China Telecommunications Corporation. Mr. Gao has
extensive experience in management and the telecommunications industry.
|
|
|
|
|
Mr. Chen Zhongyue
Age 45, is an Executive Vice President of the Company. Mr. Chen received a bachelor degree in English studies from Shanghai International Studies
University and a master degree in international trade economy from Zhejiang University. Mr. Chen served as Deputy General Manager of China Telecom Zhejiang branch, Managing Director of the Public Customers Department of the Company and China
Telecommunications Corporation and General Manager of China Telecom Shanxi branch. He is also a Vice President of China Telecommunications Corporation. Mr. Chen has extensive experience in management and the telecommunications
industry.
|
21
Biographical Details of Directors, Supervisors and Senior Management
|
|
|
|
|
Mr. Sui Yixun
|
|
|
Age 53, is the Chairman of the Supervisory Committee of the Company.
Mr. Sui is currently the Managing Director of audit department of the Company and a Supervisor of Tianyi Telecom Terminals Company Limited. Mr. Sui received a bachelor degree from Beijing Institute of Posts and Telecommunications and a
master degree in business administration from Tsinghua University. Mr. Sui served as Deputy General Manager of China Telecom Shandong branch, Deputy General Manager of the Northern Telecom of China Telecommunications Corporation and General
Manager of China Telecom Inner Mongolia Autonomous Region branch. Mr. Sui is a senior economist and has extensive experience in operational and financial management in the telecommunications industry.
|
|
|
|
|
Mr. Tang Qi
|
|
|
Age 58, is an Employee Representative Supervisor of the Company.
Mr. Tang is currently the Senior President of the Shandong branch of the Company. Mr. Tang received a doctorate degree in business administration (DBA) from the Hong Kong Polytechnic University. Mr. Tang served as the Director of the
marketing department of the Posts and Telecommunications Administration of Shandong province, Manager of the marketing department of China Telecommunications Corporation, General Manager of China Telecom Shandong branch, General Manager of China
Telecom Chongqing branch, Vice Chairman of the Labour Union of China Telecommunications Corporation and the Company. Mr. Tang is a senior engineer and has extensive experience in operation and management in the telecommunications industry.
|
|
|
|
|
Mr. Zhang Jianbin
|
|
|
Age 51, is an Employee Representative Supervisor of the Company.
Mr. Zhang is currently the Deputy Managing Director of the Corporate Strategy Department (Legal Department) and the Deputy General Counsel of China Telecommunications Corporation. Mr. Zhang graduated from the Law School of Peking
University in 1989 and received LLM degree. He also had EMBA degree from the Guanghua School of Management at Peking University in 2006. He previously worked at the Department of Policy and Regulation of the Ministry of Posts and Telecommunications
(MPT) and the Directorate General of Telecommunications (DGT) of the MPT. He served as Deputy Director of the General Office and Deputy Director of the Legal Affairs Division of the DGT of the MPT, Director of the Corporate
Strategy Department (Legal Department) of the Company. Mr. Zhang is a senior economist with extensive experience in telecommunications legislation and regulation, corporate governance, corporate legal affairs and risk
management.
|
22
Biographical Details of Directors, Supervisors and Senior Management
|
|
|
|
|
Mr. Hu Jing
|
|
|
Age 41, is a Supervisor of the Company. Mr. Hu is currently the
Director of the audit department of the Company. Mr. Hu received a bachelor degree in accounting from the Xian University of Finance and Economics in 1997 and a master degree in business administration from the Northwest University in
2003. Mr. Hu served at various financial and auditing positions at Shaanxi Telecom Company and China Telecommunications Corporation. He is a member of the Chinese Institute of Certified Public Accountants and senior accountant with extensive
experience in finance and auditing.
|
|
|
|
|
Mr. Ye Zhong
|
|
|
Age 57, is a Supervisor of the Company. Mr. Ye is a senior
accountant. He holds a bachelor degree. Mr. Ye is the Deputy General Manager of Zhejiang Financial Development Company (one of the domestic shareholders of the Company), Chairman and General Manager of Zhejiang Provincial Innovation and
Development Investment Co. Ltd., Chairman of Zhejiang Venture Capital Fund of Funds Management Co. Ltd., Chairman of Zhejiang Financial Market Investment Co. Ltd., Chairman and General Manager of Zhejiang Agricultural Investment and Development Fund
Co. Ltd. and Chairman and General Manager of Zhejiang Infrastructure Investment (including PPP) Fund Co. Ltd.. Mr. Ye served as Deputy Director of the Social Security Division of the Department of Finance of Zhejiang Province, Deputy Director
of the Discipline Inspection Division and Director of Supervisory Office of the Department of Finance of Zhejiang Province delegated by the Discipline Inspection Commission and Department of Supervision of Zhejiang Province. Mr. Ye has
extensive experience in governments work and state-owned enterprise management.
|
23
$
4G
SERVICE ECOLOGICALISATION
RECONSTITUTION
of
SERVICE
Managements Discussion and Analysis
Business Review
The following table sets out the key
operating data for 2014, 2015 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
Rates of change
over 2015
|
|
Mobile subscribers
|
|
|
Million
|
|
|
|
185.62
|
|
|
|
197.90
|
|
|
|
215.00
|
|
|
|
8.6
|
%
|
of which: 4G terminal users
|
|
|
Million
|
|
|
|
7.08
|
|
|
|
58.46
|
|
|
|
121.87
|
|
|
|
108.5
|
%
|
Mobile voice usage
|
|
|
Million minutes
|
|
|
|
655,939
|
|
|
|
667,535
|
|
|
|
720,566
|
|
|
|
7.9
|
%
|
Mobile SMS usage
|
|
|
Million messages
|
|
|
|
64,583
|
|
|
|
56,817
|
|
|
|
54,744
|
|
|
|
(3.6
|
%)
|
Handset data traffic
|
|
|
kTB
|
|
|
|
266.6
|
|
|
|
554.7
|
|
|
|
1,277.0
|
|
|
|
130.2
|
%
|
Wireline broadband subscribers
|
|
|
Million
|
|
|
|
106.95
|
|
|
|
113.06
|
|
|
|
123.12
|
|
|
|
8.9
|
%
|
of which:
Fibre-to-the-Home
(FTTH) subscribers
|
|
|
Million
|
|
|
|
42.61
|
|
|
|
70.99
|
|
|
|
105.99
|
|
|
|
49.3
|
%
|
Access lines in service
|
|
|
Million
|
|
|
|
143.56
|
|
|
|
134.32
|
|
|
|
126.86
|
|
|
|
(5.6
|
%)
|
Wireline local voice usage
|
|
|
Million pulses
|
|
|
|
130,439
|
|
|
|
110,935
|
|
|
|
93,403
|
|
|
|
(15.8
|
%)
|
e-Surfing
HD subscribers
|
|
|
Million
|
|
|
|
31.26
|
|
|
|
40.38
|
|
|
|
61.33
|
|
|
|
51.9
|
%
|
BestPay average monthly active users
|
|
|
Million
|
|
|
|
|
|
|
|
3.51
|
|
|
|
16.21
|
|
|
|
361.8
|
%
|
Internet of Things connected devices*
|
|
|
Million
|
|
|
|
|
|
|
|
0.98
|
|
|
|
14.19
|
|
|
|
1,348.0
|
%
|
*
|
China Telecom completed the construction of its efficiently-centralised operating platform for Internet of Things and operation commenced in April 2016.
|
26
Managements Discussion and Analysis
Business Review
In 2016, the Company continued to focus on the 2+5 key businesses with continuous optimisation in
business structure, achieving scale expansion, sound revenue growth momentum and remarkably strengthened comprehensive capabilities.
Step-up
transformation leaped forward to a new level.
Key operating performance in 2016
(1)
|
Healthy growth in operating revenues with continuous optimisation in business structure
|
In 2016, the Companys operating revenues increased by 6.4% to RMB352,285 million. Service revenues increased by 5.6% to
RMB309,644 million. Revenue structure was further optimised, with emerging businesses accounting for 39.6% of service revenues, up 5.2 percentage points. Of which, handset Internet access revenue and ICT service revenue increased by 42.9% and
17.2% respectively over last year, becoming the major drivers of revenue growth.
27
Managements Discussion and Analysis
Business Review
(2)
|
Rapid growth in mobile services with comprehensive acceleration in 4G business
|
Through
persistence in aggressive marketing strategy, the Company implemented sales and marketing initiatives such as Integration driving new subscribers, Seizing card slots and innovation in consumer finance, driving the rapid
development in mobile services with consistent increase in the market share of mobile subscribers. The Company leveraged its 4G network edge to comprehensively promote its 4G business. Rapidly expanding in new subscribers market and accelerating
subscribers migration, the Company became the worlds largest LTE FDD operator. Grasping the pattern of value chain development, the Company promoted the multimode handsets
1
as
the national standard to strengthen the competitive edges in handsets while expanding its sales radius to enhance
terminal-led
capability. The Company continuously optimised its product strategy, improved its
channel deployment and enhanced its sales organisation, resulting in accelerated subscriber scale expansion and rapid revenue growth. Mobile subscribers reached 215.00 million by the end of 2016, with a net addition of 17.10 million for
the year. 4G terminal users reached 121.87 million by the end of 2016, with a net addition of 63.41 million for the year, accounting for 56.7% of total mobile subscribers. Mobile service revenues increased by 10.5% over last year to
RMB137,611 million.
1
|
Multi-mode handsets represent handsets supporting the six telecommunications standards namely
TD-LTE,
LTE FDD, WCDMA,
TD-SCDMA,
GSM and CDMA, which is compatible with all the 4G/3G/2G networks of China Telecom, China Mobile and China Unicom.
|
28
Managements Discussion and Analysis
Business Review
(3)
|
Mutual enhancement in quantity and quality of data traffic operation with prominent results
|
Led by the mutual growth in data traffic volume and value, the Company diversified its products and optimised its 4G packages, and promoted the
data traffic products including spare time package, holiday package, dedicated data traffic package and integrated video card, resulting in growth in data traffic volume while preserving data traffic
value. Leveraging the edge of intellectual operation in Big Data, the Company promoted precision handsets upgrade of subscribers, accelerated subscribers migration from 3G to 4G. The Company focused on large data traffic producer,
large data traffic application and large data traffic area, resulting in remarkable data traffic consumption with signature handsets, video applications and in key areas. 4G DOU exceeded 1GB, reaching 1,029MB, while data
traffic has become the top growth driver for revenue. In 2016, handset data traffic reached 1,277kTB, representing an increase of 130.2% over last year, of which 4G handset data Internet traffic accounted for 83.1%, representing an increase of 32.4
percentage points over last year. The handset Internet access revenue accounted for 49.6% of mobile service revenues, representing an increase of 11.2 percentage points over last year.
29
Managements Discussion and Analysis
Business Review
(4)
|
Extraction of high speed fibre broadband value with solid growth in wireline business
|
Guided by the broadband development strategies of speed upgrade, content enrichment and brand establishment, the Company reinforced
its differentiated edges in its broadband services driven by Hundred-Mbps products with Gbps products as demo. With the launch of its smart fibre broadband standard, the Company redefined service connotation of high-speed broadband
service as Hundred-Mbps bandwidth or above. Proactively expanding fibre broadband subscriber scale, China Telecom has become the worlds largest FTTH operator. Building on the fundamental of its fibre network, the Company further developed its
integrated services. Through smart home gateway and 4K TV
set-top
box, the Company introduced four core applications including
e-Surfing
HD, VPN, family cloud and video
call, uplifted high bandwidth threshold and extracted broadband value to stabilise the revenue base of our wireline services, and to effectively compensate the revenue shortfall caused by the gradually declining wireline voice revenue. Net addition
of wireline broadband subscribers was 10.06 million for the year, reaching 123.12 million by the end of 2016. Net addition of FTTH subscribers was 35.00 million for the year, reaching 105.99 million by the end of 2016, accounting
for 86.1% of the total wireline broadband subscribers. Wireline broadband revenue was RMB76,766 million, representing an increase of 3.3% over last year. Wireline service revenues reached RMB172,033 million, representing an increase of
1.9% over last year. Wireline voice revenue was RMB25,987 million, accounting for 8.4% of the service revenues, representing a decrease of 1.7 percentage points from last year.
30
Managements Discussion and Analysis
Business Review
(5)
|
Strong momentum in emerging business development with favourable market trend
|
The
Company persisted in adhering to innovation as vitality and grasped business pattern to satisfy the continuously increasing and diversifying demand from customers. The Company strengthened research and development, expedited cultivation and
pragmatically promoted its emerging business with remarkable achievements. In respect of Smart Family development, leveraging resource strengths, the Company comprehensively implemented efficiently centralised operations to form and operate the
smart family alliance and developed four core applications namely
e-Surfing
HD, VPN, family cloud and video call in full strength, achieving stable expansion in its subscriber scale. By end 2016,
e-Surfing
HD subscribers reached 61.33 million, representing a net addition of 20.95 million for the year. In respect of Internet finance development, the Company stepped up emerging business promotion
including consumer finance instalments and BestPay red packet, with average monthly active users of BestPay reaching 16.21 million, representing an increase of 361.8% over last year, and actively participating merchants
reaching 300,000, grew by 773.5% over last
31
Managements Discussion and Analysis
Business Review
year. In respect of Internet of Things (IoT) development, the Company implemented efficiently centralised operation in business development featured with
one-stop
acceptance for full range of service, launched the construction of
NB-IoT
and formed
e-Surfing
IoT industry alliance with
focuses on the scale expansion in key industries such as Internet of vehicles, security monitoring and public affairs, achieving a net addition of 13.21 million connected devices. In respect of cloud services development, adhering to the
principles of cloud-network integration, appropriate deployment, reliable security and efficiently centralised operation, the Company refined the infrastructure deployment of cloud and IDC and launched
e-Surfing
cloud 3.0 products in order to achieve industry-leading capabilities in key products such as cloud hosting, cloud storage and private cloud. Revenue from IDC service was
RMB15,936 million, representing an increase of 27.9% over last year, while revenue from cloud service was RMB1,500 million, representing an increase of 48.8% over last year. In respect of Big Data development, through supporting precision
sales and marketing internally and achieving breakthroughs externally in sectors including transportation, tourism and finance, the Company enhanced its level of operation intellectualisation. Revenue from Big Data service was RMB410 million,
representing an increase of 81.4% over last year. In respect of Internet+ development, the Company published the Internet+ Action White Paper and prominently enhanced the scale and quality of big orders, remarkably
strengthened its influence through scale expansion in industries such as government administration, education and healthcare.
(6)
|
Enhancing channel capabilities by implementing sales and service integration via channels
|
The Company deepened the promotion of channel operation, effectively expanded the channel scale, refining and optimising the channel
overview and superior channel systems while remarkably enhancing precision sales and service capabilities of the channels. The Company strengthened coordination between direct sales channels, physical channels and electronic
channels for market development. Regarding physical stores, the Company expanded the open channels coverage in core business districts, built Smart Family experience stores in urban communities and promoted the establishment of sales outlets for
multi-mode handsets in rural market. At the same time, the Company initiated cooperation with various industries and widely expanded into the household electrical appliance stores, comprehensively promoting sales and service integration.
In direct sales channels, the Company leveraged the edges in big orders development and good customer relations, achieved remarkable enhancement in the volume of big orders and widespread influence in industries including government administration,
education and healthcare. In electronic channels, the Company leveraged online stores and mobile online stores service system, with mobile online service app users exceeded 100 million. The Company deepened O2O operating capability and
developed extensive cooperation with
e-commerce
companies, resulting in the consistent enhancement in sales volume of data traffic packages and customer acquisition.
32
Managements Discussion and Analysis
Business Review
(7)
|
Focusing on 2+5 key businesses with enhancement in customer service capabilities
|
The Company focused on 2+5 key businesses and reinforced the consciousness of proactive service and smart alert, in
order to comprehensively improve the level of precision service and intellectualisation level. In respect of 4G services, the Company optimised the data traffic business rules and developed data traffic operation by scenario with pilot promotion of
detailed record inquiries for data traffic. In respect of fibre broadband services, the Company implemented innovative service models to promote pay after installation in order to enhance
end-to-end
operation capabilities. In respect of key emerging businesses, the Company explicitly defined service scope and refined service system to solve key service problems. To strengthen customer
relations, the Company comprehensively promoted star services and
scaled-up
bonus points reward. The company continuously enhanced channel service quality, improved service standard of sales outlets and
strengthened the service capabilities of new media. In 2016, the Company ranked first in the industry in terms of customer satisfaction in both wireline and mobile Internet access services as assessed by the Ministry of Industry and Information
Technology.
33
Managements Discussion and Analysis
Business Review
(8)
|
Strengthening network capabilities prominently with stable enhancement in operating efficiency
|
The Company persisted in customer-oriented development strategy with innovation and continuously enhanced its investment structure and optimise
resources allocation. First, coordinating and planning for frequency resources, the Company leveraged the differentiated edges of wide coverage with low frequency, adequate capacity with high frequency. With the comprehensive launch of
the LTE 800MHz refarm, the Company built the worlds largest FDD network and achieved basic full coverage of 4G network. In 2016, the Company added 380,000 4G BTSs, reaching 890,000 4G BTSs by the end of 2016. Second, the Company efficiently
promoted the full fibre network construction, consistently optimised network coverage and enhanced network capabilities. The Company added over 65 million FTTH/O ports for the year, reaching 210 million ports by the end of 2016, with basic
full coverage of fibre network in the city area of southern China. Third, the Company officially published
China Telecoms
CTNet2025 Network Structure White Paper,
fully launched intelligentisation of network reconstitution, and
officially established open laboratory for network reconstitution. With a more open attitude, the Company carried out tests of new technologies such as SDN/NFV with various parties along the value chain, accelerated the pace of technological
innovation. Fourth, the Company endeavoured to promote
co-building
and sharing to avoid duplicated construction. In 2016, the Company jointly built 4G BTSs with China Unicom, promoted the interconnection of
two parties primary and secondary trunk networks and coordinated the cooperation demand between southern and northern China, to foster the
co-building
and sharing of fibre transmission line, effectively
saved capital expenditure.
34
Managements Discussion and Analysis
Business Review
Outlook for 2017
2017 is a crucial year for the implementation of the corporate strategy regarding step-up transformation. Navigating with strong
strategy-led,
the Company will accelerate the promotion of network intelligentisation, service ecologicalisation and operation intellectualisation to further develop the 2+5 key businesses and
forge differentiated edges. The Company will accelerate the promotion of service ecologicalisation surrounding the five service ecospheres. In respect of Intelligent Connection ecosphere, persisting in aggressive strategy, the Company will further
expedite scale expansion of 4G and fibre broadband services, proactively expanding in subscribers acquisition, strengthening data traffic operation and servicing customer retention to enhance customer value. In respect of Smart Family ecosphere,
leveraging the scale advantages of
e-Surfing
HD service, the Company will promote new integrated packages with scale deployment in
e-Surfing
gateway and 4K TV
set-top
box, and expedite the expansion in applications such as family cloud, VPN and video call, to strengthen Smart Family ecosphere development. In respect of Internet Finance ecosphere, accelerating the
promotion of credit consumption model, the Company will expand the scales of gross merchandise value, active users and actively participating merchants in BestPay service, with the introduction of various payment scenarios and enhancement in payment
capabilities, to enhance customers experience. In respect of IoT ecosphere, accelerating the construction of connection management platform and business vitality platform, the Company will focus on three markets namely smart city, vertical
industry and individual consumption and leverage the advantages in 4G dedicated network and
low-frequency
NB-IoT
network to achieve scale breakthrough. In respect of new
ICT applications ecosphere, reinforcing the promotion of cloud-network integration and provision of platform services, the Company will leverage solid network foundation to build strong cloud platform, with a focus on key industries such
as government administration, education, healthcare and industrial Internet, to promote the applications upgrade.
In 2017, the Company will seize the
opportunity in refining Big Data platform capabilities on corporate level, to accelerate the promotion of operation intellectualisation. With the largest Big Data capability platform in Asia, the Company will endeavour to establish open mechanism of
Big Data capabilities for both internal use and external clients. Internally, the Company will embed Big Data in the production systems including MSS, BSS and OSS. Externally, the Company will enhance its applications in areas including sales and
marketing, customer services, product development and network operation, in order to foster the enhancement in quality and efficiency and enhance customers experience. At the same time, the Company will leverage Big Data capabilities to deepen
internal administration, and elaborate the corporate strategies for better execution.
Guided by CTNet2025, the Company will also accelerate the promotion
of network intelligentisation. Expediting the network evolution and upgrades, the Company will build three superior basic networks, namely 4G network,
all-fibre
network and IoT network, providing strong
support for the scale development of 2+5 businesses, consistently enhancing the quality and efficiency of corporate development, and fostering the mutual growth in corporate value, customer value and employee value.
35
Managements Discussion and Analysis
Financial Review
Summary
In 2016, with reform and innovation as the driving force, the Company adhered to the 2+5 operation focuses, changed the mode of development,
strengthened the six key capabilities in order to enhance the effectiveness of operational management. The overall operating results were steadily improved. Operating revenues in 2016 were RMB352,285 million, an increase of 6.4% from 2015;
service revenues
1
were RMB309,644 million, an increase of 5.6% from 2015; operating expenses were RMB325,084 million, an increase of 6.7% from 2015; profit attributable to equity holders
of the Company was RMB18,004 million, a decrease of 10.2% from 2015; basic earnings per share were RMB0.22; EBITDA
2
was RMB95,139 million, an increase of 1.1% from 2015 and the EBITDA
margin
3
was 30.7%.
