annual report 2009
China Telecom Corporation Limited
HKEx Stock Code: 728
NYSE Stock Code: CHA
Corporate Culture
Corporate Mission
Let the customers fully enjoy a new information life
Strategic Goal
Be a world-class integrated information service provider
Core Value
Comprehensive innovation, pursuing truth and
pragmatism, respecting people and creating value all together
Operation Philosophy
Pursue mutual growth of corporate value and customer value
inside front
Corporate Culture
Service Philosophy
Customer First Service Foremost
Code of Corporate Practice
Keep promise and provide excellent service for customers
Cooperate honestly and seek win-win result in joint innovation
Operate prudently and enhance corporate value continuously
Manage precisely and allocate resources scientifi cally
Care the staff and tap their potential to the full
Reward the society and be a responsible corporate citizen
Corporate Slogan
Connecting the World
Contents
2 Corporate Information
3 2009 Milestones
4 Financial Highlights
6 Chairman’s Statement
10 Directors, Supervisors and Senior Management
25 Business Review
37 Management’s Discussion and Analysis of
Financial Conditions and Results of Operations
49 Report of the Directors
63 Report of the Supervisory Committee
64 Recognition & Awards
67 Corporate Governance Report
85 Human Resources Development Report
91 Corporate Social Responsibility Report
98 Notice of Annual General Meeting
101 Report of the Independent International Auditor
102 Consolidated Statement of Financial Position
104 Statement of Financial Position
106 Consolidated Statement of
Comprehensive Income
107 Consolidated Statement of Changes in Equity
108 Consolidated Statement of Cash Flows
110 Notes to the Financial Statements
167 Financial Summary
169 Shareholder Information
2 China Telecom Corporation Limited Annual Report 2009
Corporate Information
China Telecom Corporation Limited (“China Telecom” or the “Company”, together with its subsidiaries, collectively the “Group”) is a
full services integrated information service operator and the world’s largest wireline telecommunications and broadband services
provider, providing basic telecommunications services such as wireline telecommunications services and mobile telecommunications
services, and value-added telecommunications services such as Internet access services and information services in the PRC. As of
the end of 2009, the Company has wireline access lines in service of about 189 million, wireline broadband subscribers of over 53
million and mobile subscribers of about 56 million. The Company’s H shares and American Depositary Shares (“ADSs”) are listed on
The Stock Exchange of Hong Kong Limited and the New York Stock Exchange, respectively.
Board of Directors
Corporate Information
Audit Committee
Executive Directors
Tse Hau Yin, Aloysius (Chairman)
Wu Jichuan
Qin Xiao
Xu Erming
Wang Xiaochu (Chairman)
Shang Bing
Wu Andi
Zhang Jiping
Zhang Chenshuang
Yang Xiaowei
Yang Jie
Sun Kangmin
Non-Executive Director
Li Jinming
Remuneration
Committee
Xu Erming (Chairman)
Wu Jichuan
Qin Xiao
Tse Hau Yin, Aloysius
Supervisory Committee
Miao Jianhua (Chairman)
Zhu Lihao (Independent Supervisor)
Ma Yuzhu (Employee Representative)
Xu Cailiao
Han Fang
Legal Representative
Wang Xiaochu
International Auditor
Independent Non-Executive
Directors
Nomination Committee
KPMG
Wu Jichuan
Qin Xiao
Tse Hau Yin, Aloysius
Cha May Lung, Laura
Xu Erming
Wu Jichuan (Chairman)
Tse Hau Yin, Aloysius
Cha May Lung, Laura
Xu Erming
Legal Advisers
Jingtian & Gongcheng
Freshfields Bruckhaus Deringer
Sullivan & Cromwell LLP
Company Secretary &
Qualifi ed Accountant
Yung Shun Loy, Jacky
China Telecom Corporation Limited Annual Report 2009
3
2009 Milestones
January
China Telecom obtained a 3G mobile license
April
Launch of 3G services in 120 cities nationwide
June
Revenue from non-voice services represented more than 50% of total operating revenues refl ecting
the handsome benefi ts of our sustained and deepening transformation
July
China Telecom was honoured Number 1 in “Model State-owned Enterprises in
China” for the Year 2009 by the State
First mover advantage of 3G scale network in commercial operation with the most
comprehensive EVDO coverage in 342 cities and more than 2,000 counties
nationwide
December
Mobile subscriber scale doubled year-on-year, reaching 56 million
4 China Telecom Corporation Limited Annual Report 2009
Financial Highlights
2009
208,219
82,133
39.4%
13,271
38,042
31,159
47.8%
0.164
0.085
2.740
2009
209,370
14,422
Excluding amortisation of the upfront connection fees
Operating revenues1 (RMB millions)
EBITDA2 (RMB millions)
EBITDA margin
Net profi t4 (RMB millions)
Capital expenditure (RMB millions)
Free cash fl ow6 (RMB millions)
Total debt/Equity7
Earnings per share (RMB)
Dividend per share (HK$)
Net asset value7 per share (RMB)
2007
2008
177,510
87,054
49.0%
23,0105
46,334
34,016
47.1%
0.2845
0.085
2.774
184,507
85,8893
46.6%3
20,0663
48,410
36,768
57.9%
0.2483
0.085
2.632
Including amortisation of the upfront connection fees
Operating revenues1 (RMB millions)
Net profi t4 (RMB millions)
2007
2008
180,804
24,195
186,529
884
1
2
3
According to “IFRIC 13 Customer Loyalty Programmes”, the Group’s operating revenues in prior years were adjusted retrospectively.
For convenience of the investors’ analysis, EBITDA is calculated before CDMA network capacity lease fee (if applicable).
Excluding the impact of impairment loss of the PHS assets and natural disasters.
4 Net profi t represents profi t attributable to equity holders of the Company.
5
6
7
8
Excluding the effect of the related asset revaluation in 2007.
Free cash fl ow is calculated from EBITDA minus CDMA network capacity lease fee, capital expenditure and income tax.
Equity and net asset value represent equity attributable to equity holders of the Company.
The above fi nancial data have included Beijing Telecom acquired in 2008.
For further information, please browse our website at www.chinatelecom-h.com
China Telecom Corporation Limited Annual Report 2009
5
Financial Highlights (continued)
The charts below are based on fi nancial fi gures excluding amortisation of the upfront connection fees
6 China Telecom Corporation Limited Annual Report 2009
Chairman’s Statement
2009 was a remarkable year in the history of China Telecom.
Following our successful acquisition pursuant to the restructuring
and attaining the 3G license, we endeavoured to overcome the
challenges brought by the global fi nancial crisis and intensifi ed
competition. We continued to promote the “Customer-focused
Innovative Informatisation Strategy” by aggressively pursuing
opportunities and deepening strategic transformation. We
leveraged our integrated resources advantages, proactively
innovated our development model and persisted in adopting the
differentiated development strategy to achieve a good start of
full services operation. This has established a solid foundation
for the healthy sustainable growth and value enhancement of
the Company.
Operating Results
In 2009, the Company progressed its development steadily as
planned. The operating revenues were RMB209,370 million.
Excluding the amortisation of the upfront connection fees, the
operating revenues were RMB208,219 million, an increase of
12.9% from last year. The total mobile revenue amounted to
RMB35,620 million and gained momentum quarter over quarter.
Wireline broadband access services as well as wireline value-
added and integrated information services experienced strong
growth and their revenues were RMB47,061 million and
RMB27,983 million respectively, representing an increase of
17.1% and 9.3%, respectively from last year. The overall
business structure of the Company was optimised. Non-voice
services, which satisfi ed the social informatisation needs, also
recorded strong growth. Revenue from non-voice services
accounted for 52.7% of the operating revenues excluding the
amortisation of the upfront connection fees, constituting a new
milestone of our strategic transformation. EBITDA1, 2 was
RMB82,133 million and the EBITDA margin was 39.4%. The
profit attributable to equity holders of the Company was
RMB13,271 million, a decrease of 33.9%3 from last year. Basic
earnings per share was RMB0.16. Capital expenditure was
RMB38,042 million, a decrease of 21.4% from last year. Free
1
2
3
For convenience of investors’ analysis, EBITDA is calculated before
CDMA network capacity lease fee.
Including the amortisation of the upfront connection fees, EBITDA
was RMB83,284 million, profi t attributable to equity holders of the
Company was RMB14,422 million, and basic earnings per share
was RMB0.18.
The comparative fi gure of profi t attributable to equity holders of the
Company of the year 2008 was RMB20,066 million, which excluded
the upfront connection fees and the impact of one-off items
including Personal Handyphone System (PHS) assets impairment
loss and natural disasters.
2009 was the first year of
our full services operation,
which was also the year of our
“re-invigoration”: rapid mobile
business expansion with fast improved
integrated operation capability. We
successfully launched a number of
innovative convergence products and
services, leveraging our rich resources
and talents on wireline, mobile and
Internet services. We delighted our
customers with differentiated
experience, which is crucial to our
robust development as well as value
enhancement to the industry while
we persist in avoiding any price war.
Seeing the innovative passion and
unwavering dedication of our people,
I feel so proud and firmly believe that
our success is just right ahead of us.
China Telecom Corporation Limited Annual Report 2009
7
cash flow 4 was RMB31,159 million. We believe that the
increasing investments in promoting robust scale development
of full services operation has achieved remarkable results. As
we further progress our full services operation, the Company
would turn around its profi t trajectory and our corporate value
creation capability will be enhanced as well.
Taking into consideration of the return to shareholders, the
Company’s cash flow and its capital requirements for future
d e v e l o p m e n t , t h e B o a rd o f D i re c t o r s h a s d e c i d e d t o
recommend at the forthcoming Annual General Meeting that a
dividend being an equivalent of HK$0.085 per share for the
fi nancial year 2009, which is the same as 2008.
Business operation
Adhering to integrated operation to achieve a
good start of full services operation
We always insist on the integrated operation in the era of
informatisation and it is the key component for us to obtain the
differentiated operation advantages. In 2009, we adhered to the
integrated packaging development of wireline, mobile and
Internet services. Taking full advantage of our existing customer
resources, network resources and sales capabilities, we
proactively expanded our mobile customer base. Our mobile
subscribers increased by 28.18 million to 56.09 million in the
year, of which integrated service penetration rate reached 50%.
Total mobile revenue drove 16.0% increase in the operating
revenues. We further enhanced the full integration of our voice
services with broadband, value-added and integrated
information application services to satisfy the diverse demand of
our customers and increase their stickiness. It effectively drove
our customers and revenue growth. Through differentiated
operation, we effectively avoided single product price
competition and protected the overall industry value. We
achieved a good start of full services operation. Wireline
broadband services grew signifi cantly with net addition of 9.19
million subscribers in the year, bringing the total number of
subscribers to 53.46 million. There was also strong growth in
the wireline value-added and integrated information services.
Revenues from IT service and applications services, as well as
“Best Tone” type of information services, increased by 32.4%
and 14.7% respectively from last year. Facing the global fi nancial
crisis and the increasing mobile substitution, we proactively built
a comprehensive defense system to consolidate our wireline
voice services, in particular to actively tackle the declining trend
of wireline voice services through integrating with mobile and
Internet services. In 2009, wireline voice services revenue was
4
Free cash fl ow is calculated from EBITDA (excluding amortisation of
the upfront connection fees) minus CDMA network capacity lease
fee, capital expenditure and income tax.
8 China Telecom Corporation Limited Annual Report 2009
Chairman’s Statement (continued)
RMB78,432 million and it represented 37.7% of the operating
revenues excluding the amortisation of the upfront connection
fees. The Company’s operating risks were progressively
alleviated.
In addition, we were successful in the comprehensive integration
of our network maintenance and IT support, which enhanced
our response time and maintenance effi ciency. The time required
for activating services for customers and trouble shooting were
both shortened by nearly 40%. We continued to enhance our
front-end coordination and support capabilities to establish our
differentiated and perceivable service edge.
Optimising branding system to promote brand
development
In 2009, we focused on building our “e surfing” brand and
increasingly promoted our “3G Internet handset” to further
enrich the embedded values of our brands and to satisfy the
demands for mobile Internet applications. These efforts have
gained much market attention. According to a third-party
market survey, the brand awareness of “e surfing” reached
78.8%, the top amongst 3G brands. The Company successfully
established a new image as a full services operator. Meanwhile,
w e c o n t i n u e d t o re i n f o rc e t h e b r a n d d e v e l o p m e n t o f
“BizNavigator” and “One Home” by adding mobile service to
enrich their embedded values. This effectively enlarged our
brand customer bases. As of the end of 2009, “BizNavigator”
and “One Home” subscribers reached 4.36 million and 36.36
million respectively.
Enhancing core competitiveness through
innovation
Comprehensively enhancing the core competence of our
networks, products, sales and service are the key roots for our
full services operation. In 2009, our parent company rapidly
upgraded the mobile network and established the 3G mobile
network with the most comprehensive coverage in China. In
order to seize the leading positions in mobile products, we
established an innovative product development system by
s e t t i n g u p a n e w p ro d u c t d e v e l o p m e n t c e n t e r a t o u r
headquarters and 8 other product R&D bases to strengthen the
coordination and centralised development of our key products.
We also enhanced the synergy of our ICT companies and our
marketing channels for the gover nment and enterprise
customers to strengthen the service support for key industry-
specifi c application products. We further increased our efforts in
the development and promotion of public information products
which are based on mobile Internet applications. We launched
products like “iMusic”, wireless broadband, “189 mailbox”, “e
surfi ng LIVE” to gain market share through differentiation. We
improved our front-end customer service system by setting up
customer services department to strengthen the management
of our customer services and enhance our service capabilities.
We continuously improved our customer satisfaction, leveraging
our customer relations management system extensively. We
further reinforced our financial management by optimising
resources allocation, strengthening cost control and adjusting
investment structure. Resources were tilted towards services
with high growth potential and promising prospects such as
broadband, Internet, and value-added services. Investments
were focused on supporting the development of high growth
regions and mid-to-high-end customers to steadily increase
return on investment. We also innovated our human resources
management system to recruit high-calibre technology and
management talents, motivate the employees, optimise human
resources allocation and advance salary and incentive initiatives
to promote the corporate strategic transformation.
Promoting cooperation to stimulate industry
value chain
We persisted in scale development to boost industry value chain
confidence and advocated benefits sharing to stimulate
momentum of value chain development to promote cooperation
with external partners. We increased the percentage of
handsets procured through open channels, leveraged external
partners to achieve a breakthrough in handset bottlenecks and
continuously launched new handsets including the flagship
CDMA handsets and the 3G handsets pricing around
RMB1,000. Thus the number of models of CDMA terminals
increased at an encouraging speed of about 40 models per
month on average. We aggressively promoted the establishment
of open channels through partnering with electrical appliance
stores and mobile phone specialty stores to attract more mobile
customers. The proportion of new mobile customers developed
through open channels increased every month and reached
nearly 50% at the end of last year. At the same time, we
enhanced the cooperation with external partners in information
content especially scarce information content providers and
core industry integrated application providers. It helped promote
the development of a mobile Internet based information services
industry value chain by leveraging the strengths of our external
partners in the aspects of specialised businesses, core functions
and customer segments.
China Telecom Corporation Limited Annual Report 2009
9
Chairman’s Statement (continued)
Corporate Governance
Outlook for Future
We are fi rmly committed to adopting international best practice
to continuously improve our corporate governance. We adhered
to the principle of integrity and strengthened the establishment
and execution of internal control to effectively manage corporate
risks. We continuously enhanced corporate transparency and
performed outstandingly in investor relations. Our efforts were
widely recognised by the capital market. We have been
accredited with a number of awards and appreciation, including
“No. 1 Best Managed Company in Asia” by Euromoney, “Best
Managed Company in China” and “Best Corporate Governance
in China” by FinanceAsia, and “Asia’s Best Companies in
Corporate Governance in China” by Corporate Governance
Asia.
Mr. Neil Osborn, the Publisher of Euromoney, presented the
“Best Managed Company in Asia” award to Mr. Wang Xiaochu,
Chairman
Corporate Social Responsibility
In 2009, we made our share of contribution by actively
participating in the promotion of social informatisation amid
the global financial crisis, accelerating the development of
the industry value chain. The Company focused on achieving
harmony between the corporate development and environmental
protection. We aggressively promoted the emission reduction
project and lowered the energy-consumption-to-revenue ratio
to realise our goal of low carbon emission operation. We closely
involved in public welfare work by proactively supporting the
economic development of those less developed regions in
China, helping the disabled in getting jobs and participating in
the disaster relief works. Our continuous efforts were well
recognised by the public. In 2009, the Company was awarded
the “Valued Model Enterprise of Corporate Social Responsibility”
and “Grand Award of Corporate Social Responsibility in China”.
In 2009, we overcame various diffi culties to realise a good start
of full services operation. Looking forward, we are fully
confi dent. The foundation for the recovery of Chinese economy
is getting further consolidated. The country’s “Three Networks
Convergence” policy is gaining momentum. The demand for
mobile Internet services is increasing continuously with 3G
service development accelerating. New technologies like
Internet of Things and Cloud Computing are getting more
mature and gaining wide applications. All these will foster a
much broader market for information and communications.
However, we are also facing the serious challenges from the
intensifying competition in the telecommunications industry.
We will continue to leverage our integrated operation advantage.
In addition to our emphasis on the effective measures of
integrated packaged services, we will speed up our product and
service innovation to rapidly form a new competitive edge in
differentiation. We will strive to create a new phase of profi table
scale development and realise a new breakthrough in
informatisation services. Meanwhile, we will continue to optimise
our business structure and gradually enhance revenue
contributions from mobile, broadband access and value-added
and integrated information services through innovation in
informatisation and differentiated development. We will continue
the profitable scale development of our mobile services and
actively consolidate the comprehensive defense system of
wireline voice services to gradually alleviate the Company’s
operating risks and achieve harmonious development of our full
services.
Finally, on behalf of the Board of Directors, I would like to take
this opportunity to express my sincere appreciation to all our
shareholders and customers for their support. I firmly believe
our company will continue to create more value for our
shareholders and customers, and further contribute to the
society in 2010.
Wang Xiaochu
Chairman and Chief Executive Offi cer
Beijing, China
22 March 2010
10
China Telecom Corporation Limited Annual Report 2009
China Telecom Corporation Limited Annual Report 2009 11
Directors, Supervisors and Senior Management
1. Mr. Wang Xiaochu
5. Mr. Zhang Chenshuang 6. Mr. Yang Xiaowei 7. Mr. Yang Jie
2. Mr. Shang Bing
3. Madam Wu Andi 4. Mr. Zhang Jiping
8. Mr. Sun Kangmin
1
2
3
5
7
4
6
8
12
China Telecom Corporation Limited Annual Report 2009
Directors, Supervisors and Senior Management (continued)
Mr. Wang Xiaochu
Age 52, is the Chairman of the Board of Directors and Chief Executive Officer of the
Company. Mr. Wang graduated from Beijing Institute of Posts and Telecommunications
in 1989 and received a doctorate degree in business administration from the Hong
Kong Polytechnic University in 2005. Mr. Wang served as Deputy Director General and
Director General of the Hangzhou Telecommunications Bureau in Zhejiang province,
Director General of the Tianjin Posts and Telecommunications Administration,
Chairman and Chief Executive Officer of China Mobile (Hong Kong) Limited, Vice
President of China Mobile Communications Corporation, Chairman of the board of
directors and a Non-Executive Director of China Communications Services Corporation
Limited. He is also the President of China Telecommunications Corporation and
Honorary Chairman of China Communications Services Corporation Limited. He was
responsible for the development of China Telecom’s telephone network management
systems and various other information technology projects and as a result, received
the Third-Class Award from the State Scientific and Technological Progress Award and
the First-Class Award from the former Ministry of Posts and Telecommunications
Scientific and Technological Progress Award. Mr. Wang has over 29 years of
management experience in the telecommunications industry.
Mr. Shang Bing
Age 54, is an Executive Director, President and Chief Operating Officer of the Company.
Mr. Shang is a senior economist. He graduated in 1982 from Shenyang Chemical Industry
Institution with a bachelor’s degree in chemical industry and received a master’s degree in
business administration from New York State University in 2002. He received a doctorate
degree in business administration from the Hong Kong Polytechnic University in 2005.
Mr. Shang served as a Director of Industrial Technology Development Centre in Liaoning
Province, a Deputy General Manager and General Manager of Economic and
Technological Development Company in Liaoning Province. Mr. Shang served as a Deputy
General Manager and General Manager of China United Telecommunications Corporation
(“Unicom Group”) Liaoning Branch, a Vice President of Unicom Group, a Director of
Unicom Group, the President of Unicom Group and an Executive Director and President
of China Unicom Limited. In addition, Mr. Shang also served as a Director and President
of the China United Telecommunications Corporation Limited and China Unicom
Corporation Limited. He is also a Vice President of China Telecommunications
Corporation. Mr. Shang has extensive experience in management and telecommunications
industry.
China Telecom Corporation Limited Annual Report 2009 13
Directors, Supervisors and Senior Management (continued)
Madam Wu Andi
Age 55, is an Executive Director, Executive Vice President and the Chief Financial Officer
of the Company. She is responsible for the financial management of the Company.
Madam Wu is a senior accountant. She graduated from the Beijing Institute of
Economics with a bachelor degree in finance and trading in 1983, and studied in a
postgraduate program in business economics management at the Chinese Academy of
Social Sciences from 1996 to 1998. She studied in a master of business administration
(MBA) program at the Guanghua School of Management at Peking University from 2002
to 2003 and received an executive master degree of business administration (EMBA).
Prior to joining China Telecommunications Corporation in May 2000, she served as
Director General of the Department of Economic Adjustment and Communication
Settlement of the Ministry of Information Industry (“MII”), Director General, Deputy
Director General and Director of the Department of Finance of the MPT. She is also a
Vice President of China Telecommunications Corporation. Madam Wu has 28 years of
economic and financial management experience in the telecommunications industry in
China.
Mr. Zhang Jiping
Age 54, is an Executive Director and Executive Vice President of the Company. Mr.
Zhang is a professor-level senior engineer. He graduated from the Beijing University of
Posts and Telecommunications with a bachelor degree in radio telecommunications
engineering in 1982, studied in a postgraduate program in applied computer
engineering at Northeastern Industrial University from 1986 to 1988, and received a
doctorate degree in business administration from the Hong Kong Polytechnic
University in 2004. Prior to joining China Telecommunications Corporation in May
2000, he served as Deputy Director General of DGT of the MPT, a Deputy Director
General and Director of the Telecommunication Technology Centre of the Posts and
Telecommunications Administration of Liaoning Province. He is also a Vice President
of China Telecommunications Corporation. Mr. Zhang has 28 years of experience in
network operation and management in the telecommunications industry in China.
14
China Telecom Corporation Limited Annual Report 2009
Directors, Supervisors and Senior Management (continued)
Mr. Zhang Chenshuang
Age 58, is an Executive Director and Executive Vice President of the Company. Mr.
Zhang is a senior economist. He graduated from the Party School of the Communist
Party of China (CPC) and received a MBA degree from the Hong Kong Polytechnic
University. Mr. Zhang served as Executive Director and Vice President of China
Mobile Limited, Vice President of China Mobile Communications Corporation,
Director of China Mobile Communication Co., Ltd., the Assistant to the President of
China Mobile Communications Corporation, Director General of the Inner Mongolia
Posts and Telecommunications Administration Bureau, Deputy Director General of
the Office of the Ministry of Posts and Telecommunications. He is also a Vice
President of China Telecommunications Corporation. He has over 30 years of
experience in the telecommunications industry.
Mr. Li Ping
Age 56, is an Executive Vice President of the Company. Mr. Li graduated from the Beijing
University of Posts and Telecommunications with a major in radio telecommunications
in 1976 and received an MBA degree from the State University of New York at Buffalo,
U.S.A. in 1989. He served as Executive Director of China Telecom Corporation Limited,
Chairman and President of China Telecom (Hong Kong) International Limited,
Vice Chairman and Executive Vice President of China Mobile (Hong Kong) Limited,
Deputy Director General of the DGT of the MPT. He is the Vice President of China
Telecommunications Corporation, Chairman of the board of directors and an Executive
Director of China Communications Services Corporation Limited. Mr. Li has extensive
experience in managing public companies and 34 years of operational and managerial
experience in the telecommunications industry in China.
Mr. Yang Xiaowei
Age 46, is an Executive Director and Executive Vice President of the Company. Mr. Yang
is a senior engineer. He received a bachelor’s degree from the Computer Application
Department of Chongqing University in 1998 and a master’s degree in engineering from
the Management Engineering Department of Chongqing University in 2001. Mr. Yang
was the Assistant to Director and Deputy Director of Chongqing Telecommunications
Bureau, a Deputy Director of the Chongqing Telecommunications Administration Bureau
and a Director of Chongqing Municipal Communication Administration Bureau. Mr. Yang
served as General Manager of the Chongqing branch and the Guangdong branch of the
Unicom Group, Vice President of the Unicom Group, Director of the Unicom Group and
Executive Director and Vice President of China Unicom Limited. Mr. Yang also served as
Director and Vice President of China Unicom Corporation Limited and Chairman of
Unicom Huasheng Telecommunications Technology Co. Ltd.. He is also a Vice President
of China Telecommunications Corporation. Mr. Yang has extensive experience in
management and telecommunications industry.
China Telecom Corporation Limited Annual Report 2009 15
Directors, Supervisors and Senior Management (continued)
Mr. Yang Jie
Age 48, is an Executive Director and Executive Vice President of the Company. Mr. Yang
is a professor-level senior engineer. He graduated from the Beijing University of Posts
and Telecommunications with a major in radio engineering in 1984 and obtained
a doctorate degree in business administration (DBA) from the ESC Rennes School
of Business in 2008. Mr. Yang served as Deputy Director General of Shanxi
Posts and Telecommunications Administration Bureau, General Manager of Shanxi
Telecommunications Corporation, Vice President of China Telecom Beijing Research
Institute and General Manager of Business Department of the Northern Telecom of
China Telecommunications Corporation. He is also a Vice President of China
Telecommunications Corporation. Mr. Yang has 26 years of operational and managerial
experience in the telecommunications industry in China.
Mr. Sun Kangmin
Age 53, is an Executive Director and Executive Vice President of the Company. Mr.
Sun is a senior engineer. He holds an MBA degree from the University of Hong Kong.
Mr. Sun served as Department Head of the Information Industry Department of
Sichuan Province, Director General of Communications Bureau of Sichuan Province,
Chairman and General Manager of Sichuan Telecom Company Limited. He is also a
Vice President of China Telecommunications Corporation. Mr. Sun has 26 years of
operational and managerial experience in the telecommunications industry in China.
Mr. Li Jinming
Age 58, is a Non-Executive Director of the Company, Chairman of Guangdong Rising
Assets Management Co., Ltd. (one of the domestic shareholders of the Company) and
Chairman of Shenzhen Zhongjin Lingnan Nonfemet Company Limited. Mr. Li graduated
from Guangdong Radio and TV University, and holds an EMBA degree from Lingnan
College, Zhong Shan University after the completion of his study in the postgraduate
programme of international economics and industrial commerce management. Mr. Li
served as Chief and Deputy Director General of the Guangdong Provincial Discipline
Inspection Commission, and Director and Deputy General Manager of Guangdong
Rising Assets Management Co., Ltd.. Mr. Li has extensive experience in enterprise
management.