Operating Revenues
In 2016, while proactively responding to the impact of regulatory policies such as Speed Upgrade and Tariff Reduction, implementation of
real-name
registration and regional integration as a whole, the Company accelerated the scale development of 4G and fibre broadband business, continued to optimise its business structure and achieved a stable growth
in its operating revenues. Operating revenues in 2016 were RMB352,285 million, an increase of 6.4% from 2015. Of which, the total mobile revenues were RMB172,223 million, an increase of 10.0% from 2015; the total wireline revenues were
RMB180,062 million, an increase of 3.1% from 2015.
1
|
Service revenues were calculated based on operating revenues minus sales of mobile terminals (2016: RMB34,612 million; 2015: RMB32,026 million), sales of wireline equipment (2016: RMB5,822 million; 2015:
RMB4,430 million) and other
non-service
revenues (2016: RMB2,207 million; 2015: RMB1,480 million).
|
2
|
EBITDA was calculated based on operating revenues minus operating expenses plus depreciation and amortisation. As the telecommunications business is a capital intensive industry, capital expenditure, the level of
gearing and finance costs may have a significant impact on the net profit of companies with similar operating results. Therefore, we believe EBITDA may be helpful in analysing the operating results of a telecommunications service provider such as
the Company. Although EBITDA has been widely applied in the global telecommunications industry as a benchmark to reflect operating performance, debt raising ability and liquidity, it is not regarded as a measure of operating performance and
liquidity under generally accepted accounting principles. It also does not represent net cash from operating activities. In addition, our EBITDA may not be comparable to similar indicators provided by other companies.
|
3
|
EBITDA margin was calculated based on EBITDA divided by service revenues.
|
36
Managements Discussion and Analysis
Financial Review
The following table sets forth a breakdown of the operating revenues for 2015 and 2016, together with their
respective rates of change:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended 31 December
|
|
(RMB millions, except percentage data)
|
|
2016
|
|
|
2015
|
|
|
Rates of
change
|
|
Voice
|
|
|
70,120
|
|
|
|
78,593
|
|
|
|
(10.8
|
%)
|
Internet
|
|
|
150,405
|
|
|
|
126,546
|
|
|
|
18.9
|
%
|
Information and application services
|
|
|
66,838
|
|
|
|
66,343
|
|
|
|
0.7
|
%
|
Telecommunications network resource services and lease of network equipment
|
|
|
17,773
|
|
|
|
17,635
|
|
|
|
0.8
|
%
|
Others
|
|
|
47,149
|
|
|
|
42,085
|
|
|
|
12.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
352,285
|
|
|
|
331,202
|
|
|
|
6.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice
In 2016, being
affected by the substitution effect of mobile Internet services, such as OTT, revenue from voice services was RMB70,120 million, a decrease of 10.8% from 2015, accounting for 19.9% of operating revenues. Of this, revenue from wireline voice
services was RMB25,987 million, a decrease of 12.2% from 2015, revenue from mobile voice services was RMB44,133 million, a decrease of 9.9% from 2015. The revenue contribution from voice services continued to decrease, resulting in
persistent improvement in structures and effective mitigation of operating risks.
Internet
In 2016, revenue from Internet services was RMB150,405 million, an increase of 18.9% from 2015, accounting for 42.7% of operating revenues. The Company
comprehensively upgraded the broadband access network, leveraged the integration advantage of 4G + fibre broadband +
e-Surfing
HD and promoted the healthy development of broadband services. At the
end of 2016, the number of wireline broadband subscribers reached 123 million, with a net increase of 10.06 million. The wireline broadband revenue was RMB76,766 million, an increase of 3.3% from 2015. The Company deepened the data
traffic operation, enhanced integration of contents and data traffic and effectively drove the acceleration of mobile data traffic and revenue growth. Revenue from mobile Internet access services was RMB70,682 million, an increase of 39.4% from
2015. Of this, mobile handset Internet access revenue was RMB68,263 million, an increase of 42.9% from 2015.
37
Managements Discussion and Analysis
Financial Review
Information and Application Services
In 2016, revenue from information and application services was RMB66,838 million, an increase of 0.7% from 2015, accounting for 19.0% of operating
revenues. Of which, revenue from wireline information and application services was RMB44,335 million, an increase of 5.5% from 2015, mainly benefiting from the rapid growth of IDC, cloud and
e-Surfing
HD
services. Revenue from mobile information and application services was RMB22,503 million, a decrease of 7.4% from 2015, which was mainly due to the decrease in revenue from traditional services such as short and multimedia messaging services
and information inquiry services.
Telecommunications Network Resource Services and Lease of Network Equipment
In 2016, revenue from telecommunications network resource services and lease of network equipment was RMB17,773 million, an increase of 0.8% from 2015,
accounting for 5.0% of operating revenues. Of which, revenue from wireline telecommunications network resource services and lease of network equipment was RMB17,595 million, an increase of 2.2% from 2015.
Others
In 2016, revenue from other services was
RMB47,149 million, an increase of 12.0% from 2015, accounting for 13.4% of operating revenues. Revenue from sales of mobile terminals was RMB34,612 million, an increase of 8.1% from 2015, which was mainly due to the growth in sales of
mobile terminals driven by the sales of multimode handsets.
38
Managements Discussion and Analysis
Financial Review
Operating Expenses
The Company continued to optimise the allocation of resources and strengthened the precision management of costs and expenses in order to effectively support
the business development. In 2016, the operating expenses were RMB325,084 million, an increase of 6.7% from 2015. Operating expenses accounted for 92.3% of operating revenues, an increase of 0.3 percentage point from 2015.
The following table sets forth a breakdown of the operating expenses in 2015 and 2016 and their respective rates of change:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended 31 December
|
|
(RMB millions, except percentage data)
|
|
2016
|
|
|
2015
|
|
|
Rates of
change
|
|
Depreciation and amortisation
|
|
|
67,938
|
|
|
|
67,664
|
|
|
|
0.4
|
%
|
Network operations and support
|
|
|
94,092
|
|
|
|
81,240
|
|
|
|
15.8
|
%
|
Selling, general and administrative
|
|
|
56,417
|
|
|
|
54,472
|
|
|
|
3.6
|
%
|
Personnel expenses
|
|
|
54,460
|
|
|
|
52,541
|
|
|
|
3.7
|
%
|
Other operating expenses
|
|
|
52,177
|
|
|
|
48,843
|
|
|
|
6.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
325,084
|
|
|
|
304,760
|
|
|
|
6.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortisation
In 2016, depreciation and amortisation was RMB67,938 million, an increase of 0.4% from 2015, accounting for 19.3% of operating revenues. The depreciation
and amortisation of the newly added assets in 2016 was basically equivalent to the decrease in depreciation and amortisation resulted from the disposal of tower assets.
Network Operations and Support
In 2016, network
operations and support expenses were RMB94,092 million, an increase of 15.8% from 2015, accounting for 26.7% of operating revenues. The growth was mainly due to the increase in the tower assets lease fee and related expenses. At the same time,
the Company continuously strengthened cost management and control and the growth rate of network operations and support expenses was lower than that in the same period of last year.
39
Managements Discussion and Analysis
Financial Review
Selling, General and Administrative
In 2016, selling, general and administrative expenses amounted to RMB56,417 million, an increase of 3.6% from 2015, accounting for 16.0% of operating
revenues. Selling expenses were RMB47,821 million, an increase of 4.1% from 2015. The increase was due to the fact that the Company appropriately increased initiatives in marketing resources while continued to enhance the efficiency of
resources utilisation. Of which, commission and service expenses for third parties amounted to RMB30,753 million, an increase of 15.4% from 2015. Advertising and promotion expenses amounted to RMB17,068 million, a decrease of 11.5% from
2015, of which the terminal subsidies amounted to RMB9,370 million, a decrease of 19.4% from 2015.
Personnel Expenses
In 2016, personnel expenses were RMB54,460 million, an increase of 3.7% from 2015, accounting for 15.5% of operating revenues. For details of the number
of employees, remuneration policies and training schemes, please refer to the Environmental, Social and Governance Report in this annual report.
Other
Operating Expenses
In 2016, other operating expenses were RMB52,177 million, an increase of 6.8% from 2015, accounting for 14.8% of operating
revenues. The cost of mobile terminal equipment sold amounted to RMB32,849 million, an increase of 6.4% from 2015, which was mainly due to the increase in terminal sales leading to an increase in expenses.
Net Finance Costs
In 2016, net finance costs were
RMB3,235 million, a decrease of 24.3% from 2015. The decrease was mainly due to the fact that the interest rate of the deferred consideration of Mobile Network Acquisition decreased from 5.11% per annum in 2015 to 4.00% per annum in 2016
(adjusted in accordance with a 5 basis points premium to the yield of the
5-year
super AAA rated Medium Term Notes once a year pursuant to the agreement). Net exchange gains were RMB113 million in 2016.
The fluctuation of foreign exchange gain or loss was mainly due to the depreciation of the RMB exchange rate against the US Dollar.
Profitability
Level
Income Tax
The Companys statutory
income tax rate is 25%. In 2016, income tax expenses were RMB5,988 million with the effective tax rate of 24.8%. The difference between the effective income tax rate and the statutory income tax rate was mainly due to the preferential income
tax rate, which was lower than the statutory income tax rate, enjoyed by some of our branches with operations in the western region of China and some of our subsidiaries.
Profit Attributable to Equity Holders of the Company
In
2016, profit attributable to equity holders of the Company was RMB18,004 million, a decrease of 10.2% from 2015.
40
Managements Discussion and Analysis
Financial Review
Capital Expenditure and Cash Flows
Capital Expenditure
In 2016, the Company strictly
controlled the total amount of capital expenditure. On the basis of steady promotion of 4G and fibre broadband network investment, the Company continuously optimised the investment structure to ensure the maximisation of investment efficiency. In
2016, capital expenditure was RMB96,817 million, a decrease of 11.3% from 2015.
Cash Flows
In 2016, net decrease in cash and cash equivalents was RMB7,463 million, while the net increase in cash and cash equivalents was RMB11,309 million in
2015.
The following table sets forth the cash flow position in 2015 and 2016:
|
|
|
|
|
|
|
|
|
|
|
For the year ended 31 December
|
|
(RMB millions)
|
|
2016
|
|
|
2015
|
|
Net cash flow from operating activities
|
|
|
101,130
|
|
|
|
108,750
|
|
Net cash used in investing activities
|
|
|
(99,038
|
)
|
|
|
(102,250
|
)
|
Net cash (used in)/from financing activities
|
|
|
(9,555
|
)
|
|
|
4,809
|
|
|
|
|
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents
|
|
|
(7,463
|
)
|
|
|
11,309
|
|
|
|
|
|
|
|
|
|
|
In 2016, the net cash inflow from operating activities was RMB101,130 million, a decrease of 7.0% from 2015, which was
mainly due to the increase in costs and expenses related to operating activities.
In 2016, the net cash outflow used in investing activities was
RMB99,038 million, a decrease of 3.1% from 2015, which was mainly due to the decrease of capital expenditure for the year.
In 2016, the net cash
outflow used in financing activities was RMB9,555 million, and the net cash inflow from financing activities in 2015 was RMB4,809 million. The change was mainly due to the repayment of part of the
short-term
commercial papers in 2016.
41
Managements Discussion and Analysis
Financial Review
Working Capital
The Company consistently upheld prudent financial principles and strict fund management policies. At the end of 2016, working capital (total current assets
minus total current liabilities) deficit was RMB245,026 million, an increase in deficit of RMB67,205 million from RMB177,821 million in 2015. The deficit increased because the deferred consideration of RMB61,710 million for the Mobile
Network Acquisition will become due at the end of 2017 and was reclassified as current liabilities. As at 31 December 2016, the unutilised credit facilities were RMB161,229 million (2015: RMB128,839 million). Given the stable net cash inflow
from operating activities and the sound credit record, the Company has sufficient working capital to satisfy the operation requirement. At the end of 2016, cash and cash equivalents amounted to RMB24,617 million, amongst which cash and cash
equivalents denominated in Renminbi accounted for 81.8% (2015: 92.6%).
Assets and Liabilities
In 2016, the Company continued to maintain a solid financial position. At the end of 2016, the total assets increased by 3.6% to RMB652,368 million from
RMB629,561 million at the end of 2015. Total indebtedness decreased to RMB112,528 million from RMB116,669 million at the end of 2015. The ratio of total indebtedness to total assets decreased to 17.2% from 18.5% at the end of 2015.
Indebtedness
The indebtedness analysis as at the
end of 2015 and 2016 is as follows:
|
|
|
|
|
|
|
|
|
|
|
For the year ended 31 December
|
|
(RMB millions)
|
|
2016
|
|
|
2015
|
|
Short-term debt
|
|
|
40,780
|
|
|
|
51,636
|
|
Long-term debt and payable maturing within one year
|
|
|
62,276
|
|
|
|
84
|
|
Long-term debt and payable
|
|
|
9,370
|
|
|
|
64,830
|
|
Finance lease obligations (including current portion)
|
|
|
102
|
|
|
|
119
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
112,528
|
|
|
|
116,669
|
|
|
|
|
|
|
|
|
|
|
42
Managements Discussion and Analysis
Financial Review
By the end of 2016, the total indebtedness was RMB112,528 million, a decrease of RMB4,141 million
from the end of 2015, which was mainly due to the repayment of part of the
short-term
commercial papers. Of the total indebtedness, loans denominated in Renminbi, US Dollars and Euro accounted for 99.4% (2015:
99.4%), 0.4% (2015: 0.4%) and 0.2% (2015: 0.2%), respectively. 44.3% (2015: 46.3%) of the indebtedness are loans with fixed interest rates, while the remaining portion of the indebtedness represented loans with floating interest rates.
As at 31 December 2016, neither the Company and any of its subsidiaries pledge any assets as collateral for debt (2015: Nil).
Most of the revenues received and expenses paid in our business were denominated in Renminbi, therefore there were no significant risk exposures arising from
foreign exchange fluctuations.
Investment in China Tower
In 2016, the Company held 27.9% of China Tower Corporation Limited (China Tower). Please refer to note 9 of the audited consolidated financial
statements for its financial performance during the year. In the future, the Company can enjoy more fundamental network resources through China Tower. As one of the shareholders of China Tower, it is expected that we can benefit from the enhancement
of profits and values from China Tower.
Contractual Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 January
|
|
|
1 January
|
|
|
1 January
|
|
|
1 January
|
|
|
1 January
|
|
|
|
|
|
|
|
|
|
2017 to
|
|
|
2018 to
|
|
|
2019 to
|
|
|
2020 to
|
|
|
2021 to
|
|
|
|
|
|
|
|
|
|
31 December
|
|
|
31 December
|
|
|
31 December
|
|
|
31 December
|
|
|
31 December
|
|
|
|
|
(RMB millions)
|
|
Total
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
Thereafter
|
|
Short-term debt
|
|
|
41,425
|
|
|
|
41,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt and payable
|
|
|
75,126
|
|
|
|
62,307
|
|
|
|
1,187
|
|
|
|
1,201
|
|
|
|
1,205
|
|
|
|
1,195
|
|
|
|
8,031
|
|
Operating lease commitments
|
|
|
60,981
|
|
|
|
15,492
|
|
|
|
14,351
|
|
|
|
13,704
|
|
|
|
13,256
|
|
|
|
1,112
|
|
|
|
3,066
|
|
Capital commitments
|
|
|
13,740
|
|
|
|
13,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
|
191,272
|
|
|
|
132,964
|
|
|
|
15,538
|
|
|
|
14,905
|
|
|
|
14,461
|
|
|
|
2,307
|
|
|
|
11,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
|
Amounts of
short-term
debt, and
long-term
debt and payable include recognised and unrecognised interest payable, and are not
discounted.
|
43
OPERATION INTELLECTUALISATION
RECONSTITUTION
of
OPERATION
&
MANAGEMENT
Report of the Directors
The Board of Directors (the Board) of China Telecom Corporation Limited (the Company) hereby presents its report together with the
audited consolidated financial statements of the Company and its subsidiaries (collectively, the Group) prepared in accordance with the International Financial Reporting Standards for the year ended 31 December 2016.
Principal Business
The principal business of the Company
and the Group is the provision of fundamental telecommunications services including comprehensive wireline telecommunications services, mobile telecommunications services, value-added services such as Internet access services, information services
and other related services within the service area of the Group.
Results
Results of the Group for the year ended 31 December 2016 and the financial position of the Group as at that date are set out in the audited consolidated
financial statements on pages 127 to 195 of this annual report.
Dividend
The Board of Directors proposes a final dividend in the amount equivalent to HK$0.105 per share
(pre-tax),
totalling
approximately RMB7,548 million for the year ended 31 December 2016. The dividend proposal will be submitted for consideration at the annual general meeting to be held on 23 May 2017. Dividends will be denominated and declared in Renminbi.
Dividends for holders of domestic shares and the investors of the Shanghai Stock Exchange and Shenzhen Stock Exchange (including enterprises and individuals)
investing in the H shares of the Company listed on the Hong Kong Stock Exchange (the Southbound Trading Link) (the Southbound Investors) will be paid in Renminbi, whereas dividends for H share shareholders other than
Southbound Investors will be paid in Hong Kong dollars. The relevant exchange rate will be the average offer rate of Renminbi to Hong Kong dollars as announced by the Peoples Bank of China for the week prior to the date of declaration of
dividends at the annual general meeting. The proposed final dividends are expected to be paid on 21 July 2017 upon approval at the annual general meeting.
Pursuant to the Enterprise Income Tax Law of the Peoples Republic of China and the Implementation Rules of the Enterprise Income Tax
Law of the Peoples Republic of China in 2008, the Company shall be obliged to withhold and pay 10% enterprise income tax when it distributes the proposed 2016 final dividends to
non-resident
enterprise shareholders of overseas H shares (including HKSCC Nominees Limited, other corporate nominees or trustees, and other entities or organisations) whose names appear on the Companys H share register of members on 5 June 2017.
According to regulations by the State Administration of Taxation (Guo Shui Han [2011] No. 348) and relevant laws and regulations, if the individual H
share shareholders who are Hong Kong or Macau residents and those whose country of domicile is a country which has entered into a tax treaty with PRC stipulating a dividend tax rate of 10%, the Company will finally withhold and pay individual income
tax at the rate of 10% on behalf of the individual H share shareholders. If the individual H share shareholders whose country of domicile is a country which has entered into a tax treaty with PRC stipulating a dividend tax rate of less than 10%, the
Company will finally withhold and pay individual income tax at the rate of 10% on behalf of the individual H share shareholders. If the individual H share shareholders whose country of domicile is a
46
Report of the Directors
country which has entered into a tax treaty with PRC stipulating a dividend tax rate of more than 10% but less than 20%, the Company will withhold and pay individual income tax at the actual tax
rate stipulated in the relevant tax treaty. If the individual H share shareholders whose country of domicile is a country which has entered into a tax treaty with PRC stipulating a dividend tax rate of 20%, or a country which has not entered into
any tax treaties with PRC, or under any other circumstances, the Company will withhold and pay individual income tax at the rate of 20% on behalf of the individual H share shareholders.
The Company will determine the country of domicile of the individual H share shareholders based on the registered address as recorded in the register of
members of H share of the Company on 5 June 2017 (the Registered Address). If the country of domicile of an individual H share shareholder is not the same as the Registered Address or if the individual H share shareholder would like to
apply for a refund of the additional amount of tax finally withheld and paid, the individual H share shareholder shall notify and provide relevant supporting documents to the Company on or before Monday, 29 May 2017. Upon examination of the
supporting documents by the relevant tax authorities, the Company will follow the guidance given by the tax authorities to implement relevant tax withholding and payment provisions and arrangements. Individual H share shareholders may either
personally or appoint a representative to attend to the procedures in accordance with the requirements under the tax treaties notice if they do not provide the relevant supporting documents to the Company within the time period stated above.
For Southbound Investors (including enterprises and individuals), the Shanghai Branch of China Securities Depository and Clearing Corporation Limited and
Shenzhen Branch of China Securities Depository and Clearing Corporation Limited, as the nominee of the investors of the Southbound Trading Link, will receive all dividends distributed by the Company and will distribute the dividends to the relevant
investors under the Southbound Trading Link through its depositary and clearing system. According to the relevant provisions under the Notice on Tax Policies for Shanghai-Hong Kong Stock Connect Pilot Programme (Cai Shui [2014]
No. 81) and Notice on Tax Policies for
Shenzhen-Hong
Kong Stock Connect Pilot Programme (Cai Shui [2016] No. 127), the Company shall withhold and pay individual income tax at the
rate of 20% with respect to dividends received by the Mainland individual investors for investing in the H shares of the Company listed on the Hong Kong Stock Exchange through the Southbound Trading Link. In respect of the dividends received by
Mainland securities investment funds investing in the H shares of the Company listed on Hong Kong Stock Exchange through the Southbound Trading Link, the tax levied shall be ascertained by reference to the rules applicable to individual investors.
The Company is not required to withhold and pay income tax on dividends derived by the Mainland enterprise investors under the Southbound Trading Link, and such enterprises shall report the income and make tax payment by themselves. The record date
for entitlement to the shareholders rights and the relevant arrangements of dividend distribution for the Southbound Investors are the same as those for the Companys H share shareholders.
The Company assumes no responsibility and disclaims all liabilities whatsoever in relation to the tax status or tax treatment of the individual H share
shareholders and for any claims arising from any delay in or inaccurate determination of the tax status or tax treatment of the individual H share shareholders or any disputes relating to the tax withholding and payment mechanism or arrangements.
47
Report of the Directors
Directors and Senior Management of the Company
Changes of Directors and senior management of the Company during the year 2016 are as follows:
On 25 April 2016, Mr. Yang Jie was appointed by the Board as the Chairman and Chief Executive Officer of the Company and no longer held the offices of
the President and Chief Operating Officer of the Company. On the same date, Mr. Yang Xiaowei was appointed by the Board as the President and Chief Operating Officer of the Company and no longer held the office of the Executive Vice President of
the Company.
On 10 May 2016, Mr. Zhu Wei resigned from his position as a
Non-Executive
Director of the
Company due to change in work arrangement. On 19 August 2016, Mr. Zhang Jiping retired from his positions as an Executive Director and Executive Vice President of the Company due to his age. On 4 November 2016, Mr. Zhen Caiji was appointed
by the Board as an Executive Vice President of the Company.
On 19 December 2016, Madam Chu Ka Yee resigned from her positions as Company Secretary and
Authorised Representative of the Company. On the same date, Mr. Ke Ruiwen and Madam Wong Yuk Har were appointed by the Board as the Joint Company Secretaries. They also act as the Authorised Representatives of the Company.
The following table sets out certain information of the Directors and senior management of the Company as at 31 December 2016:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position in the Company
|
|
Date of initial
appointment as
directors/senior
management
|
Yang Jie
|
|
54
|
|
Chairman and Chief Executive Officer
|
|
20 October 2004
|
Yang Xiaowei
|
|
53
|
|
Executive Director, President and Chief Operating Officer
|
|
9 September 2008
|
Ke Ruiwen
|
|
53
|
|
Executive Director, Executive Vice President and Joint Company Secretary
|
|
30 May 2012
|
Sun Kangmin
|
|
59
|
|
Executive Director and Executive Vice President
|
|
20 October 2004
|
Tse Hau Yin, Aloysius
|
|
69
|
|
Independent
Non-Executive
Director
|
|
9 September 2005
|
Cha May Lung, Laura
|
|
67
|
|
Independent
Non-Executive
Director
|
|
9 September 2008
|
Xu Erming
|
|
67
|
|
Independent
Non-Executive
Director
|
|
9 September 2005
|
Wang Hsuehming
|
|
67
|
|
Independent
Non-Executive
Director
|
|
29 May 2014
|
Zhen Caiji
|
|
56
|
|
Executive Vice President
|
|
4 November 2016
|
Gao Tongqing
|
|
53
|
|
Executive Vice President
|
|
21 June 2013
|
Chen Zhongyue
|
|
45
|
|
Executive Vice President
|
|
12 December 2014
|
Since 31 December 2016 and up to the date of this report, there was no change to the composition of Directors and senior
management of the Company.
48
Report of the Directors
Supervisors of the Company
The following table sets out certain information of the Supervisors of the Company as at the date of this Report:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position in the Company
|
|
Date of initial
appointment as
supervisors
|
Sui Yixun
|
|
53
|
|
Chairman of the Supervisory Committee
|
|
27 May 2015
|
Tang Qi
|
|
58
|
|
Supervisor (Employee Representative)
|
|
19 August 2013
|
Zhang Jianbin
|
|
51
|
|
Supervisor (Employee Representative)
|
|
16 October 2012
|
Hu Jing
|
|
41
|
|
Supervisor
|
|
16 October 2012
|
Ye Zhong
|
|
57
|
|
Supervisor
|
|
27 May 2015
|
Share Capital
The share
capital of the Company as at 31 December 2016 was RMB80,932,368,321, divided into 80,932,368,321 shares of RMB1.00 each. As at 31 December 2016, the share capital of the Company comprised:
|
|
|
|
|
|
|
|
|
Share category
|
|
Number of shares
as at
31 December 2016
|
|
|
Percentage of the
total number of shares
in issue as at
31 December 2016
|
|
Total number of Domestic shares
(held by the companies as follows):
|
|
|
67,054,958,321
|
|
|
|
82.85
|
|
China Telecommunications Corporation
|
|
|
57,377,053,317
|
|
|
|
70.89
|
|
Guangdong Rising Assets Management Co., Ltd.
|
|
|
5,614,082,653
|
|
|
|
6.94
|
|
Zhejiang Financial Development Company
|
|
|
2,137,473,626
|
|
|
|
2.64
|
|
Fujian Investment & Development Group Co., Ltd
|
|
|
969,317,182
|
|
|
|
1.20
|
|
Jiangsu Guoxin Investment Group Co., Ltd.
|
|
|
957,031,543
|
|
|
|
1.18
|
|
|
|
|
|
|
|
|
|
|
Total number of H shares (including ADSs)
|
|
|
13,877,410,000
|
|
|
|
17.15
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
80,932,368,321
|
|
|
|
100.00
|
|
|
|
|
|
|
|
|
|
|
49
Report of the Directors
Material Interests and Short Positions in Shares and Underlying Shares of the Company
As at 31 December 2016, the interests or short position of persons who are entitled to exercise or control the exercise of 5% or more of the voting power at
any of the Companys general meetings (excluding the Directors and Supervisors) in the shares and underlying shares of equity derivatives of the Company as recorded in the register required to be maintained under Section 336 of the
Securities and Futures Ordinance (the SFO) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of shareholders
|
|
Number of shares
|
|
|
Type of shares
|
|
Percentage of
the respective
type of shares
|
|
|
Percentage of
the total
number of
shares in issue
|
|
|
Capacity
|
China Telecommunications Corporation
|
|
|
57,377,053,317
(Long Position)
|
|
|
Domestic
shares
|
|
|
85.57
|
%
|
|
|
70.89
|
%
|
|
Beneficial owner
|
Guangdong Rising Assets Management Co., Ltd.
|
|
|
5,614,082,653
(Long Position)
|
|
|
Domestic
shares
|
|
|
8.37
|
%
|
|
|
6.94
|
%
|
|
Beneficial owner
|
JPMorgan Chase & Co.
|
|
|
1,771,824,481
(Long Position)
|
|
|
H shares
|
|
|
12.77
|
%
|
|
|
2.19
|
%
|
|
331,265,117 shares as beneficial owner; 193,670,000 shares as investment manager; 10,700 shares as
trustee (other than bare trustee); and 1,246,878,664 shares as custodian corporation/approved lending agent
|
|
|
|
118,161,531
(Short Position)
|
|
|
H shares
|
|
|
0.85
|
%
|
|
|
0.15
|
%
|
|
Beneficial owner
|
|
|
|
1,246,878,664
(Shares available
for lending)
|
|
|
H shares
|
|
|
8.98
|
%
|
|
|
1.54
|
%
|
|
Custodian corporation/approved lending agent
|
BlackRock, Inc.
|
|
|
828,607,283
(Long Position)
|
|
|
H shares
|
|
|
5.97
|
%
|
|
|
1.02
|
%
|
|
Interest of controlled corporation
|
|
|
|
20,000
(Short Position)
|
|
|
H shares
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
Interest of controlled corporation
|
The Bank of New York Mellon Corporation
|
|
|
750,064,125
(Long Position)
|
|
|
H shares
|
|
|
5.40
|
%
|
|
|
0.93
|
%
|
|
Interest of controlled corporation
|
|
|
|
721,643,841
(Shares available
for lending)
|
|
|
H shares
|
|
|
5.20
|
%
|
|
|
0.89
|
%
|
|
Interest of controlled corporation
|
Templeton Global Advisors Limited
|
|
|
703,545,865
(Long Position)
|
|
|
H shares
|
|
|
5.07
|
%
|
|
|
0.87
|
%
|
|
Investment manager
|
GIC Private Limited
|
|
|
695,909,200
(Long Position)
|
|
|
H shares
|
|
|
5.01
|
%
|
|
|
0.86
|
%
|
|
Investment manager
|
50
Report of the Directors
Save as disclosed above, as at 31 December 2016, in the register required to be maintained under
Section 336 of the SFO, no other persons were recorded to hold any interests or short positions in the shares or underlying shares of the equity derivatives of the Company.
Directors and Supervisors Interests and Short Positions in Shares, Underlying Shares and Debentures
As at 31 December 2016, none of the Directors and Supervisors of the Company had any interests or short positions in the shares, underlying shares or
debentures of the Company or its associated corporations (as defined in Part XV of the SFO) as recorded in the register required to be maintained under Section 352 of the SFO or as otherwise notified to the Company and the Hong Kong Stock
Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers.
As at 31 December 2016, the Company had not granted its
Directors or Supervisors, or their respective spouses or children below the age of 18 any rights to subscribe for the shares or debentures of the Company or any of its associated corporations and none of them has ever exercised any such right.
Directors and Supervisors Interests in Transactions, Arrangements or Contracts
At the Board meeting held in 2016 in relation to the lease of telecommunications towers and related assets from China Tower, Mr. Zhang Jiping and
Mr. Sun Kangmin, the Executive Directors of the Company who also serve as the Chairman of the Supervisory Committee and Director of China Tower respectively, had voluntarily abstained from voting on the relevant resolutions.
In addition, save as disclosed above and the service agreements with the Company, for the year ended 31 December 2016, the Directors and Supervisors of the
Company did not have any material interest, whether directly or indirectly, in any transactions, arrangement or contract which was significant to the Companys business and which was entered into by the Company, its parent company or any of its
subsidiaries or fellow subsidiaries. None of the Directors or Supervisors of the Company has entered into any service contract which is not determinable by the Company within one year without payment of compensation (other than statutory
compensation).
51
Report of the Directors
Emoluments of the Directors and Supervisors
Please refer to note 29 of the audited consolidated financial statements for details of the emoluments of all Directors and Supervisors of the Company in 2016.
Purchase, Sale and Redemption of Shares
Neither the
Company nor any of its subsidiaries has purchased, sold or redeemed any securities of the Company during the reporting period.
Public Float
As at the date of this Report, based on the information that is publicly available to the Company and within the knowledge of the Directors, the Company has
maintained the prescribed public float under the Listing Rules and as agreed with the Hong Kong Stock Exchange.
Summary of Financial Information
Please refer to pages 196 to 197 of this annual report for a summary of the operating results, assets and liabilities of the Group for each of the
years in the five-year period ended 31 December 2016.
Bank Loans and Other Borrowings
Please refer to note 16 of the audited consolidated financial statements for details of bank loans and other borrowings of the Group.
Capitalised Interest
Please refer to note 27 of the
audited consolidated financial statements for details of the Groups capitalised interest for the year ended 31 December 2016.
Fixed Assets
Please refer to note 4 of the audited consolidated financial statements for movements in the fixed assets of the Group for the year ended 31 December
2016.
Reserves
Pursuant to Article 147 of the
Companys articles of association (the Articles of Association), where the financial statements prepared in accordance with the China Accounting Standards for Business Enterprises and regulations, materially differ from those
prepared in accordance with either the International Financial Reporting Standards, or accounting standards at a place outside the PRC where the Companys shares are listed, the distributable profit for the relevant accounting period shall be
deemed to be the lesser of the amounts shown in those respective financial statements. Distributable reserves of the Company as at 31 December 2016, calculated on the above basis and before deducting the proposed final dividends for 2016, amounted
to RMB112,631 million.
Please refer to note 21 of the audited consolidated financial statements for details of the movements in the reserves of the
Company and the Group for the year ended 31 December 2016.
52
Report of the Directors
Equity-linked Agreements
For the year ended 31 December 2016, the Company has not entered into any equity-linked agreement.
Donations
For the year ended 31 December 2016, the Group
made charitable and other donations with a total amount of RMB19 million.
Subsidiaries and Associated Companies
Please refer to note 8 and note 9 of the audited consolidated financial statements for details of the Companys subsidiaries and the Groups
interests in associated companies as at 31 December 2016.
Permitted Indemnity
For the year ended 31 December 2016 and as at the date of approval of this report, the Company has arranged appropriate insurance cover in respect of legal
actions against the directors of the Group.
Changes in Equity
Please refer to the consolidated statement of changes in equity as contained in the audited consolidated financial statements of the year (page 130 of this
annual report).
Retirement Benefits
Please refer to
note 39 of the audited consolidated financial statements for details of the retirement benefits provided by the Group.
Stock Appreciation Rights
Please refer to note 40 of the audited consolidated financial statements for details of the stock appreciation rights plan offered by the Company.
Pre-Emptive
Rights
There are no provisions for
pre-emptive
rights in the Articles of Association requiring the Company to offer new shares
to the existing shareholders in proportion to their shareholdings.
Major Customers and Suppliers
For the year ended 31 December 2016, revenue generated from the five largest customers of the Group accounted for an amount of less than 30% of the total
operating revenues of the Group.
For the year ended 31 December 2016, purchases from the five largest suppliers of the Group accounted for an amount of
less than 30% of the total annual purchases of the Group.
53
Report of the Directors
Continuing Connected Transactions
The following table sets out the amounts of the Groups continuing connected transactions with China Telecommunications Corporation and its Subsidiaries
(except for the Group) (the China Telecom Group)
1
for the year ended 31 December 2016:
|
|
|
|
|
|
|
|
|
Transactions
|
|
Transaction
amounts
(RMB millions)
|
|
|
Annual
monetary cap
for continuing
connected
transactions
(RMB millions)
|
|
Net transaction amount of centralised services
|
|
|
523
|
|
|
|
1,100
|
|
Net expenses for interconnection settlement
|
|
|
172
|
|
|
|
900
|
|
Mutual leasing of properties
|
|
|
596
|
|
|
|
1,400
|
|
Provision of IT services by China Telecom Group
|
|
|
1,609
|
|
|
|
1,800
|
|
Provision of IT services by the Group
|
|
|
312
|
|
|
|
700
|
|
Provision of community services by China Telecom Group
|
|
|
2,871
|
|
|
|
4,000
|
|
Provision of supplies procurement services by China Telecom Group
|
|
|
5,206
|
|
|
|
6,000
|
|
Provision of supplies procurement services by the Group
|
|
|
2,780
|
|
|
|
5,500
|
|
Provision of engineering services by China Telecom Group
|
|
|
18,936
|
|
|
|
20,000
|
|
Provision of ancillary telecommunications services by China Telecom Group
|
|
|
13,941
|
|
|
|
16,000
|
|
Provision of Internet applications channel services by the Group
|
|
|
332
|
|
|
|
2,000
|
|
Note 1:
|
China Telecommunications Corporation is a controlling shareholder of the Company. Each of China Telecommunications Corporation and its subsidiaries (except for the Group) constitutes a connected person of the Company
under the Listing Rules.
|
On 23 September 2015, the Company and the China Telecommunications Corporation entered into supplemental
agreements and renewed the Engineering Framework Agreement, the Ancillary Telecommunications Services Framework Agreement, the Interconnection Settlement Agreement, the Community Services Framework Agreement, the Centralised Services Agreement, the
Property Leasing Framework Agreement, the IT Services Framework Agreement, the Supplies Procurement Services Framework Agreement and the Internet Applications Channel Services Framework Agreement with the same terms (except the pricing terms) for a
further term of 3 years expiring on 31 December 2018. The pricing terms of the
54
Report of the Directors
agreements were elaborated or amended with a view to complying with the guidance letter on pricing policies for continuing connected transactions and their disclosure published by the Hong Kong
Stock Exchange in March 2014
(HKEx-GL73-14)
and aligning with the transactions contemplated under the agreements. Details of the respective Agreements are shown below:
Centralised Services Agreement
Pursuant to the
centralised services agreement signed between the Company and China Telecommunications Corporation on 10 September 2002 and the related supplemental agreements subsequently entered into between the two parties (collectively, the Centralised
Services Agreement), centralised services include centralised business management and operational services provided by the Group to China Telecom Group in relation to key corporate customers, its network management centre and business support
centre. Centralised services also include the provision of certain premises by China Telecom Group to the Group and the common use of international telecommunications facilities by both parties. The aggregate costs incurred by the Group and China
Telecom Group for the provision of management and operation services will be apportioned between the Group and China Telecom Group on a pro rata basis according to the revenues generated by each party. Where the Group uses the premises provided by
China Telecom Group, the Group will pay premises usage fees to China Telecom Group on a pro rata basis according to the apportioned actual area allocated to the Group. The premises usage fees shall be determined through negotiation between the two
parties based on comparable market rates. When both parties use international telecommunications facilities provided by third parties and accept services by such third parties (for example, restoration maintenance costs, the annual utilisation fee
and related service costs) and when both parties use the international telecommunications facilities of China Telecom Group, the associated costs shall be shared on a pro rata basis according to volume of the inbound and outbound voice calls to and
from international regions, Hong Kong, Macau and Taiwan originating from each party divided by the proportion of the aggregate volume of the inbound and outbound voice calls to and from international regions, Hong Kong, Macau and Taiwan originating
from both parties. When the two parties use international telecommunications facilities provided by a third party and accept restoration maintenance costs, such fees shall be determined according to the actual utilisation fee each year. The
utilisation fee associated with the shared use of the international telecommunications facilities provided by China Telecom Group shall be determined through negotiation between the two parties based on market rates. Market rates shall mean the
rates at which the same or similar type of products or services are provided by independent third parties in the ordinary course of business and under normal commercial terms. When determining the relevant market rates, to the extent practicable,
management of the Company shall take into account the rates of at least two similar and comparable transactions entered into with or carried out by independent third parties in the ordinary course of business in the corresponding period for
reference.
55
Report of the Directors
The Company and China Telecommunications Corporation have entered into a supplemental agreement on 23
September 2015 and renewed the Centralised Services Agreement on the same terms (except the pricing terms) for a further term of 3 years expiring on 31 December 2018. No later than 30 days prior to the expiry of the Centralised Services Agreement,
the Company is entitled to serve a written notice to China Telecommunications Corporation to renew the Centralised Services Agreement, and the parties shall consult and decide on matters relating to such renewal.
Interconnection Settlement Agreement
Pursuant to the
interconnection settlement agreement signed between the Company and China Telecommunications Corporation on 10 September 2002 and the related supplemental agreements subsequently entered into between the two parties (collectively, the
Interconnection Settlement Agreement), the telephone operator connecting a telephone call made to its local access network shall be entitled to receive from the operator from which the telephone call originated a fee prescribed by the
Ministry of Industry and Information Technology of the PRC from time to time. Interconnection charges are currently RMB0.06 per minute for local calls originated from the Group to China Telecom Group. The interconnection settlement charges will be
calculated according to the Notice Concerning the Issue of the Measures on Interconnection Settlement between Public Telecommunications Networks and Sharing of Relaying Fees (Xin Bu Dian [2003] No. 454) promulgated by the Ministry
of Information Industry of the PRC. The Ministry of Industry and Information Technology of the PRC may, from time to time, take into account the relevant regulatory rules and market conditions, amend or promulgate new rules or regulations in respect
of interconnection settlement which will be announced on its official website at www.miit.gov.cn. If the Ministry of Industry and Information Technology of the PRC amends the existing, or promulgates new rules or regulations in respect of
interconnection settlement, the parties shall apply such amended or new rules and regulations as acknowledged by both parties. The settlement regions include Beijing Municipality, Tianjin Municipality, Hebei Province, Heilongjiang Province, Jilin
Province, Liaoning Province, Shanxi Province, Henan Province, Shandong Province, Inner Mongolia Autonomous Region and Xizang Autonomous Region.
The
Company and China Telecommunications Corporation have entered into a supplemental agreement on 23 September 2015 and renewed the Interconnection Settlement Agreement on the same terms (except the pricing terms) for a further term of 3 years expiring
on 31 December 2018. No later than 30 days prior to the expiry of the Interconnection Settlement Agreement, the Company is entitled to serve a written notice to China Telecommunications Corporation to renew the Interconnection Settlement Agreement,
and the parties shall consult and decide on matters relating to such renewal.
56
Report of the Directors
Property Leasing Framework Agreement
Pursuant to the property leasing framework agreement signed between the Company and China Telecommunications Corporation on 30 August 2006 and the related
supplemental agreement subsequently entered into between the two parties (collectively, the Property Leasing Framework Agreement), the Group and China Telecom Group can lease properties from the other party for use as business premises,
offices, equipment storage facilities and sites for network equipment. The rental charges under the Property Leasing Framework Agreement shall be determined according to market rates. Market rates shall mean the rental charge at which the same or
similar type of properties or adjacent properties are leased by independent third parties in the ordinary course of business and under normal commercial terms. When determining the relevant market rates, to the extent practicable, management of the
Company shall take into account the rental charges of at least two similar and comparable transactions entered into with or carried out by independent third parties in the ordinary course of business in the corresponding period for reference. The
rental charges are subject to review every 3 years.
The Company and China Telecommunications Corporation have entered into a supplemental agreement on 23
September 2015 and renewed the Property Leasing Framework Agreement on the same terms (except the pricing terms) for a further term of 3 years expiring on 31 December 2018. No later than 30 days prior to the expiry of the Property Leasing Framework
Agreement, the Company is entitled to serve a written notice to China Telecommunications Corporation to renew the Property Leasing Framework Agreement, and the parties shall consult and decide on matters relating to such renewal.
IT Services Framework Agreement
Pursuant to the IT
services framework agreement signed between the Company and China Telecommunications Corporation on 30 August 2006 and the related supplemental agreements subsequently entered into between the two parties (collectively, the IT Services
Framework Agreement), the Group and China Telecom Group can provide the other party with information technology services, including office automation and software testing. Each of the Group and China Telecom Group is entitled to participate in
bidding for the right to provide information technology services to the other party in accordance with the IT Services Framework Agreement. The charges payable for such services shall be determined by reference to the market rates. Market rates
shall mean the rates at which the same or similar type of products or services are provided by independent third parties in the ordinary course of business and under normal commercial terms. When determining the relevant market rates, to the extent
practicable, management of the Company shall take into account the rates of at least two similar and comparable transactions entered into with or carried out by independent third parties in the ordinary course of business in the corresponding period
for reference.