16
China Telecom Corporation Limited Annual Report 2009
Directors, Supervisors and Senior Management (continued)
Mr. Wu Jichuan
Age 72, is an Independent Non-Executive Director of the Company. Mr. Wu is a
p ro f e s s o r- l e v e l s e n i o r e n g i n e e r. M r. Wu i s t h e H o n o r a r y C h a i r m a n o f t h e
Telecommunications and Economics Specialists Committee, Director General of
the Chinese Institute of Electronics, and Honorary Director General of the Chinese
Institute of Communications. Mr. Wu graduated from the Beijing Institute of Posts
and Telecommunications with a major in wired telecommunications engineering in
1959. Mr. Wu served as Vice Minister and Minister of the Ministry of Posts and
Telecommunications, Deputy Director of the Committee of the Radio Management of
China, Vice Leader of the Informatisation Leading Group of the State Council, Minister of
Ministry of Information Industry, a member of the Eighth & the Tenth National Committee
of Chinese People’s Political Consultative Conference (the “CPPCC”), a member of the
Standing Committee of the Tenth National Committee of CPPCC and Vice Chairman of
the Subcommittee of Education, Science, Culture, Health and Sports of the Tenth
National Committee of CPPCC.
Mr. Qin Xiao
Age 62, is an Independent Non-Executive Director of the Company. Mr. Qin obtained his
Ph.D. in economics from University of Cambridge. He is the Chairman of China
Merchants Group Limited and China Merchants Bank Co., Ltd.. He is a member of the
eleventh Chinese People’s Political Consultative Conference and the Honorary Chairman
of Hong Kong Chinese Enterprises Association, a part-time professor at the School of
Economics and Management of Tsinghua University and the Graduate School of the
People’s Bank of China. Before joining China Merchants Group, he served as President
and Vice Chairman of China International Trust and Investment Corporation (CITIC), and
Chairman of CITIC Industrial Bank. He was a deputy to the Ninth National People’s
Congress, a member of the Tenth Chinese People’s Political Consultative Conference, an
advisor on the Foreign Currency Policy of the State Administration of Foreign Exchange,
and a member of Toyota International Advisory Board, he also served as Chairman of
APEC Business Advisory Council (ABAC) for the Year 2001. He is the author of several
papers and books in the fields of economics and management.
Mr. Tse Hau Yin, Aloysius
Age 62, is an Independent Non-Executive Director of the Company. Mr. Tse is currently
an Independent Non-executive Director of CNOOC Limited, China Construction Bank
Corporation, Wing Hang Bank Limited, Linmark Group Limited, Sinofert Holdings Limited
and SJM Holdings Limited and is a member of the International Advisory Council of the
People’s Municipal Government of Wuhan. Mr. Tse is a fellow of the Institute of Chartered
Accountants in England and Wales, and the Hong Kong Institute of Certified Public
Accountants (“HKICPA”). Mr. Tse is a past president and the current Chairman of the
Audit Committee of the HKICPA. He joined KPMG in 1976, became a partner in 1984
and retired in March 2003. Mr. Tse was a non-executive Chairman of KPMG’s operations
in China and a member of the KPMG China advisory board from 1997 to 2000. Mr. Tse
is a graduate of the University of Hong Kong.
China Telecom Corporation Limited Annual Report 2009 17
Directors, Supervisors and Senior Management (continued)
Madam Cha May Lung, Laura
Age 60, is an Independent Non-Executive Director of the Company. Mrs. Cha is currently
a Hong Kong Delegate to the 11th National People’s Congress, PRC, a Member of the
Standing Committee of the Chinese People’s Political Consultative Conference
(“CPPCC”) Shanghai Committee, the Vice Chairman of the International Advisory Council
of the China Securities Regulatory Commission (“CSRC”), a Member of the Executive
Council of the Government of the Hong Kong Special Administrative Region, Non-
executive Deputy Chairman of The Hongkong and Shanghai Banking Corporation
Limited, Non-executive Director of Bank of Communications Co., Ltd. She is also an
Independent Non-executive Director of Hong Kong Exchanges and Clearing Limited and
Tata Consultancy Services Limited. Mrs. Cha served as Vice Chairman of CSRC from
February 2001 to September 2004 and Assistant Director of Corporate Finance, Senior
Director, Executive Director and Deputy Chairman of the Securities and Futures
Commission of Hong Kong from 1991 to 2001. She received a Juris Doctor degree from
Santa Clara University of USA in 1982.
Professor Xu Erming
Age 60, is an Independent Non-Executive Director of the Company. Mr. Xu is a
Deputy Dean, professor, and Ph.D. supervisor of the Graduate School at the Renmin
University of China, Deputy Secretary-General of the Tenth Session of the Academic
Committee, and a member of the Third Session of the University Affairs Committee
of the Renmin University of China, Associate Convener of the Sixth Session
of the Business Administration Academic Appraisal Group of the Academic
Degree Committee of the State Council, Vice Chairman of the Chinese Enterprise
Management Research Association, and Chairman of Beijing Contemporary
Enterprise Research Association. He is also entitled to the State Council’s special
government allowances. He is the Independent Supervisor of Harbin Power
Equipment Company Limited.
Over the years, Professor Xu has conducted research in areas related to strategic
management, organisational theories, international management and education management, and has been responsible for
research on many subjects put forward by the National Natural Science Foundation, the National Social Science Foundation, and
other authorities at provincial and ministry level. Professor Xu has issued many publications including Business Strategy and
Innovative analysis, Business Strategic Management, Introduction to International Business Management, a number of case studies,
as well as a number of academic dissertations such as Empirical Research: Effects on Performance of Supervision Mechanisms
Substitution Effect of Listed Companies and has also been a columnist in the Economic Daily. He has received many awards such
as the Ministry of Education’s Class One Excellent Higher Education Textbook Award and the State-Level Class Two Teaching
Award. Professor Xu has been a visiting professor at over 10 domestic universities and has been awarded the Fulbright Scholar of
U.S.A. twice. Professor Xu was previously a lecturer at the New York State University at Buffalo, U.S.A., the University of Scranton,
U.S.A., the University of Technology, Sydney, the Kyushu University, Japan and Hong Kong Polytechnic University.
18
China Telecom Corporation Limited Annual Report 2009
Directors, Supervisors and Senior Management (continued)
Mr. Yung Shun Loy, Jacky
Age 47, is the Assistant Chief Financial Officer, Qualified Accountant and the Company Secretary of the Company. Mr. Yung is a
fellow member of the Hong Kong Institute of Certified Public Accountants, a fellow member of the Association of Chartered Certified
Accountants of United Kingdom, and a Certified Practising Accountant in Australia. He has a bachelor degree in laws and a bachelor
degree in social sciences. Mr. Yung has over 20 years of experience in auditing, company secretary and senior financial management
of listed companies.
Mr. Wang Qi
Age 55, is the financial controller of the Company. Mr. Wang is a senior accountant. He graduated from Beijing Institute of Posts and
Telecommunications and the Australian National University. He holds a Master degree in international management. He served a
Deputy Director General of Anhui Posts and Telecommunications Administration Bureau and a Deputy General Manager of China
Telecom Group Anhui Corporation prior to his relocation to the headquarters of China Telecom Group in 2000. Mr. Wang is also
Managing Director of the Finance Department of China Telecommunications Corporation. Mr. Wang has 35 years of managerial and
accounting experience in the telecommunications industry in China.
China Telecom Corporation Limited Annual Report 2009 19
Directors, Supervisors and Senior Management (continued)
Supervisors
Mr. Miao Jianhua
Age 58, is the Chairman of the Supervisory Committee of the Company and the head of the Discipline Inspection Division of China
Telecommunications Corporation. Mr. Miao holds a master degree in management from the Australian National University. Mr. Miao
held senior positions at the former Jilin Provincial Administration of Posts and Telecommunications and served as Director of the
Inspection Bureau of the former MPT and the MII. Mr. Miao also served as the General Manager of the Human Resources
Department of China Network Communications Group Corporation and China Netcom Group Corporation (Hong Kong) Limited,
Assistant to President of China Network Communications Group Corporation, Executive Director and the Joint Company Secretary
of China Netcom Group Corporation (Hong Kong) Limited, the head of the Discipline Inspection Division and the chairman of the
union of China United Telecommunications Corporation, Executive Director of China Unicom Limited, Chairman of the Supervisory
Committee of China United Telecommunications Corporation Limited. Mr. Miao is a senior economist and has extensive
management experience in working for the government and enterprises in the PRC.
Madam Zhu Lihao
Age 69, is an Independent Supervisor of the Supervisory Committee of the Company. Madam Zhu is a senior auditor and a qualified
accountant in the PRC. She graduated from Beijing Graduate School of Mining and Technology with a major in engineering
economics in 1963. Madam Zhu served as a Deputy Director General, Director General, Deputy Director and Director of the
Department of Industry and Communications of the National Audit Bureau of China, and the Director General of the Department of
Foreign Affairs and Foreign-related Auditing of the Audit Bureau. Madam Zhu has over 40 years of experience in management and
auditing.
Mr. Ma Yuzhu
Age 56, is an Employee Representative Supervisor of the Supervisory Committee of the Company, Managing Director of the
Corporate Culture Department of the Company. Mr. Ma graduated from the Beijing University of Posts and Telecommunications with
a major in telecommunications in 1982. Mr. Ma studied part-time in Australian National University in 2000 and obtained a master
degree in international business administration in 2001. Mr. Ma served as a Director General in China International
Telecommunication Construction 1st Engineering Bureau, Director of the department of General Engineering of DGT. Mr. Ma is a
senior engineer and has over 30 years of telecommunications construction and operation management experience in the
telecommunication industry.
Mr. Xu Cailiao
Age 46, is a Supervisor of the Supervisory Committee of the Company. Mr. Xu is a Director of the Corporate Strategy Department of
the Company. Mr. Xu graduated from the Law School of Peking University with a master degree in law in 1987. He served as a
Director of the State Commission for Economic Restructuring and Managing Director of the Hong Kong branch of Irico Group. He
was qualified to practise law in China in 1988. Mr. Xu is highly experienced in respect of corporate governance, organisational
development and process management.
Madam Han Fang
Age 37, is a Supervisor of the Supervisory Committee of the Company. Madam Han is a Director of the Audit Department of the
Company. Madam Han graduated from the Beijing University of Posts and Telecommunications with a bachelor’s degree in
Engineering Management in 1995. She obtained a master degree in business administration at the Norwegian School of
Management in 2007. She worked in finance-related jobs serving in China Huaxin Post and Telecommunications Economy
Development Centre and the audit department of China Telecommunications Corporation. Madam Han is an international internal
auditor, a qualified accountant in PRC and a senior accountant and has 15 years of finance and audit experience.
Change Has Come
Business Review
China Telecom Corporation Limited Annual Report 2009
25
Business Review
The following table sets out key operating data for 2007, 2008 and 2009.
Unit
2007
2008
2009
(2009 over 2008)
Rates of change
Wireline access lines in service
Million
220.64
208.35
Wireline local voice usage
Million pulses
407,445
372,477
Wireline caller ID service subscribers
Wireline Color Ring Tone subscribers
Wireline broadband subscribers
Mobile subscribers
Mobile voice usage
Mobile SMS usage
Mobile Color Ring Tone subscribers
“One Home” subscribers
“BizNavigator” subscribers
Million
Million
Million
Million
Million minutes
Million messages
Million
Million
Million
146.88
146.74
63.21
35.74
—
—
—
—
10.61
—
79.25
44.27
27.91
26,375
2,028
8.64
23.93
2.53
188.56
320,585
128.45
74.07
53.46
56.09
155,410
15,136
32.63
36.36
4.36
(9.5%)
(13.9%)
(12.5%)
(6.5%)
20.8%
101.0%
489.2%
646.4%
277.7%
51.9%
72.3%
Note: As the Company commenced its mobile service from the fourth quarter of 2008, data related to the Company’s mobile operation in 2008 only
included those in the fourth quarter.
In 2009, amid the global fi nancial crisis and increasingly intensifi ed market competition, the Company captured the opportunities
and leveraged its comprehensive edges to strengthen the integrated operation of wireline, mobile and Internet services. The
Company focused on the development of its “e surfi ng” brand and expanded its mobile subscriber base rapidly. At the same time,
we reinforced the development of the transformation services and maintained stable development of the wireline services,
successfully realising a good start for the full services operation.
Mr. Wang Xiaochu, Chairman and Mr. Yang Xiaowei,
Executive Vice President, jointly hosted the offi cial launch of
e surfi ng 3G service
Mr. Shang Bing, President, hosted the opening ceremony of
the launch of e surfi ng 189 prefi x number mobile service
26 China Telecom Corporation Limited Annual Report 2009
Business Review (continued)
Key Operating Performance
In 2009, total operating revenues were RMB209,370 million. Excluding the amortisation of the upfront connection fees, the operating
revenues were RMB208,219 million, representing an annual growth rate of 12.9%. The Company’s overall business structure has
been optimised and its strategic transformation has achieved new development.
Mobile services experienced rapid development. In 2009, the Company fully utilised its customer and network resources, and
marketing capabilities to rapidly expand the mobile subscriber base to 56.09 million, successfully doubling the number with an
increase rate of 101.0% from the beginning of the year. Revenue from mobile services was RMB30,003 million with stable MOU and
ARPU.
Overall development of wireline services was relatively stable. The Company persisted in strengthening the branding and
development of broadband services. In 2009, the net addition of wireline broadband subscribers was 9.19 million with a subscriber
base of 53.46 million. Revenue from wireline broadband access service was RMB47,061 million, an increase of 17.1%. The wireline
value-added and integrated information services registered signifi cant growth in 2009. Revenue from wireline non-voice services was
RMB94,167 million, an increase of 14.7% year on year, accounting for 54.6% of the wireline services revenue excluding the upfront
connection fees. Revenue from wireline voice services was RMB78,432 million, accounting for 37.7% of the operating revenues
excluding the upfront connection fees. The operating risk of the Company’s wireline services has been progressively alleviated.
China Telecom Corporation Limited Annual Report 2009
27
Business Review (continued)
Business Operating Strategies
In 2009, the Company seized the opportunities to continuously enhance its capabilities in integrated operation, brand building, new
product development, sales channel optimisation and extension of industry value chain, focusing on the implementation of fi ve major
operating strategies:
Firstly, we insisted on integrated operation and our differentiated
competitive edges gradually emerged. We further promoted the in-depth
integration of our voice services with our broadband, value-added and
integrated information services. This has not only satisfi ed the diverse
needs of our customers, but also increased their stickiness through
enhanced marketing initiatives such as upgrade of broadband bandwidth,
brand marketing and Internet applications. Customer and revenue
growths were effectively stimulated. As of the end of 2009, integrated
service penetration rate within the mobile subscribers reached 50.0%,
representing an increase of 15 percentage points from the end of 2008.
“One Home” service package customers accounted for 32.4% of our
total household customers, an increase of 12 percentage points from the
end of 2008. The penetration rate of “BizNavigator” services amongst
small and medium-sized enterprises reached 43.0%, an increase of 22
percentage points from the end of 2008.
e surfi ng – diversifi ed entertainment contents and information
application services
28 China Telecom Corporation Limited Annual Report 2009
Business Review (continued)
Secondly, we strengthened our brand building with a focus on promoting
our “e surfing” brand. In 2009, we reinforced the promotion of “3G
Internet handsets” and effectively enhanced the market infl uences of our
“e surfi ng” brand. According to a third-party independent market survey
in 2009, our “e surfi ng” brand ranked the top in brand awareness among
all 3G brands, at least 10 percentage points ahead of all other competing
brands and became a leading brand in the 3G market. Meanwhile, the
Company continued to strengthen the brand building of “BizNavigator”
and “One Home” by adding mobile elements to enrich their embedded
values and thus effectively accelerated the expansion of our brand
customer base. As of the end of 2009, the number of subscribers for
“BizNavigator” and “One Home” reached 4.36 million and 36.36 million
respectively, establishing a new corporate image for the Company as a
full services operator.
BizNavigator – total solutions of communications and
information services for government and
enterprises customers
Thirdly, we continued to improve the perception of product functions and enhanced our core competitiveness. In 2009, in order to
seize the leading positions in mobile products, the Company innovated its product development system by setting up a product
development centre at our headquarters and 8 product R&D bases and improved its network-wide coordination effi ciency through
strengthened coordination and centralised development of key products. We further increased our efforts in developing public
information products which are based on mobile Internet applications
such as “iMusic”, wireless broadband, “189 mailbox”, “e surfi ng LIVE”,
“Mobile Global Mega-Eye”, “e surfi ng Video”, “e surfi ng Push-to-Talk” to
gain market share through differentiation. We enhanced the synergy of
our ICT companies and our marketing channels for the government and
enterprise customers to strengthen the service support for the key
industry-specific application products. We introduced integrated and
differentiated industry applications such as “Digital City Management”
and “e-Commerce and Industry Administration” to effectively expand our
mid-to-high-end customer base comprising government and enterprise.
In the meantime, we paid more attention to the cooperation with
external partners of information content especially with scarce
One Home — Integrated communications and information
information content providers and core industry integrated application
services for households
providers. By leveraging the strengths of our external partners in their
specialised businesses, core functions and customer segments, we
continuously improved our customer perception and satisfaction, and
gradually formulated the Company’s differentiated and long-lasting
competitiveness in full services operation.
China Telecom Corporation Limited Annual Report 2009
29
Business Review (continued)
Fourthly, we reinforced the sharing of sales channel resources and comprehensively enhanced the sales channels’ service
capabilities. We made full efforts in the promotion of open channel establishment and the number of the open sales channels
increased by nearly four times in 2009. We proactively promoted the establishment of open channels through partnering with
electrical appliance stores and mobile phone specialty stores to attain more mobile customers. The proportion of new mobile
customers developed through open channels increased every month and reached nearly 50% at the end of 2009. We improved the
basic service offered through electronic channels and enhanced self-service capabilities to allow our customers to use more user-
friendly means such as mobile handsets and Internet to satisfy their service needs. In addition, we expanded the size of our chief
account manager team and provided more comprehensive customer service to enhance the service-provision capabilities of our key
services and effectively realised differentiated services.
Fifthly, we achieved scale development of mobile services and successfully invigorated industry value chain. The Company promoted
open channels and strived to encourage the purchase and sales of terminals through open channels in 2009. We accelerated our
access to all kinds of mainstream open retail channels and actively promoted sales via electronic and online channels, which
boosted the growth in handset sales. In 2009, CDMA handset sales reached over 30 million units, three times more than that of
2008. Adhering to a philosophy of win-win cooperation, we increased our efforts in cooperating with external partners and enlarging
the proportion of terminals procured by open channels. We also launched new models of handsets including the fl agship CDMA
handsets and the 3G handsets pricing around RMB1,000, stimulating the development of the information services industry value
chain with a focus on mobile Internet.
Mr. Yang Xiaowei, Executive Vice President, presented a
speech at the Annual Conference of CDMA Handset
Industry Value Chain
Expanding portfolio of e surfi ng handset models
30 China Telecom Corporation Limited Annual Report 2009
Business Review (continued)
Network and Operation Support
In 2009, we fully utilised the opportunities brought forth by full services operation to promote broadband bandwidth upgrade,
services platform integration, and development of integrated information services and industry specifi c applications. Our parent
company rapidly upgraded the mobile network and established the most comprehensive and fi rst-in-commercial-use 3G mobile
network in China, forming an initial unifi ed network structure for our full services operation.
In 2009, capital expenditure was RMB38,042 million, a decline of 21.4% from 2008, which accounted for 18.3% of the operating
revenues excluding the upfront connection fees, a decrease of 7.9 percentage points from 2008. Adhering to the principal of
effectively allocating resources and supporting key development areas, we further increased investments in broadband, platform
integration of value-added services and integrated information services. The investments in broadband as well as value-added and
integrated information services accounted for 54.1% and 17.8% respectively of total capital expenditure of the year, an increase of
8.7 percentage points and 1.3 percentage points respectively from 2008. In 2009, capability and quality of the Company’s
broadband network were comprehensively enhanced with newly-built broadband access ports reaching 15 million. Over 98.0% of
broadband access lines in the southern urban areas in China, including counties, have the bandwidth of over 2 Mbps and 94.0% of
those lines have the bandwidth of over 4 Mbps, an increase of 15 percentage points from 2008. Promising achievements were also
seen in business platforms integration and functions optimisation. The structures for management platforms, capability platforms
and application platforms were better defi ned, and a unifi ed authentication system structure was initially established. We successfully
completed the optimisation and upgrade of more than 200 provincial-level capability platforms such as SMS centers, MMS centers
and WAP portals, allowing the rapid deployment of our integrated operations. Meanwhile, the Company accelerated the construction
of WLAN hotspots. The number of newly-built Wi-Fi hotspots was about 70,000, bringing the total Wi-Fi hotspots to nearly 100,000,
helping us to build up a differentiated competitive advantage in an innovative way. In order to effectively support our 3G service and
full services integrated operation, we set up the model of IT infrastructure supporting network-wide integrated operations. Our real-
time billing and CRM management capabilities were enhanced. The time required for activating new services and trouble shooting
were both shortened by nearly 40%. This has signifi cantly enhanced support capabilities of our IT system and improved overall
customer perceptions.
China Telecom Corporation Limited Annual Report 2009
31
Business Review (continued)
Operating Highlights in 2010
In 2010, the Company will continue its operating strategy of “innovative integrated operation with differentiated edges and profi table
scale development”. We will continue to optimise our business structure and gradually increase the revenue contribution from
mobile, broadband access, and value-added and integrated information services. While accelerating the development of our mobile
services, we will promote the expansion of our core 3G products and mid-end handsets to support 3G development. We will also
push forward the intensive scale promotion of industry-specifi c applications and provide commercialised, standardised and in-series
application products components to enhance customer values. We will strive to promote the upgrade of broadband bandwidth,
enrich Internet applications and integration of our wireline and wireless broadband operations. Furthermore, we will insist on win-win
cooperation strategy and adopt fl exible partnership models to stimulate the development of mobile-Internet-based information
services value chain, enriching the embedded values of our value-added and integrated information services. Through initiatives
such as integrated operations, branded packages and service quality improvement, we will gradually alleviate the risk of our wireline
voice service decline and achieve a coordinated development of full services. Meanwhile, we will strengthen our network optimisation
and maintenance to further perfecting services systems and increase services capabilities. We will also strengthen the synergy
between front-end and back-end to establish differentiated and perceivable competitive advantages.
Promoting integrated package service for the campus
A brilliant popular service — iMusic
Change Has Come
Management’s
Discussion and Analysis
of Financial Conditions
and Results of Operations
China Telecom Corporation Limited Annual Report 2009
37
Management’s Discussion and Analysis of
Financial Conditions and Results of Operations
Summary
The Group’s operating revenues in 2009 were RMB209,370 million, an increase of 12.2%1 from 2008; operating expenses were
RMB186,712 million, an increase of 2.9% from 2008; profi t attributable to equity holders of the Company was RMB14,422 million
and basic earnings per share was RMB0.18; EBITDA2 was RMB83,284 million and the EBITDA margin was 39.8%.
Excluding the amortisation of upfront connection fees, the operating revenues of the Group in 2009 were RMB208,219 million, an
increase of 12.9% from 2008; profi t attributable to equity holders of the Company was RMB13,271 million, a decrease of 33.9%3
from 2008, basic earnings per share was RMB0.16; EBITDA was RMB82,133 million and the EBITDA margin was 39.4%.
Operating Revenues
In 2009, the Group actively coped with the global fi nancial crisis as well as increasingly intense market competition, and continued
to adhere to the customer branding operation. Through vigorously promoting strategic transformation, the full services operation has
a remarkable start. Operating revenues in 2009 were RMB209,370 million, an increase of 12.2% from 2008. Excluding the
amortisation of upfront connection fees of RMB1,151 million, operating revenues in 2009 were RMB208,219 million, an increase of
12.9% from 2008. Of this, the total mobile revenue was RMB35,620 million (including mobile voice revenue of RMB20,027 million,
revenue of RMB9,976 million from mobile Internet access, value-added and integrated information application services as well as
leased line services and other mobile services revenue of RMB5,617 million), maintaining a satisfactory growth momentum. The ratio
of wireline non-voice services to total revenue from wireline services, excluding the amortisation of upfront connection fees, has
increased over the year to 54.6% in 2009, a rise of 8.6 percentage points from 2008. With the sustainable development of our
wireline non-voice services, the Group’s revenue structure has become more optimised and the risk of over-reliance on traditional
businesses has been further reduced, enhancing the Group’s capacity in risk management.
1
2
3
According to the “IFRIC 13 Customer Loyalty Programmes”, operating revenues, selling, general and administrative expenses, as well as other
operating expenses for 2008 were adjusted. Please refer to note 3 of the audited fi nancial statements for details.
EBITDA is calculated from operating revenues minus operating expenses (which excluded depreciation and amortisation and CDMA network
capacity lease fee). As the telecommunications business is a capital intensive industry, capital expenditure, the level of gearing and fi nance costs
may have a signifi cant impact on the net profi t 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 refl ect operating performance, fi nancial capability 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.
Excluding the one-off items of the asset impairment loss of PHS assets of RMB18,366 million (after-tax effect) and the losses related to natural
disasters of RMB2,838 million (after-tax effect), profi t attributable to equity holders of the Company in 2008 was RMB20,066 million.
38 China Telecom Corporation Limited Annual Report 2009
Management’s Discussion and Analysis of
Financial Conditions and Results of Operations (continued)
The following table sets forth a breakdown of the operating revenues of the Group for 2008 and 2009, together with their respective
rates of change:
(RMB in millions, except percentage data)
Wireline voice
Mobile voice
Internet
Value-added services
Integrated information application services
Managed data and leased line
Others
Upfront connection fees
Total operating revenues
Wireline Voice
For the year ended 31 December
2009
78,432
20,027
51,567
21,533
12,659
11,499
12,502
1,151
2008 Rates of Change
96,258
3,955
40,727
16,253
10,803
10,231
6,280
2,022
(18.5%)
406.4%
26.6%
32.5%
17.2%
12.4%
99.1%
(43.1%)
209,370
186,529
12.2%
In 2009, revenue from wireline voice services was RMB78,432 million, a decrease of 18.5% from RMB96,258 million in 2008,
accounting for 37.5% of our operating revenues. The major reason for the continuous decline in the wireline voice revenue was due
to the lower demand for telecommunications services under the global fi nancial crisis and the cannibalisation of wireline voice usage
with newer forms of communication, such as mobile communications and VOIP.
Mobile Voice
In 2009, revenue from mobile voice services was RMB20,027 million, accounting for 9.6% of our operating revenues. With the
launch of full services operation, the mobile services have gained momentum of development and have become one of the main
revenue drivers.
Internet
In 2009, revenue from Internet access services was RMB51,567 million, an increase of 26.6% from RMB40,727 million in 2008,
accounting for 24.6% of our operating revenues. Through integrated operations, the revenue from our Internet access services has
grown rapidly with the continual increase in broadband subscribers. At the end of 2009, the number of wireline broadband
subscribers increased by 20.8% to 53.46 million, with a net increase of 9.19 million subscribers from the end of 2008. The ARPU of
the wireline broadband subscribers in 2009 was RMB80.3. Revenue from mobile Internet access services was RMB3,760 million.