57
Report of the Directors
In the circumstances where the relevant laws or regulations in the PRC specify that the prices and/or the fee
standards for particular services to be provided pursuant to such agreement are to be determined by a tender process, the charges payable for such services shall be finally determined in accordance with the Bidding Law of the PRC and the
Regulations on the Implementation of the Bidding Law of the PRC or the relevant tender procedures. The Group shall solicit at least three tenderers for the tender process. If the terms offered by the Group or China Telecom Group are no
less favourable than those offered by an independent third party provider, the Group or China Telecom Group may award the tender to the other party.
The
Company and China Telecommunications Corporation have entered into a supplemental agreement on 23 September 2015 and renewed the IT Services Framework Agreement on the same terms (except the pricing terms) for a further term of 3 years expiring on
31 December 2018. No later than 30 days prior to the expiry of the IT Services Framework Agreement, the Company is entitled to serve a written notice to China Telecommunications Corporation to renew the IT Services Framework Agreement, and the
parties shall consult and decide on matters relating to such renewal.
Community Services Framework Agreement
Pursuant to the community services framework agreement signed between the Company and China Telecommunications Corporation on 30 August 2006 and the related
supplemental agreements subsequently entered into between the two parties (collectively, the Community Services Framework Agreement), China Telecom Group provides the Group with community services such as culture, education, property
management, vehicle service, health and medical care, hotel and conference service, community and sanitary service. The community services under the Community Services Framework Agreement are provided at:
(1)
|
market prices, which shall mean the prices at which the same or similar type of products or services are provided by independent third parties in the ordinary course of business and under normal commercial terms. When
determining the relevant market prices, to the extent practicable, management of the Company shall take into account the prices of at least two similar and comparable transactions entered into with or carried out by independent third parties in the
ordinary course of business over the corresponding period for reference;
|
58
Report of the Directors
(2)
|
where there is no or it is not possible to determine the market prices, the prices are to be agreed between the parties based on the reasonable costs incurred in providing the services plus the amount of the relevant
taxes and reasonable profit margin. For this purpose, reasonable profit margin is to be fairly determined by negotiations between the parties in accordance with the internal policies of the Group. When determining the relevant
reasonable profit margin, to the extent practicable, management of the Company shall take into account the profit margin of at least two similar and comparable transactions entered into with independent third parties in the corresponding
period or the relevant industry profit margin for reference.
|
The Company and China Telecommunications Corporation have entered into a
supplemental agreement on 23 September 2015 and renewed the Community Services Framework Agreement on the same terms (except the pricing terms) for a further term of 3 years expiring on 31 December 2018. No later than 30 days prior to the expiry of
the Community Services Framework Agreement, the Company is entitled to serve a written notice to China Telecommunications Corporation to renew the Community Services Framework Agreement, and the parties shall consult and decide on matters relating
to such renewal.
Supplies Procurement Services Framework Agreement
Pursuant to the supplies procurement services framework agreement signed between the Company and China Telecommunications Corporation on 30 August 2006 and the
related supplemental agreements subsequently entered into between the two parties (collectively, the Supplies Procurement Services Framework Agreement), China Telecom Group and the Group provide each other with supplies procurement
services, including comprehensive procurement services, the sale of proprietary telecommunications equipment, resale of third-party equipment, management of tenders, verification of technical specifications, storage, transportation and installation
services.
Where the procurement services are provided on an agency basis, the maximum commission for such procurement services shall be calculated at:
(1)
|
not more than 1% of the contract value for procurement of imported telecommunications supplies; or
|
(2)
|
not more than 3% of the contract value for the procurement of domestic telecommunications supplies and domestic
non-telecommunications
supplies.
|
59
Report of the Directors
The pricing basis of the services for the provision of supplies procurement other than on an agency basis
under the Supplies Procurement Services Framework Agreement is the same as those set out in the Community Services Framework Agreement.
The Company and
China Telecommunications Corporation have entered into a supplemental agreement on 23 September 2015 and renewed the Supplies Procurement Services Framework Agreement on the same terms (except the pricing terms) for a further term of 3 years
expiring on 31 December 2018. No later than 30 days prior to the expiry of the Supplies Procurement Services Framework Agreement, the Company is entitled to serve a written notice to China Telecommunications Corporation to renew the Supplies
Procurement Services Framework Agreement, and the parties shall consult and decide on matters relating to such renewal.
Engineering Framework
Agreement
Pursuant to the engineering framework agreement signed between the Company and China Telecommunications Corporation on 30 August 2006 and
the related supplemental agreements subsequently entered into between the two parties (collectively, the Engineering Framework Agreement), China Telecom Group through bids provides to the Group services such as construction, design,
equipment installation and testing and/or engineering project supervision services. The charges payable for such engineering services shall be determined by reference to market rates. Market rates shall mean the rates at which the same or similar
type of products or services are provided by independent third parties in the ordinary course of business and under normal commercial terms. When determining the relevant market rates, to the extent practicable, management of the Company shall take
into account the rates of at least two similar and comparable transactions entered into with or carried out by independent third parties in the ordinary course of business in the corresponding period for reference. The charges payable for the design
or supervision of engineering projects with a value of over RMB500,000 or engineering construction projects with a value of over RMB2 million shall be determined by the tender award price, which is determined in accordance with the relevant
tendering procedure of the Group and the relevant laws and regulations in the PRC, including the Bidding Law of the PRC and the Regulations on the Implementation of the Bidding Law of the PRC. The Group shall solicit at least
three tenderers for the tender process.
The Group does not accord any priority to China Telecom Group to provide such services, and the tender may be
awarded to an independent third party. However, if the terms of an offer from China Telecom Group are at least as favorable as those offered by other tenderers, the Group may award the tender to China Telecom Group.
The Company and China Telecommunications Corporation have entered into a supplemental agreement on 23 September 2015 and renewed the Engineering Framework
Agreement on the same terms (except the pricing terms) for a further term of 3 years expiring on 31 December 2018. No later than 30 days prior to the expiry of the Engineering Framework Agreement, the Company is entitled to serve a written notice to
China Telecommunications Corporation to renew the Engineering Framework Agreement, and the parties shall consult and decide on matters relating to such renewal.
60
Report of the Directors
Ancillary Telecommunications Services Framework Agreement
Pursuant to the ancillary telecommunications services framework agreement signed between the Company and China Telecommunications Corporation on 30 August 2006
and the related supplemental agreements subsequently entered into between the two parties (collectively, the Ancillary Telecommunications Services Framework Agreement), China Telecom Group provides the Group with certain repair and
maintenance services, including repair of telecommunications equipment, maintenance of fire equipment and telephone booths, as well as other customer services. The pricing terms for such services are the same as those set out in the Community
Services Framework Agreement.
The Company and China Telecommunications Corporation have entered into a supplemental agreement on 23 September 2015 and
renewed the Ancillary Telecommunications Services Framework Agreement on the same terms (except pricing terms) for a further term of 3 years expiring on 31 December 2018. No later than 30 days prior to the expiry of the Ancillary Telecommunications
Services Framework Agreement, the Company is entitled to serve a written notice to China Telecommunications Corporation to renew the Ancillary Telecommunications Services Framework Agreement, and the parties shall consult and decide on matters
relating to such renewal.
Internet Applications Channel Services Framework Agreement
Pursuant to the Internet Applications Channel Services Framework Agreement signed between the Company and China Telecommunications Corporation on 16 December
2013 and the related supplemental agreement subsequently entered into between the two parties (collectively, the Internet Applications Channel Services Framework Agreement), the Company provides Internet applications channel services to
China Telecom Group. The channel services mainly include the provision of telecommunications channel and applications support platform, provision of billing and deduction services, coordination of sales promotion and development of customers
services, etc. The pricing terms for such services are the same as those set out in the Community Services Framework Agreement.
The Company and China
Telecommunications Corporation have entered into a supplemental agreement on 23 September 2015 and renewed the Internet Applications Channel Services Framework Agreement on the same terms (except the pricing terms) for a further term of 3 years
expiring on 31 December 2018. No later than 30 days prior to the expiry of the Internet Applications Channel Services Framework Agreement, the Company is entitled to serve a written notice to China Telecommunications Corporation to renew the
Internet Applications Channel Services Framework Agreement, and the parties shall consult and decide on matters relating to such renewal.
61
Report of the Directors
The Company confirms that it has complied with the disclosure requirements in accordance with Chapter 14A of
the Listing Rules in respect of the connected transactions the Company conducted in the year 2016.
The Companys external auditor was engaged to
report on the Groups continuing connected transactions for the year ended 31 December 2016 in accordance with the Hong Kong Standard on Assurance Engagements 3000 Assurance Engagements Other Than Audits or Reviews of Historical Financial
Information and with reference to Practice Note 740 Auditors Letter on Continuing Connected Transactions under the Hong Kong Listing Rules issued by the Hong Kong Institute of Certified Public Accountants.
The auditors of the Group have reviewed the continuing connected transactions of the Group for the year ended 31 December 2016 and have confirmed to the Board
that the transactions:
1.
|
have received the approval of the Board;
|
2.
|
have been entered into in accordance with the pricing policies as stated in the relevant agreements; and
|
3.
|
have been entered into in accordance with the terms of the agreements governing such transactions; and the values of continuing connected transactions entered into between the Group and its connected persons which are
subject to annual caps have not exceeded their respective annual caps.
|
The Independent
Non-Executive
Directors of the Company have confirmed that all continuing connected transactions for the year ended 31 December 2016 to which the Group was a party:
1.
|
had been entered into, and the agreements governing those transactions were entered into, by the Group in the ordinary and usual course of business;
|
2.
|
had been entered into either:
|
|
(i)
|
on normal commercial terms or better; or
|
|
(ii)
|
if there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to the Company than those available to or (if applicable) from independent third
parties; and
|
3.
|
had been entered into in accordance with the relevant terms that are fair and reasonable and in the interests of the shareholders of the Company as a whole.
|
The Independent
Non-Executive
Directors have further confirmed that:
The values of continuing connected transactions for the year ended 31 December 2016 entered into between the Group and its connected persons which are subject
to annual caps have not exceeded their respective annual caps.
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Report of the Directors
Lease of telecommunications towers and related assets from China Tower
Upon completion of the disposal of tower assets by the Company to China Tower, the Company and China Tower entered into an agreement (the Lease
Agreement) on 8 July 2016 to finally confirm the pricing and related arrangements in relation to the lease of telecommunications towers and related assets. Please refer to the announcement published by the Company on 8 July 2016 for further
details.
Business Review
Relating to the details of
the material development of the Group in 2016, a fair review of the business and a discussion and analysis of the Groups performance during the year and the material factors underlying its results and financial position are provided in the
Chairmans Statement on pages 8 to 15, Business Review on pages 26 to 35 and Financial Review on pages 36 to 43 of this annual report. Description of the principal risks and uncertainties facing the Group can be found throughout this annual
report, particularly in the Environmental, Social and Governance Report on pages 70 to 117 of this annual report. Particulars of important events affecting the Group that have occurred after 31 December 2016, if any, can also be found in the Notes
to the Consolidated Financial Statements. The outlook of the Groups business is discussed throughout this annual report including in the Chairmans Statement.
Description of the Groups key relationships with its employees, customers, suppliers and others that have a significant impact on the Company and on
which the Companys success depends can be found throughout this annual report, particularly in the Environmental, Social and Governance Report on pages 70 to 117 of this annual report. In addition, more details regarding the Groups
performance by reference to financial key performance indicators and environmental policies, as well as compliance with relevant laws and regulations which have a significant impact on the Group, are provided in the Chairmans Statement,
Business Review, Financial Review, Environmental, Social and Governance Report of this annual report. Each of the above-mentioned relevant contents form an integral part of this Report of the Directors.
Compliance with the Corporate Governance Code
Please
refer to the Environmental, Social and Governance Report set out on pages 70 to 117 of this 2016 annual report of the Company for details of our compliance with the Corporate Governance Code.
Material Legal Proceedings
As at 31 December 2016, the
Company was not involved in any material litigation or arbitration, and as far as the Company is aware, no material litigation or claims were pending or threatened or made against the Company.
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Report of the Directors
Auditors
Deloitte Touche Tohmatsu and Deloitte Touche Tohmatsu Certified Public Accountants LLP were appointed as the international and domestic auditors of the
Company, respectively for the year ended 31 December 2016. Deloitte Touche Tohmatsu has audited the accompanying consolidated financial statements, which have been prepared in accordance with the International Financial Reporting Standards. The
Company has appointed Deloitte Touche Tohmatsu and Deloitte Touche Tohmatsu Certified Public Accountants LLP since 29 May 2013. The relevant re-appointment of Deloitte Touche Tohmatsu and Deloitte Touche Tohmatsu Certified Public Accountants LLP as
the Companys international and domestic auditors, respectively for the year ending 31 December 2017 will be proposed to the annual general meeting of the Company to be held on 23 May 2017.
By Order of the Board
Yang Jie
Chairman and Chief Executive Officer
Beijing, China
21 March 2017
64
Report of the Supervisory Committee
During the reporting period, all members of the Supervisory Committee acted in accordance with the Company Law of the Peoples Republic of China and the
Articles of Association of the Company, followed the principles of integrity and diligently carried out their supervisory function to safeguard the interests of shareholders, the Company and the employees.
I. The work status of the Supervisory Committee of the Company
During the reporting period, the Supervisory Committee held two meetings and organised one onsite exchange and studies. At the fourth meeting of the Fifth
Session of the Supervisory Committee held on 16 March 2016, the Supervisory Committee reviewed and approved five agenda items, including the financial statements for the year 2015, the audited report issued by the external auditors, the profit
distribution and dividend proposal, the Supervisory Committees report for the year 2015, the working plan of the Supervisory Committee for the year 2016, and passed the relevant resolutions. Regarding the disposal of towers and related assets,
internal control formulation, and change of as well as control and management of connected transactions, the Supervisory Committee has communicated with the Finance Department, Internal Audit Department and external auditors and raised certain
recommendations. At the fifth meeting of the Fifth Session of the Supervisory Committee held on 16 August 2016, the Supervisory Committee reviewed and approved the interim financial statements of the Company for year 2016 and the review report of
the external auditors, and passed the relevant resolutions. Regarding the Companys operating results, the review work of interim financial statements and connected transactions, the Supervisory Committee has communicated with the Finance
Department, Internal Audit Department and external auditors and raised certain recommendations. During the reporting period, members of the Supervisory Committee attended the Board meetings and Audit Committee meetings and visited frontline
companies for exchange and studies to have a better understanding of the operation development. The Supervisory Committee also supervised the Companys major decisions and the performance duties of the Board members and the senior management.
II. The overall assessment of the operation management and performance during the reporting period
The Supervisory Committee believed that during the reporting period, all members of the Board and members of senior management have complied with rules and
regulations, upheld the principles of diligence and integrity, safeguarded the interests of shareholders, fulfilled their responsibilities fully in accordance with the Articles of Association of the Company, diligently implemented the resolutions of
the shareholders meetings and the Board meetings, and strictly complied with the relevant regulations for listed companies. The Supervisory Committee has not observed any behaviours that breached the laws, rules, and Articles of Association of
the Company, or damaged the interests of shareholders.
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Report of the Supervisory Committee
During the reporting period, by seizing the favourable opportunities from the policy to refarm 800MHz
frequency,
co-sharing
of telecommunications towers and cooperation amongst the industry, the Company appropriately and promptly established a comprehensive transformation and upgrades strategy and strengthened
network coverage in depth and in breadth to enhance core network capability, and also persisted to adhere to proactive marketing strategy to reinforce the strengths of our fundamental businesses, accelerated the construction of business ecology to
highlight the valuable edges of emerging businesses, and strived to embark on a new stage of corporate development. In 2016, operating revenues of the Company amounted to RMB352.3 billion, representing an increase of 6.4% over last year.
Service revenues amounted to RMB309.6 billion, representing an increase of 5.6% over last year, achieving continuous improvement in growth rate. EBITDA was RMB95.1 billion while EBITDA margin was 30.7%. Net profit was RMB18.0 billion,
representing an increase of 11.7% as compared to the net profit for the year 2015 excluding the
one-off
gain from the disposal of tower assets. Basic earnings per share were RMB0.22. Capital expenditure was
RMB96.8 billion, representing a decrease of 11.3% over last year while free cash flow was -RMB7.7 billion with remarkable improvement over last year. In summary, the Company accurately grasped the trends in mobile Internet development and
the integrated development of the industry. The operational efficiency was rapidly improved. The core competitiveness was significantly strengthened and the corporate development is full of vitality. Meanwhile, while conscientiously fulfilling its
responsibility to shareholders, the Company voluntarily committed itself to the sustainable economic, social and environmental development and persisted in as well as excelled in fulfilling its social responsibilities, such as its inherent corporate
responsibilities, responsibilities towards customers, responsibilities towards employees, environmental responsibilities and social welfare responsibilities.
III. The independent opinion on the relevant matters during the reporting period
1. The opinion raised by the Supervisory Committee on the compliance of the operation of the Company with laws and regulations
Pursuant to the relevant laws and regulations of the PRC, the Supervisory Committee monitored the convening procedures and resolutions of the meetings of the
Board, the implementation by the Board of the resolutions approved by the shareholders meetings, the performance of duties by the Companys senior management, and the Companys management policies. The Supervisory Committee is of the
view that the Directors and the senior management, in performing their duties, strictly complied with the relevant rules and regulations, safeguarded the legitimate rights and interests of the Company and the shareholders as a whole especially those
of the minority shareholders, actively promoted the regulated operations of the Company, enhanced the level of governance of the Company, followed lawful procedures in their decision-making, and implemented resolutions of the shareholders
meetings. The Supervisory Committee was not aware of any behaviours of the Directors or the senior management which violated the laws, regulations, the Articles of Association of the Company or were detrimental to the interests of the Company.
2. The opinion raised by the Supervisory Committee on the financial implementations of the Company
Through the supervision and inspection of the Companys financial policies and financial condition, the Supervisory Committee is of the view that the
Company is able to strictly comply with the regulatory requirements such as section 404 of the
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US Sarbanes-Oxley Act and to continue to enhance its internal controls over financial reporting, while effectively controlling and managing the Company in accordance with rules and regulations.
Upon the review of the financial statements for the year 2016 with unqualified audit opinion and other relevant information, which were prepared in accordance with the China Accounting Standards for Business Enterprises and the International
Financial Reporting Standards as audited by PRC certified accountants and international auditors of the Company, the Supervisory Committee is of the opinion that the financial statements truly and fairly reflect the Companys financial
condition, operating results and cash flows.
In 2017, the Supervisory Committee will continue to strictly adhere to the Articles of Association of the
Company and relevant regulations, assume its responsibility to protect the interests of the shareholders and the Company and monitor the Company to fulfill its commitment to its shareholders. The Supervisory Committee will focus on the
implementation of comprehensive transformation and upgrades strategy (Transformation 3.0), implementation of important measures in the process of promoting network intelligentisation, service ecologicalisation and operation intellectualisation, and
will further broaden the planning of the work of the Supervisory Committee and strengthen its efforts in monitoring so as to protect the interests of all investors.
By Order of the Supervisory Committee
Sui Yixun
Chairman of the Supervisory Committee
Beijing, China
21 March 2017
67
Recognition and Awards
Investor
CHINA
TELECOM
CORP.
Investor
CHINA
TELECOM
CORP.
2015 VISION AWARDS
China Telecom Corporation Limited
2015 VISION AWARDS
China Telecom Corporation Limited
2015 VISION AWARDS
China Telecom Corporation Limited
FinanceAsia
ASIAS BEST COMPANIES 2016
China Telecom
20th FinanceAsia
PLATINUM AWARDS 20 Years of Execellence
China Telecom
THE Asset
CHINA TELECOM CORPORATION
THE Asset
Best CEO
Telecommunication
THE Asset
EUROMONEY
BEST MANAGED COMPANIES 2016
This is to certify that
China Telecom
OUR ACHIEVEMENTS
PURSUING for EXCELLENCE
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Environmental, Social and Governance Report
GREEN DEVELOPMENT
∎
OPERATING WITH INTEGRITY
∎
WIN-WIN COOPERATION
∎
CREATING VALUE TOGETHER
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Environmental, Social and Governance Report
As a large-scale and leading integrated information service operator in the world, China Telecom all along
persists to incorporate the responsibilities of environmental, social and governance (ESG) in corporates operation and management , and has established and continues to optimise the effective risk management and internal control
systems in relation to ESG. With rapid development of mobile Internet and swift upgrade of information consumption, the Company persists to promote the corporate transformation and accelerates business upgrade, endeavouring to provide premium
network information services for users and striving to be a leading integrated intelligent information service provider.
This report covers the
Groups work on ESG areas for the financial year ended 31 December 2016 and explains how China Telecom complies with the comply or explain provisions of the ESG Reporting Guide in Appendix 27 to the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited (HKEX ESG Reporting Guide). This report has been reviewed and approved by the Board of Directors of the Company.
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Corporate Social Responsibility Report
By adhering to the core philosophy of comprehensive innovation, pursuing truth and pragmatism,
respecting people and creating value together, China Telecom persevered in the fulfillment of its responsibilities for the interests of stakeholders including the country, shareholders, customers, employees, suppliers, peers within the same
industry and the community, while establishing the strategy of transformation and upgrades in 2016, continuously promoting corporate transformation and development and persistently enhancing corporate comprehensive values.
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Inherent Corporate Responsibilities:
As a national mainstream telecommunications operator, there are inherent corporate responsibilities towards the fundamental network, new style communication
facilities, universal telecommunications services, network information security, emergency communications, technology innovation and value chain development. China Telecom unwaveringly exerts the backbone function to facilitate the establishment of
Cyberpower and persistently contributes to the development of the economic and community.