Management’s Discussion and Analysis of
Financial Conditions and Results of Operations (continued)
China Telecom Corporation Limited Annual Report 2009
39
Value-Added Services
In 2009, revenue from value-added services was RMB21,533 million, an increase of 32.5% from RMB16,253 million in 2008,
accounting for 10.3% of our operating revenues. The increase in revenue was mainly attributable to the rapid development of mobile
value-added services and the IDC business of wireline value-added services. Revenue from mobile value-added services was
RMB5,602 million.
Integrated Information Application Services
In 2009, revenue from integrated information application services was RMB12,659 million, an increase of 17.2% from RMB10,803
million in 2008, accounting for 6.0% of our operating revenues. The increase in revenue was mainly due to the rapid development of
the IT service and applications services, “Best Tone” type of information services and “V-Net” services. Revenue from mobile
integrated information application services was RMB607 million.
Managed Data and Leased Line
In 2009, revenue from managed data and leased line services was RMB11,499 million, an increase of 12.4% from RMB10,231
million in 2008, accounting for 5.5% of our operating revenues. The increase in revenue was mainly attributable to the increasing
demand from non-operator customers for network resources, leading to increased revenue growth from the leased circuits services
and IP-VPN services.
Others
In 2009, revenue from other services was RMB12,502 million, an increase of 99.1% from RMB6,280 million in 2008, accounting for
6.0% of our operating revenues. The growth of revenue was mainly attributable to the sales revenue of mobile terminal equipments.
Revenue from other mobile services was RMB5,617 million.
Upfront Connection Fees
Upfront connection fees represent the amortised amount of upfront fees received for the initial activation of wireline services of the
Group, amortised over an expected customer relationship period of 10 years. Effective from July 2001, the Group ceased to charge
new subscribers upfront connection fees. The amortised amount was RMB1,151 million in 2009, representing a decrease of 43.1%
from RMB2,022 million in 2008.
The amortisation of upfront connection fees will end in July 2011. The amortised upfront connection fees for the year 2010 and
2011 will be RMB497 million and RMB98 million respectively.
40 China Telecom Corporation Limited Annual Report 2009
Management’s Discussion and Analysis of
Financial Conditions and Results of Operations (continued)
Operating Expenses
In 2009, the operating expenses of the Group were RMB186,712 million, an increase of 2.9% from 2008. The ratio of operating
expenses to operating revenues fell from 97.2% in 2008 to 89.2% in 2009. The Group has stringent cost control measures to
continuously optimise the costs structure and increased investment in mobile services and transformation services in order to
support the full services operation so as to ensure the sustainable and healthy development.
The following table sets out a breakdown of the operating expenses of the Group in 2008 and 2009 and their respective rates of
change:
(RMB in millions, except percentage data)
Depreciation and amortisation
Network operations and support expenses
Selling, general and administrative expenses
Personnel expenses
Other operating expenses
For the year ended 31 December
2009
52,243
42,903
40,507
32,857
17,449
2008 Rates of Change
53,880
36,096
27,501
28,946
10,794
(3.0%)
18.9%
47.3%
13.5%
61.7%
Impairment loss on property, plant and equipment
753
24,167
(96.9%)
Total operating expenses
186,712
181,384
2.9%
Depreciation and Amortisation
In 2009, depreciation and amortisation was RMB52,243 million, a decrease of 3.0% from RMB53,880 million in 2008, accounting
for 25.0% of our operating revenues. The decline was due to the impairment loss of PHS assets in 2008 and the reduction of capital
expenditure by the Group.
Network Operations and Support Expenses
In 2009, network operations and support expenses were RMB42,903 million, an increase of 18.9% from RMB36,096 million in
2008, accounting for 20.5% of our operating revenues. The increase was mainly attributable to the increase in CDMA network
capacity lease fee and an increased investment in transformation services by the Group. The CDMA network capacity lease fee in
2009 amounted to RMB8,383 million.
Selling, General and Administrative Expenses
In 2009, selling, general and administrative expenses amounted to RMB40,507 million, an increase of 47.3% from RMB27,501
million in 2008, accounting for 19.3% of our operating revenues. The growth was mainly attributable to an increased investment in
resources to reinforce the rapid scale development of the mobile services.
Management’s Discussion and Analysis of
Financial Conditions and Results of Operations (continued)
China Telecom Corporation Limited Annual Report 2009
41
Personnel Expenses
In 2009, personnel expenses were RMB32,857 million, an increase of 13.5% from RMB28,946 million in 2008, accounting for
15.7% of our operating revenues. The increase in personnel expenses was mainly due to the inclusion of annual personnel expenses
of employees from China Unicom Group for the whole year of 2009 (the fi gures of 2008 represented the expenses for the fourth
quarter only) as well as the recruitment of talents with high-calibre in mobile communications, IP, IT and information operations areas
to meet the requirement to develop full services operation.
Other Operating Expenses
In 2009, other operating expenses were RMB17,449 million, an increase of 61.7% from RMB10,794 million in 2008, accounting for
8.3% of our operating revenues. The increase was largely attributed to the growth in the mobile interconnection expenses and cost
of mobile terminal equipments sold. The mobile interconnection expenses amounted to RMB3,467 million in 2009, while the cost of
mobile terminal equipments sold were RMB4,980 million.
Impairment loss on Property, Plant and Equipment
In 2009, the impairment loss on property, plant and equipment was RMB753 million, which was mainly due to the decrease in
customer demand for Digital Data Network (DDN) service and its technology being gradually substituted by other technologies,
resulting in the signifi cant decrease in the revenue generated from these assets. As a result, the Group recognised an impairment
loss on these assets. In 2008, the Group had recognised an impairment loss of RMB23,954 million on PHS assets.
Net Finance Costs
In 2009, the Group’s net fi nance costs were RMB4,375 million, a decline of 13.8% from RMB5,076 million in 2008. Benefi ted from
the reduction of interest rates by the People’s Bank of China at the end of 2008 and our low-cost fi nancing in 2008, net interest
expenses fell by RMB612 million. In addition, the Group optimised its fi nancing by reinforcing its centralised capital management,
leading to a reduction in fi nance costs. Net exchange gains were RMB67 million in 2009, while net exchange losses were RMB170
million in 2008. The change in net exchange gain/loss was mainly attributable to the appreciation of the RMB against the Japanese
Yen.
Profi tability Level
Income Tax
The Group’s statutory income tax rate is 25%. In 2009, the Group’s income tax expenses were RMB4,549 million, with the effective
income tax rate of 23.7%. The difference between the effective income tax rate and the statutory income tax rate of the Group was
mainly attributable to the exclusion of upfront connection fees from taxable revenue, and the preferential income tax rate of 20% or
15% enjoyed by our branches located in special economic zones and the western regions of China.
Profi t Attributable To Equity Holders of the Company
In 2009, profit attributable to equity holders of the Company was RMB14,422 million, an increase of RMB13,538 million from
RMB884 million in 2008. Excluding the amortisation of upfront connection fees, the profit attributable to equity holders of the
Company was RMB13,271 million, a decrease of 33.9% from RMB20,066 million (excluding the impact of one-off items including
PHS assets impairment loss with after-tax effect of RMB18,366 million and natural disasters with after-tax effect of RMB2,838
million) in 2008.
42 China Telecom Corporation Limited Annual Report 2009
Management’s Discussion and Analysis of
Financial Conditions and Results of Operations (continued)
Capital Expenditure and Cash Flows
Capital Expenditure
In 2009, the Group maintained its prudent policy on capital expenditure. Capital expenditure was RMB38,042 million, a decrease of
21.4% from RMB48,410 million in 2008.
Cash Flows
In 2009, net cash infl ow for the Group was RMB6,940 million, while the net cash infl ow was RMB6,522 million in 2008.
The following table sets out the cash fl ow position of the Group in 2008 and 2009:
(RMB millions)
Net cash fl ow from operating activities
Net cash used in investing activities
Net cash (used in)/from fi nancing activities
For the year ended 31 December
2009
74,988
(43,255)
(24,793)
2008
76,756
(75,819)
5,585
Net increase in cash and cash equivalents
6,940
6,522
In 2009, the net cash infl ow from operating activities was RMB74,988 million, a decrease of RMB1,768 million from RMB76,756
million in 2008.
In 2009, the net cash outfl ow for investing activities was RMB43,255 million, a decrease of RMB32,564 million from RMB75,819
million in 2008, mainly resulting from a reduction in the Group’s capital expenditure in 2009 and the payment of most of the
consideration for the acquisition of the CDMA business from China Unicom Group in 2008.
In 2009, the net cash outfl ow for fi nancing activities was RMB24,793 million while the net cash infl ow was RMB5,585 million in
2008. The increase in net cash outflow was mainly due to the Group’s repayment of the remaining balance of the deferred
consideration in respect of the acquisition in prior years totalling RMB15,150 million to China Telecommunications Corporation and
short-term commercial papers totalling RMB10,000 million.
Working Capital
At the end of 2009, the Group’s working capital (total current assets minus total current liabilities) defi cit was RMB82,545 million, a
reduction of defi cit of RMB38,746 million from RMB121,291 million in 2008. The decrease in defi cit was mainly attributable to the
issuance of medium-term notes, amounting to RMB30,000 million, net off by the repayment of short-term debt including short-term
commercial papers. At the end of 2009, the Group’s cash and cash equivalents amounted to RMB34,804 million, amongst which
cash and cash equivalents in RMB accounted for 94.7% (2008: 94.2%).
Assets and Liabilities
In 2009, the Group continued to maintain a solid capital structure. By the end of 2009, the total assets of the Group fell to
RMB426,520 million from RMB440,337 million at the end of 2008, while total indebtedness decreased to RMB105,923 million from
RMB123,279 million in 2008. The ratio of the Group’s total indebtedness to total assets fell from 28.0% at the end of 2008 to 24.8%
at the end of 2009.
Management’s Discussion and Analysis of
Financial Conditions and Results of Operations (continued)
China Telecom Corporation Limited Annual Report 2009
43
Indebtedness
The indebtedness analysis of the Group as of the end of 2008 and 2009 is as follows:
(RMB millions)
Short-term debt
Long-term debt maturing within one year
Finance lease obligations maturing within one year
Long-term debt (excluding current portion)
Finance lease obligations (excluding current portion)
For the year ended 31 December
2009
51,650
1,487
18
52,768
—
2008
83,448
565
22
39,226
18
Total debt
105,923
123,279
By the end of 2009, the total indebtedness of the Group was RMB105,923 million, a decrease of RMB17,356 million from 2008.
The main reason for the decrease was our repayment of the remaining balance of the deferred consideration in respect of the
acquisition in prior years to China Telecommunications Corporation. Of the total indebtedness of the Group, the Company’s loans in
Renminbi, US Dollars, Japanese Yen and Euro accounted for 96.9% (2008: 97.2%), 0.8% (2008: 0.7%), 1.7% (2008: 1.5%), and
0.6% (2008: 0.6%) respectively. 95.7% (2008: 87.2%) of this indebtedness was loans with fi xed interest rates, while the remainder
are loans with fl oating interest rates. As of 31 December 2009, the Group did not pledge any assets as collateral for debt (2008: Nil).
Most of the Group’s revenue receipts from and payments made for its business were denominated in Renminbi, therefore the Group
did not have signifi cant risk exposure to foreign exchange fl uctuations.
As at 31 December 2009, the Group’s unutilised committed credit facilities was RMB102,555 million (2008: RMB128,231 million).
Contractual Obligations
(RMB millions)
Short-term debt
Long-term debt
Finance lease obligations
Operating lease commitments
Capital commitments
Total
52,294
62,764
18
11,110
4,542
Payable in
1 Jan 2010-
31 Dec 2010
1 Jan 2011-
31 Dec 2011
1 Jan 2012-
31 Dec 2012
1 Jan 2013-
31 Dec 2013
Thereafter
52,294
3,742
18
8,531
4,542
—
12,260
—
643
—
—
13,126
—
505
—
—
11,353
—
417
—
—
22,283
—
1,014
—
Total contractual obligations
130,728
69,127
12,903
13,631
11,770
23,297
Note: Amounts of short-term debt, long-term debt and fi nance lease obligations include recognised and unrecognised interest payable, and are not
discounted.
Change Has Come
Report of the Directors
China Telecom Corporation Limited Annual Report 2009
49
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 financial statements of the Company and its subsidiaries (collectively, the “Group”) prepared in accordance with
International Financial Reporting Standards for the year ended 31 December 2009.
Principal Business
The principal business of the Company and the Group is the provision of basic communications services including comprehensive
wireline telecommunications services, mobile telecommunications services, value-added services such as Internet access services,
integrated information services and other related services within the service area of the Group.
Results
Results of the Group for the year ended 31 December 2009 and the financial position of the Company and the Group as at that date
are set out in the audited financial statements on pages 102 to 166 in this annual report.
Dividend
The Board proposes a final dividend in the amount equivalent to HK$0.085 per share, totalling approximately RMB6,076 million for
the year ended 31 December 2009. The dividend proposal will be submitted for consideration at the Annual General Meeting to be
held on 25 May 2010. Dividends will be denominated and declared in Renminbi. Dividends on domestic shares will be paid in
Renminbi, whereas dividends on H shares will be paid in Hong Kong dollars. The relevant exchange rate will be the lowest of the
average offer rates of Renminbi to Hong Kong dollars as announced by the key commercial banks in China for the week prior to the
date of declaration of dividends at the Annual General Meeting. The final dividends are expected to be paid around 30 June 2010
after obtaining the shareholders’ approval at the Annual General Meeting.
Pursuant to the Enterprise Income Tax Law of the People’s Republic of China and the Detailed Rules for the Implementation of the
Enterprise Income Tax Law of the People’s Republic of China implemented in 2008, beginning from 1 January 2008, any Chinese
domestic enterprise which pays dividend to a non-resident enterprise shareholder in respect of accounting periods beginning from 1
January 2008 shall withhold and pay enterprise income tax for such shareholder. Please refer to the relevant announcement to be
issued by the Company separately for more details.
50 China Telecom Corporation Limited Annual Report 2009
Report of the Directors (continued)
Directors and Senior Management of the Company
The following table sets out certain information of the Directors and senior management of the Company as at the date of this
Report:
Name
Age
Position in the Company
Date of Appointment
Wang Xiaochu
Shang Bing
Wu Andi
Zhang Jiping
Zhang Chenshuang
Li Ping
Yang Xiaowei
Yang Jie
Sun Kangmin
Li Jinming
Wu Jichuan
Qin Xiao
Tse Hau Yin, Aloysius
Cha May Lung, Laura
Xu Erming
Yung Shun Loy, Jacky
Wang Qi
52
54
55
54
58
56
46
48
53
58
72
62
62
60
60
47
55
Chairman and Chief Executive Officer
Executive Director, President and Chief Operating Officer
Executive Director, Executive Vice President and
Chief Financial Officer
Executive Director and Executive Vice President
Executive Director and Executive Vice President
Executive Vice President
Executive Director and Executive Vice President
Executive Director and Executive Vice President
Executive Director and Executive Vice President
Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
Assistant Chief Financial Officer, Qualified Accountant and
Company Secretary
Financial Controller
20 December 2004
9 September 2008
10 September 2002
10 September 2002
31 August 2007
10 September 2002
9 September 2008
20 October 2004
20 October 2004
20 December 2004
9 September 2008
9 September 2008
9 September 2005
9 September 2008
9 September 2005
1 February 2005
10 September 2002
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
Miao Jianhua
Zhu Lihao
Ma Yuzhu
Xu Cailiao
Han Fang
Age
Position in the Company
Date of Appointment
58
69
56
46
37
Chairman of the Supervisory Committee
Independent Supervisor
Supervisor (Employee Representative)
Supervisor
Supervisor
29 December 2009
10 September 2002
9 September 2005
9 September 2005
9 September 2008
Mr. Xiao Jinxue tendered the resignation from the position of the supervisor of the Company due to change in job responsibility. An
Extraordinary General Meeting was convened on 29 December 2009 by the Company to elect Mr. Miao Jianhua as the Supervisor
of the third session of the Supervisory Committee. On the same day after the Extraordinary General Meeting, the Supervisory
Committee held a meeting to elect Mr. Miao Jianhua as the Chairman of the Supervisory Committee.
China Telecom Corporation Limited Annual Report 2009
51
Report of the Directors (continued)
Share Capital
The share capital of the Company as at 31 December 2009 was RMB80,932,368,321, divided into 80,932,368,321 shares of
RMB1.00 each. As at 31 December 2009, the share capital of the Company comprised:
Share category
Domestic shares (total):
Domestic shares held by:
China Telecommunications Corporation
Guangdong Rising Assets Management Co., Ltd.
Zhejiang Financial Development Company
Fujian State-owned Assets Investment Holdings Co., Ltd.
Jiangsu Guoxin Investment Group Co., Ltd.
Total number of H shares (including ADSs)
Number of
shares as at
31 December 2009
Percentage of the
total number of
shares in issue as at
31 December 2009
(%)
67,054,958,321
82.85
57,377,053,317
5,614,082,653
2,137,473,626
969,317,182
957,031,543
13,877,410,000
70.89
6.94
2.64
1.20
1.18
17.15
Total
80,932,368,321
100.00
52 China Telecom Corporation Limited Annual Report 2009
Report of the Directors (continued)
Material Interests and Short Positions in Shares and Underlying Shares of
the Company
As at 31 December 2009, 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 Company’s 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 shareholder
Number of
shares held Type of Shares
Percentage of
the respective
type of shares
Percentage of
the total umber
of shares in issue Capacity
China Telecommunications
Corporation
57,377,053,317
(Long position)
Guangdong Rising Assets
Management Co., Ltd.
5,614,082,653
(Long position)
Domestic shares
85.57%
70.89% Beneficial owner
Domestic shares
8.37%
6.94% Beneficial owner
Capital Research and
Management Company
1,254,424,000
(Long position)
H shares
9.04%
1.55% Investment Manager
Blackrock, Inc.
RFS Holdings B.V.
JPMorgan Chase & Co.
1,198,985,251
(Long position)
H shares
5,502,000
(Short position)
H shares
907,191,530
(Long position)
H shares
1,180,327,134
(Short position)
H shares
845,413,761
(Long position)
H shares
8.64%
1.48% Interest of controlled corporation
0.04%
0.007% Interest of controlled corporation
6.54%
1.12% Interest of controlled corporation
8.51%
1.46% Interest of controlled corporation
6.09%
1.04% 144,948,301 shares as beneficial
owner, 139,302,000 shares as
investment manager and
561,163,460 shares as
security interest holder/
approved lending agent
65,214,186
(Short position)
H shares
0.47%
0.08% Beneficial owner
561,163,460
(Shares available
for lending)
H shares
4.04%
0.69% Security interest holder/approved
lending agent
UBS AG
707,680,334
(Long position)
H shares
5.10%
0.87% 474,845,617 shares as benefi cial
136,979,307
(Short position)
H shares
0.99%
owner, 91,632 shares as
security interest holder and
232,743,085 shares as interest
of controlled corporation
0.17% 69,232,390 shares as benefi cial
owner, 33,778,632 shares as
security interest holder and
33,968,285 shares as interest
of controlled corporation
China Telecom Corporation Limited Annual Report 2009
53
Report of the Directors (continued)
Save as stated above, as at 31 December 2009, 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 2009, none of the directors and supervisors of the Company had any interests or short positions in the shares,
underlying shares of equity derivatives 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 Stock Exchange of Hong Kong Limited pursuant to the Model Code for Securities Transactions by Directors of Listed
Issuers.
As at 31 December 2009, 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 Contracts
For the year ended 31 December 2009, none of the directors and supervisors of the Company had any material interest, whether
directly or indirectly, in any of the contracts of significance entered into by the Company, any of its holding companies or subsidiaries
or subsidiaries of the Company’s holding company, apart from their service contracts. None of the directors and supervisors of the
Company has entered into any service contract which is not determinable by the Company within one year without payment
compensation (other than statutory compensation).
Emoluments of the Directors and Supervisors
Please refer to note 28 of the audited financial statements for details of the emoluments of all Directors and Supervisors of the
Company in 2009.
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 Stock Exchange
of Hong Kong Limited.
Summary of Financial Information
Please refer to pages 167 to 168 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 2009.
54 China Telecom Corporation Limited Annual Report 2009
Report of the Directors (continued)
Bank Loans and Other Borrowings
Please refer to note 16 of the audited financial statements for details of bank loans and other borrowings of the Group.
Capitalised Interest
Please refer to note 26 of the audited financial statements for details of the Group’s capitalised interest for the year ended 31
December 2009.
Fixed Assets
Please refer to note 4 of the audited financial statements for movements in the fixed assets of the Group for the year ended 31
December 2009.
Reserves
Pursuant to Article 147 of the Company’s articles of association (the “Articles of Association”), where the financial statements
prepared in accordance with PRC Accounting Standards for Business Enterprises, materially differ from those prepared in
accordance with either International Financial Reporting Standards or those prepared in accordance with the place outside the PRC
where the Company’s 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 2009,
calculated on the above basis and before deducting the proposed final dividends for 2009, amounted to RMB37,922 million.
Please refer to note 21 of the audited financial statements for details of the movements in the reserves of the Company and the
Group for the year ended 31 December 2009.
Donations
For the year ended 31 December 2009, the Group made charitable and other donations with a total amount of RMB8 million.
Subsidiaries and Associated Companies
Please refer to note 8 and note 9 of the audited financial statements for details of the Company’s subsidiaries and the Group’s
interests in associated companies as at 31 December 2009.
Changes in Equity
Please refer to the consolidated statement of changes in equity as contained in the audited financial statements of this year (page
107 of this annual report).
Retirement Benefi ts
Please refer to note 37 of the audited financial statements for details of the retirement benefits provided by the Group.
China Telecom Corporation Limited Annual Report 2009
55
Report of the Directors (continued)
Stock Appreciation Rights
Please refer to note 38 of the audited financial statements for details of the stock appreciation rights 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 2009, sales to the five largest customers of the Group accounted for an amount no more than
30% of the operating revenues of the Group.
For the year ended 31 December 2009, purchases from the five largest suppliers of the Group accounted for an amount no more
than 30% of the total annual purchases of the Group.
To the knowledge of the Board, no director of the Company, their associates, or any person holding more than 5% of the issued
share capital in the Company has any interests in such suppliers.
Continuing Connected Transactions
The following table sets out the amounts of continuing connected transactions of the Group for the year ended 31 December 2009:
Transactions
Net transaction amount of centralised services
Net expenses for interconnection settlement
Mutual leasing of properties
Provision of IT services by China Telecommunications Corporation and
its subsidiaries (except for the Group) (the “China Telecom Group”)2
Provision of Supplies Procurement services by China Telecom Group
Provision of Supplies Procurement services to China Telecom Group
Provision of engineering services by China Telecom Group
Provision of community services by China Telecom Group
Provision of ancillary telecommunications services by China Telecom Group
CDMA network capacity lease fee
Annual monetary
cap for continuing
connected
transactions
(RMB millions)
Transaction amount
(RMB millions)
534
598
410
520
1,956
940
5,970
2,324
6,044
7,2203
800
N/A1
510
850
3,300
1,650
8,327
2,900
6,800
20,000
1
According to the waiver letter issued to the Company by The Stock Exchange of Hong Kong Limited on 31 July 2008, the Company is not
required to set an annual monetary cap for the total amount under interconnection settlement agreements.
2 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.
3
The CDMA network capacity lease fee has already deducted the capacity maintenance related costs of CDMA network payable to the Company
by China Telecommunications Corporation amounted to RMB1,163 million.
56 China Telecom Corporation Limited Annual Report 2009
Report of the Directors (continued)
Centralised Services Agreement
Pursuant to the Centralised Services Agreement signed between the Company and China Telecommunications Corporation on 10
September 2002 and the supplemental agreements subsequently entered into between the two parties (collectively, the “Centralised
Services Agreement”), Centralised services includes the provision of centralised services such as the business management and
operational services in relation to key corporate customers, its network management centre, business support centre, and also the
provision of certain premises by the China Telecommunications Corporation to the Company. In addition, centralised services also
include the common use of international telecommunications facilities between both parties. The aggregate costs incurred by the
Company and China Telecommunications Corporation for the provision of management and operation services in relation to key
corporate customers, its network management centre and business support centre will be apportioned between the Company and
China Telecommunications Corporation on a pro rata basis according to the revenues generated by each party. Where the Company
uses the premises provided by China Telecommunications Corporation, the Company shall pay premises usage fees to China
Telecommunications Corporation on a pro rata basis according to the actual apportioned used areas on the venues. The premises
usage fees shall be determined through negotiation between the two parties based on comparable market rates. In the situation
where both parties use third-party international telecommunications facilities and accept third-party services such as the costs of
restoration maintenance, the annual utilisation fee shall be determined on a pro rata basis according to the actual utilisation each
year. In the situation where both parties use the international telecommunications facilities of China Telecommunications Corporation,
the associated costs shall be determined 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 aggregate volume of the
inbound and outbound voice calls to and from international regions, Hong Kong, Macau and Taiwan originating from both parties.
The utilisation fee shall be determined through negotiation between the two parties based on market rates.
The Centralised Services Agreement was renewed on 16 December 2009 with expiration on 31 December 2010, and may be
renewed for further periods of one year upon expiration without limit in the number of renewals, unless the Company provides a
notice of non-renewal in writing to the China Telecommunications Corporation three months prior to the end of the relevant term.
Interconnection Settlement Agreement
Pursuant to the Interconnection Settlement Agreement signed between the Company and China Telecommunications Corporation
on 10 September 2002 and the supplemental agreements subsequently entered into between the two parties (collectively, the
“Interconnection Settlement Agreement”), the telephone operator terminating a telephone call made to its local access network
under the agreement shall be entitled to receive from the operator from which the telephone call originated, a fee of RMB0.06 per
minute. When originating a telephone call, the Company shall pay RMB0.06 per minute to China Telecommunications Corporation.
The settlement regions include Beijing city, Tianjin city, Hebei province, Heilongjiang province, Jilin province, Liaoning province,
Shanxi province, Henan province, Shandong province, Inner Mongolia Autonomous Region and Tibet Autonomous Region. The
rates for interconnection settlement and the charges payable for the interconnection are prescribed by the Ministry of Industry and
Information Technology.
The Interconnection Settlement Agreement was renewed on 31 December 2008 for another two years with expiration on 31
December 2010 and will be renewed for a period of three years upon expiration without limit in the number of renewals, unless the
Company provides notice of non-renewal in writing to the China Telecommunications Corporation three months prior to the end of
the relevant term.
China Telecom Corporation Limited Annual Report 2009
57
Report of the Directors (continued)
Property Leasing Framework Agreement
Pursuant to the Property Leasing Framework Agreement signed between the Company and China Telecommunications Corporation
on 30 August 2006, the Group and China Telecommunications Corporation and/or its associates can enter into the lease of property
mutually. The rental charges under the Property Leasing Framework Agreement were determined according to market rates, with
reference to the fees standards of the local price authority. The rental charges are subject to review every three years.
The Property Leasing Framework Agreement was renewed on 16 December 2009 with expiration on 31 December 2010 and may
be renewed for further periods of one year upon expiration without limit in the number of renewals, unless the Company provides
notice of non-renewal in writing to the China Telecommunications Corporation three months prior to the end of the relevant term.
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 supplemental agreements subsequently entered into between the two parties (collectively, the “IT Services
Framework Agreement”), the provision of information technology services by China Telecommunications Corporation and/or its
associates provided to the Company and vice versa, including offi ce automation and software testing.
Each of the Company and China Telecommunications Corporation and/or its associates is entitled to participate in bidding for
the right to provide services to the other party under the agreement. The charges payable for such services shall be determined
by reference to market rates obtained through the tender process. If the terms of an offer from the Company or China
Telecommunications Corporation and/or its associates are at least as favourable as those offered by an independent third-party
provider, the Company or China Telecommunications Corporation and/or its associates may give priority to using the services
provided by the other party.
The IT Services Framework Agreement was renewed on 16 December 2009 with expiration on 31 December 2010 and may be
renewed for further periods of one year upon expiration without limit in the number of renewals, unless the Company provides notice
of non-renewal in writing to the China Telecommunications Corporation three months prior to the expiry of the relevant term.
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 supplemental agreements subsequently entered into between the two parties (collectively,
the “Community Services Framework Agreement”), China Telecommunications Corporation and/or its associates provide community
services such as culture, education, property management, vehicle service, health and medical care, hotel and conference service,
community and sanitary service to the Company. The community services under the Community Services Framework Agreement
are provided at:
(1)
the government-prescribed prices;
(2) where there are no government-prescribed prices but where there are government-guided prices, the government-guided
prices apply;
(3) where there are neither government-prescribed prices nor government-guided prices, the market prices apply. The market
price is defi ned as the price at which the same type of services are provided by independent third parties in the ordinary
course of business; or
(4) where none of the above is applicable, the prices are to be agreed between the relevant parties for the provision of the above
services, which shall be the reasonable costs incurred in providing the same services plus reasonable profi t margin (for this
purpose, “reasonable costs” means such costs as confi rmed by both parties after negotiations).
58 China Telecom Corporation Limited Annual Report 2009
Report of the Directors (continued)
The Community Services Framework Agreement was renewed on 29 October 2009 with expiration on 31 December 2010 and may
be renewed for further periods of three years upon expiration without limit in the number of renewals, unless either party provides
notice of non-renewal in writing to the other party three months prior to the expiry of the relevant term.
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 supplemental agreements subsequently entered into between the two
parties (collectively, the “Supplies Procurement Services Framework Agreement”), the provision of supplies procurement services by
the China Telecommunications Corporation and/or its associates to the Group and vice versa, including the comprehensive
procurement services, the sale of proprietary telecommunication equipment, resale of third party equipment, management of
tenders, verifi cation of technical specification, storage, transport and installation services.
The charges payable for the above services are calculated at: where payments made in relation to the agency services for the
provision of supplies procurement are in the form of commissions:
(1)
(2)
procurement services in respect of imported telecommunications supplies are provided at 1% of the contract value at the
maximum;
procurement services in respect of domestic telecommunications supplies and other domestic non-telecommunications
materials are provided at 3% of the contract value at the maximum.
The pricing basis for the services for the provision of supplies procurement other than agency services under the Supplies
Procurement Services Framework Agreement is the same as those set out in the Community Services Framework Agreement.
The Supplies Procurement Services Framework Agreement was renewed on 16 December 2009 with expiration on 31 December
2010 and may be renewed for further periods of one year upon expiration without limit in the number of renewals, unless the
Company provides notice of non-renewal in writing to the China Telecommunications Corporation three months prior to the expiry of
the relevant term.
Engineering Framework Agreement
Pursuant to the Engineering Framework Agreement signed between the Company and China Telecommunications Corporation on
30 August 2006 and the supplemental agreements subsequently entered into between the two parties (collectively, the “Engineering
Framework Agreement”), China Telecommunications Corporation and/or its associates through bids provide to the Company
supervision and management of services relating to construction, design, equipment installation and testing and/or services as the
main contractors for the construction and supervision of engineering projects. The charges payable for such engineering services
shall be determined by reference to the market rates. The charges payable for the design or supervision of engineering projects with
a value over RMB500,000, or any construction of engineering projects with a value over RMB2 million shall be determined by
referring to the tender price.
China Telecom Corporation Limited Annual Report 2009
59
Report of the Directors (continued)
The Engineering Framework Agreement was renewed on 29 October 2009 with expiration on 31 December 2010 and may be
renewed for further periods of three years upon expiration without limit in the number of renewals, unless the Company provides
notice of non-renewal in writing to the China Telecommunications Corporation three months prior to the expiry of the relevant term.
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 supplemental agreements subsequently entered into between the two
parties (collectively, the “Ancillary Telecommunications Services Framework Agreement”), China Telecommunications Corporation
and/or its associates provide repair and maintenance services, including repair of telecommunications equipment, maintenance of
fire equipment and telephone booths, as well as other customer services to the Company. The pricing terms for ancillary
telecommunications services in the Ancillary Telecommunications Services Framework Agreement are the same as those set out in
the Community Services Framework Agreement.
The Ancillary Telecommunications Services Framework Agreement was renewed on 29 October 2009 with expiration on 31
December 2010 and may be renewed for further periods of three years upon expiration without limit in the number of renewals,
unless either party provides notice of non-renewal in writing to the other party three months prior to the expiry of the relevant term.
CDMA Network Capacity Lease Agreement
Pursuant to the CDMA Network Capacity Lease Agreement signed between the Company and China Telecommunications
Corporation on 27 July 2008, China Telecommunications Corporation agreed to lease its CDMA network capacity under the CDMA
network to the Company and the Company shall have the exclusive right to use and operate the CDMA network to provide CDMA
services in its service areas. The leasing fee is based on 28% of the CDMA service revenue (which is calculated by the total revenue
from the CDMA services operations minus any upfront non-refundable revenue arising out of the CDMA operations and any revenue
from sale of telecommunication products in connection with the CDMA operations) per year. For the year ended 31 December 2008
and for the year ending 2009, there is no minimal annual leasing fee. For the year ending 31 December 2010, the minimum annual
lease fee shall be 90% of the total amount of the lease fee paid by the Company to China Telecommunications Corporation in the
year ending 31 December 2009. The cost of network construction shall be borne by China Telecommunications Corporation, while
the maintenance-related costs shall be shared as agreed between the two parties.
Pursuant to the CDMA Network Capacity Lease Agreement, China Telecommunications Corporation has granted to the Company
an option to purchase the CDMA network. The option may be exercised, at the discretion of the Company, at any time during the
term of the lease or within one year after the expiry of the lease. No premium has been paid or will be payable by the Company for
the grant of the option.
The CDMA Network Capacity Lease Agreement is effective till 31 December 2010 and may be renewed for further periods as
agreed by both parties on similar terms.
60 China Telecom Corporation Limited Annual Report 2009
Report of the Directors (continued)
Strategic Agreement and its Supplemental Agreements
Pursuant to the Strategic Agreement signed between the Company and China Communications Services Corporation Limited
(“China Communications Services”) on 30 August 2006 and a supplemental agreement (“Strategic Agreement and its Supplemental
Agreement”) signed on 15 June 2007, the Company agreed that, in the period between 1 January 2007 and 31 December 2009, if
service terms related to the design, implementation and supervision of the communications engineering provided by China
Communications Services are basically the same as those of other service providers, the provincial branches of the Company in the
service area of China Communication Services shall annually receive such services from the related wholly-owned subsidiaries of
China Communications Services with total value no less than 10.6% of total annual capital expenditure of the related provincial
branches of the Company in that year. China Communications Services will offer at least 5% price discount to the Company based
on the applicable standard prices for the services in connection with the design, construction, project supervision and management
of communication engjneering projects. Meanwhile, pursuant to the Strategic Agreement and its Supplemental Agreement, the
Company pledged that, in the period between 1 January 2007 and 31 December 2009, if the terms related to certain maintenance
management services provided by China Communications Services are basically the same as those of other service providers, the
provincial branches of the Company in the service area of China Communication Services shall annually receive such services from
the wholly-owned subsidiaries of China Communications Services with total value no less than RMB1,780 million.
The business areas of the strategic alliance between the two parties governed by the terms and conditions in the Strategic
Agreement and its Supplemental Agreement include: design, implementation and supervision of the communications engineering,
maintenance management service, contents application service, sales channel service, usage of telecommunications and other new
businesses arising from time to time which are appropriate for the collaboration between the two parties. China Communications
Services pledges its support to the strategic transformation of the Company from a traditional basic telecommunications operator to
an integrated information service provider, its active support to the Company’s business development, and its active use of the
Company’s products and services in its own business. Such services shall comply with the related standards of China or the
standards agreed by both parties, and shall be on terms no less favourable than those available to any third parties to which the
same or similar services are provided by either party. Without breaching the requirements governed by PRC laws, in respect of the
same services, where the terms and conditions of services provided by either party to the Strategic Agreement and its Supplemental
Agreement are the same as those provided by an independent third party, the party under the Strategic Agreement and its
Supplemental Agreement shall have the priority to be appointed as the service provider by the other party.
The Company and China Communications Services has entered into a supplemental agreement (“2009 Supplemental Agreement”)
on 29 October 2009 to renew the Strategic Agreement and its Supplemental Agreement in accordance with their provisions for a
further term of three years expiring on 31 December 2012. Upon expiration, both parties may negotiate the renewal of Strategic
Agreement which is subject to the requirements of Chapter 14A of the Listing Rules (including disclosure and independent
shareholders’ approval requirements).
Neither the Strategic Agreement nor Supplemental Agreement nor the 2009 Supplemental Agreement sets out any annual caps for
the transactions thereunder as China Telecommunications Corporation, the holding company of China Communications Services,
has signed certain framework agreements for continuing connected transactions with the Company and the transactions
contemplated under the Strategic Agreement, Supplemental Agreements and 2009 Supplemental Agreement are covered by these
framework agreements. These frameworks agreements are already subject to annual caps and the proposed annual caps for the
transactions under the Strategic Agreement and the Supplemental Agreement (as amended by the 2009 Supplemental Agreement)
are subsumed under the annual caps of those framework agreements between the Company and China Telecommunications
Corporation (including the Engineering Framework Agreement, the Ancillary Telecommunications Services Framework Agreement
and the Community Services Framework Agreement).
China Telecom Corporation Limited Annual Report 2009
61
Report of the Directors (continued)
The Company confirms that it has complied with the disclosure requirements in accordance with Chapter 14A of the Listing Rules in
respect of the above connected transactions.
The Independent Non-Executive directors of the Company have confirmed that all continuing connected transactions for the year
ended 31 December 2009 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
(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 overall 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 entered into between the Group and its connected persons which are subject to
annual caps have not exceeded their respective annual caps.
The auditors of the Group have reviewed the continuing connected transactions of the Group 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.
62 China Telecom Corporation Limited Annual Report 2009
Report of the Directors (continued)
Compliance with Code on Corporate Governance Practices
Please refer to the “Corporate Governance Report” set out in page 67 of this 2009 annual report of the Company for details of our
compliance with the Code on Corporate Governance Practices.
Material Legal Proceedings
As at 31 December 2009, 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.
Auditors
KPMG and KPMG Huazhen were appointed as the international and domestic auditors of the Company for the year ended 31
December 2009. KPMG has audited the accompanying financial statements, which have been prepared in accordance with
International Financial Reporting Standards. The Company has engaged KPMG and KPMG Huazhen since the date of its listing. A
resolution for the reappointment of KPMG and KPMG Huazhen as the international and domestic auditors of the Company for the
year ending 31 December 2010 will be proposed at the Annual General Meeting of the Company to be held on 25 May 2010.
By Order of the Board
Wang Xiaochu
Chairman and Chief Executive Officer
Beijing, PRC
22 March 2010
China Telecom Corporation Limited Annual Report 2009
63
Report of the Supervisory Committee
During the reporting period, all members of the Supervisory Committee, acted strictly in accordance with the Company Law of the
People’s Republic of China and the Articles of Association of the Company, followed the principles of integrity, rigorousness and
discipline to diligently and effectively carry out its supervisory function so as to safeguard the interests of shareholders and the
Company.
During the reporting period, the Supervisory Committee held five meetings. At the first meeting of the Third Session of the
Supervisory Committee held in January 2009, the Supervisory Committee approved the renewal of Mr. Xiao Jinxue’s term of offi ce to
be the Chairman of the Third Session of the Supervisory Committee of China Telecom Corporation Limited. The Supervisory
Committee also reviewed and approved a proposal for the remuneration of the Independent Supervisor of the Supervisory
Committee. At the second meeting of the Third Session of the Supervisory Committee held in March of the same year, the
Supervisory Committee reviewed and approved five agenda items, including the financial statements for the year 2008, the
independent auditors’ report, the profi t distribution and dividend proposal, the Supervisory Committee’s report for the year 2008 and
the working plan of the Supervisory Committee for the year 2009. At the third meeting of the Third Session of the Supervisory
Committee held in August 2009, the Supervisory Committee has reviewed the interim fi nancial statements and the independent
auditors’ review report of 2009. At the fourth meeting of the Third Session of the Supervisory Committee held in October of the
same year, the Supervisory Committee approved the resignation of Mr. Xiao Jinxue as a Supervisor of the Company due to a change
in job responsibility. On the same day, the Supervisory Committee proposed to elect Mr. Miao Jianhua as a supervisor of the
Company. At the fifth meeting of the Third Session of the Supervisory Committee held in December 2009, the Supervisory
Committee elected Mr. Miao Jianhua as the Chairman of the Third Session of the Supervisory Committee of China Telecom
Corporation Limited. During the reporting period, members of the Supervisory Committee supervised the major decision-making
processes of the Company and the performance of duties carried out by members of the Board of Directors and the senior
management through their attendance at the Extraordinary General Meeting, meetings of the Board of Directors and meetings of the
Audit Committee.
The Supervisory Committee is of the view that 2009 was a remarkable year in the history of the development of the Company.
Following the acquisition pursuant to the industry restructuring and grant of 3G license, the Company realised the long dream to
start the full services operation and confronted with unprecedented opportunities and challenges. The Company as a whole has
attained signifi cant achievements by striving together to accomplish all targeted missions and proactively tackling severe market
competition and the negative impacts brought by the global financial crisis. The Supervisory Committee is satisfied with the
performance of the Company in 2009 and is confi dent with the future of the Company.
The Supervisory Committee believes that during 2009, all members of the Board of Directors and members of senior management
have upheld the principles of diligence and integrity, safeguarded the interests of shareholders, fulfi lled their role fully in accordance
with the Articles of Association of the Company, diligently implemented the resolutions approved at the shareholders’ general
meetings and the board meetings, and persistently managed operations in accordance with the relevant regulations for listed
companies. The Supervisory Committee did not observe any behaviors that have breached the laws, rules and Articles of
Association of the Company, or affected the interests of shareholders.
Upon the review of the unqualifi ed fi nancial statements of the Company for the year ended 2009 and other relevant information
which was prepared in accordance with PRC Accounting Standards for Business Enterprises and regulations and International
Financial Reporting Standards as audited by domestic certified accountants and international auditors of the Company, and
proposed to be submitted to the shareholders’ general meeting by the Board of Directors, the Supervisory Committee is of the
opinion that the fi nancial statements are prepared in accordance with the principle of consistency and that they truly and fairly refl ect
the Company’s fi nancial position, results of operations and cash fl ows.
In 2010, the Supervisory Committee will continue to do its best to further improve the planning of supervision and strengthening its
efforts in monitoring to preserve the interests of all investors.
By Order of the Supervisory Committee
Miao Jianhua
Chairman of the Supervisory Committee
Beijing, PRC
22 March 2010
64 China Telecom Corporation Limited Annual Report 2009
Recognition & Awards
2
China Telecom Corporation Limited Annual Report 2009
65
8
3
5
7
6
9
4
1
1.
2.
3.
The Company has been voted by investors the “No. 1 Best Managed Company in China” across all industries in the
“Asia Best Managed and Governed Companies 2010” ranking by Euromoney.
The Company has been voted by investors the “No. 1 Best Managed Company in Asia” in the “Asia Best Managed and Governed
Companies 2010” ranking by Euromoney.
The Company was awarded the “Best Companies in Corporate Governance in China” by Corporate Governance Asia’s Annual
Recognition Awards 2009.
4.
The corporate website of the Company (www.chinatelecom-h.com) was accredited the Gold Winner in the iNova Awards 2009.
5.
6.
7.
8.
9.
The 2008 annual report won the Best of Hong Kong Grand Award in the 2009 International ARC Awards.
The corporate website of the Company (www.chinatelecom-h.com) won the “Best Investor Relations Website” in Greater China in
IR Global Rankings 2009.
The Company was awarded the “Best Investor Relations” in China by FinanceAsia in the Asia’s Best Companies Poll 2009.
Mr. Wang Xiaochu, Chairman and CEO of the Company, was awarded the “Best CEO” in China by FinanceAsia in the
Asia’s Best Companies Poll 2009.
Madam Wu Andi, CFO of the Company, was awarded the “Best CFO” in China by FinanceAsia in the Asia’s Best Companies
Poll 2009.
Corporate
Governance Report
China Telecom Corporation Limited Annual Report 2009
67
Corporate Governance Report
Overview of Corporate Governance
The Company is dedicated to enhance corporate values and ensure long term sustainable development. To achieve this goal, the
Company inherited an excellent and prudent management style and insisted on practising highly transparent corporate governance
with efficient management and operations. The Company attaches great importance on high quality board management,
comprehensive internal control mechanism and suffi cient transparency and strives to ensure the operations are in the long term
interests of the Company and its shareholders as a whole. In 2009, the Company increasingly improved the daily operations of the
Board of Directors and its sub-committees, continued to perfect and optimise the Company’s organisational structure, and put
comprehensive risk management into operational practice, so as to continuously enhance its standard of corporate governance and
firmly protect the interests of shareholders.
As a company incorporated in the PRC, the Company adopts the PRC Company Law and other related laws and regulations as the
basic guidelines for the Company’s corporate governance. As a company listed both in Hong Kong and the United States, the
current Articles of Association are in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited (“the Listing Rules”) in Hong Kong and the regulatory requirements for non-US companies listed in the United States,
and these rules serve as guidance for the Company to improve its foundation of corporate governance. The Company has regularly
published responsibility statements relating to its internal control in accordance with the US Sarbanes-Oxley Act of 2002 and the
regulatory requirements of the U.S. Securities and Exchange Commission (SEC) and the New York Stock Exchange, to confirm its
compliance with related financial reporting, information disclosure and corporate internal control requirements.
The Charter of Audit Committee of the Company was amended in March 2009 to refl ect certain code provisions under the Code on
Corporate Governance Practices in Appendix 14 of the Listing Rules which became effective from 1 January 2009. The roles of
Chairman and Chief Executive Offi cer of the Company were performed by the same individual for the year of 2009. In the Company’s
opinion, through supervision of the Board and the Independent Non-Executive Directors, and effective control of the Company’s
internal check and balance mechanism, the same individual performing the roles of Chairman and Chief Executive Offi cer can
achieve the goal of improving the Company’s efficiency in decision-making and execution, and effectively capture business
opportunities. Many leading international corporations also have similar arrangements.
Save as stated above, the Company has been in compliance with all the code provisions as set out in Appendix 14 “Code on
Corporate Governance Practices” of the Listing Rules in the year 2009.
In 2009, the Company’s continuous efforts in corporate governance had gained wide recognition from the capital market and
accredited with a number of awards. The Company was honored Number 1 in the “Model State-owned Enterprises in China” for the
year 2009 by the government. The Company was also named the “No. 1 Best Managed Company in Asia” and “No. 1 Best
Managed Company in China” by Euromoney, while at the same time was ranked as having the “Best Corporate Governance in
Asia”, the “Most Convincing and Coherent Strategy in Asia” and the “Most Accessible Senior Management in Asia” in each individual
categories. In addition, the Company was awarded “Best Investor Relations”, “Best Managed Company” and “Best Corporate
Governance” by FinanceAsia, and Mr. Wang Xiaochu, Chairman and Chief Executive Offi cer of the Company, was awarded “Best
CEO” in China, and Madam Wu Andi, Chief Financial Offi cer of the Company, was awarded “Best CFO” in China. Furthermore, the
Company was accredited with “The Most Promising Companies in China “by The Asset; the “Asia’s Best Companies in Corporate
Governance in China” by Corporate Governance Asia; ranked as “Top 10 in China” in the “Asia 200” survey by The Wall Street
Journal Asia; and was awarded “CAPITAL Outstanding China Enterprise Awards — Telecommunications” by CAPITAL for four
consecutive years. The Company’s 2008 Annual Report also won the Gold Award in the overall annual report category at the “2009
International ARC Awards” and won the “Grand Award — Best of Hong Kong” amongst the winning entries in the “Best of Class”
competition.
68 China Telecom Corporation Limited Annual Report 2009
Corporate Governance Report (continued)
Overall Structure of 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. Audit Committee, Remuneration Committee and Nomination
Committee were established under the Board. The Board is authorised by the Articles of Association to make major decisions in
regard to the Company’s operation and to oversee the daily operation of the senior management. The Supervisory Committee is
mainly responsible for the supervision of the performance of duties by the Board and the senior management. Each of the Board of
Directors and the Supervisory Committee is independently accountable to the Shareholders’ Meeting.
Shareholders’ Meeting
In 2009, the Company convened three shareholders’ general meetings, including the Annual General Meeting (“AGM”) for 2008 and
two Extraordinary General Meetings (“EGM”). The AGM held on 26 May 2009 reviewed and approved the financial statements for
the year of 2008, Report of the Independent International Auditor, proposal for annual profit distribution and final dividends,
authorisation to the Board for the formulation of a budget for 2009, appointment and remuneration of auditors, and authorisation to
the Board to issue bonds. The first EGM was held on 12 March 2009 to approve the amendments to the Articles of Association to
include the CDMA2000 3G mobile business in the scope of business of the Company. The second EGM was held on 29 December
2009 to approve the renewal of connected transactions, appointment of supervisor and amendments to the Articles of Association.
The Annual General Meeting held in Hong Kong on 26 May 2009
China Telecom Corporation Limited Annual Report 2009
69
Corporate Governance Report (continued)
Since the Company’s listing in 2002, at each of the shareholders’ general meetings, a separate shareholders’ resolution was
proposed in respect to each independent item, and details of the voting procedures and the right of voting by poll at the demand of
shareholders were recorded in the circulars to shareholders in accordance with the Articles of Association and the governing listing
rules of the places of listing. These circulars to shareholders also provided details about the resolutions. All resolutions tabled at the
Company’s shareholders general meetings were already conducted via voting 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 general meetings and the communication between directors and shareholders. The directors provided detailed and
complete answers to the questions raised by shareholders at the shareholders’ general meetings.
Board of Directors
The Third Session of the Board of Directors comprises 14 directors with eight executive directors, one non-executive director, and
five independent non-executive directors. The period of office lasts for three years, starting from 9 September 2008 until the day of
the Company’s Annual General Meeting in 2011.
The number of independent non-executive directors constitute more than one-third of the Board members. Mr. Tse Hau Yin,
Aloysius, Chairman of the Audit Committee, is an internationally renowned financial expert with expertise in accounting and financial
management. The Audit Committee, Remuneration Committee and Nomination Committee under the Board, all comprise solely
independent non-executive directors, ensuring that the committees are able to provide suffi cient review, strive the balance and make
independent judgments effectively to protect the interest of shareholders and the Company as a whole.
The Company strictly complies with the Code on Corporate Governance Practices of the Listing Rules and rigorously regulates the
operating procedures of the Board and the committees under it, and ensures that the procedures of Board meetings are in
compliance in terms of organisation, regulations and personnel. The Board is responsible for the effective supervision of the
preparation of financial statements for each financial period, so that such financial statements truly and fairly reflect the financial
position, the operating results and cash flows of the Company for each period. In preparing the financial statements for the year
ended 31 December 2009, the directors adopted appropriate accounting policies and made prudent, fair and reasonable judgments
and estimates, and prepared the financial statements on a going concern basis.
The Articles of Association of the Company provide that the Board is accountable to the shareholders’ meetings, and its duties
include the execution of resolutions, formulation of major decisions for operations, financial proposals and policies, the Company’s
management system, and the appointments of managers and other senior management personnel of the Company. The Articles of
Association clearly define the respective duties of the Board and the management. The management is responsible for the operation
and management of the Company, the implementation of the resolutions of the Board, developing the annual operation plans and
investment proposals of the Company, set-up of the Company’s internal administrative organisations and sub-organisations, and
performs other duties as authorised by the Articles of Association and the Board. In order to maintain a highly efficient operation, as
well as flexibility and swiftness in operational decision-making, the Board, when necessary, may delegate its managing and
administrative powers to the management, and provide clear guidance regarding such delegation so as to avoid seriously impeding
or undermining the overall capabilities of the Board in exercising its powers.
All members of the Board of Directors/Committee are informed of the meeting schedule for the Board of Directors/Committee for
the year at the beginning of each year. In addition, all Directors will receive notifi cation 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 Corporate Secretary for details to ensure that they have
received sufficient information on various matters related to the meeting agendas. In addition, the Company regularly reminds
directors of their functions and responsibilities by providing them with information about the latest development of listing rules and
70 China Telecom Corporation Limited Annual Report 2009
Corporate Governance Report (continued)
other applicable regulations. To ensure that directors are familiar with the Company’s latest operations for decision-making, the
Company provides key financial data and operational information to the directors on a monthly basis. Through regular Board
meetings and reports from management, the directors are able to clearly understand the operations, business strategy and latest
development of the Company and the industry. The Company also provides all newly appointed directors with updated data on
industry development by arranging induction activities.
The Board meets at least four times a year. Additional board meetings will be held when necessary. In 2009, the Board of Directors
played a significant role in the Company’s operation, budgeting, decision-making, supervision, internal control, organisational
restructuring and corporate governance. In 2009, the Company convened four board meetings, four audit committee meetings and
one independent board meeting. At these meetings, the Board reviewed matters including the Company’s annual and interim
financial statements, annual operational, financial and investment budgets, the impairment loss of the PHS assets, annual asset
appraisals, internal control implementation and assessment report, proposal for annual profit distribution, annual report and interim
report, appointment and remuneration of auditors, approval of authorisation granted to the Company for bond issue, amendments
to the Articles of Association and continuing connected transactions.
Attendance rates of individual directors at Board meetings in 2009 (including attendance with
written proxies)
Number of Directors
Directors
Executive Directors
Wang Xiaochu (Chairman)
Shang Bing
Wu Andi
Zhang Jiping
Zhang Chenshuang
Yang Xiaowei
Yang Jie
Sun Kangmin
Independent Non-executive Directors
Wu Jichuan
Qin Xiao
Tse Hau Yin, Aloysius
Cha May Lung, Laura
Xu Erming
Non-Executive Director
Li Jinming
Number of meeting/attendance
Attendance Rates
14
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
China Telecom Corporation Limited Annual Report 2009
71
Corporate Governance Report (continued)
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of
the Listing Rules to govern securities transactions by the Directors. Based on the written confi rmation from the Directors, all of the
Company’s Directors have strictly complied with Appendix 10 Model Code for Securities Transactions by Directors of Listed Issuers
of the Listing Rules regarding the standard requirements for directors in conducting securities transactions. The Company has
received annual independence confi rmations from each of the independent non-executive directors, and considers them to be
independent.