Responsibilities towards Shareholders:
Shareholders are corporates investors. China Telecom adheres to carry out robust operations, striving to honour its commitment to shareholders through
achieving excellent operating results and continuously enhancing its corporate values.
Responsibilities towards Customers:
Customers are the foundation for corporate sustainable development. China Telecom strives to provide heartfelt services to customers, protect their rights,
deepen understanding of customers needs, and unwaverly innovate and provide products and services to customers, all of which endeavor to make our customers fully enjoy their digital lifestyles.
Responsibilities towards Employees:
Employees are the
corporates most valuable assets. China Telecom safeguards the interests of its employees in accordance with laws, fosters staff development, encourages employees to participate in management, takes care of its employees well-being, and
aligns the development of the Company and its employees.
Environmental Responsibilities:
It is a mission of all mankind to develop a green and environmentally friendly environment. Through promoting green elements in management, procurement,
operation, office administration, public service and community well-being activities, China Telecom strives to achieve an environmentally friendly green development to assist the green development of economy and society.
Social Welfare Responsibilities:
Commitment to
charitable social activities helps to turn the society into a better place. China Telecom takes the initiatives to reward the society by enthusiastically participating in community charity affairs.
China Telecom regards sustainable development as the direction and continuously enhances its level of responsible management, while coordinating and
fulfilling the responsibilities towards stakeholders, committing to the path of responsible development.
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I. Operating with integrity and in compliance with the laws
China Telecom persists in maintaining good corporate governance and operating in compliance with the laws and integrity through abidance by relevant laws and
regulations, industry regulations and business ethics. We have established an
all-rounded
and seamless compliance system featuring internal control design, audit supervision, anti-corruption and comprehensive
risk management. We have created a long lasting, effective and standard communication mechanism in order to regulate the disclosure of corporate information. We have taken the initiatives to be governed by the government regulation and the social
supervision. In 2016, in accordance with the laws and regulations and the requirements of the regulatory departments, the Company integrated the changes in business operations areas, strengthened the setting up of the Companys anti-corruption
and supervision systems, further perfected the relevant rules and systems, continuously developed the supervision and inspection of the implementation of these rules and systems, and timely rectificated the problems when they were discovered.
II. Fulfilling our essential responsibilities as a telecommunications operator
As a key player of the construction of Broadband China, the Company accelerated the construction and improvement of 4G mobile Internet and fibre
broadband network in 2016, providing speedier, safer and more reliable network assurance. The Company strives to achieve the missions in maintaining network information safety, universal telecommunications services and assurances of emergency
communications.
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Vigorous Speed Upgrade and Tariff Reduction
The Company accelerated the construction of 4G network, and achieved a basic full coverage nationwide, with 95% population coverage. The Company also initiated
the project to refarm the 800MHz frequency in rural areas, deployed the 4G+ base stations in all cities across the country and provided
e-Surfing
4G+ service.
The Company comprehensively promoted fibre broadband network upgrade. In the southern provinces dominated by China Telecom, we primarily achieved full
coverage of fibre broadband in all cities nationwide. With the introduction of new technologies such as optical fibre access, the Company gradually upgraded the internet access in core areas of key cities to Gbps, providing users with higher
bandwidth wireline broadband experience. We widely promoted
Hundred-Mbps
fibre broadband products to users, with our
Hundred-Mbps
fibre broadband scale maintaining at
industry-leading level.
The Company has further reduced the data traffic tariff of wireline broadband and handset. In 2016, the bandwidth unit price of
wireline broadband has reduced by 50% compared with that of 2015, and the unit price of handset data traffic has decreased by 38% compared with that of 2015.
Maintaining network information security
The Company
complies with the laws and regulatory requirements of network information security, and continuously enhances its ability to maintain network information security. The Company conscientiously complies with the Announcement on Preventing and
Cracking Down on Telecom and Internet Frauds issued by the Ministry of Industry and Information Technology, Ministry of Public Security and other authorities and the related work arrangements, and implemented
real-name
registration system of telephone subscribers, strengthened the protection of users personal information, reinforced the supervision, prevention and rectification against illegal telephone
business and false caller IDs, improved the management of agency channels, and strengthened the publicity and reminder alerts amongst users and staff, improved the management system of information security, and continued to combat harmful internet
information. The Company continued to promote security products such as DDos security protection product Cloud Dam and office security administration products in accordance with customers demands.
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Promoting universal telecommunication services
The Company persistently promotes the construction of communication networks in rural areas and remote rural villages. In 2016, the Company actively
participated in the
government-led
pilot project of promoting universal telecommunication services, assisted in the program formulation, participated in the bid within its capabilities, won the bid for the
construction and operation of communication network for 35,000 administrative villages, and strived to improve the broadband access level in remote rural villages.
The Company strives to participate in setting up services points for rural villages and foster the
e-commerce
development and informatisation in rural areas, endeavoring to enhance the level of informatisation of rural villages, agriculture and farmers, and bridge the digital divide between the urban and rural areas.
Assuring emergency communications
The Company is
dedicated to provide assurances for safe and smooth communication. The Company fought against a number of severe natural disasters such as catastrophic flood and typhoon, and successfully accomplished the communication assurance tasks for important
conference events including the G20 Hangzhou Summit, the Eurasia Expo held in Xinjiang, the Global Conference on Health Promotion held in Shanghai, etc. Throughout the year, a total of over 190,000 headcounts of relief workers, over 40,000 rescue
vehicles, over 30,000 diesel generators, 32 sets of satellite phones, and over 3,900 emergency communications equipment were deployed, and over 29 million emergency public messages were sent out.
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III. Fulfilling our responsibilities towards our customers
China Telecom strictly implements the laws and regulations regarding the protection of the interests of customers, persisting to provide products and services
in compliance with laws and regulations. The Company also puts in place strict compliance checks for advertising campaigns, strictly protect customer information and continuously standardise the tariff management.
Adhering to the customers demand, in 2016, the Company aggressively promoted the two fundamental businesses 4G and fibre broadband, and
innovatively provided new emerging businesses such as HD IPTV, cloud computing, Big Data, mobile payments, IoT, and Internet+ industry information applications. The Company worked together with business partners and customers to
construct a business ecosphere of coexistence,
co-innovation
and
win-win;
assisted the transformation and upgrades of customers in various sectors and industries; and
met the individual customers demands for information. Through resolving key service issues in a timely manner based on customers feedback and prompt rectification of the problems in hotspot services, the Company persisted in innovation
of service methods and enhancement of service capabilities. According to the survey conducted by the Ministry of Industry and Information Technology, China Telecom continued to outperform amongst its peers in the customer satisfaction ratings of
mobile Internet and wireline Internet in 2016.
Enhancing services capability for fundamental business
The Company strived to improve 4G data traffic service level. The Company launched a coordinated Dual-High alert programme, sending alerts to users
when high data traffic detected and high tariff incurred; and provided scenario-based data service to support the online service diagnosis of problematic service scenarios.
The Company innovated the services methods of broadband services, and promoted pay after installation service nationwide. The Company also
accelerated the Internet+ fibre maintenance mode, improved the
end-to-end
operation capability of fibre broadband, further enhanced the self-service
capability of broadband, and facilitated the self-troubleshooting functions for customers.
Implementation of the morals and rectification requirements
and remedy of services hotspots issues
Aiming at implementing important tasks and tackling hot issues such as the prevention of telecommunications
information fraud, users information security protection, the full implementation of real-name registration system, electronic invoice, lucky numbers and international roaming, etc., the Company strengthened the supervision and inspection
measures, set up defensing measures for key matters in advance, implemented service guarantee and risk prevention in a timely manner, and promoted the optimisation of relevant business terms. In response to customer complaints, the Company promoted
the operation monitoring and analysis of complaint receipts at both of headquarters and provincial branch level, and strengthened the rectification of problems reflected in the complaints. The Company reinforced the service at sales outlets, focused
on key issues that affect customers perceptions, improved the counter services, carried out secret observations on the service at sales outlets on a regular basis, encouraged the sales outlets to meet service standards and elected excellent
sales outlets.
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IV. Fulfilling our responsibility towards our employees
China Telecom safeguards the interests of our employees in accordance with the laws, continues to establish stable and harmonious labour relations, cares and
cherishes our employees, actively leverages various types of talents and supports labour unions in carrying out their functions.
Regulating labor
relations in accordance with the laws
Adhering to the doctrine of being responsible for our employees, the corporate and the society, the Company
strictly complies with and earnestly implements the relevant laws and regulations regarding labour and social security, conscientiously improves the management of labour, and ensures labour employment in accordance with the laws and regulations. The
Company established lawful labour relations and signed employment contracts with employees, entered into dispatch agreements with dispatching units, urged the dispatching units to sign employment contracts with employees, and strived to provide a
harmonious and stable internal environment for enterprise development.
Strengthening production safety management
The Company deeply implemented its responsibility and strengthened the long-term mechanism of production safety. The Company continued to improve the
management system of production safety, and branches at all levels conscientiously organised the installation and maintenance workers to study the production safety management. The Company also implemented the defined duties of the frontline level,
and strengthened the assessment of their responsibilities.
The Company persisted in carrying out supervision and inspection of production safety, got rid
of the hidden dangers in a timely manner, improved the emergency contingency plan by strengthening emergency drills.
The Company conscientiously complies
with the Production Safety Law, proactively implemented the occupational health management system, organised physical examinations of employees on a regular basis, and made efforts to improve employees working environments and
conditions, effectively preventing the occurrence of occupation diseases. The Company organised frontline production workers to conduct risk assessment and hazard identification at the operating sites and working environments in groups in order to
enhance their consciousness in self-protection and self-defense, effectively preventing occurrence of accidents.
Promoting employees growth
In accordance with the needs of the corporate transformational development and the improvement of employees capabilities, the Company
implemented training programme for targeted employees. The Company also strengthened the cultivation of young employees, implemented pilot tutorial system for new staff, and further improved the cultivation programmes for outstanding college
graduates. The Company continued to carry out projects to enhance the capabilities of unit CEOs, focused on five
front-end
and back-end core teams of unit CEOs namely, head of
sub-divisions,
outlets managers, physical channels managers, commercial customers channels managers and back-end maintenance units leaders, organised various unit CEOs core employee training camps and
unit CEO internal trainers training courses with over 1,200 employees participated in person. The
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Company launched labour competition, skills competition and knowledge competition on core business areas,
established innovative workshops for model workers, guided the staff to improve their capabilities and qualities, encouraged employees innovation in their own posts, and realised the enhancement and development of personal values.
Strengthening the construction of professional talents team
The Company further strengthened the construction of high-level professional talents teams. In 2016, by application, screening, written examination,
evaluation, publicity and other aspects of selection, we had selected Rank B professional talents in five areas with expertise in platform and core network technology, power and infrastructure facilities, wireless and mobile, finance and laws. In
two key areas namely, industry applications and network operation, we launched a pilot program of high-level professionals workstation which could provide a practical working platform for high-level professional talents. The Company fully
leveraged the functions of high level professional talents, solved the important and difficult problems encountered in corporate development and enhanced the capabilities of high-level professional talents in practical training.
Promoting the work of caring and cherishing our employees
The Company perfected the closed-loop management mechanism for employees complaints by collecting, analysing, dealing with and giving feedbacks to
employees complaints. The Company adopted methods that combined traditional ways and internet surveys, including holding seminars,
on-site
visits,
face-to-face
activities, establishing employees forum and internet platforms, striving to understand the employees thoughts and situations, timely responding to the employees requests in
order to help the employees to solve their practical difficulties and problems at its best endeavours.
Routine care and visits were offered for frontline
employees in difficulty and those with outstanding performance. Routine care and visits at all levels covered 630,000 employees. The Company also timely relieved 22,000 employees in difficulty and affected by natural disasters. The construction,
stabilisation and renovation of Four-Smalls namely small canteens, small bathrooms, small washrooms and small activity rooms, were completed for over 5,400 frontline units. To satisfy the special needs of female employees, we have also
built over 790 units of Mummy Cabins.
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V. Fulfilling our responsibility towards the environment
China Telecom complies with the relevant laws and regulations in environmental protection and strengthens enforcement and training regarding environmental
protection laws and regulations to ensure that employees comply with the relevant provisions. We called on employees to carry out environmentally friendly activities in their daily work and commuting to enhance employees environmental
protection awareness and their self-consciousness in resources saving, such as the saving of one kilowatt of electricity, one drop of water, one litre of oil, one piece of paper, and one pen. The Company specified, censored and regularly published
environmental protection indexes, and we also formulated measures and systems to protect the environment. Besides, through various means including rules and regulations, work deployment and appraisals and evaluation, the Company applied the
requirements of energy saving, emission reduction and environmental protection across the board to link through various operating activities such as procurement, construction, operation and office administration, making all kinds of efforts to
reduce various energy consumptions and greenhouse gas emissions. The Company persistently researched on and developed environmentally friendly informatisation products to assist the customers to pursue energy saving and emission reduction and to
achieve environment development goals. We actively communicated with the community about the environmental protection actions and the performance we had achieved to receive public supervision with the purposes of continuously enhancing our
environmental protection performance.
Promoting energy saving and emission reduction
The Company accelerated the evolution of network and the construction of optical fibre network, promoted the integration of our business platform with
cloud resource pools and strived to build a green communications network. The Company deeply promoted the application of Energy Performance Contracting (EPC) in the renovation of old traditional fundamental ancillary facilities like old
electricity and
air-conditioning
as well as withdrawal of traditional applications, further extended the coverage rate of the energy-saving technological transformation of fundamental ancillary facilities and
actively promoting the optimisation and reduction of redundancy of the fundamental ancillary facilities. The Company further promoted the energy-saving processing of
sub-divided
performance units and
integrated the energy consumption monitoring system to achieve precision management in energy saving and emission reduction. Water resource management was strengthened. Sewage disposal and treatment works and water recycling in operation were
actively carried out. Water-saving appliances were promoted and popularised. Moreover, the Company regularly checked and repaired every part of the water supply system to prevent waste of water resources, including water leakage and water running
without being used.
We continued to promote the development of electronic channels, improved the proportion of electronic channel services to the total
amount of channel services. The Company promoted and encouraged the use of video conference calls and video trainings, and also actively guided the employees to participate in learning or training via online-universities.
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Promoting Reverse Logistics
The Company continued to promote the recycling, refurbishment, replacement, reallocation and resale of obsolete products like obsolete copper cables,
rechargeable batteries, wireline terminals, etc. in accordance with the related internal rules and regulations in relation to reverse logistics and recycling and disposal of obsolete materials.
Since obsolete rechargeable batteries contain large quantities of heavy metals, waste acid, waste alkali and other electrolyte solution, discarding will
create water pollution, damage crops and land. On the one hand, the Company carried out comprehensive
on-site
investigations on the environmental protection situations of battery suppliers and procured lithium
iron phosphate batteries and other energy-saving products. On the other hand, the Company adhered to the recycling of obsolete rechargeable batteries to prevent environmental pollution by establishing a comprehensive management system regarding the
batteries recycling and disposal. The Company worked together with professional third party manufacturers in recycling and disposal of old and scrap copper cables generated by Fibre
roll-out,
continued to promote the recycling and utilisation of wireline terminal equipment, improved efficient use of resources and reduced the risk of environmental pollution. Regarding waste and old materials without recycling value, the Company treated
them properly after taking full account of the environmental impacts of disposal in strict compliance with relevant national environmental protection regulations.
Emphasising environmental protection in engineering construction
In relation to the concerns of the government and the public such as farmland protection, equipment pollution, impact of construction, electromagnetic
radiation and other issues arising from engineering construction, the Company proactively implemented environmental protection measures. In the aspect of farmland protection, we considered old locations and wastelands as priorities in selecting base
stations, with the purpose of not increasing any newly occupied farmland. In the area of equipment pollution, we endeavored to select and use optical fibre cables and system equipment with low noise, low electromagnetic radiation and free of
pollutants. In the aspect of construction, we strived to preserve the surrounding environment by avoiding mines, forests, grasslands, wildlife habitats, natural and cultural relics, natural reserves, scenic areas and other areas when conducting
routing deployment for optical fibre cables. In regard to electromagnetic radiation, we carried out monitoring and assessment for electromagnetic environment around base stations which was subject to public scrutiny; strengthened communication with
the community and respected the voices from community; conducted strict source control on the quality of network equipment to monitor the root source; actively adopted advanced technologies to elaborate our base station layout to maintain our
electromagnetic radiation index to be lower than the national standards.
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Promoting joint construction and sharing of telecommunications infrastructure
The Company jointly constructed and shared telecommunications infrastructure with other telecommunications operators to avoid duplicate construction, protect
the natural environment and landscape, and reduce land use, consumption of energy and raw materials. The Company devoted efforts in promoting the joint construction and sharing of base stations. As a result, the Company effectively saved the
investment in 4G base stations.
VI. Supply chain management
China Telecom actively communicates with the suppliers, persists in open cooperation to achieve a
win-win
situation,
adheres to valued procurement, sunshine procurement, ecological procurement, and encourages suppliers to jointly fulfill their social responsibilities.
In the area of valued procurement, the Company continued to strengthen the quality management of procurement products, persistently extended the scope of
product quality inspection and suppliers evaluation and improved suppliers assessment system. Through reinforcing the inspection and applying follow-up results in bidding assessment, the suppliers were encouraged to improve their
performance. For sunshine procurement, the Company strictly complied with the relevant national laws and regulations in procurement, bidding and tendering to further improve the Companys procurement management system. We revised the
Procurement Management Manuals, Management Manuals in relation to Bid Evaluation Experts, etc. while we adhered to the principles of bidding the project that we ought to bid and bidding projects as we
can to extend the scope of bidding, enrich the bidding methods and enhance the standardised level of procurement comprehensively. For ecological procurement, we continually promoted the use of ecological procurement assessment indexes in the
procurement process and prioritised resources saving and environmentally friendly products to enlarge energy-saving procurement. In 2016, the module of energy-efficient power supply was increased by 20% while energy consumption for targeted
professional units was reduced by 4.5%.
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VII. Contributing to community well-being
China Telecom actively supports the development of science and technology, education, culture, sports and hygiene and helped those in poverty, disabilities and
disadvantages. We advocate and encourage our employees to foster the volunteering spirit and participate in various forms of voluntary service activities.
The Company continued to assist our parent company in providing poverty alleviation and aid programme to Tibet and Xinjiang. In 2016, the Company assisted in
providing poverty alleviation and assistance in Bianba County in the Tibet Autonomous Region, Yanyuan County and Muli County in Sichuan Province, Shufu County in Xinjiang Uygur Autonomous Region and Tianlin County of Guangxi Zhuang Autonomous
Region, helped to establish fundamental facilities, informatisation, education and training, agriculture, hygiene and technology in the five counties. The Company assisted the poverty alleviation organisation to promote the application of the Big
Data management platform for poverty alleviation in China, which conducted a dynamic management of local poor villages, poor households and poor population to ensure the full implementation of household policies related to poverty alleviation. As
demanded by the actual needs of the rural markets, the Company invested almost RMB100 million in establishing platforms that benefit the farmers. We promoted information-based poverty alleviation in rural areas by constructing information
services and introducing rural products into cities. More than 18,000 Farmers Cooperatives have been established covering 100 counties in 15 provinces including Sichuan Province, Jiangsu Province, Zhejiang Province, Hubei Province, etc. with
more than 2.8 million registered farmers.
In 2017, China Telecom will deeply put forward five development concepts including innovation,
harmonisation, green, openness and sharing. The Company will implement national Cyberpower strategy and informatisation development strategy, devote to execute the new round of corporate strategy of transformation and upgrades,
while striving to provide more suitable and quality businesses and services to customers and economic society. We will assist the transformation and upgrades of various sectors and industries to promote the mutual value growth for stakeholders, and
will contribute to the supply-side structural reform and the development of a
better-off
society.
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In 2016, our work on human resources has firmly adhered to the Companys strategies aiming at
enhancement of the value of our human resources. We further enhanced capabilities, optimised corporate structure, innovated systems and mechanisms, implemented precise management and stimulated vitality in order to promote intelligent-oriented human
resources management and provide sound organisational assurance and personnel support for the corporate transformation and upgrades.
I.
Strengthen senior management and executive team building.
Integrating with the structural adjustment of executive team, we continued to promote younger cadre team and optimised the leadership structure of our provincial and municipal
branches. We initiated integrated evaluation on the leaders and their management teams from provincial branches, which provided a better reference for the selection and training of executive team and further enhanced the scientific standard of our
leadership management. We strengthened the construction of our reserve cadre team and organised trainings and cultivation of reserve cadres in order to provide the
back-up
reserve talents for our corporate
development.
II.
Strengthen the supervision and guidance on staff selection and appointment.
We carried out special governance work on
staff selection and appointment, organised annual special governance work on the basis of self-assessment and self-correction at subordinated units throughout the year, specifically rectified the problems identified to ensure that the special
governance work has been effectively implemented. Through the specific governance work, we have standardised the procedures on staff selection and appointment and improved its credibility.
III.
Continuously optimise the structure of human resources and standardise the management of labour and employment.
We further optimised the
total staff size control methods according to the business development of provincial branches and the existing level of human resources efficiency, strictly implemented the control and management of staff size, providing the tools and guidelines in
managing staff size and optimisation of structure through implementation of human resources rolling plan and annual efficiency benchmarking for provincial branches.
IV.
Strengthen the human resources information system and improve the standard of management.
Adhering to the corporate strategic transformation
and value enhancement, we optimised business processes and system functions, standardised business operations, expanded business applications, explored and developed Big Data analysis and intelligent operation of human resources.