Audit Committee
The Audit Committee comprises four independent non-executive directors. The Charter of the Audit Committee clearly defi nes the
status, qualifi cations, work procedures, duties and responsibilities, funding and remuneration, etc. of the Audit Committee. The Audit
Committee’s principal duties include the supervision of the truthfulness and completeness of the Company’s fi nancial statements,
the effectiveness and completeness of the Company’s internal control and risk management system, as well as the work of the
Company’s internal audit department. It is also responsible for the monitoring and review of the qualifications, selection and
appointment, independence and services of external independent auditors. The Audit Committee ensures that the management has
discharged its duty to establish and maintain an effective internal control system including the adequacy of resources, qualifi cations
and experience of staff fulfi lling the accounting and fi nancial reporting function of the Company together with the adequacy of the
staff’s training programmes and the related budget. The Audit Committee also has the authority to set up a reporting system to
receive and handle cases of complaints or complaints made on an anonymous basis regarding the Company’s accounting, internal
control and audit matters. The Audit Committee will regularly reports on its work to the Board.
In 2009, pursuant to the requirements of the governing laws and regulations of the places of listing and the Charter of the Audit
Committee, and under the clear mandate of the Board, the Audit Committee fully assumed its responsibilities. The Audit Committee
also proposed a number of practical and professional improvement recommendations based on the Company’s 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 signifi cant role in protecting the interests of independent shareholders.
In 2009, the Audit Committee convened four meetings, where it reviewed important matters related to the Company’s financial
statements, assessment of the qualifi cations, independence and performance of the external auditors and their appointments,
effectiveness of internal control, internal audit, connected transactions and amendments to the Charter of the Audit Committee. The
Audit Committee received quarterly reports in relation to the internal audit and connected transactions and provided guidance to the
internal audit department. Additionally, the Audit Committee reviewed internal control assessment and audit reports, followed up
with the recommendations proposed by the external auditors, reviewed the U.S. annual report, and communicated independently
with the auditors.
72 China Telecom Corporation Limited Annual Report 2009
Corporate Governance Report (continued)
Attendance rates of individual members of the Audit Committee in 2009 (including attendance with
written proxies)
Number of Committee members
Percentage of Independent Non-executive Directors of the Committee
4
100%
Member of the Committee
Number of meeting/attendance
Attendance Rates
Tse Hau Yin, Aloysius (Chairman of the Committee)
Wu Jichuan
Qin Xiao
Xu Erming
Remuneration Committee
4/4
4/4
4/4
4/4
100%
100%
100%
100%
The Remuneration Committee comprises four independent non-executive directors. The Charter of the Remuneration Committee
clearly defines the status, qualifications, work procedures, duties and responsibilities, funding and remuneration etc. of the
Remuneration Committee. The Remuneration Committee assists the Company’s Board to formulate overall remuneration policy and
structure for the Company’s directors and senior management personnel, and to establish related remuneration procedures that are
standardised and transparent. The Remuneration Committee’s principal duties include supervising the compliance of the Company’s
remuneration system with legal requirements, presenting the evaluation report on the Company’s remuneration system to the Board,
as well as giving recommendations to the Board in respect to the overall remuneration policy and structure for the Company’s
directors and senior management personnel. Its responsibilities comply with the requirements of the Code on Corporate Governance
Practices. The Remuneration Committee regularly reports its work to the Board. No meeting was held by the Remuneration
Committee in 2009.
Nomination Committee
The Company’s Nomination Committee was formed by four independent non-executive directors. The Charter of the Nomination
Committee clearly defines the status, qualifications, work procedures, duties and responsibilities, funding and remuneration etc. of
the Nomination Committee, and it specifically requires that the Nomination Committee members 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 and succession plans for the appointment of directors, and
further improve the composition of the Board. The principal duties of the Nomination Committee include: regularly reviewing the
structure, number of members and composition of the Board; identifying candidates and advising the Board with the appropriate
qualifications for the position of Directors; evaluating the independence of independent non-executive directors; advising the Board
on matters regarding the appointment or re-appointment of directors and succession plans for the directors. The Nomination
Committee is accountable to the Board and regularly reports its work. The Nomination Committee has not convened any meeting in
2009 because there were no signifi cant matters such as the addition and replacement of directors.
Independent Board Committee
Pursuant to the requirements under the Listing Rules, the Company’s Independent Board Committee convened one meeting in
2009, with all fi ve independent non-executive directors attended where it reviewed the renewal of connected transactions and gave
the relevant confi rmation as well as submitted the recommendations on these matters to the independent shareholders.
Supervisory Committee
The Company established the Supervisory Committee in accordance with PRC Company Law. At present, the Supervisory
Committee comprises five supervisors, of which there is an external independent supervisor and an employee representative
supervisor. Mr. Xiao Jinxue tendered his resignation as a supervisor of the Company in 2009 due to a change in job responsibility.
The Company convened an Extraordinary General Meeting on 29 December 2009 to appoint Mr. Miao Jianhua to be the supervisor
of the Third Session of the Supervisory Committee. On the same date after the Extraordinary General Meeting, the Supervisory
Committee held a meeting to elect Mr. Miao Jianhua as the Chairman of the Supervisory Committee.
China Telecom Corporation Limited Annual Report 2009
73
Corporate Governance Report (continued)
The principal duties of the Supervisory Committee include supervising, in accordance with the law, the Company’s financials and
performance of its directors, managers and other senior management of the Company 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 holds meetings at least once or twice a year.
Attendance rates of individual members of the Supervisory Committee in 2009
The Third Session of the Supervisory Committee
Number of Supervisors
Number of meetings in 2009
5
5
Supervisors
Number of Meetings/attendance
Attendance Rates
Miao Jianhua (Chairman of the Committee, appointed as
a supervisor of the Company in December 2009)
Xiao Jinxue (resigned as the Supervisor in December 2009)
Zhu Lihao (Independent Supervisor)
Ma Yuzhu (Employee Representative Supervisor)
Xu Cailiao
Han Fang
External Auditors
1/1
4/4
5/5
5/5
5/5
5/5
100%
100%
100%
100%
100%
100%
The international and domestic auditors of the Company are KPMG and KPMG Huazhen, respectively. In order to maintain their
independence, the non-audit services provided by the external auditors have not contravened the requirements of the US Sarbanes-
Oxley Act of 2002.
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 2009 is as follows:
Service item
Audit services
Non-audit services, mainly includes internal control advisory service
Total
Fee
(RMB in millions)
67.50
3.02
70.52
The Audit Committee and the Board have agreed to the re-appointment of KPMG and KPMG Huazhen, respectively, as the
international and domestic auditors of the Group for 2010, and the proposal will be submitted for approval at the 2009 Annual
General Meeting.
74 China Telecom Corporation Limited Annual Report 2009
Corporate Governance Report (continued)
Internal Control
Internal control system
The Board is aware of its responsibility to ensure a solid, complete and effective internal control system of the Company and to
monitor the effective implementation of such system, in order to protect shareholders’ investment and the safety of the Company’s
assets, whilst enhancing operation efficiency and effectiveness, and improving corporate governance, risk assessment, risk
management and internal control. In this way, the Company can achieve long-term development goals. The Company’s
management is responsible for the establishment and implementation of the internal control system. The internal control system of
the Company is built on clear organisational structure and management duties, an effective delegation and 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. It covers all businesses and transactions of the Company. To
make the internal control system more effective, the Company has formulated a code of conduct for the senior management and
employees in order to ensure their ethical value and competency. The Company has continued to improve its internal declaration
system, which encourages anonymous reporting of situations where employees, especially directors and senior management
personnel, breach the rules.
In August 2003, the Company appointed KPMG Huazhen to provide advisory services in relation to internal control. Over more than
six years, the Company has formulated manuals, implementing rules and supporting regulations in relation to internal control and
based on the requirements of the U.S. securities regulatory authorities and the COSO Internal Control Framework. The Company
has also been strengthening its IT internal control capabilities, which has improved the efficiency and effectiveness of internal control,
enhancing the safety of the Company’s information system so that the integrity, timeliness and reliability of data and information are
maintained.
To ensure the truthfulness, accuracy, completeness and timeliness of the Company’s information disclosure, the Company has
formulated rules for its information disclosure management in order to improve management of the Company’s information
disclosure since its IPO in 2002. Over the years, the Company strictly complies with, and from time to time enhances, the formulated
rules in order to strengthen the management on the information disclosure of the Company. It primarily focuses on: the disclosure of
important information such as share price sensitive information and annual and interim reports; standardising the Company’s internal
collection, processing, summarisation and reporting of its important information; formulating procedures for the regular and irregular
external disclosure of documents; and defining the responsibilities and behavior standards of related internal departments, branches,
and subsidiaries of the Company in respect to information disclosure.
In 2009, the Company revised and improved its internal control manuals and limits of authority in response to the internal control
requirements of the Ministry of Finance of the People’s Republic of China. Such revision and improvement were also made to cope
with the changes in corporate structure, organisational structure and full services operation, as well as impact resulting from market
expansion, the integration of the mobile services, management innovation and changes in business processes. The revised sections
included amendments to the internal control manual on content not applicable to the existing business process; the inclusion of the
control procedures related to the mobile services and transformation services; rearrangement of the integrated billing system and
the standardisation of the corresponding control points; and further clarifi cation at the company level. Through perfection on the
internal control system, the Company has ensured the realisation of effective internal control management under full services
offerings. In addition, the Company has further strengthened the supervision and inspection of the implementation of internal
controls to promote the effectiveness of implementation on the internal control, as well as to prevent and mitigate the fi nancial risks.
China Telecom Corporation Limited Annual Report 2009
75
Corporate Governance Report (continued)
Comprehensive Risk Management
The Company views comprehensive risk management as an important task within the Company’s daily operation. Pursuant to
regulatory requirements in the United States and Hong Kong, the Company has formulated a unique fi ve-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, implemented a
standardised risk management procedure and established and refi ned the contralised risk directories and case studies database of
the Company, so that risk management terminology is unified across all levels of the Company and the effectiveness of risk
management was improved. Following the efforts made in the past three years, China Telecom has established a comprehensive
risk management system and has gradually perfected its comprehensive risk monitoring and prevention mechanism.
In 2009, pursuant to the requirement of provision C2 of the Code on Corporate Governance Practices of the Stock Exchange of
Hong Kong Limited and based on the works completed in 2008, the Company further incorporated comprehensive risk
management into its daily operation. The Company has implemented the level-oriented, category-oriented and centralised risk
management, with resources concentrated on the prevention of two types of major risk, including the risk of fi nancial crisis and the
risk following the restructuring, and has achieved satisfactory results. In 2009, the Company was not confronted with any major
risks.
After strict risk identifi cation, assessment and analysis, the Company has conducted a preliminary assessment of potential major
risks to the Company in 2010, such as the risk of fi nancial crisis, risk of industry competition, risk of network convergence, risk of
wireline operations, and has put forward detailed responsive measures. Through the use of strict and appropriate risk management
procedures, the Company will ensure that the impact from the above risks to the Company are limited to and within an expected
range.
Annual Internal Control Evaluation
The Company has been continuously improving its internal control system. In order to meet the governing regulatory requirements of
its places of listing, including the United States and Hong Kong, and strengthen its internal control while guarding against operational
risks, the Company’s internal audit department is responsible for coordinating the supervision and assessment of internal control.
The Company has adopted the COSO Internal Control Framework as the standard for the internal control assessment. With the
management’s internal control testing guidelines and the Audit Standard No. 5 that were issued by PCAOB as its directives, the
Company’s internal control assessment is composed of the self-assessment conducted by the persons responsible for internal
control and of the independent assessment conducted by the internal audit department. In order to judge the nature of deficiencies
in internal control and analyse the effectiveness of the internal control system, the Company adopts the following four 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 effectiveness of the execution of internal control, (4) analyse the impact of deficiencies in internal control. The Company
then rectifies any deficiencies found after the assessment. By formulating “Interim Measures for the Internal Control Assessment of
Joint Stock”, “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 2009, the Company’s internal audit department initiated and coordinated the assessment of internal control at company level,
timely reported the outcome to the Audit Committee in the fourth quarter and executed the opinions and recommendations in areas
such as continual perfection of the overall internal control system, further reinforcement of the management, control and training,
optimisation of the IT system for internal matching purposes and formulation of the relevant standards as set out by the Audit
Committee.
76 China Telecom Corporation Limited Annual Report 2009
Corporate Governance Report (continued)
Self-assessment of internal control adopts a top-down approach which reinforces assessment in respect of control points at the
corporate level and control points corresponding to major accounting 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 2009, based on its past experiences and by adhering to the principle of optimising assessment procedures and
facilitating on-the-spot operation, the Company explored and further improved the ways and measures of self-assessment, such as
the guidance and supervision of the internal control for nine provincial branches in northern China and for Beijing branch. The self-
assessment worked coherently with the actual operational management, further improving the corresponding measures towards the
operational risks and depth of risk management. The drawbacks were rectifi ed on timely basis and achieved a remarkable result on
improving the quality of work and effi ciency.
In 2009, the Company actively investigated and proposed key issues as major risks for independent assessment that needed to be
investigated deeply and thoroughly. To ensure that the nature of risks and problems were identified and captured, the Company’s
assessment had to be based on a complete internal control system. In addition, the Company proposed to integrate independent
assessment and daily audit projects effectively, aiming to improve the guidance of effectiveness of the overall audits. In this way, all
units of the Company could enhance the quality and efficiency of their independent assessment. In accordance with the ideology
and arrangement of assessment for the Company, all provincial branches launched a proactive independent assessment within each
province. When problems of internal control were identified after the assessment, the provincial branches proposed
recommendations and oversaw the process to rectify the problems. As a result, the independent assessment effectiveness of each
provincial branch was improved. The Company guided all provincial branches to launch these independent assessments, whilst
launching independent assessments of some provincial branches by incorporating a number of factors into consideration, such as
extraordinary risks of internal control, proportion of assets and revenue, and the frequency of assessment made by external auditors.
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 internal control assessment during which the internal control assessment team and other
relevant departments closely coordinated with the external auditors. The external audit covered the Company and all its subsidiaries
as well as the key processes and control points in relation to major accounting items. The external auditors regularly communicated
the results to the management.
All levels of the Company have been attaching great importance to rectifying internal control deficiencies. The Company pushes all
units to carry out rectification in relation to deficiencies identified through self-assessment, independent assessment and the internal
control audit made by the external auditors. The Company also highlighted the participation of professional departments whilst
exploring the establishment of an internal control mechanism with long-term efficiency. To ensure effective rectification, the Company
also strengthened the verification and supervision of the rectification of internal control deficiencies. Pursuant to requests from the
Company, all provincial branches launched rectification on any deficiencies identified from the assessment (including the assessment
by external auditors) in a positive manner.
Through self-assessments and independent assessments conducted by branches 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 internal control and successfully passed the
year-end audit undertaken by the external auditors.
The Board, through the Audit Committee, reviewed the internal control system of the Company and its subsidiaries for the financial
year ended 31 December 2009, which covered its controls on financial reporting, operation and compliance, as well as its risk
management functions. The Board is of the view that the Company’s internal control system is solid, well-estated and effective. The
annual review also considers the adequacy of resources, qualifi cations and experience of staff fulfi lling the Company’s accounting
and fi nancial reporting functions, together with the adequacy of the staff’s training programmes and the relevant budget.
China Telecom Corporation Limited Annual Report 2009
77
Corporate Governance Report (continued)
Investor Relations and Transparent Information Disclosure Mechanism
The Company establishes 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 and provides them with the necessary information so as to allow them to fully understand the
operation and development of the Company. Every year, the Company’s senior management presents the annual results and interim
results in Hong Kong. Through various activities such as analyst meetings, press conferences, global investor telephone conference
and investors road shows, the senior management provides the capital markets and the media with important information related to
key issues of which the investors are of prime concerns. This has helped to reinforce the understanding of the Company’s 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 public shareholders, to actively
participate in the Company’s Annual General Meetings and to promote the direct communication and exchange of ideas between
the Board of Directors and shareholders.
With an aim of strengthening communications with the capital market and enhancing the transparency of information disclosure, the
Company has provided the quarterly disclosure of revenue, EBITDA, net profi t fi gures and other key operational data, and the
monthly announcements of the number of wireline access lines in service, mobile subscribers and wireline broadband subscribers.
The Company attaches great importance to maintain daily communication with shareholders, investors and analysts. In 2009, the
Company has participated in a number of investors conferences held by a number of major international investment banks in order
to maintain active communication with institutional investors.
2009 Annual Results Announcement on 22 March 2010
78 China Telecom Corporation Limited Annual Report 2009
Corporate Governance Report (continued)
In 2009, the Company attended the following investors conferences held by major international investment banks:
Date
January 2009
January 2009
January 2009
January 2009
March 2009
April 2009
May 2009
May 2009
May 2009
May 2009
June 2009
June 2009
June 2009
July 2009
September 2009
September 2009
September 2009
November 2009
November 2009
November 2009
November 2009
November 2009
November 2009
Name of Conference
UBS Greater China Conference 2009
Deutsche Bank Access China Conference 2009
DBS Vickers Pulse of Asia 2009
Merrill Lynch Hong Kong and China Corporate Day 2009
Credit Suisse Asian Investment Conference 2009
Hong Kong Stock Exchange/Daiwa Investors Conference 2009
CLSA Corporate Access Forum 2009
UBS Pan-Asian Telco Conference 2009
Citigroup Asian Market Gainers Mini Conference 2009
Macquarie China Conference 2009
Nomura Shinka Conference 2009
RBS China/Hong Kong Conference 2009
Goldman Sachs Telecoms & Internet Corporate Day 2009
Deutsche Bank Access China Corporate Day 2009
CLSA China Investment Forum 2009
CLSA Hong Kong Investors’ Forum 2009
Daiwa Asian Teleco Day 2009
Goldman Sachs China Investment Conference 2009
Merrill Lynch China Investment Summit 2009
Morgan Stanley Asia-Pacifi c Summit 2009
HSBC Asia Investor Forum 2009
RBS Asian Conference 2009
Daiwa Investment Conference Hong Kong 2009
The Company’s investor relations website not only acts as the
primary channel for the Company to disseminate press releases
and corporate information to investors and the capital market, but
also plays a significant role in evaluating the values of the
company’s appraisals and helps the Company to comply with
regulatory requirements for information disclosure. In recent years,
the Company has continued to innovate its corporate website
(www.chinatelecom-h.com) and has further improved its functions,
design, interaction with investors and disclosure of information in
accordance with the requirements of the capital market and
international best practice, which enables the Company to fully
enhance the interaction and communication with investors and
shareholders. In 2009, in alignment with the commencement of
full services offerings, the Company revamped its corporate
website to refl ect the Company’s business transformation and at
the same time incorporated a series of new functions to ensure
that its website keeps abreast of the latest updates and
development. The corporate website was accredited the Gold
Award in the category of “Redesign Website — Telecommunications” in the iNova Awards 2009, and was also awarded the “Best
Investor Relations Website” in Greater China in IR Global Rankings 2009, indicating that the corporate website is highly recognised
by the capital market and professionals. The Company also took the initiative to seek recommendations on how to improve the
Company’s annual report from shareholders through a survey, and, in accordance with its shareholders’ recommendations, prepared
and distributed the annual report in a more environmental-friendly and cost-saving manner.
The overall design and contents of corporate website were
revamped in 2009
China Telecom Corporation Limited Annual Report 2009
79
Corporate Governance Report (continued)
Signifi cant 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 (“SEHK”) 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 the 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 followed by 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 SEHK, the
Company needs to comply with the Listing Rules. These rules require that at least one third of the Board of Directors of a listed
company in Hong Kong be independent directors. The Board of the Company comprises of 14 directors, of which five are
independent directors, making the number of independent directors exceed one third of the total number of directors on the Board,
in compliance with the number set out as a recommended best practice in the Code on Corporate Governance Practices of the
Listing Rules. These independent directors also satisfy the requirements on “independence” under the Listing Rules. However, the
related standard 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 on Corporate Governance Practices of the SEHK for the accounting year ended 31 December
2009.
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 control system and practice, adopts fi duciary, transparent,
open and effective corporate governance principles and structure, to ensure the long term sustainable development of the Company
and to seek sustainable returns for the shareholders and investors.
Change Has Come
Human Resources
Development Report
China Telecom Corporation Limited Annual Report 2009
85
Human Resources Development Report
Summary
In 2009, the Company’s human resources management centered around the strategy of “Customer-focused Innovative
Informatisation”. We accelerated the innovation of our management system and team-building mechanism and endeavoured to
enhance our capabilities in human resources management service and support, and established a harmonious and stable business
environment to fully support the Company’s strategic transformation.
We continued to control the total number of employees and continuously adjusted our labour structure. We increased modestly the
number of employees for our branches in the northern provinces according to their development needs, while focusing on
introducing suitable personnel to meet the needs of the Company’s transformation and full services operation. We also strengthened
our control over the number of employees in our traditional businesses and daily operations, and at the same time encouraged our
employees through a variety of ways to shift to key transformation units and posts for full services operation. In addition, we have
established a standardised position system which meets the requirements of full services operation in order to lay a solid foundation
for the precise management of human resources and structural adjustment.
We constantly optimised our resource allocation by perfecting our allocation model for labor costs and remuneration. We further
optimised the model for decision on total labor costs in order to fulfi ll the demand for human resources required by the full services
operation. We also actively explored the application of fl exible allocation methods such as an agreed wage system and point-based
system.
We improved the Company’s management system for senior managers with a focus on enhancing our capabilities in full services
operation, strengthening the building of our leadership and management teams, and shaping the entrepreneurial spirit of our
management. We focused on the needs of full services operation, fostering the development of personnel to strengthen our position
in dealing with government and enterprise customers, our mobile service, corporate informatisation and overseas services. We also
integrated our resources and organised large-scale full services training sessions to strengthen the implementation of our strategies.
In order to expand our talent pool, we cooperated strategically with key universities and built a college-enterprise cooperation
platform to reinforce the recruitment of outstanding graduates. We also strengthened the support and management of the personnel
in our branches in the northern provinces to promote integrated and coordinated development.
We value our employees as the foundation of the Company, caring for our frontline employees, those engaged in less developed
areas and in special diffi culties. We also enhanced our workplace safety management to ensure the harmony and stability of the
Company.
Employees Distribution
At the end of 2009, the Group had a total of 312,520 employees. The employees’ distribution was as follows:
Management, Finance and Administration
Sales and Marketing
Operation and Maintenance
Research and Development
Total
No. of Employees
Percentage
50,206
160,780
99,904
1,630
16.1%
51.4%
32.0%
0.5%
312,520
100%
86 China Telecom Corporation Limited Annual Report 2009
Human Resources Development Report (continued)
Corporate-Employee Relationship
Communication between Management and Employees
The Company’s management continued to follow its good corporate tradition and reinforced its communication with its employees
through various methods. The Company’s management conducted regular visits and research and listened to views of frontline staff
to gather fi rst hand information. In 2009, the Company’s management conducted fi eld research at provincial offi ces of the Company
and their subordinate units in ten groups, and carried out in-depth communications with the production and operation frontline staff
to have a better understanding of their situation. They also listened to the views of employees and provided guidances. The
Company conducted an online survey of 100,000 employees to gather feedback and recommendations from employees for the
Company’s scientifi c decision making, thereby bringing our advantages of informatisation into full play. The Company also started an
online dialogue with over 6,000 frontline staff to discuss the Company’s scientifi c development. For young employees, the Company
continued to host a series of “face-to-face” dialogues, such
as interviews, interactive questions and answer sessions to
exchange information on key topics with young employees
including studies and activities for scientific development,
the resolutions of the annual meeting, career development of
young employees to strengthen ties with its young frontline
employees. This extensive and in-depth communication
between the management and employees ensured
cohesive deployment of various corporation decisions of the
Company.
Mr. Wang Xiaochu, Chairman, cordially visited frontline staff of
“114”enquiry hotline
The Company further perfected its mechanism for employees to
express their ideas and appeals and formulated the “Guidance
on a Sound and Perfect Mechanism for Employees to express
their Ideas and Appeals”. The Company conducted a timely
c o l l e c t i o n a n d a n a l y s i s o f e m p l o y e e s ’ c o m m e n t s a n d
recommendations through various channels such as on-site
research, seminars, online questionnaires and surveys, and
improved those areas which employees were not satisfi ed with.
Roles and Duties of Labor Unions
Mr. Sun Kangmin, Executive Vice President, visited provincial branch
for exchange and study
Insisting on the principle of “promoting corporate development and employees growth” and the management concept of
“concentrating in key areas, serving the overall situation, highlighting employee rights and increasing participation”, the labor unions
play an irreplaceable role in the Company’s business management, corporate reforms and full services operation. For the promotion
of corporate development, the labor unions have organised job-skill contests, carried out technological innovations and collected
rational recommendations from employees and motivated the employees to achieve successful results.
China Telecom Corporation Limited Annual Report 2009
87
Human Resources Development Report (continued)
For promoting employees’ growth, the labor unions provided on-the-job training, skill competitions and activities to establish a
“learning team” to create a platform for knowledge sharing, enhance the business skills of employees, and assist them in adapting
to the requirements of full services operation. The labor unions participated in the decision-making process with respect to employee
benefi ts and the formulation of corporate policies, while at the same time cared for employees and improved the work conditions
and living standards of employees and assisted them in solving their daily life problems by building a mutually benefi cial platform for
realising simultaneous growth for the Company and its employees.
Coordination and Communication between the Company and the Labor Unions
The Company has reinforced coordination and communication with the labor unions in 2009. In order to accomplish the strategic
goal of full services operation, the Company’s Labor Emulation Committee has coordinated with the labor unions to carry out
contests including the “3G e surfing Star Employee Competition” to promote the development of its business. As part of the
successful implementation of the “Labor Contract Law” and the “Labor Dispute Mediation Arbitration Law”, and to meet the
requirements of the “new social model for corporate-employee relationships which is standardised, fair and reasonable, mutually
benefi cial, harmonious and stable”, the labor unions have strengthened their participation in the Company’s management of human
resources and coordination of labor relations. This has also reinforced coordination and communication with the Company in
perfecting its employee management system, and improving the handling of labor disputes through the assistance of the Labor
Dispute Mediation System Committee. The Company further enhanced the soundness and fairness of the Collective Contract
System. The labor unions have strengthened the coordination with respect to the collective contracts signed between the Company
and labor unions especially in specifi c areas such as employees’ leave and holidays, education and training, performance appraisals,
etc. In an attempt to standardise its human resources management, the Company and the labor unions have jointly promulgated the
“Measures Related to Collective Employment Contract” to standardise the process for the equitable collective negotiation for
collective contract, and jointly amended the “Interim Measures for Management on Branch Companies’ Employees Representative
Committee” in order to set up a clear mechanism and specifi c responsibilities. This is the fi rst time the evaluation of employee
satisfaction on provincial-level management team building was co-organised, which is of great significance for the further
strengthening of frontline democracy, enhancing the participation of frontline employees and improving the supervision of
democracy.
Caring for Employees
In relation to the welfare of the employees, the Company applies a corporate culture which values employees as the foundation of
the Company, and strives to solve the most direct and practical problems concerning its staff.
In times of natural disasters, the Company has always bore the suffering of affected employees in mind. In order to help affected
employees to come out of the shadows and rebuild their confi dence, the Company held a “Caring Employer & Giving our Heart &
Hand—Training for Outstanding Staff in Maintaining Telecommunication Services during Earthquake” on the fi rst year anniversary
date of the Wenchuan Earthquake. This was followed by on-the-spot learning activities which were co-organised by eight provincial
companies and the labor unions, with participation of 342 outstanding employees from affected areas in Sichuan, Gansu, and
Shaanxi. The activities further promoted the great spirit of unity among our affected employees to participate in disaster relief work,
which has motivated the spirit of contribution among all of the Company’s employees, while establishing and promoting the
Company’s people-oriented corporate image.