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Information of Employees
As at the end of 2016, the Group had 287,076 employees. The number of employees working under each classification and their respective proportions were as
follows:
|
|
|
|
|
|
|
|
|
|
|
Number of
Employees
|
|
|
Percentage
|
|
Management, Finance and Administration
|
|
|
43,194
|
|
|
|
15.1
|
%
|
Sales and Marketing
|
|
|
147,885
|
|
|
|
51.5
|
%
|
Operations and Maintenance
|
|
|
94,005
|
|
|
|
32.7
|
%
|
Research and Development
|
|
|
1,992
|
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
287,076
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
Corporate Employee Relationship
Communication between Management and Employees
We
endeavoured to understand the employees thoughts. We persisted in the semi-annual reporting system on staff thoughts and timely reporting of emergency and significant situations, organised frontline branches to adopt a combination of
traditional and internet integrated communication methods, regularly conducted online and offline collection, analysis, sorting and reporting of employees thoughts; timely understanding of their conditions in earthquake, typhoon and other
natural disasters. On the basis of grasping the overall staffs thoughts, we constantly refined and deeply cultivated the following: Firstly, we refined and segmented the targeted staff groups, such as specific understanding of Unit
CEOs Group. Secondly through combination of understanding staffs thoughts and serving the corporate, we understood and positively guided our employees through their degree of engagement, satisfaction survey, etc. Thirdly, from staff
understanding to resolving of their demands, a closed-loop management mechanism was gradually formed and entrenched through system establishment.
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Roles and Duties of Labour Unions
Adhere to servicing employees and facilitating development.
The labour unions built a platform for innovating employees positions and duties and
nurtured an environment for innovation. In order to vigorously promote the excellent qualities and spirit of the advanced model employees, a forum was organised by the labour union for advanced model employees. During the periods of
International Working Womens Day and National May 1st in 2016, the Company obtained over 200 honours at national, provincial and ministerial levels. In the skills competitions of customer services, the headquarter and
all the provincial labour unions have actively participated and won a total of 63 honours. 145 individuals won the honorary title of the Companys Technical Experts and 9 individuals obtained the honorary title of Innovation Expert.
Through the Dual Hundred platform, the Company organised an election of the Companys top 100 Elite Female shop managers and excellent channel managers voted by frontline staff, and over 200,000 employees participated in
the election. In the My team, My home activity, nearly 9,000 frontline units participated, published more than 14,000 messages of experiences and practices, and the employees participated in nearly 270,000 times of exchange and
discussions. Labour union vigorously promoted the advanced model employees and nurtured an environment for learning from the advanced and striving to learn and step forward. Through various media channels, all levels of the labour unions vigorously
promoted the advanced model employees, and promoted over 1,000 excellent employees and over 300 advanced groups from all levels of the corporation. Labour unions at all levels organised more than 6,000 recreation and sports activities which animated
the cultural life of employees outside of work.
Coordination and Communication between the Company and the Labour Unions
All levels of the labour unions motivated employees to be conscientious and innovative, actively established platforms in the areas of labour competition,
skills competition, knowledge competition, innovative office and responsible positions innovation, creating an environment for innovation in positions and duties. Labour unions of the Company jointly with the relevant departments, organised 11
labour competitions, 7 skills competitions, 1 knowledge competition, 9 innovation selections and established 36 advanced model innovative workshops. For instances, BestPay Orange Financial Services Promotion Labour Competition,
Integration Cup industry application synergy sales and labour competition, the first
e-Surfing
Cloud Cup labour competition, customer services career skills competition, the 10th
Excellent Marketing Skills Cup sales and marketing career skills competition, fibre broadband+TV repair and maintenance skills competition, the 3rd i Innovation Dark Horse competition,
on-the-job
innovation and Four-Smalls Caring Dual Hundred case selection activity, etc. Over 1 million employees participated in the activities, promoting concurrent enhancement of business
development and employees skills.
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Caring for Employees
Promote the reinforcement and enhancement of the construction of the Four-Smalls, and continuously improve the capabilities level of service
staff.
Nearly 5,500 frontline units from all levels of the Company carried out the construction of Four-Smalls or improvement of the Four-Smalls facilities and invested a total of RMB200 million. On this basis, we
selected 100 demonstration points and 100 outstanding frontline teams in order to promote the reinforcement and enhancement of the construction of Four-Smalls. We attributed the costs of construction, operation, maintenance and updates
in the cost budget management according to their respective characteristics and nature, established a long-term mechanism to further improve the level of our support services to the staff in various aspects including dining, rest and activities;
while focusing on solving the problems commonly faced by the majority of our employees.
The Company strove to understand the work life of frontline
employees and their difficulties and problems; promoted policies formulation by employees through the democratic management platform to resolve the root causes of problems and safeguard employees rights and interests.
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Offer assistance to employees who were in difficulties.
We regulated and strengthened the support
works for our employees who were in living difficulties. We organised provincial labour unions to establish and optimise the files of the staff in need, guided the establishment of serious illness support relief funds at provincial levels, and
regulated the process of funds usage. On average, we allocated relief funds of over RMB47 million to over 22,000 staff in need last year, timely understanding their living conditions and ensuring relief for employees who were in difficulties.
Caring for frontline staff in different forms and ways.
In the aspect of health care, there were in total 23 provincial labour unions providing
medical services to nearly 35,000 employees; conducted more than 6,000 recreation and sports activities of various kinds with 86% employee participation rate. Health level of employees was effectively promoted. Through equipping the frontline
employees with small medicine box, health giving (including medical facilities, health seminars, etc.), we timely solved employees physical health problems. With psychological counselling hotline, trainings, seminars, psychological counselling
app, psychological counselling website, close chat, etc., we help the staff relieving pressures and making psychological adjustment. In the aspect of improving the living and working environments for employees, working environments were improved
through various means including equipping with green plants and carbon package to purify air and installation of water purification facilities to further improve environmental conditions. In regard to family care for employees, we promoted family
harmony and good family tradition construction by conducting home visits, home activities whilst having kids taking examinations and children summer holiday camp activities. In terms of sympathy and relief to the staff, we carried out timely
sympathy and relief activities to staff synchronising with major holidays, key periods of production and operation, major events of staff family, natural disasters, etc. According to our statistics, all the frontline labour unions of the Company
handled a total of approximately 7,200 matters for the employees. The labour union allocated disaster relief funds amounting to over RMB1 million to 13 provinces and allocated Summer Cool Offer relief payments amounting to
approximately RMB600,000 to 18 provinces.
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Promote activities for the care of female employees.
We selected outstanding female employees advanced
models to stimulate positive spirit. Jointly with sales and channel development department, we select 100 persons to become the third session of Elite Female shop managers and channel managers. We launched the first session of
outstanding female employee learning exchange activities. We organised and carried out Scholar Family female employees reading activities through the Dual Hundred platform, guided the staff to read more books and good books.
Through the Dual Hundred study groups, we guided female employees to share joy and happiness in their lives and more than 2,700 reading commentaries and experiences were shared with the participation of approximately 48,000 employees.
Regarding our concerns to protect the rights and interests of female employees under the two child policy, we organised the construction of nearly 800 Mummy Cabins in the Company which were welcomed and praised by frontline
female employees.
Activities for boosting morale and team spirit, consolidating strengths for
development.
The labour unions at all levels
organised more than 6,700 recreational and sports activities last year. Through the organisation of a variety of recreational and sporting activities, cultural life was activated, morale was enhanced, pressure was relieved and team spirit was
strengthened.
Strengthening Human Capital
Focusing
on the key priorities of our strategic development, the Company continued to strengthen the development of talent teams, and actively promoted the capabilities improvement of our operation managers, professionals and technical personnel.
Actively developing mobile learning pilots units
Through
product construction, content construction and promotion of operation, we actively introduced Internet thinking and deeply applied the means of Internet learning to provide sustainable and effective support for various work including transformation
and upgrades and key personnel training and nurturing. We created
on-demand
learning, active sharing and innovative learning culture within the corporation. For the year, we had a total of 9,700 new learning
course resources with more than 3 million individuals participating in the event and the total length of study exceeded 3 million hours. Adhering to the needs of the corporate reform and development, we promoted the efficient
centralisation of talent team construction and the Internet-oriented transformation through centralised management and Big Data applications as the driving force. We had organised nearly 18,200 training courses covering the whole year, formed 361
online business communities and laid the foundation for intelligent operation of talent management.
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Building up the internal training team
We fully leveraged the positive impact of our internal trainers at all levels in areas such as promoting and implementing strategies, improving professional
abilities and shaping the corporate culture. We further improved the management mechanisms in the selection, use, cultivation, evaluation and stimulative encouragement of our internal trainers, and strengthened the nurturing capabilities of internal
trainers. We optimised the professional structure of the internal training team, gradually covering all areas of expertise in order to meet the needs of corporate development and talent training and to provide guarantee for the corporate sustainable
and healthy development. Up to 2016, the appointment of internal trainers at corporate level (including trial recruitments) exceeded 1,100 individuals, the third tier internal trainers exceeded 15,000 individuals.
Developing Leadership Skills
We further strengthened the
construction of leadership development system, compiled the education and training plans for operational management personnel for 2016-2018, and formulated implementation rules for operational management personnel training, and plotted the learning
map for managers from counties branches. In 2016, we focused on strategy of Transformation and Upgrades 3.0, continued to hold two phases of entrepreneur training camp training projects for our reserve cadres, focused on intensive
training for 64 reserve cadres who came from 8 provincial branches. Over the past three years, we had conducted concentrated trainings in accordance with our reserve cadre training plan for 192 reserve cadres who came from 24 provincial branches.
Cultivating Professional Talents
We strengthened
the construction of talent support for Transformation 3.0. Through online examinations programmes, we assessed the scope of internal talent pools in programming and Big Data. With continuous optimisation of the talent team structure and quality
enhancement, we provided better support services for the key works of Transformation 3.0. Under the guidance of the China Telecom Internet+ talent planning, we established systematic training mode for the respective talents team of
product, operation and skills.
In 2016, we further strengthened the construction of senior professional talents teams. We had completed professional
talents selections in various aspects including platform and core network technology, power and infrastructure facilities, wireless and mobile, finance and laws. In addition, in the key areas of industry applications and network operation, we
launched a pilot system of senior professionals workstation
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which provides a practical combat platform for senior professional talents, strengthening the cultivation and
fully leveraging the functions of senior professional talents, cohesively solving the key, difficult and professional problems for corporate development.
Staff capacity building
We focused on
sub-dividing
performance evaluation units with performance contracts and enhanced the capabilities of frontline staff. We held the 207th session of professional intensive
face-to-face
trainings classes, covering 16,000 staff members, further promoted the combination of works and learning, production and training, deeply promoting the application of practical projects. In 2016,
our value-creation marketing trainings for government and enterprises covered 16 provinces, 102 counties, benefiting more than 3,600 customer services managers for government and enterprises. We carried out practical promotion training
in our channel marketing, effectively enhancing production capacity of our shops outlets and commercial cycles, helping the frontline staff to enhance their knowledge, skills and improve performance through competition substituting
training and training + practice.
Nurturing and introducing brilliant young talents
We promoted high-school internship programme on a regular basis and organised spring and summer internship programme with our Surfing internship
platform, providing a total of nearly 2,800 internship positions cumulatively in 2016. We also continued to organise the top graduate cultivation programme and selected 1,072 top graduates for this programme. The Company organised the three
sessions of demonstration class for top graduates, with the participation of 210 frontline outstanding young staff representatives.
Recruitment
The Company recruits university graduates and mature talents from the society. The Company unified the recruitment process of university graduates. In
2016, the Company recruited nearly 5,000 university fresh graduates. Upon joining the Company, the graduates generally have to attend 1 to 2 months of induction training to help them understand the corporate culture and the business of the Company.
In order to promote the integration of new employees into the corporate culture, accelerate the growth of new employees, the Company organised a new employee mentoring pilot program in 2016. For the recruitment of mature talents, the Company
organised the recruitment from the society in accordance with the needs of the business development.
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To provide opportunities for the employees career development, the Company developed a comprehensive
dual promotion channel. Promotion is based on the principles of fairness, justice, openness and transparency. The Company fully respects employees rights of choice, knowledge and scrutiny.
In the recruitment and promotion processes, the Company treats all candidates and employees equally regardless of gender, age and race.
The Company strictly abides by the national regulations relating to employees working hours and implemented the Regulations on Paid Annual Leave
for Employees promulgated by the State Council and formulated the relevant policies in relation to employee vacation.
The Company strictly abides
by the laws and regulations such as the Labour Contract Law of the Peoples Republic of China and constantly improved the management system relevant to employees. Taking into account the actual situation of the Company, we
implemented a relevant system and developed detailed provisions for termination of employee labour contracts.
Remuneration and Performance Management
Remuneration
The remuneration of the
Companys employees is mainly composed of basic salary, performance bonus, insurance benefits, etc. and has taken into account both short term and
medium-to-long
term incentives. In determining the internal distribution of employees remuneration, the Company adhered to the value-oriented, contribution-oriented and equity-oriented approach while tilting towards high-quality professionals and the
frontline staff. We further optimised and improved labour cost management through the introduction of system designs including transfer prevailing labour cost system and induce stimulation, progressive increase of allocation
and elastic budget control system. We fully mobilised the enthusiasm of the development of subordinated branches and encouraged everyone to adhere to high contribution, high yield and early development, early
benefit. At the same time, we offered special incentives on the emerging businesses to promote the accelerated scale development of the emerging business.
In the aspect of remuneration management for senior executives, we strengthened the performance oriented approach aiming to narrow the differences
between the subordinated branches arising from their respective development regions and history and other factors, focusing more on development, emphasising the improvement and enhancement of performance.
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Performance management
The Company has established a relatively comprehensive performance evaluation system for all of its employees. Branches at all levels have established
employees performance evaluation teams which are led by the respective general managers of the relevant branches and have formulated evaluation methods for deputies, functional departments, subordinated units and general employees. The Company
improved its employee evaluation and incentive mechanism and the related scrutiny and supervision system to ensure the fairness and reliability of the performance evaluation results. At the same time, it has further optimised and improved the
performance evaluation system and implemented performance evaluation by categories of business units, deputies,
mid-level
management and employees of all levels, enhancing the specificity of the performance
evaluation work.
Guaranteeing Employees Rights and Interests
The Company strictly abides by the laws and regulations such as the Labour Law of the Peoples Republic of China and the Labour Contract
Law of the Peoples Republic of China to regulate its employment practices. The Company adheres to offering equality of remuneration and work for male and female employees and implements special regulations to protect female
employees rights and interests. There were no discriminatory policies or regulations, nor had there been any circumstance whereby child labour or forced labour was employed.
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Corporate Governance Report
An Overview of Corporate Governance
The Company strives to maintain high level of corporate governance and has inherited an excellent, prudent and efficient corporate governance concepts and
continuously improves its corporate governance methodology, regulates its operations, improves its internal control mechanism, implements sound corporate governance and disclosure measures, and ensures that the Companys operations are in line
with the
long-term
interests of the Company and its shareholders as a whole. In 2016, the Shareholders Meeting, the Board and the Supervisory Committee maintained efficient operations in accordance with
the operating specifications, and the Company insisted on reform and innovation and strived to promote corporate transformation and upgrades, while continuously optimised its internal control system and comprehensive risk management in order to
effectively ensure corporate steady operation. The sustained enhancement of the Companys corporate governance aligned with the
long-term
best interest of shareholders and ensured that the interests of
shareholders was effectively assured.
The Company persists to refine the basic principles of its corporate governance. As a company incorporated in the
PRC, the Company adopts the Company Law of the Peoples Republic of China and other relevant laws and regulations as the basic guidelines for the Companys corporate governance. As a company dual-listed in Hong Kong and the United States,
the Company strives to ensure compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the Listing Rules) and the regulatory requirements for non-US companies listed in the United States.
In addition, the Company has regularly
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published statements relating to its internal control in accordance with the US Sarbanes-Oxley Act and the
regulatory requirements of the SEC and the New York Stock Exchange to confirm its compliance with related financial reporting, information disclosure, corporate internal control requirements and other regulatory requirements.
For the financial year ended 31 December 2016, save that the roles of Chairman and Chief Executive Officer of the Company were performed by the same
individual, the Company has been in compliance with all the code provisions under the Corporate Governance Code as set out in Appendix 14 to the Listing Rules. In the Companys opinion, through supervision by the Board and the Independent
Non-Executive Directors, with effective control of the Companys internal check and balance mechanism, the same individual performing the roles of Chairman and Chief Executive Officer can enhance the Companys efficiency in decision-making
and execution and effectively capturing business opportunities. Many leading international corporations around the world also have similar arrangements.
In 2016, the Companys continuous efforts in corporate governance gained wide recognition from the capital markets and the Company was accredited with a
number of awards. The Company was voted the No. 1 Overall Best Managed Company in Asia by
Euromoney
for seven consecutive years, while at the same time being ranked as the No. 1 Best Managed Company in
Telecommunications Sector in Asia. The Company was accredited with the Best Telecommunications Company in Asia and the Best Company in China in
FinanceAsia
s Platinum Awards, to honour the Company for
consistent provision of quality services and innovation for its clients over the past 20 years. The Company was voted as the Most Honored Company in Asia and Asias Best Investor Relations Company in Telecommunications
Sector in 2016
All-Asia-Executive-Team
ranking organised by
Institutional Investor
for six consecutive years. The Company was accredited the Platinum
Award Excellence in Governance, CSR & Investor Relations in the poll of Corporate Awards 2016 by
The Asset
. In addition, Mr. Yang Jie, Chairman and CEO of the Company, was voted as the Best CEO in
Telecommunications for his excellence in leadership, strategic thinking, team- and relationship- building, effective communication and change management. The Company was awarded The Best of Asia Icon on Corporate Governance
by
Corporate Governance Asia
for four consecutive years.
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Overall Structure of the Corporate Governance
A
double-tier
structure has been adopted as the overall structure for corporate governance: the Board and the
Supervisory Committee are established under the Shareholders Meeting. The Audit Committee, Remuneration Committee and Nomination Committee were established under the Board. The Board is authorised by the Articles of Association to make major
operational decisions of the Company and to oversee the daily management and operations of the senior management. The Supervisory Committee is mainly responsible for the supervision of the performance of duties of the Board and the senior
management. Each of the Board and the Supervisory Committee is independently accountable to the Shareholders Meeting.
Shareholders Meeting
In 2016, the Company convened one Shareholders Meeting, which was the annual general meeting (AGM) held on 25 May 2016. At the AGM,
numerous resolutions such as the consolidated financial statements for the year 2015 of the Company, report of the international auditors, proposal for profit and dividend distribution, and the
re-appointment
of auditors were reviewed and approved. Meanwhile, the Board was authorised to prepare the budget for the year 2016, fix the remuneration of the auditors and issue debentures.
Since the Companys listing in 2002, at each of the Shareholders Meetings a separate shareholders resolution was proposed by the Company in
respect of each independent item. The circulars to shareholders also provided details of the resolutions. All votes on resolutions tabled at the Shareholders Meetings of the Company were conducted by poll and all voting results were published
on the websites of the Company and The Stock Exchange of Hong Kong Limited. The Company attaches great importance to the Shareholders Meetings and the communication between Directors and shareholders. The Directors provided detailed and
complete answers to the questions raised by shareholders at the Shareholders Meetings. The Board implemented the shareholders communication policy to ensure that the shareholders are provided with comprehensive, equal, understandable and
public information of the Company on a timely basis and to strengthen the communication amongst the Company, and the shareholders and investors.
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Board of Directors
As at 31 December 2016, the Board of the Company comprised 8 Directors with 4 Executive Directors and 4 Independent Non-Executive Directors. The compositions
of the Audit Committee, Remuneration Committee and Nomination Committee under the Board consist solely of Independent Non-Executive Directors, which ensure that the Committees are able to provide sufficient review and check and balance, and make
independent judgements to protect the interests of shareholders and the Company as a whole. The number of Independent
Non-Executive
Directors exceeds
one-third
of the
members of the Board of the Company. Mr. Tse Hau Yin, Aloysius, the Chairman of the Audit Committee, is an internationally renowned financial expert with expertise in accounting and financial management. The term of office for the 5th session
of the Board lasts for 3 years, starting from May 2014 until the day of the Companys annual general meeting for the year 2016 to be held in 2017, upon which the 6th session of the Board will be elected.
In August 2013, the Company implemented the Board diversity policy. The Company strongly believes that Board diversity will contribute significantly to the
enhancement of the overall performance of the Company. The Company views Board diversity as the key element for accomplishing its strategic goals and sustainable development. In determining the composition of the Board, the Company takes into
account diversity of the Board from a number of perspectives, including but not limited to gender, age, education background or professional experience, skills, knowledge, duration of service, etc. All appointments made or to be made by the Board
are merit-based, and candidates are selected based on objective criteria taking full consideration of Board diversity. Final decisions are comprehensively made based on each candidates attributes and the consideration for his/her value
contributions to be made to the Board. The Nomination Committee oversees the implementation of Board diversity policy, reviews the existing policy as and when appropriate, and recommends proposals for revisions for the Boards approval.
Biographical details of existing Directors are set out in the Biographical details of Directors, Supervisors and Senior Management section of this Annual Report. The Company considers that the Board currently comprises experts from
diversified professions such as telecommunications, accounting, finance, law and management, and is diversified in terms of gender, age, duration of service, etc., which contributes to the enhanced management standard and more regulated operation of
corporate governance of the Company, and results in a more comprehensive and balanced Board structure and decision-making process.