88 China Telecom Corporation Limited Annual Report 2009
Human Resources Development Report (continued)
The Company cares for its frontline employees. In order to
create a good working and living environment for frontline
employees, the Company and the labor unions have put great
efforts in jointly promulgating the “Guidance on Improving
Employees’ Living Standard” and “Guidance on Establishing
and Perfecting Employee Relief Fund Management System”,
with the labor unions also promulgating the “Guidance on
Caring for Employees”. Labor unions also implemented 10
initiatives, including establishing a sound mechanism for
employees to express their ideas and appeals, promoting the
regular growth of wages, and operating a paid annual leave
system, to extend its care for employees.
In times of New Year and Lunar New Year, as well as during
critical production and operational stages and natural disasters,
the Company vigorously carries out its “Warmth Delivering”
activities by visiting and comforting employees in difficulty,
employees at the frontline of production, outstanding employees and retired employees. During the summer of 2009, the labor unions
issued the “Notice regarding the Launch of ‘Caring for Employee’ Activities during the Summer Season”, while all provincial branches
took effective measures to protect employees from the negative effects and damages to their health brought by high temperatures.
Mr. Zhang Chenshuang, Executive Vice President, attended a table tennis
match for employees
Strengthening Human Resources
The Company attaches great importance to cultivate talents and allocate substantial resources to build employees’ leadership skills
and capabilities.
Building leadership skills
The Company values the building of leadership skills amongst its employees. Through leadership development training, the Company
has further enhanced the capability in strategic execution of its managers. The Company organised one session of training for its
general managers in its provincial branches, two sessions of training for its vice presidents in provincial branches and four sessions of
training for general managers in district branches with senior management to elaborate the Company’s business strategy and
development focus. The Company also strengthened the
development of its training courses under the setting of full
services operation, introducing intensive training courses on
themes such as “Strategic Performance” and “Driving
Transformation”, aiming to apply these tools and methods to
daily operations through an action-based learning approach
and providing support to the realisation of performance targets.
Additionally, the Company further fostered the leadership
training of its 8,546 managers of the district branches, as well
as its 4,340 managers of working groups, regional branches
and sub-regional branches. Furthermore, the Company strived
to build an effi cient headquarters and organised four sessions
of training on the theme of “Coordination and Effi ciency” at its
corporate headquarters. At the same time, the Company
organised monthly seminars on the theme of “The Key to
Transformation” to further reinforce employees’ customer
orientation awareness, coordination and execution.
Mr. Shang Bing, President, conducted the lessons in management skills
training programmes
China Telecom Corporation Limited Annual Report 2009
89
Human Resources Development Report (continued)
Enhancing Professional Skills
Aiming at supporting its full services operation, the Company organised many training sessions with an emphasis on promoting
business transformation and enhancing professional skills in sales, services, support and maintenance. Trainings include those of
products customised for full services, those to enhance practical skills for sales staff, government and enterprise account managers,
wireless network optimisation staff, “Best Tone” information service operator, customer service representatives for the 10000 hotline,
trainings of skills of information collection and editing, as well as post skills certifi cation for network maintenance staff. The Company
also carried out intensive training courses to meet the work and learning needs of its employees and made full use of its Online
University to carry out universal training, including customised courses such as “Project Management”, “Network Optimisation”,
“CDMA Technology”, “Mobile Products”, “Building Sales Capability”, and “Solutions for Industry-specifi c Applications in Full services
operation”. By conducting interactive training through its Online University, the Company’s successful experiences in full services
operation were widely and timely promoted.
Remuneration and Performance Management
In accordance with the corporate principle of “salaries based on performance, effi ciency fi rst and fairness ensured”, the Company
has set up a mechanism that the growth of personnel cost/total amount of salaries being correlated with corporate earnings’ growth
for branches, and has continuously improved it in practice. The Company implemented a strict performance management system,
with KPI-based performance appraisal mechanisms for its employees. Overall performance targets has been distributed to all levels
of the Company to ensure that each employee has his own specifi c performance targets. The results of the performance appraisal
are effectively applied to various aspects including adjustments in job post-based salaries, performance salaries, promotions,
training, redeployment and transfers. The integration of the performance appraisal with operating performance and capacity
improvement program serves as an effective way to enhance the capacity and performance of employees. According to the
corporate principle of being “objective, fair, democratic, open, and performance-oriented”, the Company carried out open
recruitment and competitions for job vacancies, and built up job posts-centered management with flexible promotions and
degradation and fl exible recruitment and dismissal for the scientifi c and rational allocation of human resources.
Protecting Employee Welfare
The Company strictly follows the laws and regulations as stipulated by the “Labor Law of the People’s Republic of China” and the
“Labor Contract Law of the People’s Republic of China” to standardise employment practice. The Company offers equal payment
for equal work and has no discriminative policies on employment such as gender discrimination. The Company does not employ
child labor or forced labor. The Company and the labour unions has also jointly promulgated the “Special Collective Sample Contract
for the Protection of China Telecom Female employee’s Rights and Interests”, further ensuring the protection of the rights and
interests of its female workforce.
Corporate Social
Responsibility
Report
China Telecom Corporation Limited Annual Report 2009
91
Corporate Social Responsibility Report
As the main national telecommunications operator with a responsibility to improve the national informatisation infrastructure and
modern information services, the Company has strived to share the benefi ts of information and communications services with the
society and act as a “responsible corporate citizen”. The Company has always adhered to its core philosophy of “all-round
innovation, through the pursuit of truth and pragmatism, with human resources as a
foundation, and through the joint creation of values” in order to provide returns to
society, services to clients, a caring environment for employees and returns to
shareholders. The Company aims to integrate its corporate development with the
economic, social and environmental development so as to promote the overall
harmony and development of society. In 2009, the Company was awarded the
“Valuable Model Enterprise in Corporate Social Responsibility” and the “Grand Award
of Corporate Social Responsibility in China” by domestic authoritative institutions.
Stimulating consumption and Increasing
employment
Looking back at 2009, the global fi nancial crisis has affected every part of the world
including the Chinese economy, leaving a deep memory on everyone. To counter the
impact of the global fi nancial crisis, the Company has thoroughly supported scientifi c
development by working closely with all levels of the government to promote a
strategy for national and regional informatisation development. A full scale
cooperation, including the planning and research on informatisation, the establishment
of integrated information infrastructure, and the exploration and use of information
resources, has improved the informatisation of the government and the corporates,
agricultural sector and public sectors, as well as accelerated the training of
informatisation talents. This will further facilitate the integration of industrialisation and
informatisation, and ultimately promote the rapid and healthy development of the
economy and society.
China Telecom was honoured the Grand Award
of Corporate Social Responsibility in China
In line with its strategy of “Customer-Focused Innovative Informatisation”, the Company has implemented its corporate
transformation by continuously enriching its integrated information services and products to help stimulate the consumption of
information of the society and enhance the overall economic performance. For public customers, the Company has made great
efforts in developing its 3G business of “e surfi ng” as well as broadband services. It has also integrated CDMA, Wi-Fi and other
services into its “One Home” brand, providing customers with a number of diversified, tangible and extendable products and
services. For corporate customers, the Company has continued to enrich its “BizNavigator” and “Best Tone” services. These efforts
92 China Telecom Corporation Limited Annual Report 2009
Corporate Social Responsibility Report (continued)
have opened up a new path towards informatisation by allowing corporations to do e-trading easily, as well as helping small and
medium-sized enterprises to explore new development opportunities by lowering costs and increasing their competitiveness during
any crisis. For industry customers, the Company has proactively provided assistance to various government departments and
industries (including those relating to public security, tax affairs, insurance, inspection and quarantine, education, culture, health care,
tourism etc.), and to the construction of e-governments and digital cities, and implemented “Ten Informatisation Engineering
Projects” providing total solutions for the informatisation of key industries.
In response to calls by the governments to increase employment, the Company has implemented a number of employment-
boosting initiatives, which were promoted by the State Council and the State-Owned Assets Supervision and Administration
Commission, by carrying out a range of measures such as management salary reduction to relief the pressure of unemployment.
The Company has also strengthened its cooperation with universities for the benefi ts of its production and operations. At present,
the Company has signed strategic cooperation agreements with 10 colleges, including Tsinghua University, Renmin University of
China, Shanghai Jiao Tong University, Fudan University, Beijing University of Posts and Telecommunications and the Nanjing
University of Posts and Telecommunications. We has further increased our efforts in recruiting university graduates and providing
internship opportunities for unemployed university graduates, as well as summer internship opportunities for undergraduates and
post-graduates. This has created a favorable working and education environment for them. Additionally, in order to contribute to the
development of a harmonious society, the Company has created more employment opportunities by proactively developing labor-
intensive businesses such as call centers. Furthermore, by capitalising on its expertise in informatisation services, the Company has
made use of the Internet to proactively offer the relevant information service for the purpose of promoting the employment of the
disabled.
Mr. Wang Xiaochu, Chairman, attended the launching ceremony of “Project for providing job opportunities
for the disabled through information services via Internet”
China Telecom Corporation Limited Annual Report 2009
93
Corporate Social Responsibility Report (continued)
Making contribution to society through informatisation services
The Company has assumed a responsibility to maintain social communications. While meeting the requirements for basic voice
communication services in rural areas, the Company has devoted to the continuous and overall enhancement of the informatisation
in such areas. Through the implementation of a model information facility project, “Serving Thousands of Townships and Villages”,
the Company has been the pioneer in introducing information technology into the construction of rural areas, allowing the
advancement in information technology to become benefi cial to townships and villages. Through our service branches, which are
widely distributed in townships and villages, the Company has introduced “E-farm” services, which integrates information resources
that are related to the construction of rural areas, such as technology, education and commerce, by means of voice, SMS, telephone
radio and broadband networks to build up a “Golden Bridge of Science and Technology” for the prosperity of rural areas.
Through our “Distance-Learning Educational System”, “Green and Healthy Online Project” and other information communications
services, the Company has improved the ability of the young generation to make use of information communications techniques and
created a favourable Internet environment for the healthy growth of our youth. The Company has also actively contributed to
education informatisation and accordingly received the “Most Outstanding Contribution Award” awarded by the central government
for the healthy Internet programme.
After obtaining the mobile service license, and leveraging on our full services operation and 3G service edge, the Company was
active in further integrating the whole industry value chain. In order to address the vertical needs of highly differentiated industries
and the common needs of cross-industry customers, the Company has launched an application platform with strengthened
functions. The Company proactively promoted the construction of digital cities and launched the “Ten Informatisation Engineering
Projects”. The Company also effectively helped the government, enterprises and institutions to effectively improve management, cut
costs and enhance effi ciency by promoting the application of its innovative “Global Mega-eye” business in over 20 fi elds that are
closely related to national economy and public livelihood, such as safe cities, supervision, inspection and quarantine, pollution
sources control, fl ood control, traffi c control, oil tanker safety and the appraisal of automobile insurance claims.
94 China Telecom Corporation Limited Annual Report 2009
Corporate Social Responsibility Report (continued)
Over the years, the Company has undertaken the responsibility of securing safe and smooth national communications. The
Company has successfully provided support and secured communication services for the successful hosting of important and grand
activities, such as major festivals, the Beijing Olympics, the Boao Forum, the launch of the Shenzhou VII spacecraft and the 60th
Anniversary celebration of the founding of the People’s Republic of China. As a partner of World Expo 2010 and the Asian Games in
Guangzhou, the Company will continue to provide high quality communication security and information services. The Company also
provided reliable communication security to the governments in response to major disasters and emergency incidents such as the
Wenchuan earthquake and the snowstorms in 2008. In the event of catastrophies, the Company strives to fulfi ll its mission and its
responsibility as the main national telecommunications operator to ensure smooth communications and the timely restoration of
communication services in disaster areas.
Mr. Zhang Jiping, Executive Vice President, donated the
documentary files on the Wenchuan earthquake to the State
Archives Administration on behalf of China Telecom
Mr. Yang Jie, Executive Vice President, participated in the forum
on Informatisation and Internet Security on behalf of China
Telecom
China Telecom Corporation Limited Annual Report 2009
95
Corporate Social Responsibility Report (continued)
Focusing on effi ciency and environmental protection
The Company has long been devoted to promote environment protection and a recyclable economic development and our
communications projects are always constructed under the measures and guidelines for environmental protection. In 2009, in line
with the global calls for reduction of emission, the Company has increased its efforts in developing energy-saving products and has
also assisted different industries and sectors to improve their operational effi ciency by offering diversifi ed applications for information
technology. During the fi rst “World Low Carbon and Eco-Economy Conference and Technology Exposition” held in November, the
Company exhibited a number of applications for industry informatisation that cater for a low-carbon economy, such as
“E-Government”, “Digital Environment Protection”, “Construction of Safe City”, “Digital Scenery” and “E-farm” and received wide
recognition from the public for the encouraging amount of energy to be saved and emissions to be reduced.
The Company has been proactive in promoting energy saving and emission reduction within the Company through improving the
effi ciency of its facilities and reducing energy consumption and emission, which achieved a saving of 220 million kWh of energy and
RMB200 million of energy costs over the year. This brilliant result has built a strong internal atmosphere of “conservation-oriented
enterprise”, while establishing a good external image of being an “environmentally-friendly enterprise”.
By leveraging the features of the telecommunications industry, the Company has insisted on technology innovation and actively
provided informatisation solutions so as to develop new products to promote energy-saving and emission-reduction among various
enterprises, industries and the society and to make due contribution for the construction of a conservation-oriented society. The
Company has also provided “Global Mega-eye”, “Best Tone” and other communication application products to individuals,
enterprises and industries as substitutes for traditional information transmission methods. This will facilitate the saving of offi ce
resources and transportation resources and promote the construction of a conservation-oriented society.
Through its long history of development and business in the communications industry in China, the Company has been the
“backbone” of national communication development. In the future, in line with further strategic adjustment in China’s economic
structure and the continuous acceleration of efforts to popularise information technology within national economic activities in China,
the Company will continue to provide its customers with convenient, diverse and customised integrated information services with a
high price/function ratio, integrating various services, networks and terminals and extending value chain. This will bring extensive
and far-reaching effects on the informatisation of society and the daily lives of the public, and help the Company to better achieve its
goal in serving the national economy and promoting social development. The Company will sincerely provide returns to society and
make its due contribution to the construction of a more harmonious society.
W e Innovate
We Trans f o r m
We Differentiate
Superior
Prospect
To Grow
To Succeed
To T ri v e
98 China Telecom Corporation Limited Annual Report 2009
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the annual general meeting of China Telecom Corporation Limited (the “Company”) for the year
ended 2009 will be held at 11:00 am on 25 May 2010 at Nathan Room, Lower Lobby, Conrad Hong Kong, Pacifi c Place, 88
Queensway, Hong Kong to consider and, if thought fi t, pass the following businesses:
Ordinary Resolutions
1.
2.
3.
THAT the consolidated fi nancial statements of the Company, the report of the Board of Directors, the report of the Supervisory
Committee and the report of the international auditor for the year ended 31 December 2009 be considered and approved,
and the Board of Directors (the “Board”) be authorised to prepare the budget of the Company for year 2010;
THAT the profi t distribution proposal and the declaration and payment of a fi nal dividend for the year ended 31 December
2009 be considered and approved;
THAT the reappointment of KPMG and KPMG Huazhen as the international auditor and domestic auditor of the Company
respectively for the year ending 31 December 2010 be considered and approved, and the Board be authorised to fi x the
remuneration of the auditors;
and to consider and approve other businesses (if any).
And as special business, to consider and, if thought fi t, pass the following as special resolutions:
Special Resolutions
4.
To consider and approve, by way of special resolutions, each of the following resolutions in relation to the proposed granting
of a general mandate to the Board of the Company to issue debentures:
(1)
THAT the granting of a general mandate to the Board to issue debentures denominated in local or foreign currencies, in
one or more tranches, including, but not limited to, short-term commercial paper, medium term note, company bonds,
corporate debts, convertible bonds, asset securitisation products and asset-backed notes, from the date of this
meeting until the date on which the annual general meeting of the Company for the year 2010 is held, with a maximum
outstanding repayment amount of up to RMB90 billion;
(2)
THAT the Board or any two or more directors of the Company duly authorised by the Board, taking into account the
specifi c needs of the Company and market conditions, be and are hereby generally and unconditionally authorised to:
(a)
(b)
(c)
determine the specifi c terms and conditions of, and other matters relating to, the issue of debentures, including,
but not limited to, the determination of the type, amount, interest rate, term, rating, security, any repurchase or
redemption provisions, any placing arrangements, any option to adjust the nominal interest rate and use of
proceeds, secure approvals, engage professional advisors, disseminate relevant application documents to the
regulatory authorities, obtain approvals from the regulatory authorities, execute all requisite legal documentation
relating to the issue as requested by the regulatory authorities and make relevant disclosure;
do all such acts which are necessary and incidental to the issue of debentures (including, but not limited to, the
securing of approvals, the determination of underwriting arrangements, preparation and dissemination of relevant
application documents to the regulatory authorities, and the securing of approvals from the regulatory authorities);
and
take all such steps which are necessary for the purposes of executing the issue of debentures (including, but not
limited to, the execution of all requisite documentation and the disclosure of relevant information in accordance
with applicable laws)
and to the extent that any of the aforementioned acts and steps that have already been undertaken by the Board or the
duly authorised Directors in connection with the issue of debentures, be and are hereby approved, confi rmed and
ratifi ed.
5.
To consider and approve, by way of special resolutions, each of the following resolutions in relation to the proposed issue of
debentures:
(1)
THAT the Company’s issue of debentures denominated in local or foreign currencies with an aggregate amount of
RMB90 billion, within which the issue of company bonds in the PRC in one or more tranches not exceeding RMB30
billion be and is hereby approved with:
(a)
Size of issue: Up to RMB30 billion.
China Telecom Corporation Limited Annual Report 2009
99
Notice of Annual General Meeting (continued)
(b)
(c)
Placing to existing shareholders: The company debentures will not be issued to existing shareholders on a
preferred basis by way of placing.
Term: The company debentures will have a term not exceeding 10 years and may have the same term or different
terms, which will be determined in accordance with the market conditions and the Company’s capital
requirements.
(d) Use of proceeds: The company bonds issued will be for the purpose of supplementing the general working
capital of the Company.
(e)
Effective period: from the date on which the resolutions passed to the date on which the annual general meeting
of the Company for the year 2010 is held.
(2)
THAT the Board or any two or more Directors of the Company duly authorised by the Board be and are hereby
generally and unconditionally authorised to:
(a)
(b)
(c)
(d)
(e)
determine the type, specifi c terms and conditions of, and other matters relating to, the issue (including, but not
limited to, the determination of the type, amount, interest rate, term, rating, security, whether there will be
repurchase or redemption provisions, whether there will be an option to adjust the nominal interest rate and
specifi c arrangements relating to the use of proceeds within the scope approved by the shareholders in this
meeting);
do all such acts which are necessary and incidental to the issue (including, but not limited to, the securing of
approvals, engaging professional advisors, the determination of underwriting arrangements, preparation and
dissemination of relevant application documents to the regulatory authorities, and the securing of approvals from
the regulatory authorities);
take all such steps which are necessary for the purposes of executing the issue (including, but not limited to, the
execution of all requisite documentation and the disclosure of relevant information in accordance with applicable
laws), and to the extent that any of the above acts and steps that have already been undertaken by the Board or
the Directors in connection with the issue, be and are hereby approved, confi rmed and ratifi ed;
if there are changes in the regulatory policies or market conditions, adjust the specifi c proposal relating to the
issue and related matters in accordance with the opinion of the regulatory authorities; and
after completion of the issue, determine and approve matters relating to the listing of the relevant company
bonds.
6.
THAT:
(a)
(b)
(c)
subject to paragraph (c) below, the exercise by the Board during the Relevant Period (as hereinafter defi ned) of all the
powers of the Company to allot, issue and deal with additional shares of the Company and to make or grant offers,
agreements and options which might require the exercise of such powers be hereby generally and unconditionally
approved;
the approval in paragraph (a) shall authorise the Board during the Relevant Period to make or grant offers, agreements
and options which might require the exercise of such powers after the end of the Relevant Period;
the amount of additional domestic Shares or overseas-listed foreign invested shares (“H Shares”) (as the case may be)
allotted, issued and dealt with or agreed conditionally or unconditionally to be allotted, issued and dealt with either
separately or concurrently by the Board pursuant to the approval in paragraph (a), otherwise than pursuant to (i) a
Rights Issue (as hereinafter defi ned) or (ii) any scrip dividend or similar arrangement providing for the allotment of Shares
in lieu of the whole or part of a dividend on Shares in accordance with the articles of association of the Company shall
not exceed 20% of each of the Company’s existing domestic Shares and H Shares (as the case may be) in issue at the
date of passing this special resolution; and
(d)
for the purpose of this special resolution 6:
“Relevant Period” means the period from the passing of special resolution 6 until the earliest of:
(i)
the conclusion of the next annual general meeting of the Company;
100 China Telecom Corporation Limited Annual Report 2009
Notice of Annual General Meeting (continued)
(ii)
the expiration of the 12 months period following the passing of these special resolutions; and
(iii)
the revocation or variation of the authority given to the Board under these special resolutions by a special
resolution of the Company’s shareholders in its general meeting.
“Rights Issue” means an offer of shares open for a period fi xed by the Board to holders of Shares on the register of
members on a fi xed record date in proportion of their holdings of such Shares (subject to such exclusion or other
arrangements as the Board may deem necessary or expedient in relation to fractional entitlements or having regard to
any legal or practical restrictions or obligations under the laws of, or the requirement of, any recognised regulatory body
or any stock exchange in any territory applicable to the Company) and an offer, allotment or issue of shares by way of
rights shall be construed accordingly.
7.
THAT the Board be authorised to increase the registered capital of the Company to refl ect the issue of shares in the Company
authorised under special resolution 6, and to make such appropriate and necessary amendments to the articles of association
of the Company as they think fi t to refl ect such increases in the registered capital of the Company and to take any other action
and complete any formality required to effect such increase of the registered capital of the Company.
By Order of the Board
China Telecom Corporation Limited
Yung Shun Loy, Jacky
Company Secretary
Beijing, PRC
8 April 2010
Notes:
(1)
(2)
(3)
Shareholders who submit their share transfer application forms to the Company’s share registrar before 4:30 p.m. on 23 April 2010 and then
register as shareholders on the register of members of the Company are entitled to attend the annual general meeting.
Each shareholder entitled to attend and vote at the annual general meeting may appoint one or more proxies to attend and vote on his behalf
at the annual general meeting. A proxy need not be a shareholder. Each shareholder who wishes to appoint one or more proxies should fi rst
review the annual report of the Company for the year 2009, which is expected to be dispatched to shareholders around 8 April 2010.
To be valid, the form of proxy together with the power of attorney or other authorisation document (if any) signed by the authorised person or
notarially certifi ed power of attorney must be delivered to the Offi ce of the Board of the Company for holders of domestic shares and to the
Computershare Hong Kong Investor Services Limited for holders of H shares not less than 24 hours before the designated time for the holding
of the annual general meeting. Completion and return of a form of proxy will not preclude a shareholder from attending in person and voting at
the annual general meeting if he so wishes. The address of the share registrar for the Company’s H shares is Computershare Hong Kong
Investor Services Limited, 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(4)
All resolutions proposed at the AGM will be voted by poll.
(5)
The registration procedure for attending the annual general meeting:
(a)
shareholders attending the annual general meeting in person or by proxy shall present their identity certification. If the attending
shareholder is a corporation, its legal representative or person authorised by the Board or other decision making authority shall present
a copy of the relevant resolution of the Board or other decision making authority in order to attend the annual general meeting.
(b)
shareholders intending to attend the annual general meeting shall return the attendance slip via hand delivery, mail or fax to the Offi ce of
the Board of the Company on or before 4 May 2010.
(6)
Closure of the register of members:
The register of members of the Company will be closed from 25 April 2010 to 25 May 2010 (both days inclusive).
(7)
The annual general meeting is expected to last for half a day and shareholders (in person or by proxy) attending the annual general meeting
shall be responsible for their own transport and accommodation expenses.
(8)
The address of the Offi ce of the Board is as follows:
31 Jinrong Street
Xicheng District, Beijing 100033
PRC
Contact person: Yung Shun Loy, Jacky
Telephone: (8610) 6642 8166
Facsimile: (8610) 6601 0728
China Telecom Corporation Limited Annual Report 2009
101
Report of the Independent International Auditor
To the Shareholders of
China Telecom Corporation Limited
(Incorporated in The People’s Republic of China with limited liability)
We have audited the consolidated fi nancial statements of China Telecom Corporation Limited (the “Company”) set out on pages 102
to 166, which comprise the consolidated and company statement of financial position as at 31 December 2009, and the
consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement
of cash fl ows for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes.
Directors’ Responsibility for the Financial Statements
The directors of the Company are responsible for the preparation and the true and fair presentation of these fi nancial statements in
accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and the
disclosure requirements of the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and
maintaining internal control relevant to the preparation and the true and fair presentation of fi nancial statements that are free from
material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting
estimates that are reasonable in the circumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on these fi nancial statements based on our audit. This report is made solely to you, as a
body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of
the report.
We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certifi ed Public
Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance as to whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements.
The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the
fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the entity’s preparation and true and fair presentation of the fi nancial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated fi nancial statements give a true and fair view of the state of affairs of the Company and of the Group
as at 31 December 2009 and of the Group’s profi t and cash fl ows for the year then ended in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board and the disclosure requirements of the Hong Kong
Companies Ordinance.
KPMG
Certifi ed Public Accountants
8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong
22 March 2010
102
China Telecom Corporation Limited Annual Report 2009
Consolidated Statement of Financial Position
At 31 December 2009
(Amounts in millions)
Note
2009
RMB
2008
RMB
ASSETS
Non-current assets
Property, plant and equipment, net
Construction in progress
Lease prepayments
Goodwill
Intangible assets
Interests in associates
Investments
Deferred tax assets
Other assets
Total non-current assets
Current assets
Inventories
Income tax recoverable
Accounts receivable, net
Prepayments and other current assets
Time deposits with original maturity over three months
Cash and cash equivalents
Total current assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Short-term debt
Current portion of long-term debt
Accounts payable
Accrued expenses and other payables
Income tax payable
Current portion of fi nance lease obligations
Current portion of deferred revenues
Total current liabilities
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Long-term debt
Finance lease obligations
Deferred revenues
Deferred tax liabilities
Total non-current liabilities
Total liabilities
The notes on pages 110 to 166 form part of these fi nancial statements.
4
5
6
7
9
10
11
19
12
13
14
15
16
16
17
18
19
16
19
11
286,328
11,567
5,517
29,922
12,311
997
722
12,898
5,322
299,159
13,615
5,608
29,922
14,235
882
177
14,628
6,612
365,584
384,838
2,628
1,714
17,438
3,910
442
34,804
2,561
—
17,289
7,386
397
27,866
60,936
55,499
426,520
440,337
51,650
1,487
34,321
52,193
395
18
3,417
83,448
565
34,458
53,628
164
22
4,505
143,481
176,790
(82,545)
(121,291)
283,039
263,547
52,768
—
5,045
2,613
39,226
18
6,939
2,816
60,426
48,999
203,907
225,789
China Telecom Corporation Limited Annual Report 2009
103
Consolidated Statement of Financial Position (continued)
At 31 December 2009
(Amounts in millions)
Equity
Share capital
Reserves
Total equity attributable to equity holders of the Company
Minority interests
Total equity
Total liabilities and equity
Approved and authorised for issue by the Board of Directors on 22 March 2010.