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The Company strictly complies with the Corporate Governance Code under the Listing Rules to rigorously
regulate the operating procedures of the Board and its committees, and to ensure that the procedures of the Board meetings are in compliance with related rules in terms of organisation, regulations and personnel. The Board responsibly and earnestly
supervises the preparation of financial statements for each financial period, so that such financial statements truly and fairly reflect the financial condition, the operating results and cash flows of the Company for such period. In preparing the
financial statements for the year ended 31 December 2016, the Directors adopted appropriate accounting policies and made prudent, fair and reasonable judgements and estimates, and prepared the financial statements on a going concern basis.
The Articles of Association of the Company clearly defines the respective duties of the Board and the management. The Board is accountable to the
Shareholders Meetings, and its duties mainly include the execution of resolutions, formulation of major operational decisions, financial proposals and policies, formulation of the Companys basic management system, and the appointment of
senior management personnel of the Company. The management is responsible for the operation and management of the Company, the implementation of the Board resolutions and the annual operation plans and investment proposals of the Company,
formulating the proposal of the Companys internal administrative organisations and
sub-organisations,
and performing other duties as authorised by the Articles of Association and the Board. In order to
maintain highly efficient operations, as well as flexibility and swiftness in operational decision-making, the Board may delegate its management and administrative powers to the management when necessary, and shall provide clear guidance regarding
such delegation so as to avoid impeding or undermining the capabilities of the Board when exercising its powers as a whole.
The below sets out the
analysis of the Board composition as at 31 December 2016:
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All members of the Board/Committees are informed of the meeting schedule for the Board/Committees for the
year at the beginning of each year. In addition, all Directors will receive meeting notification at least 14 days prior to the meeting under normal circumstances. The Company Secretary is responsible for ensuring that the Board meetings comply with
all procedures, related rules and regulations while all Directors can make inquiries to the Company Secretary for details to ensure that they have received sufficient information on various matters set out in the meeting agendas.
The Board holds at least 4 meetings in each year. Additional Board meetings will be held in accordance with practical needs. In 2016, the Board played a
pivotal role in the Companys operation, budgeting, supervision, internal control, risk management, and other significant decisions and corporate governance. The Board reviewed significant matters including the Companys annual and interim
financial statements, quarterly financial results, financial and investment budgets, risk management, internal control implementation and assessment report, annual proposal for profit distribution, implementation of continuing connected
transactions, lease of telecommunications towers and related assets,
re-appointment
and remuneration of auditors and change of directors, senior management and Company Secretary of the Company. During the
year, the Company convened 4 Board meetings and completed various written resolutions. In 2016, the Chairman held a meeting to communicate with
Non-Executive
Directors without the presence of Executive
Directors independently to ensure that the
Non-Executive
Directors can fully express their opinions and further facilitate the communication of different views amongst the Board.
The Company determines the Directors remuneration with reference to factors such as their respective responsibilities and duties in the Company, as well
as their experiences and market conditions at the relevant time.
The Board formulates and reviews the Companys policies and practices on corporate
governance; reviews and monitors the training and continuous professional development of Directors and Senior Management; reviews and monitors the Companys policies and practices on compliance with legal and regulatory requirements; develops,
reviews and monitors the code of conducts for employees; and reviews the Companys compliance with the Corporate Governance Code and disclosure in the Corporate Governance Report.
Directors training and continuous professional development
The Company provides guidelines on duties, continuing obligations, relevant laws and regulations, operation and business of the Company to the newly appointed
Directors so that they are provided with the tailored induction relating to their appointment. To ensure that the Directors are familiar with the Companys latest operations for decision-making, the Company arranges for key financial data and
operational data to be provided to the Directors on monthly basis. Meanwhile, through regular Board meetings and reports from management, the Directors are able to have more clear understandings on the operations, business strategy, the latest
development of the Company and the industry. In addition, the Company reminds the Directors of their functions and duties by continuously providing them with information regarding the latest development of the Listing Rules and other applicable
regulations, and arranging internal training on topics related to the latest development of the industry and operating focuses of the Company for mutual exchange of ideas and discussion. The Directors actively participate in training and continuous
professional development to develop and refresh their knowledge and skills to ensure their contribution to the Company.
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During the year, the Directors as at 31 December 2016 have participated in training and continuous
professional development activities, and the summary is as follows:
|
|
|
Directors
|
|
Types of training
|
Executive Directors
|
|
|
Yang Jie
|
|
A, B
|
Yang Xiaowei
|
|
A, B
|
Ke Ruiwen
|
|
A, B
|
Sun Kangmin
|
|
A, B
|
Independent
Non-Executive
Directors
|
|
|
Tse Hau Yin, Aloysius
|
|
A, B
|
Cha May Lung, Laura
|
|
A, B
|
Xu Erming
|
|
A, B
|
Wang Hsuehming
|
|
A, B
|
A:
|
attending relevant seminars and/or conferences and/or forums; or delivering speeches at relevant seminars and/or conferences and/or forums
|
B:
|
reading or writing relevant newspapers, journals and articles relating to economy, general business, telecommunications, corporate governance or Directors duties
|
Compliance with the Model Code for Securities Transactions by Directors and Supervisors and Confirmation of independence by the Independent
Non-Executive
Directors
The Company has adopted the Model Code for Securities Transactions by Directors of Listed
Issuers as set out in Appendix 10 to the Listing Rules to govern securities transactions by the Directors and Supervisors. Based on the written confirmation from the Directors and Supervisors, the Companys Directors and Supervisors have
strictly complied with the Model Code for Securities Transactions by Directors of Listed Issuers in Appendix 10 to the Listing Rules regarding the requirements in conducting securities transactions for the year 2016. Meanwhile, the Company has
received annual independence confirmation from each of the Independent
Non-Executive
Directors and considered them independent.
Audit Committee
At 31 December 2016, the Audit Committee
comprised 3 Independent
Non-Executive
Directors, Mr. Tse Hau Yin, Aloysius as the Chairman and Mr. Xu Erming and Madam Wang Hsuehming as the members. The Audit Committee is responsible to the Board.
The Charter of the Audit Committee clearly defines the status, structure and qualifications, work procedures, duties and responsibilities, funding and remuneration, etc. of the Audit Committee. The Audit Committees principal duties include the
supervision of the truthfulness and completeness of the Companys financial statements, the effectiveness and completeness of the Companys internal control and risk management systems as well as the work of the Companys Internal
Audit Department. It is also responsible for the supervision and review of the qualifications, selection and appointment, independence
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and services of external independent auditors. The Audit Committee ensures that the management has discharged its duty to establish and maintain an effective risk management and internal control
system including the adequacy of resources, qualifications and experience of staff fulfilling the accounting, internal control and financial reporting function of the Company together with the adequacy of the staffs training programmes and the
related budget. The Audit Committee also has the authority to set up a reporting system on whistleblowing to receive and handle cases of complaints or complaints made on an anonymous basis regarding the Companys accounting, internal control
and audit matters.
In 2016, pursuant to the requirements of the governing laws and regulations of the places of listing and the Charter of the Audit
Committee, the Audit Committee fully assumed its responsibilities within the scope of the clear mandate from the Board. The Audit Committee proposed a number of practical and professional recommendations for improvement based on the Companys
actual circumstances in order to promote the continuous improvement and perfection of corporate management. The Audit Committee has provided important support to the Board and played a significant role in protecting the interests of independent
shareholders.
In 2016, the Audit Committee convened 4 meetings and passed 2 written resolutions, in which it reviewed important matters related to the
Companys annual and interim financial statements, quarterly financial results, assessment of the qualifications, independence, performance, appointments and remuneration of the external auditors, effectiveness of risk management, internal
control, internal audit and implementation of continuing connected transactions. The Audit Committee reviewed the annual auditors report, interim review reports and quarterly
agreed-upon
procedures
reports prepared by the external auditors, communicated with the management and the external auditors in regards to the regular financial reports and proposed them for the Boards approval after review and approval. The Audit Committee received
quarterly reports in relation to the internal audit and continuing connected transactions and provided guidance to the Internal Audit Department. Additionally, the Audit Committee reviewed the internal control assessment report and the attestation
report, followed up with the implementation procedures of the recommendations proposed by the external auditors, reviewed the U.S. annual report, and communicated independently with the external auditors twice a year.
Remuneration Committee
At 31 December 2016, the
Remuneration Committee comprised 3 Independent
Non-Executive
Directors, Mr. Xu Erming as the Chairman and Mr. Tse Hau Yin, Aloysius and Madam Wang Hsuehming as the members. The Remuneration Committee
is responsible to the Board. The Charter of the Remuneration Committee clearly defines the status, structure and qualifications, work procedures, duties and responsibilities, funding and remuneration, etc. of the Remuneration Committee. The
Remuneration Committee assists the Companys Board to formulate overall remuneration policy and structure for the Companys Directors and senior management personnel, and to establish related procedures that are standardised and
transparent. The Remuneration Committees principal duties include supervising the compliance of the Companys remuneration system with legal requirements, presenting the evaluation report on the Companys remuneration system to the
Board, giving recommendations to the Board in respect
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of the overall remuneration policy and structure for the Companys Directors and senior management personnel and the establishment of a formal and transparent procedure for developing
remuneration policy, and determining, with delegated responsibility by the Board, the remuneration packages of individual Executive Directors and Senior Management including benefits in kind, pension rights and compensation payments (including any
compensation payable for loss or termination of their office or appointment). Its responsibilities comply with the requirements of the Corporate Governance Code. No Remuneration Committee meeting was held in 2016.
Nomination Committee
At 31 December 2016, the Nomination
Committee comprised 3 Independent Non-Executive Directors, Madam Cha May Lung, Laura as the Chairlady and Mr. Tse Hau Yin, Aloysius and Mr. Xu Erming as the members. The Nomination Committee is responsible to the Board. The Charter of the
Nomination Committee clearly defines the status, structure and qualifications, work procedures, duties and responsibilities, funding and remuneration, etc. of the Nomination Committee, and it specifically requires that the Nomination Committee
members shall have no significant connection to the Company, and comply with the regulatory requirements related to independence. The Nomination Committee assists the Board to formulate standardised, prudent and transparent procedures
for the appointment and succession plans of Directors, and to further optimise the composition of the Board. The principal duties of the Nomination Committee include regularly reviewing the structure, number of members, composition and diversity of
the Board; identifying candidates and advising the Board with the appropriate qualifications for the position of Directors; reviewing the Board Diversity Policy as appropriate to ensure its effectiveness; evaluating the independence of nominees for
Independent
Non-Executive
Directors; advising the Board on matters regarding the appointment or
re-appointment
of Directors (especially Chairman and Chief Executive
Officer) and succession plans for the Directors. 1 meeting was held by the Nomination Committee and 1 Nomination Committee written resolution was passed in 2016, and it performed a review of the structure and operations of the Board and discussed
the proposed appointment of Chairman and Chief Executive Officer and other related matters.
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The number of Attendance/Meetings of the members of the Board and Committees in year 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Board
Meeting
|
|
|
Audit
Committee
Meeting
|
|
|
Nomination
Committee
Meeting
|
|
|
Shareholders
Meeting
|
|
Executive Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yang Jie
|
|
|
4/4
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
1/1
|
|
Yang Xiaowei
|
|
|
4/4
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
0/1
|
|
Ke Ruiwen
|
|
|
3/4
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
1/1
|
|
Sun Kangmin
|
|
|
4/4
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
1/1
|
|
Zhang Jiping*
|
|
|
1/2
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
0/1
|
|
Non-Executive
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhu Wei*
|
|
|
0/2
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Independent
Non-Executive
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tse Hau Yin, Aloysius
|
|
|
4/4
|
|
|
|
4/4
|
|
|
|
1/1
|
|
|
|
1/1
|
|
Cha May Lung, Laura
|
|
|
4/4
|
|
|
|
N/A
|
|
|
|
1/1
|
|
|
|
0/1
|
|
Xu Erming
|
|
|
2/4
|
|
|
|
1/4
|
|
|
|
1/1
|
|
|
|
1/1
|
|
Wang Hsuehming
|
|
|
4/4
|
|
|
|
4/4
|
|
|
|
N/A
|
|
|
|
1/1
|
|
|
|
|
Note:
|
|
Certain Directors (including
Non-Executive
Director and Independent
Non-Executive
Directors) could not attend Shareholders Meeting, some of the
Board meetings and other Committee meetings due to other important business commitments. Such Directors have reviewed the relevant meeting agendas and papers before the meeting and authorised other Directors in writing to vote on their behalf so as
to ensure their views were fully reflected in the meeting.
|
*
|
On 10 May 2016, Mr. Zhu Wei resigned from his position as a
non-executive
director of the Company due to change in work arrangement. On 19 August 2016, Mr. Zhang
Jiping retired from his positions as an Executive Director and Executive Vice President of the Company due to his age.
|
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The Company will identify suitable Director candidates through multiple channels such as internal recruitment
and recruiting from the labour market. The criteria of identifying candidates include, but not limited to, their gender, age, educational background or professional experience, skills, knowledge and length of service and capability to commit to the
affairs of the Company and, in case of Independent Non- Executive Director, the candidates should fulfill the independence requirements set out in the Listing Rules from time to time. After the Nomination Committee and the Board have reviewed and
resolved to appoint the appropriate candidate, the relevant proposal will be put forward in writing to the Shareholders Meeting for approval.
Directors shall be elected at the Shareholders Meeting for a term of 3 years. At the expiry of a Directors term, the Director may stand for
re-election
and
re-appointment.
According to the Articles of Association, before the convening of the annual general meeting, shareholders holding 5% or more of the total
voting shares of the Company shall have the right to propose new motions (such as election of Directors) in writing, and the Company shall place such proposed motions on the agenda for such annual general meeting if there are matters falling within
the functions and powers of shareholders in General Meetings. According to the Articles of Association, shareholders can also request for the convening of extraordinary general meeting provided that 2 or more shareholders holding in aggregate 10% or
more of the shares carrying the right to vote at the meeting sought to be held and they shall sign one or more written requisitions in the same format and with the same content, requiring the Board to convene an extraordinary general meeting and
stating the resolutions of meeting (such as election of Directors). The Board shall convene an extraordinary general meeting within 2 months. The minimum period during which written notice given to the Company of the intention to propose a person
for election as a Director, and during which written notice to the Company by such person of his/her willingness to be elected may be given, will be at least 7 days. Such period will commence no earlier than the day after the despatch of the notice
of the meeting for the purpose of considering such election and shall end no later than 7 days prior to the date of such meeting. The ordinary resolution to approve the appointment of Directors shall be passed by votes representing more than
one-half
of the voting rights represented by the shareholders (including proxies) present at the meeting.
Supervisory Committee
At 31 December 2016, the
Companys Supervisory Committee comprised 5 Supervisors, including 2 Employee Representative Supervisors. The principal duties of the Supervisory Committee include supervising, in accordance with the law, the Companys financials and
performance of its Directors, managers and other Senior Management so as to prevent them from abusing their powers. The Supervisory Committee is a standing Supervisory organisation within the Company, which is accountable to and reports to all
shareholders. The Supervisory Committee usually holds meetings at least twice a year. The Supervisory Committee convened 2 meetings in 2016. The term of office for the 5th session of the Supervisory Committee lasts for 3 years, starting from May
2014 until the day of the Companys annual general meeting for the year 2016 to be held in 2017, upon which the 6th session of the Supervisory Committee will be elected.
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The number of Attendance/Meetings of members of the Supervisory Committee in year 2016
|
|
|
Supervisors
|
|
Number of
Attendance/Meetings
|
Sui Yixun (Chairman of the Supervisory Committee)
|
|
2/2
|
Tang Qi (Employee Representative Supervisor)
|
|
2/2
|
Zhang Jianbin (Employee Representative Supervisor)
|
|
2/2
|
Hu Jing
|
|
2/2
|
Ye Zhong
|
|
2/2
|
External Auditors
The
international and domestic auditors of the Company are Deloitte Touche Tohmatsu and Deloitte Touche Tohmatsu Certified Public Accountants LLP, respectively. The non-audit services provided by the external auditors did not contravene the requirements
of the US Sarbanes-Oxley Act and therefore enabling them to maintain the independence.
A breakdown of the remuneration received by the external auditors
for audit and
non-audit
services provided to the Company for the year ended 31 December 2016 is as follows:
|
|
|
|
|
Service item
|
|
Fee
(including
value-added tax)
(RMB millions)
|
|
Audit services
|
|
|
71.0
|
|
Non-audit
services (mainly include internal control
advisory and other advisory services)
|
|
|
1.6
|
|
|
|
|
|
|
Total
|
|
|
72.6
|
|
|
|
|
|
|
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The Directors of the Company are responsible for the preparation of consolidated financial statements that
give a true and fair view in accordance with the International Financial Reporting Standards as issued by the International Accounting Standards Board and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal
control as the Directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
The statements by the external auditors of the Company, Deloitte Touche Tohmatsu, regarding their reporting responsibilities on the consolidated financial
statements of the Company is set out in the Independent Auditors Report on pages 120 to 126.
Since the approval at the annual general meeting of
the Company for the financial year 2012, the external auditors, Deloitte Touche Tohmatsu and Deloitte Touche Tohmatsu Certified Public Accountants LLP have provided audit services for the Company for 4 consecutive years. The Audit Committee and the
Board of the Company have resolved to
re-appoint
Deloitte Touche Tohmatsu and Deloitte Touche Tohmatsu Certified Public Accountants LLP as the international and domestic auditors respectively for the financial
year 2017, subject to the approval at the 2016 annual general meeting of the Company.
Risk Management and Internal Control System
The Board attaches great importance to the establishment and perfection of the risk management and internal control system. The Board is responsible for
evaluating and determining the nature and extent of the risks it is willing to take in achieving the Companys strategic objectives, and ensuring that the Company establishes and maintains appropriate and effective risk management and internal
control systems, and the Board acknowledges that it is responsible for the risk management and internal control systems and for reviewing their effectiveness. Such systems are designed to manage rather than eliminate the risk of failure to achieve
business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss. The Board oversees management in the design, implementation and monitoring of the risk management and internal control systems.
The Board takes effective approaches to supervise the implementation of related control measures, whilst enhancing operation efficiency and effectiveness, and optimising corporate governance, risk assessment, risk management and internal control so
that the Company can achieve long-term development goals. The internal control system of the Company is built on clear organisational structure and management duties, an effective delegation and
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accountability system, definite targets, policies and procedures, comprehensive risk assessment and management, a sound financial accounting system, and continuing analysis and supervision of
operational performance, which plays a pivotal role in the Companys overall operation. The Company has formulated a code of conduct for the Senior Management and employees which ensures their ethical value and competency. The Company attaches
great importance to the prevention of fraud and has formulated its internal reporting system, which encourages anonymous reporting of situations where employees, especially Directors and Senior Management personnel, breach the rules.
The Company views comprehensive risk management as an important task within the Companys daily operation. Pursuant to regulatory requirements in capital
markets of the United States and Hong Kong, the Company has formulated a unique
5-step
risk management approach based on risk management theory and practice, including risk identification, risk assessment, key
risk analysis, risk reaction and risk management assessment. The Company has also designed a risk management template, established and refined the centralised risk directories and case studies database of the Company, continued to strengthen the
level of risk management informatisation, and solidified a standardised risk management procedure so that risk management terminology is unified across all levels of the Company and the effectiveness of risk management was enhanced. Following the
efforts made over the years, the Company has established a structured and highly-effective comprehensive risk management system and has gradually perfected its comprehensive risk monitoring and prevention mechanism.
In 2016, pursuant to the requirement of provision C2 of the Corporate Governance Code promulgated by the Hong Kong Stock Exchange, the Company concentrated
resources on the prevention of significant potential risks, and strive to reduce negative effect from significant risk, the Company did not confront with any major risk event throughout the whole year. In 2016, the potential significant risks and
the major risk- prevention and countering measures are as follows:
Economic and policy environment adaptation risk: The downward pressure has increased
under the macroeconomic environment, and the effects of multiple policy adjustments have accumulated. The telecommunications industry has shown a trend of low growth amid the interweaving of the three periods, namely, the periods of shifting growth
rate, structural adjustment and policy adaptation. Therefore, the Company continued to view economic and policy environment adaptation risks as a significant risk to be tackled. The Company will actively adapt to changes in regulatory policies and
attain achievements of work implementation. The Company will promote comprehensive
in-depth
reform to further stimulate vitality; strengthen deployment in investment and cost control to enhance quality and
efficiency of development.
Business development risks: The Company is in an industry with intensified competition; traditional business gradually
saturated and new entrants further intensified the market competition. Therefore, the Company continued to view business development risks as a significant risk to be tackled. The Company will innovate mobile business development model to reinforce
the dominant position of broadband services, to achieve breakthrough in emerging business areas, endeavouring to accomplish the objectives of increasing market share, scale expansion, and structural adjustments.
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The Company has strictly identified, assessed and analysed potential major risks faced by the Company in
2017, including economic and policy environment adaptation risks and business development risks etc., and has put forward detailed response plans. Through strict and appropriate risk management procedures, the Company will ensure the potential
impact from the above risks to the Company is limited to and within an expected range.
The Company highly values the compliance with the laws and
regulations of the Peoples Republic of China as well as the places of listing of the Company and where the Companys business operations are located, strictly complies with all laws and regulations and timely and proactively incorporates
the laws and regulations into the Companys rules and regulations to protect the Companys legitimate business management, maintains the Companys legitimate rights and supports corporate to achieve
long-term
healthy development target.
The Counterterrorism Law of the Peoples Republic of China has come
into force on 1 January 2016. It requires telecommunications business operators and Internet service providers to provide technical support and assistance such as technical interface and decryption to the public security authorities and national
security authorities for their lawful prevention and investigation of terrorist activities; it requires telecommunications business operators and Internet service providers to put into practice the network security, information content supervision
system and technical measures for security protection in accordance with the laws and administrative regulations, in order to prevent the dissemination of information relating to terrorism and extremism; it requires telecommunications business
operators and Internet service providers to, where any information in relation to terrorism or extremism is detected, immediately cease the relevant transmission, keep the relevant records, delete the relevant information and report to the public
security divisions or the relevant departments; it also requires telecommunications business operators and Internet service providers to examine the identity of the users and not to provide services to any person of unknown identity or to persons
who refuse to have their identity examined. Violation of the above provisions may result in fines and the relevant responsible persons may also be fined or detained.
On 23 September 2016, six departments including the Supreme Peoples Court, the Supreme Peoples Procuratorate, Ministry of Public Security,
Ministry of Industry and Information Technology, the Peoples Bank of China and China Banking Regulatory Commission jointly released the Announcement on Preventing and Cracking Down on Telecom and Internet Frauds. The Announcement requires
telecom operators to strictly implement the real-name registration system of telephone subscribers. Services to those entities or individuals which/who have not registered in real names and could not complete the true identity information
registration within the stipulated time will be terminated. It also requires telecom operators to immediately carry out measures to clean up users accounts who registered multiple phone cards, and to block internet publication, searching,
dissemination and sales channels of change number software. It also strictly prohibits the operation and any business of illegal change number via internet services, strictly regulates the transmission of caller IDs of the
Administration of International Communication Accesses, fully implements the regulation and cleaning up of private voice lines and caller authentication, strengthens the detection and interception of fake caller IDs in and between networks,
immediately takes down and regulates telephone services such as
one-number
service, business switchboard and 400.
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On 7 November 2016, the Standing Committee of the National Peoples Congress announced that the
Cybersecurity Law of the Peoples Republic of China shall come into force on 1 June 2017. It specifies the principle of cyberspace sovereignty, the safety obligations of network products and services providers as well as the safety obligations
of network operators; and it further enhances the protection of personal data, establishes the framework for the protection of critical information infrastructure facilities, and establishes rules regulating cross-border transmission of key data via
critical information infrastructure facilities. Telecom operators shall comply with the requirements under the Cybersecurity Law of the Peoples Republic of China in respect of network operating security and network information security.
On 7 November 2016, the Ministry of Industry and Information Technology issued the Implementation Opinions on the Work of Further Prevention and Crack Down on
Communication Information Fraud, which requires telecom operators to rigorously implement the
real-name
registration for telephone subscribers, rectify and standardise the key telecommunications services,
rectify the issue of changing number via internet services and strengthen the protection of telephone subscribers personal data.
On 28
December 2016, the Ministry of Industry and Information Technology promulgated the Notice on Matters Relating to the Regulating Telecommunications Services Agreements, which has come into force on 1 February 2017. It specifies the standard of
signing and record-keeping of telecommunications services agreements and emphasises that the telecom operators should inform the telephone subscribers and carry out remedial work when some or all of the terms under the telecommunications service
agreements could not be observed due to force majeure or adjustment of national policies.
Apart from implementing the latest and newly-amended laws and
regulations in a timely manner, the Company also actively and closely monitors forthcoming changes in the relevant laws and regulations in order to strengthen the management of the relevant business operation behaviour, safeguards the effective
adherence to relevant laws and regulations so as to ensure that the Companys operations are in full compliance with the laws.
Since 2003, based on
the requirements of the U.S. securities regulatory authorities and the COSO Internal Control Framework, and with the assistance of other advisory institutions including external auditors, the Company has formulated manuals, implementation rules and
related rules in relation to internal control, and has developed the Policies on Internal Control Management and Internal Control Accountability Management to ensure the effective implementation of the above systems. The Company has all along
continuously revises and improves the manuals and implementation rules in view of the ever changing internal and external operation environment as well as the requirements of business development over the years. While continuing to improve the
internal control related policies, the Company has also been strengthening its IT internal control capabilities, which has
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improved the efficiency and effectiveness of internal control, enhancing the safety of the Companys
information system so that the integrity, timeliness and reliability of data and information are maintained. At the same time, the Company attaches great importance to the control and monitoring of network information safety. The Company
persistently optimises the relevant rules and guidances, further defines the responsible entities and regularly commences the inspection of network safety and information safety in order to promote the enhancement of the awareness of network
information safety and relevant skills and knowledge.
In 2016, in accordance with the requirements of external regulation and policy environment, the
Company comprehensively considered the various initiatives of deepening reforms, the changes in business development, and the needs of information system upgrade. The Company corresponded with the new strategy on transformation and upgrades,
promptly addressed market needs, solved new problems and new conditions arising in the course of business innovation, operation innovation and cooperation innovation, as well as revised the internal control manuals during the year. The Company
strengthened the special control requirement on transactions with financing arrangement, advanced payment and other businesses, enhanced relevant control and management in accordance with rules and regulations and persistently optimised the control
over liquidity risk so as to promote business development. In response to the impact on the Companys information system after the implementation of MSS system, the Company amended the general control over IT system, increased the control
requirement of MSS system, refined the authority limits of internal control and further refined the approval procedures and authorisation requirements of provincial branches on significant matters.
The Internal Audit Department plays a vital role in supporting the Board, the management and the risk management and internal control systems. The functions
of the Internal Audit Department are independent of the Companys business operations and are complementary to the duties of the external auditors, and play an important role in the monitoring of the Companys internal management. The
Internal Audit Department is responsible for internal controls assessment of the Company, and provides an objective assurance to the Audit Committee and the Board that the risk management and internal control systems are maintained and operated by
the management in compliance with agreed processes and standards. The Internal Audit Department regularly reports the internal audit results to the Audit Committee on a quarterly basis, and reports the internal audit results to the Board through the
Audit Committee.
Annual Evaluation of Risk Management and Internal Control Systems
The Company has been continuously improving its risk management and internal control systems so as to meet the regulatory requirements of its places of
listing, including the United States and Hong Kong, and strengthen its internal control while guarding against operational risk.
The Company has adopted
the COSO Internal Control Framework (2013) as the standard for the internal control assessment. With the managements internal control
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testing guidelines and the Audit Standard No. 5 that were issued by PCAOB as its directives, the Companys internal control assessment system is composed of the self-assessment
conducted by the persons responsible for internal control together with the independent assessment conducted by the Internal Audit Department. In order to evaluate the nature of internal control deficiencies and reach a conclusion as to the
effectiveness of the internal control system, the Company adopts the following 4 major steps of assessment: (1) analyse and identify areas which require assessment, (2) assess the effectiveness of the design of internal control,
(3) assess the operating effectiveness of the internal control, (4) analyse the impact of deficiencies in internal control. At the same time, the Company rectifies any deficiencies found during the assessment. By formulating Interim
Measures for the Internal Control Assessment, Manual for the Self-Assessment of Internal Control, Manual for the Independent Assessment of Internal Control and other documents, the Company has ensured the assessment
procedures are in compliance. In 2016, the Companys Internal Audit Department initiated and coordinated the assessment of internal control all over the Company, and reported the results to the Audit Committee and the Board.
Self-assessment of internal control adopts a
top-down
approach which reinforces assessment in respect of control
points corresponding to control environment and material financial statements items. The Company insisted on risk-oriented principles and, on the basis of comprehensive assessment, identified key control areas and control points for major assessment
through risk analysis. In 2016, the Company further strengthens the leading function of business departments and various units in the internal control self-assessment. In order to promote the effectiveness of self-assessment, the Company conducted
focused and targeted self-evaluation exercises surrounding the major risks of respective business areas. Through independent internal control assessment to evaluate the performance assessment of the self-assessment, it promoted the self-assessment
to become effective. The above measures effectively promoted the participation of various departments and units and ensured the self-assessment work of the Company with 100% coverage. Focusing on the internal control deficiencies identified during
the self-assessment, the Company promptly identified the responsibilities and timely rectified the deficiencies, effectively control and eliminate any potential risks. The Company also worked towards perfecting the systems and procedures, and
deepening its governance measures, while continuously enhancing the design and operating effectiveness of internal control.
On the basis of risk-oriented
independent assessment of the Companys internal control, we consolidated audit resources, worked around key areas and major business processes and conducted assessments. At the same time, we focused on new services and new units including
mobile Internet, and build upon our internal control construction and selected key businesses and units for assessment to prevent and manage the risks associated with the new business areas. In 2016, the Company further reinforced cross evaluation
amongst various units and organised independent assessments of 8 units and
follow-up
assessments of 12 units to strengthen the execution of internal control system and rectification of internal control
deficiencies. Besides, amongst various audit projects,
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the Company continuously paid attention to the effectiveness of the internal control over fundamental businesses. Through independent assessment, the Company not only grasped the overall
situation of internal control, but also developed key tests for its
high-risk
processes. In addition, the Company inspected the related units in respect of their rectification of internal control deficiencies
and focused on the key issues in order to ensure the depth and quality of assessment.
Furthermore, the Company organised the risk management and internal
control assessment team and other relevant departments to closely coordinate with the external auditors audit of internal control over financial reporting. The internal control audit covered the Company and all its subsidiaries as well as the
key processes and control points in relation to material financial statements items. The external auditors regularly communicated with the management in respect of the audit results.
All levels of the Company have been attaching great importance to rectifying internal control deficiencies. Focusing on deficiencies identified through
self-assessment, independent assessment and internal control audit, the Company required all units to carry out rectification measures and established a collaborative risk prevention mechanism to promote different professional reporting lines of
various departments in the headquarters office to execute vertical supervision and system improvement for the rectification work whilst exploring the establishment of an internal control mechanism with long-term effectiveness. To ensure effective
rectification, the Company also strengthened the verification and supervision of the rectification measures of internal control deficiencies. All subordinates entities proactively rectified deficiencies identified from the internal and external
assessments on the request from the Company.
Through self-assessments and independent assessments conducted at different levels, the Company carried out
multi-layered and full-dimensional reviews of its internal control system, and put its utmost efforts into rectifying the problems which were identified. Through this method, the Company was able to ensure the effectiveness of its internal control
and successfully passed the
year-end
attestation undertaken by the external auditors.
The Board oversees the
Companys risk management and internal control systems on an ongoing basis and the Board, through the Audit Committee, conducted an annual review of the risk management and internal control systems of the Company and its subsidiaries for the
financial year ended 31 December 2016, which covered all material areas including financial controls, operational controls and compliance controls, as well as its risk management functions. After receiving the reports from the Internal Audit
Department and the confirmation from the management to the Board on the effectiveness of the Companys risk management and internal control systems (including Environmental, Social and Governance risk management and internal control systems),
the Board is of the view that these systems are solid, well-established, effective and sufficient. The annual review also confirms the adequacy of resources relating to the Companys accounting, internal control and financial reporting
functions, the sufficiency of the qualifications and experience of staff, together with the adequacy of the staffs training programmes and the relevant budget.
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Investor Relations and Transparent Information Disclosure Mechanism
The Company established an Investor Relations Department which is responsible for providing shareholders and investors with the necessary information, data and
services in a timely manner. It also maintains proactive communications with shareholders, investors and other capital market participants so as to allow them to fully understand the operation and development of the Company. The Companys
senior management presents the annual results and interim results every year. Through various activities such as analyst meetings, press conferences, global investor telephone conferences and investors road shows, senior management provides the
capital market and media with important information and responds to key questions which are of prime concerns to the investors. This has helped reinforce the understanding of the Companys business and the overall development of the
telecommunications industry in China. Since 2004, the Company has been holding the Annual General Meetings in Hong Kong to provide convenience and encourage its shareholders, especially the public shareholders, to actively participate in the
Companys Annual General Meetings and to promote direct and two-way communications between the Board and shareholders.
With an aim of strengthening
communications with the capital market and enhancing transparency of information disclosure, the Company has provided quarterly disclosure of revenue, operating expenses, EBITDA, net profit figures and other key operational data, and monthly
announcements of the number of access lines in service, mobile subscribers and wireline broadband subscribers. The Company attaches great importance to maintaining daily communication with shareholders, investors and analysts. In 2016, the Company
participated in a number of investor conferences held by a number of major international investment banks in order to maintain active communication with institutional investors.
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In 2016, the Company attended the following investors conferences held by major international investment
banks:
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Date
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Name of Conference
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Location
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January 2016
|
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DBS Vickers Pulse of Asia Conference 2016
|
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Singapore
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January 2016
|
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Deutsche Bank Access China Conference 2016
|
|
Beijing
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January 2016
|
|
UBS 16th Greater China Conference
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Shanghai
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April 2016
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Credit Suisse Asian Investment Conference 2016
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Hong Kong
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April 2016
|
|
DBS Vickers Pulse of Asia Conference 2016
|
|
Hong Kong
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May 2016
|
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Macquarie Greater China Conference 2016
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Hong Kong
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May 2016
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CLSA China Forum 2016
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Chengdu
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May 2016
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BNP Paribas 7th Asia Pacific TMT Conference
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Hong Kong
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May 2016
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Nomura China TMT Corporate Day 2016
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Hong Kong
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May 2016
|
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Deutsche Bank Access Asia Conference 2016
|
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Singapore
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May 2016
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Morgan Stanley China Summit 2016
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Beijing
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June 2016
|
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UBS
Pan-Asian
Telco Conference 2016
|
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Hong Kong
|
June 2016
|
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Bank of America Merrill Lynch Global Telecom & Media Conference 2016
|
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London
|
June 2016
|
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J.P. Morgan Global China Summit 2016
|
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Beijing
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September 2016
|
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Morgan Stanley China Corporate Day
|
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London
|
September 2016
|
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Nomura China Investor Forum 2016
|
|
Shanghai
|
September 2016
|
|
23rd CLSA Investors Forum 2016
|
|
Hong Kong
|
October 2016
|
|
Jefferies 6th Annual Greater China Summit
|
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Hong Kong
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November 2016
|
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CICC Investment Forum 2016
|
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Beijing
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November 2016
|
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Bank of America Merrill Lynch China Conference 2016
|
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Beijing
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November 2016
|
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Citi China Investor Conference 2016
|
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Macau
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November 2016
|
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Daiwa Investment Conference 2016
|
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Hong Kong
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November 2016
|
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J.P. Morgan Global TMT Conference 2016
|
|
Hong Kong
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November 2016
|
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Morgan Stanley 15th Annual Asia Pacific Summit
|
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Singapore
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November 2016
|
|
Daiwa Asia Communication Days 2016 &
Non-Deal
Roadshow
|
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Europe
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November 2016
|
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Jefferies and BNY Mellon 2nd ADR Conference
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New York
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In 2016, the Company organised reverse roadshow with over 20 participants. The analysts first attended a
meeting with management in Beijing, followed by a site visit to Beijing Yongfeng Internet Data Centre (IDC) and a demonstration of
e-surfing
HD (IPTV) in Chengdu, Sichuan. The reverse roadshow served as an
introduction of the Companys strategies and development in IDC and cloud services, as well as the implementation of new convergence strategy, Internet+ industry applications,
end-to-end
fibre network speed upgrade and intelligent network management in Sichuan. The reverse roadshow successfully enhanced analysts understanding of the Companys development in the emerging
businesses and new convergence, and strengthened investor confidence in the Companys prospect.
The Companys investor relations website
(www.chinatelecom-h.com)
not only serves as an important channel for the Company to disseminate press releases and corporate information to investors, media and the capital market, but also plays a significant role
in the Companys valuation and our compliance with regulatory requirements for information disclosure. In 2016, the Company revamped its corporate website to enhance the design and functionality, with an aim to align with the latest
international best practices, as well as enhance the level of transparency and timeliness of the Companys information disclosure. The Company launched a responsive website with the latest technology, which allows automatic adjustment to fit
for different screen resolution and user interface, assuring the best browsing experience of website content with desktop computers, laptops or mobile devices. This allows investors, shareholders, reporters and the general public to browse the
updated information on the Companys website with any device more easily and promptly anytime anywhere. The Companys website is equipped with a number of useful functions including interactive stock quote, interactive KPI, interactive
FAQs, auto email alerts to investors, downloading to excel, RSS Feeds, self-selected items in investors briefcase, html version annual report, financial highlights, investor toolbar, historical stock quote, add investor events to calendars, content
sharing to social media, etc. The Companys website was accredited a number of awards in the professional rankings of
Institutional Investor
,
W3
and
iNova
, indicating that the Companys website is highly recognised by
the professionals. The Company also actively seeks recommendations on how to improve the Companys annual report from shareholders through survey, and prepared and distributed the annual report in a more environmentally-friendly and cost-saving
manner according to the recommendations received. Shareholders can ascertain their choice of receiving the annual reports and communications by electronic means, or receiving printed version in both English and Chinese, English only or Chinese only.
In 2016, the Company launched a dedicated investor relations enquiry line, for the purpose of providing a direct channel to address enquiries from the investment community. This allows the Company to better serve its shareholders and investors.
The Company has always maintained a good information disclosure mechanism. While keeping highly transparent communications with media, analysts and investors,
we attach great importance to the handling of inside information. In general, the authorised speakers only clarify and explain on information that are available on the market, and avoid providing or divulging any unpublished inside information
either as an individual or as a team. Before conducting any external interview, if the authorised speaker has any doubt about the information to be disclosed, he/she would seek verification from the relevant person or the
person-in-charge
of the relevant department, so as to determine if such information is accurate. In addition, discussions on the Companys key financial data or other
financial indicators are avoided during the blackout periods.
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Shareholders Rights
According to the Articles of Association, shareholders who request for the convening of an extraordinary general meeting or a class meeting shall comply with
the following procedures:
2 or more shareholders holding in aggregate 10% or more of the shares carrying the right to vote at the meeting sought to be
held shall sign 1 or more written requisitions in the same format and with the same content, stating the proposed matters to be discussed at the meeting, and requiring the Board to convene an extraordinary general meeting or a class meeting thereof.
If the Board fails to issue a notice of such a meeting within 30 days from the date of receipt of the requisitions, the shareholders who make the requisitions may themselves convene such a meeting (in a manner as similar as possible to the manner in
which shareholders meetings are convened by the Board) within 4 months from the date of receipt of the requisitions by the Board.
When the Company
convenes an annual general meeting, shareholders holding 5% or more of the total voting shares of the Company shall have the right to propose new motions in writing, and the Company shall place such proposed motions on the agenda for such annual
general meeting if they are matters falling within the functions and powers of shareholders meetings.
Process of forwarding shareholders
enquiries to the Board:
Shareholders may at any time send their enquiries and concerns to the Board in writing through the Company Secretary and the
Investor Relations Department.
The contact details of the Company Secretary are as follows:
The Company Secretary
China Telecom Corporation Limited
38th Floor, Dah Sing Financial Center,
108 Gloucester Road,
Wanchai,
Hong Kong
Email:
ir@chinatelecom-h.com
Tel No.: (852) 2877 9777
IR Enquiry: (852) 2582 0388
Fax No.: (852) 2877 0988
A dedicated Investor section is available on the Companys website
(www.chinatelecom-h.com).
There is
a FAQ function in the Investor section designated to enable timely, effective and interactive communication between the Company,
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shareholders and investors. Company Secretary and the Investor Relations Department of the Company handle
both telephone and written enquiries from shareholders of the Company from time to time. Shareholders enquiries and concerns will be forwarded to the Board and/or the relevant Board Committees of the Company, where appropriate, which will
answer the shareholders questions. Information on the Companys website is updated regularly.
Significant Differences Between the Corporate
Governance Practices followed by the Company and those followed by NYSE-Listed U.S. Companies
The Company was established in the PRC and is currently
listed on The Stock Exchange of Hong Kong Limited and the New York Stock Exchange (NYSE). As a foreign private issuer in respect of its listing on the NYSE, the Company is not required to comply with all corporate governance rules of
Section 303A of the NYSE Listed Company Manual. However, the Company is required to disclose the significant differences between the corporate governance practices of the Company and the listing standards followed by NYSE-listed U.S. companies.
Pursuant to the requirements of the NYSE Listed Company Manual, the Board of Directors of all NYSE-listed U.S. companies must be made up by a majority of
Independent Directors. Under currently applicable PRC and Hong Kong laws and regulations, the Board of the Company is not required to be formed with a majority of Independent Directors. As a listed company on The Stock Exchange of Hong Kong Limited,
the Company needs to comply with the Listing Rules. The Listing Rules require that at least
one-third
of the Board of Directors of a listed company in Hong Kong be Independent
Non-Executive
Directors. The Board of the Company currently comprises 8 Directors, of which 4 are Independent Directors, making the number of Independent Directors exceeds
one-third
of the total number of Directors on the Board, in compliance with the requirements of the Corporate Governance Code of the Listing Rules. These Independent Directors also satisfy the requirements on
independence under the Listing Rules. However, the related standard set out in the Listing Rules is different from the requirements in Section 303A.02 of the NYSE Listed Company Manual.
Pursuant to the requirements of the NYSE Listed Company Manual, companies shall formulate separate corporate governance rules. Under the currently applicable
PRC and Hong Kong laws and regulations, the Company is not required to formulate any rules for corporate governance; therefore, the Company has not formulated any separate corporate governance rules. However, the Company has implemented the code
provisions under the Corporate Governance Code and Corporate Governance Report as set out in Appendix 14 of the Listing Rules for the financial year ended 31 December 2016.
Continuous Evolution of Corporate Governance
The Company
continuously analyses the corporate governance development of international advanced enterprises and the investors desires, constantly examines and strengthens the corporate governance measures and practice, and improves the current practices
at the appropriate time; we strongly believe that by adhering to good corporate governance principles, and improving the transparency of operations, as well as the establishment of the effective accountability system, we can ensure the
long-term
stable development of the Company and seek sustainable returns for the shareholders and investors.
For
further information, please browse our website at
www.chinatelecom-h.com
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