Note
20
21
2009
RMB
2008
RMB
80,932
140,800
221,732
881
80,932
132,104
213,036
1,512
222,613
214,548
426,520
440,337
Wang Xiaochu
Chairman and Chief
Executive Offi cer
Shang Bing
Executive Director,
President and
Chief Operating Offi cer
Wu Andi
Executive Director,
Executive Vice President
and Chief Financial Offi cer
The notes on pages 110 to 166 form part of these fi nancial statements.
104
China Telecom Corporation Limited Annual Report 2009
Statement of Financial Position
At 31 December 2009
(Amounts in millions)
ASSETS
Non-current assets
Property, plant and equipment, net
Construction in progress
Lease prepayments
Goodwill
Intangible assets
Investments in subsidiaries
Interests in associates
Investments
Deferred tax assets
Other assets
Total non-current assets
Current assets
Inventories
Income tax recoverable
Accounts receivable, net
Prepayments and other current assets
Time deposits with original maturity over three months
Cash and cash equivalents
Total current assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Short-term debt
Current portion of long-term debt
Accounts payable
Accrued expenses and other payables
Income tax payables
Current portion of fi nance lease obligations
Current portion of deferred revenues
Total current liabilities
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Long-term debt
Finance lease obligations
Deferred revenues
Deferred tax liabilities
Total non-current liabilities
Total liabilities
The notes on pages 110 to 166 form part of these fi nancial statements.
Note
2009
RMB
2008
RMB
4
5
6
7
8
9
10
11
19
12
13
14
15
16
16
17
18
19
16
19
11
283,628
11,475
5,513
29,877
12,201
8,555
736
148
12,815
5,272
296,201
13,525
5,600
29,877
14,147
8,435
737
177
14,520
6,577
370,220
389,796
1,739
1,711
16,230
3,805
135
27,526
1,907
—
16,185
7,426
113
21,556
51,146
47,187
421,366
436,983
51,650
1,487
32,183
52,713
215
18
3,412
83,443
556
33,108
54,140
123
22
4,502
141,678
175,894
(90,532)
(128,707)
279,688
261,089
52,768
—
5,045
2,501
39,226
18
6,939
2,802
60,314
48,985
201,992
224,879
China Telecom Corporation Limited Annual Report 2009
105
Statement of Financial Position (continued)
At 31 December 2009
(Amounts in millions)
Equity
Share capital
Reserves
Total equity
Total liabilities and equity
Approved and authorised for issue by the Board of Directors on 22 March 2010.
Note
20
21
2009
RMB
2008
RMB
80,932
138,442
80,932
131,172
219,374
212,104
421,366
436,983
Wang Xiaochu
Chairman and Chief
Executive Offi cer
Shang Bing
Executive Director,
President and
Chief Operating Offi cer
Wu Andi
Executive Director,
Executive Vice President
and Chief Financial Offi cer
The notes on pages 110 to 166 form part of these fi nancial statements.
106
China Telecom Corporation Limited Annual Report 2009
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2009
(Amounts in millions, except per share data)
Operating revenues
Operating expenses
Depreciation and amortisation
Network operations and support
Selling, general and administrative
Personnel expenses
Other operating expenses
Impairment loss on property, plant and equipment
Total operating expenses
Operating profi t
Net fi nance costs
Investment income
Share of profi ts of associates
Profi t before taxation
Income tax
Profi t for the year
Other comprehensive income/(loss) for the year:
Change in fair value of available-for-sale equity securities
Deferred tax on change in fair value of available-for-sale equity securities
Exchange difference on translation of fi nancial statements of subsidiaries
outside mainland PRC
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income for the year
Profi t attributable to:
Equity holders of the Company
Minority interests
Profi t for the year
Total comprehensive income attributable to:
Equity holders of the Company
Minority interests
Total comprehensive income for the year
Basic earnings per share
Weighted average number of shares
The notes on pages 110 to 166 form part of these fi nancial statements.
Note
2009
RMB
2008
RMB
(restated)
22
209,370
186,529
(52,243)
(42,903)
(40,507)
(32,857)
(17,449)
(753)
(53,880)
(36,096)
(27,501)
(28,946)
(10,794)
(24,167)
(186,712)
(181,384)
22,658
(4,375)
791
101
19,175
(4,549)
14,626
538
(120)
(2)
416
15,042
14,422
204
14,626
14,763
279
15,042
0.18
5,145
(5,076)
5
112
186
793
979
(92)
23
(83)
(152)
827
884
95
979
732
95
827
0.01
80,932
80,932
23
24
4
25
26
27
32
32
China Telecom Corporation Limited Annual Report 2009
107
Consolidated Statement of Changes in Equity
For the year ended 31 December 2009
(Amounts in millions)
Attributable to equity holders of the Company
Share
capital
RMB
Capital
reserve
RMB
Share
premium
RMB
Note
Re-
valuation
reserve
RMB
Statutory
reserves
RMB
Other
reserves
RMB
Exchange
reserve
RMB
Retained
earnings
RMB
Minority
interests
RMB
Total
RMB
Total
equity
RMB
Balance as at 1 January 2008
Deferred tax on revaluation
surplus of property, plant
and equipment realised
Revaluation surplus realised
Deferred tax on land use
rights realised
Distributions to minority
interests
Dividends
Distribution to China
Telecommunications
Corporation
Adjustment to statutory
reserves
Transfer from retained
earnings to other reserves
Consideration for the
acquisition of the Fourth
Acquired Company
Total comprehensive
income for the year
Balance as at
31 December 2008
Deferred tax on revaluation
surplus of property, plant
and equipment realised
Revaluation surplus realised
Deferred tax on
land use rights realised
Distributions to minority
interests
Disposal of a subsidiary
Dividends
Appropriations
Total comprehensive
income for the year
Balance as at
31 December 2009
31
1
31
21
80,932
(2,804)
10,746
11,972
52,367
8,327
(582)
63,563
224,521
1,451
225,972
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(562)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,718
—
—
—
127
—
(132)
—
—
(535)
—
425
(5,557)
—
—
—
—
—
—
—
—
—
(127)
562
132
—
—
—
—
—
—
—
—
—
—
(6,125)
—
(6,125)
(34)
—
(34)
(6,125)
—
(535)
(3,718)
(425)
—
—
—
(5,557)
—
—
—
—
95
(535)
—
—
(5,557)
827
(69)
(83)
884
732
80,932
(2,804)
10,746
11,410
56,085
2,586
(665)
54,746
213,036
1,512
214,548
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(547)
—
—
—
—
—
—
—
—
—
—
—
—
4,521
125
—
(147)
—
—
—
—
—
—
—
—
—
—
—
(125)
547
147
—
—
(6,067)
(4,521)
—
—
—
—
—
(6,067)
—
—
—
—
(867)
(43)
—
—
—
—
—
(867)
(43)
(6,067)
—
—
343
(2)
14,422
14,763
279
15,042
80,932
(2,804)
10,746
10,863
60,606
2,907
(667)
59,149
221,732
881
222,613
The notes on pages 110 to 166 form part of these fi nancial statements.
108
China Telecom Corporation Limited Annual Report 2009
Consolidated Statement of Cash Flows
For the year ended 31 December 2009
(Amounts in millions)
Net cash from operating activities
(a)
74,988
76,756
Note
2009
RMB
2008
RMB
Cash fl ows from investing activities
Capital expenditure
Purchase of investments
Lease prepayments
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of lease prepayments
Proceeds from disposal of investments
Purchase of time deposits with maturity over three months
Maturity of time deposits with maturity over three months
Payment of purchase price for the acquisition of CDMA business,
net of cash acquired
Net cash used in investing activities
Cash fl ows from fi nancing activities
Principal element of fi nance lease payments
Proceeds from bank and other loans
Proceeds from issuance of medium-term notes
Repayments of bank and other loans
Repayment of short-term commercial papers
Repayment of amount due to China Telecommunications Corporation
in connection with the First Acquisition
Repayment of amount due to China Telecommunications Corporation
in connection with the Second Acquisition
Payment of purchase price for the Fourth Acquisition
Payment of dividends
Net cash distributions to minority interests
(40,311)
(23)
(94)
393
380
735
(442)
397
(46,652)
(92)
(120)
620
—
111
(397)
222
(4,290)
(29,511)
(43,255)
(75,819)
(22)
88,958
29,906
(111,084)
(10,000)
(24)
109,235
19,787
(96,650)
—
—
(15,000)
(15,150)
—
(6,493)
(908)
—
(5,557)
(6,167)
(39)
Net cash (used in)/generated from fi nancing activities
(24,793)
5,585
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Effect of changes in foreign exchange rate
6,940
27,866
(2)
6,522
21,427
(83)
Cash and cash equivalents at 31 December
34,804
27,866
The notes on pages 110 to 166 form part of these fi nancial statements.
China Telecom Corporation Limited Annual Report 2009
109
Consolidated Statement of Cash Flows (continued)
For the year ended 31 December 2009
(Amounts in millions)
(a) Reconciliation of profi t before taxation to net cash from operating activities
Profi t before taxation
Adjustments for:
Depreciation and amortisation
Impairment loss on property, plant and equipment
Impairment losses for doubtful debts
Impairment losses for inventory
Investment income
Share of profi ts of associates
Interest income
Interest expense
Unrealised foreign exchange (gain)/loss
Loss on retirement and disposal of property, plant and equipment
Operating profi t before changes in working capital, net of effect of acquisition
Increase in accounts receivable
(Increase)/decrease in inventories
Increase in prepayments and other current assets
Decrease in other assets
Increase in accounts payable
Increase in accrued expenses and other payables
Decrease in deferred revenues
Cash generated from operations
Interest received
Interest paid
Investment income received
Income tax paid
2009
RMB
19,175
52,243
753
1,791
108
(791)
(101)
(282)
4,724
(67)
1,352
78,905
(1,906)
(175)
(78)
1,290
2,178
7,105
(2,982)
84,337
271
(5,053)
58
(4,625)
2008
RMB
186
53,880
24,167
1,828
—
(5)
(112)
(430)
5,336
170
2,550
87,570
(1,439)
357
(1,155)
1,309
3,745
3,000
(4,042)
89,345
440
(5,055)
21
(7,995)
Net cash from operating activities
74,988
76,756
The notes on pages 110 to 166 form part of these fi nancial statements.
110
China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements
For the year ended 31 December 2009
1. Principal Activities, Organisation and Basis of Presentation
Principal activities
China Telecom Corporation Limited (the “Company”) and its subsidiaries (hereinafter, collectively referred to as the “Group”)
offers a comprehensive range of wireline and mobile telecommunications services including wireline voice, mobile voice,
Internet, managed data and leased line, value-added services, integrated information application services and other related
services. The Group provides wireline telecommunications services and related services in Beijing Municipality, Shanghai
Municipality, Guangdong Province, Jiangsu Province, Zhejiang Province, Anhui Province, Fujian Province, Jiangxi Province,
Guangxi Zhuang Autonomous Region, Chongqing Municipality, Sichuan Province, Hubei Province, Hunan Province, Hainan
Province, Guizhou Province, Yunnan Province, Shaanxi Province, Gansu Province, Qinghai Province, Ningxia Hui Autonomous
Region, Xinjiang Uygur Autonomous Region and Hong Kong Special Administrative Region of the People’s Republic of China
(the “PRC”). Following the acquisition of Code Division Multiple Access (“CDMA”) mobile communication business in October
2008, the Group also provides nation-wide mobile telecommunications and related services in the mainland of the PRC and
the Macau Special Administrative Region of the PRC. The Group also provides leased line and other related services in certain
countries of the Asia Pacifi c, South America and North America regions.
The operations of the Group in the mainland PRC are subject to the supervision and regulation by the PRC government. The
Ministry of Industry and Information Technology of the PRC (hereinafter “MIIT”), pursuant to the authority delegated to it by the
PRC State Council, is responsible for formulating the telecommunications industry policies and regulations, including the
regulation and setting of tariff levels for basic telecommunications services, such as wireline and mobile local and long
distance telephony services, managed data services, leased line, roaming and interconnection arrangements.
Organisation
China Telecommunications Corporation (together with its subsidiaries other than the Group referred to as “China Telecom
Group”) is a state-owned enterprise which is under the supervision and regulation of the MIIT of the PRC. In November 2001,
pursuant to an industry restructuring plan approved by the State Council, China Telecommunications Corporation’s wireline
telecommunications networks and related operations in 10 northern provinces, municipalities and autonomous regions of the
PRC were transferred to the former China Netcom Group (subsequently merged with China United Network Communications
Group Company Limited). China Telecommunications Corporation retained the wireline telecommunications networks and
related operations of 21 provinces, municipalities and autonomous regions of the PRC, including those of the Company’s
subsidiaries. In accordance with this industry restructuring plan, China Telecommunications Corporation and the former China
Netcom Group own 70% and 30%, respectively, of the nationwide inter-provincial optic fi bres.
As part of the reorganisation (the “Restructuring”) of China Telecommunications Corporation, the Company was incorporated
in the PRC on 10 September 2002. In connection with the Restructuring, China Telecommunications Corporation transferred
to the Company the wireline telecommunications business and related operations in Shanghai Municipality, Guangdong
Province, Jiangsu Province and Zhejiang Province together with the related assets and liabilities (the “Predecessor
Operations”) in consideration for 68,317 million ordinary domestic shares of the Company. The shares issued to China
Telecommunications Corporation have a par value of RMB1.00 each and represented the entire registered and issued share
capital of the Company at that date.
Pursuant to the resolution passed by the Company’s independent shareholders at an Extraordinary General Meeting held on
15 December 2003, the Company acquired the entire equity interests in Anhui Telecom Company Limited, Fujian Telecom
Company Limited, Jiangxi Telecom Company Limited, Guangxi Telecom Company Limited, Chongqing Telecom Company
Limited and Sichuan Telecom Company Limited (collectively the “First Acquired Group”) and certain network management and
research and development facilities from China Telecommunications Corporation for a total purchase price of RMB46,000
million on 31 December 2003 (hereinafter, referred to as the “First Acquisition”). The purchase price consisted of a cash
payment of RMB11,000 million and a long-term payable of RMB35,000 million. The remaining balance of the long-term
payable was settled in October 2008.
China Telecom Corporation Limited Annual Report 2009
111
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
1. Principal Activities, Organisation and Basis of Presentation (continued)
Organisation (continued)
Pursuant to the resolution passed by the Company’s independent shareholders at an Extraordinary General Meeting held on 9
June 2004, the Company acquired the entire equity interests in Hubei Telecom Company Limited, Hunan Telecom Company
Limited, Hainan Telecom Company Limited, Guizhou Telecom Company Limited, Yunnan Telecom Company Limited, Shaanxi
Telecom Company Limited, Gansu Telecom Company Limited, Qinghai Telecom Company Limited, Ningxia Telecom Company
Limited and Xinjiang Telecom Company Limited (collectively the “Second Acquired Group”) from China Telecommunications
Corporation for a total purchase price of RMB27,800 million on 30 June 2004 (hereinafter, referred to as the “Second
Acquisition”). The purchase price consisted of a cash payment of RMB8,340 million and a long-term payable of RMB19,460
million. On 30 June 2004, the Company repaid RMB4,310 million of this payable amount using the net proceeds from the
issuance of new H shares in May 2004. The remaining balance of the long-term payable was settled in March 2009.
Pursuant to an equity purchase agreement entered into by the Company with China Telecommunications Corporation on 15
June 2007, the Company acquired the entire equity interests in China Telecom System Integration Co., Ltd. (“CTSI”), China
Telecom (Hong Kong) International Limited (“CT (HK)”) and China Telecom (Americas) Corporation (“CT Americas”) (collectively
the “Third Acquired Group”) from China Telecommunications Corporation for a total purchase price of RMB1,408 million
(hereinafter, referred to as the “Third Acquisition”). The purchase price was fully paid in July 2007.
Pursuant to an acquisition agreement entered into by the Company and China Telecommunications Corporation on 31 March
2008, the Company acquired the entire equity interest in China Telecom Group Beijing Corporation (“Beijing Telecom” or the
“Fourth Acquired Company”) from China Telecommunications Corporation for a total purchase price of RMB5,557 million
(hereinafter, referred to as the “Fourth Acquisition”). The purchase price was fully paid in July 2008.
Hereinafter, the First Acquired Group, the Second Acquired Group, the Third Acquired Group and the Fourth Acquired
Company are collectively referred to as the “Acquired Groups”.
Basis of presentation
Since the Group is under common control of China Telecommunications Corporation, the Group’s above acquisitions have
been accounted for as a combination of entities under common control in a manner similar to a pooling-of-interests.
Accordingly, the assets and liabilities of these entities have been accounted for at historical amounts and the consolidated
fi nancial statements of the Group prior to the acquisitions are combined with the fi nancial statements of the Acquired Groups.
The consideration for the acquisition of these entities are accounted for as an equity transaction in the consolidated statement
of changes in equity.
Merger with subsidiaries
Pursuant to the resolution passed by the Company’s shareholders at an Extraordinary General Meeting held on 25 February
2008, the Company entered into merger agreements with each of the following subsidiaries: Shanghai Telecom Company
Limited, Guangdong Telecom Company Limited, Jiangsu Telecom Company Limited, Zhejiang Telecom Company Limited,
Anhui Telecom Company Limited, Fujian Telecom Company Limited, Jiangxi Telecom Company Limited, Guangxi Telecom
Company Limited, Chongqing Telecom Company Limited, Sichuan Telecom Company Limited, Hubei Telecom Company
Limited, Hunan Telecom Company Limited, Hainan Telecom Company Limited, Guizhou Telecom Company Limited, Yunnan
Telecom Company Limited, Shaanxi Telecom Company Limited, Gansu Telecom Company Limited, Qinghai Telecom
Company Limited, Ningxia Telecom Company Limited and Xinjiang Telecom Company Limited. In addition, the Company
entered into merger agreements with Beijing Telecom on 1 July 2008. Pursuant to these merger agreements, the Company
merged with these subsidiaries and the assets, liabilities and business operations of these subsidiaries were transferred to the
Company’s branches in the respective regions.
112 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
2. Signifi cant Accounting Policies
(a) Basis of preparation
The accompanying financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). IFRS includes International
Accounting Standards (“IAS”) and interpretations. These financial statements also comply with the disclosure
requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Rules Governing
the Listing of Securities on the Stock Exchange of Hong Kong Limited.
These fi nancial statements are prepared on the historical cost basis as modifi ed by the revaluation of certain property,
plant and equipment (Note 2(g)) and available-for-sale equity securities (Note 2(m)). The accounting policies described
below have been consistently applied by the Group.
The preparation of the financial statements in conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under the circumstances, the results of which
form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results could differ from those estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the
revision and future periods if the revision affects both current and future periods.
Judgements made by management in the application of IFRS that have signifi cant effect on the fi nancial statements and
estimates with a signifi cant risk of material adjustment in future fi nancial periods are described in Note 39.
(b) Basis of consolidation
The consolidated financial statements comprise the Company and its subsidiaries and the Group’s interests in
associates. A subsidiary is an entity controlled by the Company. Control exists when the Company has the power,
directly or indirectly, to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities.
The fi nancial results of subsidiaries are included in the consolidated fi nancial statements from the date that control
commences until the date that control ceases, and the profi t attributable to minority interests is separately presented on
the face of the consolidated statement of comprehensive income as an allocation of the profi t or loss for the year
between the minority interests and the equity holders of the Company. Minority interests represent the portion of the net
assets of subsidiaries attributable to equity interests that are not owned by the Company, whether directly or indirectly
through subsidiaries. Minority interests at the end of the reporting period are presented in the consolidated statement of
fi nancial position within equity and consolidated statement of changes in equity, separately from equity attributable to
the equity holders of the Company.
An associate is an entity, not being a subsidiary, in which the Group exercises signifi cant infl uence, but not control, over
its management. Signifi cant infl uence is the power to participate in the fi nancial and operating policy decisions of the
investee but is not control over those policies.
An investment in an associate is accounted for in the consolidated fi nancial statements under the equity method and is
initially recorded at cost and adjusted thereafter for the Group’s equity share of the post-acquisition changes in the
associate’s net assets.
China Telecom Corporation Limited Annual Report 2009
113
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
2. Signifi cant Accounting Policies (continued)
(b) Basis of consolidation (continued)
All signifi cant intercompany balances and transactions and any unrealised gains arising from intercompany transactions
are eliminated on consolidation. Unrealised gains arising from transactions with associates are eliminated to the extent
of the Group’s interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains, but only to the
extent that there is no evidence of impairment.
(c) Translation of foreign currencies
The accompanying consolidated fi nancial statements are presented in Renminbi (“RMB”). The functional currency of the
Company and its subsidiaries in mainland PRC is RMB. The functional currency of CT (HK), CT Americas, China
Telecom (Macau) Company Limited (“CT Macau”) and China Telecom (Singapore) Pte. Limited (“CT Singapore”) is Hong
Kong dollars (HK$), US dollars (US$), Macau Pataca (MOP) and Singapore dollars (S$) respectively. Transactions
denominated in currencies other than the functional currency during the year are translated into the functional currency
at the applicable rates of exchange prevailing on the transaction dates. Foreign currency monetary assets and liabilities
are translated into the functional currency using the applicable exchange rates at the end of the reporting period. The
resulting exchange differences, other than those capitalised as construction in progress (Note 2(i)), are recognised as
income or expense in profi t or loss. For the periods presented, no exchange differences were capitalised.
When preparing the Group’s consolidated fi nancial statements, the results of operations of CT (HK), CT Americas, CT
Macau and CT Singapore are translated into Renminbi at average rate prevailing during the year. Statement of fi nancial
position items of CT (HK) and CT Americas, CT Macau and CT Singapore are translated into Renminbi at the foreign
exchange rates ruling at the end of the reporting period. The resulting exchange differences are recognised in other
comprehensive income and accumulated separately in equity in the exchange reserve.
(d) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and time deposits with original maturities of three
months or less when purchased. Cash equivalents are stated at cost, which approximates fair value. None of the
Group’s cash and cash equivalents is restricted as to withdrawal.
(e) Trade and other receivables
Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost less allowance
for impairment of doubtful debts (Note 2(o)) unless the effect of discounting would be immaterial, in which case they are
stated at cost.
(f) Inventories
Inventories consist of materials and supplies used in maintaining the telecommunications network and goods for resale.
Inventories are valued at cost using the specifi c identifi cation method or the weighted average cost method, less a
provision for obsolescence.
Inventories that are held for resale are stated at the lower of cost or net realisable value. Net realisable value is the
estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated
costs necessary to make the sale.
114 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
2. Signifi cant Accounting Policies (continued)
(g) Property, plant and equipment
Property, plant and equipment are initially recorded at cost, less subsequent accumulated depreciation and impairment
losses (Note 2(o)). The cost of an asset comprises its purchase price, any directly attributable costs of bringing the asset
to working condition and location for its intended use and the cost of borrowed funds used during the periods of
construction. Expenditure incurred after the asset has been put into operation, including cost of replacing part of such
an item, is capitalised only when it increases the future economic benefi ts embodied in the item of property, plant and
equipment and the cost can be measured reliably. All other expenditure is expensed as it is incurred.
Subsequent to the revaluation as described in Note 4, property, plant and equipment are carried at revalued amount,
being the fair value at the date of the revaluation, less subsequent accumulated depreciation and impairment losses.
When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the revaluation
is restated proportionately with the change in the gross carrying amount of the asset so that the carrying amount of the
asset after revaluation equals its revalued amount. The separate classes into which the Company groups assets for the
revaluation are buildings and improvements; telecommunications network plant and equipment; and furniture, fi xture,
motor vehicles and other equipment. When an item of property, plant and equipment is revalued, the entire class of
property, plant and equipment to which that asset belongs is revalued simultaneously. When an asset’s carrying amount
is increased as a result of a revaluation, the increase is recognised in other comprehensive income and accumulated in
equity in the revaluation reserve. However, a revaluation increase is recognised as income to the extent that it reverses a
revaluation decrease of the same asset previously recognised as an expense. When an asset’s carrying amount is
decreased as a result of a revaluation, the decrease is recognised as an expense in the profi t or loss. However, a
revaluation decrease is charged directly against any related revaluation surplus to the extent that the decrease does not
exceed the amount held in the revaluation reserve in respect of that same asset. Revaluations are performed with
suffi cient regularity such that the carrying amount does not differ materially from that which would be determined using
fair value at the end of the reporting period. Revaluations are performed annually on items which experience signifi cant
and volatile movements in fair value while items which experience insignifi cant movements in fair value are revalued
every three to fi ve years.
Assets acquired under leasing agreements which effectively transfer substantially all the risks and benefi ts incidental to
ownership from the lessor to the lessee are classifi ed as assets under fi nance leases. Assets held under fi nance leases
are initially recorded at amounts equivalent to the lower of the fair value of the leased assets at the inception of the lease
or the present value of the minimum lease payments (computed using the rate of interest implicit in the lease). The net
present value of the future minimum lease payments is recorded correspondingly as a fi nance lease obligation. Assets
held under fi nance leases are amortised over their estimated useful lives on a straight-line basis. As at 31 December
2009, the carrying amount of assets held under fi nance leases was RMB80 million (2008: RMB93 million).
Gains or losses arising from retirement or disposal of property, plant and equipment are determined as the difference
between the net disposal proceeds and the carrying amount of the asset and are recognised as income or expense in
the profi t or loss on the date of disposal. On retirement or disposal of a revalued asset, the related revaluation surplus is
transferred from the revaluation reserve to retained earnings.
China Telecom Corporation Limited Annual Report 2009
115
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
2. Signifi cant Accounting Policies (continued)
(g) Property, plant and equipment (continued)
Depreciation is provided to write off the cost/revalued amount of each asset over its estimated useful life on a straight-
line basis, after taking into account its estimated residual value, as follows:
Buildings and improvements
Telecommunications network plant and equipment
Furniture, fi xture, motor vehicles and other equipment
Depreciable lives
primarily range from
8 to 30 years
6 to 10 years
5 to 10 years
Where parts of an item of property, plant and equipment have different useful lives, the cost or valuation of the item is
allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an
asset and its residual value are reviewed annually.
(h) Lease prepayments
Lease prepayments represent land use rights paid. Land use rights are initially carried at cost and then charged to profi t
or loss on a straight-line basis over the respective periods of the rights which range from 20 years to 70 years.
(i) Construction in progress
Construction in progress represents buildings, telecommunications network plant and equipment and other equipment
and intangible assets under construction and pending installation, and is stated at cost less impairment losses (Note
2(o)). The cost of an item comprises direct costs of construction, capitalisation of interest charges and foreign exchange
differences on related borrowed funds to the extent that they are regarded as an adjustment to interest charges during
the periods of construction. Capitalisation of these costs ceases and the construction in progress is transferred to
property, plant and equipment and intangible assets when the asset is substantially ready for its intended use.
No depreciation is provided in respect of construction in progress.
(j) Goodwill
Goodwill represents the excess of the cost over the Group’s interest in the fair value of the net assets acquired in the
CDMA acquisition.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is
tested annually for impairment (Note 2(o)). On disposal of a cash generating unit during the year, any attributable amount
of the goodwill is included in the calculation of the profi t or loss on disposal.
(k) Intangible assets
The Group’s intangible assets comprise computer software and customer relationships acquired in the CDMA business
acquisition (Note 7).
Computer software that is not an integral part of any tangible assets, is recorded at cost less subsequent accumulated
amortisation and impairment losses (Note 2(o)). Amortisation of computer software is calculated on a straight-line basis
over the estimated useful lives, which mainly range from three to fi ve years.
The customer relationships acquired in the CDMA acquisition are recorded at the acquisition-date fair value and
amortised on a straight-line basis over the expected customer relationship of fi ve years.
116 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
2. Signifi cant Accounting Policies (continued)
(l)
Investments in subsidiaries
In the Company’s stand-alone statement of financial position, investments in subsidiaries are stated at cost less
impairment losses (Note 2(o)).
(m) Investments
Investments in available-for-sale equity securities are carried at fair value with any change in fair value being recognised
in other comprehensive income and accumulated separately in equity. When these investments are derecognised or
impaired, the cumulative gain or loss previously recognised in other comprehensive income is recognised in the profi t or
loss. Investments in equity securities that do not have a quoted market price in an active market and whose fair value
cannot be reliably measured are stated at cost less impairment losses (Note 2(o)).
(n) Operating lease charges
Where the Group has the use of assets held under operating leases, payments made under the leases are charged to
profi t or loss in equal instalments over the accounting periods covered by the lease term, except where an alternative
basis is more representative of the pattern of benefi ts to be derived from the leased asset. Lease incentives received are
recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are
charged to profi t or loss in the accounting period in which they are incurred.
(o) Impairment
(i)
Impairment of investments in equity securities and trade and other receivables
Investments in equity securities and trade and other receivables are reviewed at the end of each reporting period
to determine whether there is objective evidence of impairment. If such evidence exists, the impairment loss is
measured as the difference between the asset’s carrying amount and the estimated future cash fl ows, discounted
at the current market rate of return for a similar fi nancial asset where the effect of discounting is material, and is
recognised as an expense in profi t or loss. Impairment losses for trade and other receivables are reversed through
profi t or loss if in a subsequent period the amount of the impairment losses decreases. Impairment losses for
equity securities are not reversed.
(ii)
Impairment of long-lived assets
The carrying amounts of the Group’s long-lived assets, including property, plant and equipment, intangible assets
and construction in progress are reviewed periodically to determine whether there is any indication of impairment.
These assets are tested for impairment whenever events or changes in circumstances indicate that their recorded
carrying amounts may not be recoverable. For goodwill, the impairment testing is performed annually at each year
end.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and the net selling
price. When an asset does not generate cash flows largely independent of those from other assets, the
recoverable amount is determined for the smallest group of assets that generates cash infl ows independently (i.e.
a cash-generating unit). In determining the value in use, expected future cash fl ows generated by the assets are
discounted to their present value using a pre-tax discount rate that refl ects current market assessments of time
value of money and the risks specifi c to the asset. The goodwill arising from a business combination, for the
purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the
synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its
estimated recoverable amount. Impairment loss is recognised as an expense in profi t or loss. Impairment loss
recognised in respect of cash-generating units is allocated fi rst to reduce the carrying amount of any goodwill
allocated to the units and then to reduce the carrying amounts of the other assets in the unit (group of units) on a
pro rata basis.
China Telecom Corporation Limited Annual Report 2009
117
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
2. Signifi cant Accounting Policies (continued)
(o) Impairment (continued)
(ii)
Impairment of long-lived assets (continued)
The Group assesses at the end of each reporting period whether there is any indication that an impairment loss
recognised for an asset in prior years may no longer exist. An impairment loss is reversed if there has been a
favourable change in the estimates used to determine the recoverable amount. A subsequent increase in the
recoverable amount of an asset, when the circumstances and events that led to the write-down cease to exist, is
recognised as an income in profit or loss. The reversal is reduced by the amount that would have been
recognised as depreciation had the write-down not occurred. For the years presented, no reversal of impairment
loss was recognised in profi t or loss. An impairment loss in respect of goodwill is not reversed.
(p) Revenue recognition
The revenue recognition methods of the Group are as follows:
(i)
Revenue derived from local, DLD and ILD usage are recognised as the services are provided.
(ii)
Upfront fees received for activation of wireline services and wireline installation charges are deferred and
recognised over the expected customer relationship period. The direct incremental costs associated with the
installation of wireline services are deferred to the extent of the upfront fees and are amortised over the same
expected customer relationship period.
(iii) Monthly service fees are recognised in the month during which the services are provided to customers.
(iv) Revenue from sale of prepaid calling cards are recognised as the cards are used by customers.
(v)
Revenue derived from value-added services are recognised when the services are provided to customers.
(vi) Revenue from the provision of Internet and managed data services are recognised when the services are provided
to customers.
(vii)
Interconnection fees from domestic and foreign telecommunications operators are recognised when the services
are rendered as measured by the minutes of traffi c processed.
(viii) Lease income from operating leases is recognised over the term of the lease.
(ix) Revenue derived from integrated information application services are recognised when the services are provided
to customers.
(x)
Sale of equipment is recognised on delivery of the equipment to customers and when the signifi cant risks and
rewards of ownership and title have been transferred to the customers.
118 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
2. Signifi cant Accounting Policies (continued)
(q) Advertising and promotion expense
The costs for advertising and promoting the Group’s telecommunications services are expensed as incurred. Advertising
and promotion expense, which is included in selling, general and administrative expenses, was RMB22,360 million for
the year ended 31 December 2009 (2008: RMB12,776 million).
(r) Net fi nance costs
Net fi nance costs comprise interest income on bank deposits, interest costs on borrowings, and foreign exchange gains
and losses. Interest income from bank deposits is recognised as it accrues using the effective interest method.
Interest costs incurred in connection with borrowings are calculated using the effective interest method and are
expensed as incurred, except to the extent that they are capitalised as being directly attributable to the construction of
an asset which necessarily takes a substantial period of time to get ready for its intended use.
(s) Research and development expense
Research and development expenditure is expensed as incurred. For the year ended 31 December 2009, research and
development expense was RMB545 million (2008: RMB490 million).
(t) Employee benefi ts
The Group’s contributions to defi ned contribution retirement plans administered by the PRC government are recognised
in profi t or loss as incurred. Further information is set out in Note 37.
Compensation expense in respect of the stock appreciation rights granted is accrued as a charge to the profi t or loss
over the applicable vesting period based on the fair value of the stock appreciation rights. The liability of the accrued
compensation expense is re-measured to fair value at the end of each reporting period with the effect of changes in the
fair value of the liability charged or credited to profi t or loss. Further details of the Group’s stock appreciation rights
scheme are set out in Note 38.
(u) Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial
recognition, interest-bearing borrowings are stated at amortised cost with any difference between the amount initially
recognised and the redemption value recognised in profi t or loss over the period of the borrowings, together with any
interest, using the effective interest method.
(v) Trade and other payables
Trade and other payables are initially recognised at fair value and thereafter stated at amortised cost unless the effect of
discounting would be immaterial, in which case they are stated at cost.
(w) Provisions and contingent liabilities
A provision is recognised in the consolidated statement of fi nancial position when the Group has a legal or constructive
obligation as a result of a past event, and it is probable that an outfl ow of economic benefi ts will be required to settle the
obligation. Where the time value of money is material, provisions are stated at the present value of the expenditure
expected to settle the obligation.
Where it is not probable that an outfl ow of economic benefi ts will be required, or the amount cannot be estimated
reliably, the obligation is disclosed as a contingent liability, unless the probability of outfl ow of economic benefi ts is
remote. Possible obligations, whose existence will only be confi rmed by the occurrence or non-occurrence of one or
more future events, are also disclosed as contingent liabilities unless the probability of outfl ow of economic benefi ts is
remote.
China Telecom Corporation Limited Annual Report 2009
119
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
2. Signifi cant Accounting Policies (continued)
(x) Income tax
Income tax for the year comprises current tax and movement in deferred tax assets and liabilities. Income tax is
recognised in profi t or loss except to the extent that it relates to items recognised in other comprehensive income, in
which case the relevant amounts of tax are recognised in other comprehensive income. Current tax is the expected tax
payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting
period, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet
liability method, providing for all temporary differences between the carrying amounts of assets and liabilities for fi nancial
reporting purposes and their tax bases. The amount of deferred tax is calculated on the basis of the enacted or
substantively enacted tax rates that are expected to apply in the period when the asset is realised or the liability is
settled. The effect on deferred tax of any changes in tax rates is charged or credited to profi t or loss, except for the
effect of a change in tax rate on the carrying amount of deferred tax assets and liabilities which were previously
recognised in other comprehensive income, in such case the effect of a change in tax rate is also recognised in other
comprehensive income.
A deferred tax asset is recognised only to the extent that it is probable that future taxable income will be available
against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that
the related tax benefi t will be realised.
(y) Dividends
Dividends are recognised as a liability in the period in which they are declared.
(z) Segmental reporting
An operating segment is a component of the Group that engages in business activities from which the Group may earn
revenues and incur expenses, and is identifi ed on the basis of the internal fi nancial reports that are provided to and
regularly reviewed by the Group’s chief operating decision maker in order to allocate resource and assess performance
of the segment. For the periods presented, management has determined that the Group has no operating segments as
the Group is only engaged in the integrated telecommunication business. The Group’s assets and operating revenues
derived from activities located outside the PRC are less than 1% of the Group’s assets and operating revenues,
respectively. No geographical area information has been presented as such information is immaterial.
3. Changes in Accounting Policy, Financial Statement Presentation and
Disclosures
The IASB has issued a number of new and revised IFRS and Interpretations that are effective or available for early adoption for
accounting periods beginning on or after 1 January 2009. The Group has adopted these new and revised IFRS in the
preparation of the Group’s fi nancial statements for the year ended 31 December 2009. The Group has not applied any new
standard or interpretations that is not yet effective for the current accounting period (Note 40).
The accounting policies of the Group after the adoption of these new and revised IFRS have been summarised in Note 2. The
following sets out further information on the changes in accounting policies, fi nancial statement presentation and disclosures
for the annual accounting period beginning on 1 January 2009 which have been refl ected in these fi nancial statements.
(i)
IAS 1 (revised 2007), “Presentation of fi nancial statements”
In prior years, the Group’s consolidated fi nancial statements comprised the consolidated balance sheet, consolidated
income statement, consolidated statement of changes in equity, consolidated statement of cash flows and other
explanatory notes. Income and expenses recognised in profit or loss were presented in the consolidated income
statement. All changes in equity during the year arising from transactions with equity shareholders in their capacity and
other income and expenses that the Group recognised directly in equity in accordance with IFRS were presented in the
consolidated statement of changes in equity.
120 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
3. Changes in Accounting Policy, Financial Statement Presentation and
Disclosures (continued)
(i)
IAS 1 (revised 2007), “Presentation of fi nancial statements” (continued)
As a result of the adoption of IAS 1 (revised 2007), the Group’s consolidated income statement is replaced by the
consolidated statement of comprehensive income. All income and expenses recognised in profi t or loss, together with
other income and expenses that were previously recognised directly in equity in accordance with IFRS are now
presented in the consolidated statement of comprehensive income. Comparative amounts have been restated to
conform with the new presentation. This change in presentation has no effect on reported profi t or loss, total income
and expenses or net assets for any periods presented. In addition, the term “consolidated balance sheet” has been
changed to “consolidated statement of fi nancial position” in accordance with IAS 1 (revised 2007).
(ii) IFRIC 13, “Customer loyalty programmes”
The Group has launched a customer loyalty scheme to its telephony and Internet service subscribers that provides
subscribers with bonus point credits. The bonus point credits can be redeemed for free telecommunication services or
other gifts.
In prior years, the Group recognised bonus point credits associated with the customer loyalty scheme as a current
liability based on the estimated fair value of the bonus point credits granted to subscribers, with a corresponding charge
to selling, general and administrative expense. When the subscribers redeemed the awards or when the bonus point
credits expired, the liability was reduced accordingly to refl ect the change in outstanding obligations.
As a result of the adoption of IFRIC 13 which is effective for accounting period beginning on or after 1 July 2008, the
Group accounts for bonus point credits associated with the customer loyalty scheme as a separately identifiable
component of the sales transaction in which bonus point credits are granted. The fair value of the consideration
received or receivable is allocated between bonus point credits and other components of the sale transaction based on
their relative fair values. Consideration allocated to bonus point credits is initially recorded as a current liability which is
subsequently recognised as revenue when the bonus point credits are redeemed by subscribers or the bonus point
credits expire. The costs of gifts redeemed by subscribers is recognised as other operating expenses.
The following table summarises the retrospective adjustments that have been made in accordance with IFRIC 13 to
each of the line items in the consolidated statement of comprehensive income for the year ended 31 December 2008:
Operating revenues
Selling, general and administrative expenses
Other operating expenses
Effect of adoption of IFRIC 13
((decrease)/increase for the year)
RMB millions
(272)
(434)
162
As a result of the adoption of IFRIC 13, the Group’s operating revenues and selling, general and administrative expenses
decreased by RMB92 million and RMB227 million respectively while other operating expenses increased by RMB135
million for the year ended 31 December 2009. The adoption of IFRIC 13 did not have any effect on the Group’s net
profi t and total comprehensive income for the periods presented.
(iii) Amendments to IFRS 7, “Financial Instruments: Disclosure”
As a result of the adoption of the amendments to IFRS 7, Note 34(a) contains disclosures about the fair value
measurement of the Group’s fi nancial instruments, including categorising these fair value measurements into a three-
level fair value hierarchy.
China Telecom Corporation Limited Annual Report 2009
121
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
4. Property, Plant and Equipment, Net
The Group:
Buildings and
improvements
RMB
millions
Telecommunications
network plant and
equipment
RMB
millions
Furniture,
fi xture, motor
vehicles
and other
equipment
RMB
millions
Cost/valuation:
Balance at 1 January 2008
Additions
Transferred from construction in progress
Acquisition of CDMA business
Disposals
Reclassifi cation
Balance at 31 December 2008
Additions
Transferred from construction in progress
Disposals
Reclassifi cation
81,881
100
2,511
920
(148)
—
85,264
185
2,013
(293)
9
Total
RMB
millions
678,242
1,985
44,879
2,633
(15,703)
—
576,153
1,014
40,784
1,622
(14,564)
174
20,208
871
1,584
91
(991)
(174)
605,183
21,589
712,036
852
33,596
(17,535)
42
745
1,277
(1,330)
(51)
1,782
36,886
(19,158)
—
Balance at 31 December 2009
87,178
622,138
22,230
731,546
Accumulated depreciation and impairment:
Balance at 1 January 2008
Acquisition of CDMA business
Depreciation charge for the year
Provision for impairment
Written back on disposal
Reclassifi cation
Balance at 31 December 2008
Depreciation charge for the year
Provision for impairment
Written back on disposal
Reclassifi cation
(20,117)
—
(3,436)
(36)
76
—
(23,513)
(3,643)
—
239
3
(316,560)
(27)
(46,661)
(24,131)
11,545
(99)
(12,273)
(9)
(2,160)
—
912
99
(348,950)
(36)
(52,257)
(24,167)
12,533
—
(375,933)
(13,431)
(412,877)
(42,889)
(753)
15,605
(21)
(2,165)
—
1,265
18
(48,697)
(753)
17,109
—
Balance at 31 December 2009
(26,914)
(403,991)
(14,313)
(445,218)
Net book value at 31 December 2009
60,264
218,147
7,917
286,328
Net book value at 31 December 2008
61,751
229,250
8,158
299,159
122 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
4. Property, Plant and Equipment, Net (continued)
The Company:
Buildings and
improvements
RMB
millions
Telecommunications
network plant and
equipment
RMB
millions
Furniture,
fi xture, motor
vehicles
and other
equipment
RMB
millions
Cost/valuation:
Balance at 1 January 2008
Transferred from subsidiaries
Additions
Transferred from construction in progress
Acquisition of CDMA business
Disposals
Reclassifi cation
Balance at 31 December 2008
Additions
Transferred from construction in progress
Disposals
Reclassifi cation
216
80,852
93
2,422
913
(148)
—
84,348
172
1,967
(233)
27
Total
RMB
millions
861
670,739
1,802
44,592
2,460
(15,495)
—
468
570,381
954
40,647
1,511
(14,393)
177
177
19,506
755
1,523
36
(954)
(177)
599,745
20,866
704,959
771
33,474
(15,950)
32
688
1,201
(1,284)
(59)
1,631
36,642
(17,467)
—
Balance at 31 December 2009
86,281
618,072
21,412
725,765
Accumulated depreciation:
Balance at 1 January 2008
Transferred from subsidiaries
Depreciation charge for the year
Provision for impairment
Written back on disposal
Reclassifi cation
Balance at 31 December 2008
Depreciation charge for the year
Provision for impairment
Written back on disposal
Reclassifi cation
(2)
(19,769)
(3,409)
(36)
76
—
(23,140)
(3,584)
—
190
(1)
(145)
(313,326)
(46,320)
(24,131)
11,438
(83)
(73)
(11,855)
(2,090)
—
884
83
(220)
(344,950)
(51,819)
(24,167)
12,398
—
(372,567)
(13,051)
(408,758)
(42,564)
(753)
14,179
(18)
(2,072)
—
1,225
19
(48,220)
(753)
15,594
—
Balance at 31 December 2009
(26,535)
(401,723)
(13,879)
(442,137)
Net book value at 31 December 2009
59,746
216,349
7,533
283,628
Net book value at 31 December 2008
61,208
227,178
7,815
296,201
China Telecom Corporation Limited Annual Report 2009
123
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
4. Property, Plant and Equipment, Net (continued)
In accordance with the Group’s accounting policy (Note 2(g)), the property, plant and equipment of the Group as at 31
December 2007 were revalued for each asset class by the Group on a depreciated replacement cost basis. The property,
plant and equipment as at 31 December 2007 was revalued at RMB326,123 million. The surplus on revaluation of certain
property, plant and equipment totalling RMB4,809 million was credited to the other comprehensive income for the year ended
31 December 2007 and accumulated separately in equity in the revaluation reserve while the defi cit on revaluation of certain
property, plant and equipment totalling RMB2,755 million was recognised as an expense in profi t or loss for the year ended 31
December 2007.
The following is a summary of the carrying value of the Group’s property, plant and equipment (excluding Beijing Telecom)
before the revaluation and the revalued amounts of these assets as at 31 December 2007:
Carrying
value
before the
revaluation
RMB
millions
Revaluation
surplus
RMB
millions
Revaluation
defi cit
RMB
millions
Revalued
amounts
RMB
millions
Buildings and improvements
Telecommunications network plant and equipment
Furniture, fi xture, motor vehicles and other equipment
56,913
259,349
7,807
3,578
1,231
—
—
(2,754)
(1)
60,491
257,826
7,806
324,069
4,809
(2,755)
326,123
For the year ended 31 December 2008, an impairment loss on property, plant and equipment of RMB24,167 million was
recognised, which included an impairment loss on wireless access service (“PHS”) specifi c equipment of RMB23,954 million.
The recoverable amounts of the PHS specific equipment were determined based on the asset held in use model that
estimated the future cash fl ows and outfl ows to be derived from continuing use of the asset for three years and from its
ultimate disposal and applying a discount rate that refl ects current market assessment of the time value of money and the
risks specifi c to the asset. The primary factor resulting in the impairment loss was due to lower revenue expected to be
generated from this equipment following the acquisition of the CDMA business and execution of full services integrated
operations.
For the year ended 31 December 2009, an impairment loss on property, plant and equipment of RMB753 million was
recognised which mainly represented impairment made in respect of the Digital Data Network (“DDN”) specifi c equipment.
The recoverable amounts of the DDN specific equipment were determined based on the asset held in use model that
estimated the future cash fl ows and outfl ows to be derived from continuing use of the asset lives and from its ultimate disposal
and applying a discount rate that refl ects current market assessment of the time value of money and the risks specifi c to the
asset. The primary factor resulting in the impairment loss was due to the decrease in customer demand for DDN service and
its technology being gradually substituted by other technologies.
124 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
5. Construction in Progress
Balance at 1 January 2008
Additions
Transferred from subsidiaries
Transferred to property, plant and equipment
Transferred to intangible assets
Balance at 31 December 2008
Additions
Transferred to property, plant and equipment
Transferred to intangible assets
The Group The Company
RMB
millions
RMB
millions
13,626
46,328
—
(44,879)
(1,460)
13,615
36,220
(36,886)
(1,382)
202
46,024
13,338
(44,592)
(1,447)
13,525
35,961
(36,642)
(1,369)
Balance at 31 December 2009
11,567
11,475
6. Goodwill
The Group
The Company
2009
RMB
millions
2008
RMB
millions
2009
RMB
millions
2008
RMB
millions
Cost:
Goodwill arising from acquisition of CDMA business
29,922
29,922
29,877
29,877
On 1 October 2008, the Group acquired the CDMA mobile communication business and related assets and liabilities, which
also included the entire equity interests of China Unicom (Macau) Company Limited (currently known as China Telecom
(Macau) Company Limited) and 99.5% equity interests of Unicom Huasheng Telecommunications Technology Company
Limited (currently known as Tianyi Telecom Terminals Company Limited) (collectively the “CDMA business”) from China
Unicom Limited (currently known as China Unicom (Hong Kong) Limited) and China Unicom Corporation Limited (currently
known as China United Network Communications Corporation Limited) (collectively “China Unicom”). The purchase price of
the business combination was RMB43,800 million. In addition, pursuant to the acquisition agreement, the Group acquired the
customer-related assets and assumed the customer-related liabilities of CDMA business for a net settlement amount of
RMB3,471 million due from China Unicom. This amount was subsequently settled by China Unicom in 2009. The business
combination was accounted for using the purchase method.
China Telecom Corporation Limited Annual Report 2009
125
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
6. Goodwill (continued)
The fair value of the identifi able assets acquired and liabilities assumed on acquisition date and the purchase price allocation
are as follows:
Pre-acquisition
carrying
amounts
RMB
millions
Fair value
adjustments
RMB
millions
Recognised
values on
acquisition
RMB
millions
Property, plant and equipment
Lease prepayments
Deferred tax assets
Intangible assets
Other non-current assets
Inventories
Accounts receivable
Prepayment and other current assets
Cash and cash equivalents
Accounts payable
Accrued expenses and other payables
Tax payable
Identifi able net assets acquired
Minority interest
Goodwill
Total cost of acquisition, including direct transaction
cost of RMB84 million
Consideration payable
Settlement amount due from China Unicom in relation to
the acquisition (reduction to the original purchase price)
Cash acquired
Net cash outfl ow
2,892
181
23
15
208
487
737
16
1,150
(385)
(5,583)
(32)
(295)
—
—
11,286
30
(234)
—
—
—
—
—
—
2,597
181
23
11,301
238
253
737
16
1,150
(385)
(5,583)
(32)
10,496
(5)
29,922
40,413
(13,223)
3,471
(1,150)
29,511
126 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
6. Goodwill (continued)
The goodwill recognised in the business combination is attributable to the skills and technical talent of the acquired business’s
workforce, and the synergies expected to be achieved from integrating and combining the CDMA mobile communication
business into the Group’s telecommunication business.
For purposes of goodwill impairment testing, the goodwill arising from the acquisition of CDMA business was allocated to the
appropriate cash-generating unit of the Group, which is the Group’s telecommunication business. The recoverable amount of
the Group’s telecommunication business is estimated based on the value in use model, which considers the Group’s fi nancial
budgets covering a fi ve-year period and a pre-tax discount rate of 10%. Cash fl ows beyond the fi ve-year period are projected
to perpetuity at annual growth rate of 1%. Management performed impairment tests for the goodwill and determined that
goodwill was not impaired. Management believes any reasonably possible change in the key assumptions on which the
recoverable amount is based would not cause its recoverable amount to be less than carrying amount.
Key assumptions used for the value in use calculation model are the number of subscribers, average revenue per subscriber
and gross margin. Management determined the number of subscribers, average revenue per subscriber and gross margin
based on historical trends and fi nancial information.
The operating revenue from CDMA mobile services for the period from 1 October 2008 to 31 December 2008 was RMB6,154
million. The amount of net income or loss of the acquired CDMA business since the acquisition date included in the
consolidated statements of comprehensive income for the year ended 31 December 2008 and the amounts of operating
revenues and net income or loss of the Group for the year ended 31 December 2008 as though the CDMA business was
acquired as of 1 January 2008 have not been provided because the disclosure of such information was impracticable. The
reason why such disclosure was considered impracticable was because no discrete and/or historical profi t or loss or operating
revenues information of the CDMA business for the relevant periods was available or existed to determine the disclosure
amounts. The Group has made every reasonable effort to provide such information, however, after considering the number of
signifi cant adjustments and estimates that would be required to be made, the Group determine that, without any objective
information, it was impossible to provide such information that is reliable and meaningful.
China Telecom Corporation Limited Annual Report 2009
127
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
7. Intangible Assets
The Group:
Cost:
Balance at 1 January 2008
Additions
Acquisition of CDMA business
Transferred from construction in progress
Disposals
Balance at 31 December 2008
Additions
Transferred from construction in progress
Disposals
Computer
software
RMB
millions
Customer
relationships
RMB
millions
Total
RMB
millions
4,600
148
11,301
1,460
(113)
—
—
11,238
—
—
11,238
17,396
—
—
—
111
1,382
(64)
4,600
148
63
1,460
(113)
6,158
111
1,382
(64)
Balance at 31 December 2009
7,587
11,238
18,825
Accumulated amortisation:
Balance at 1 January 2008
Amortisation charge for the year
Provision for impairment
Written back on disposal
Balance at 31 December 2008
Amortisation charge for the year
Provision for impairment
Written back on disposal
(1,786)
(917)
(5)
109
(2,599)
(1,162)
(3)
60
—
(562)
—
—
(562)
(2,248)
—
—
(1,786)
(1,479)
(5)
109
(3,161)
(3,410)
(3)
60
Balance at 31 December 2009
(3,704)
(2,810)
(6,514)
Net book value at 31 December 2009
3,883
8,428
12,311
Net book value at 31 December 2008
3,559
10,676
14,235
128 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
7. Intangible Assets (continued)
The Company:
Computer
software
RMB
millions
Customer
relationships
RMB
millions
Cost:
Balance at 1 January 2008
Transferred from subsidiaries
Additions
Transferred from construction in progress
Acquisition of CDMA business
Disposals
Balance at 31 December 2008
Additions
Transferred from construction in progress
Disposals
68
4,364
115
1,447
51
(104)
5,941
70
1,369
(60)
Total
RMB
millions
68
4,364
115
1,447
11,289
(104)
—
—
—
—
11,238
—
11,238
17,179
—
—
—
70
1,369
(60)
Balance at 31 December 2009
7,320
11,238
18,558
Accumulated amortisation:
Balance at 1 January 2008
Transferred from subsidiaries
Amortisation charge for the year
Provision for impairment
Written back on disposal
Balance at 31 December 2008
Amortisation charge for the year
Provision for impairment
Written back on disposal
(44)
(1,628)
(893)
(5)
100
(2,470)
(1,131)
(3)
57
—
—
(562)
—
—
(562)
(2,248)
—
—
(44)
(1,628)
(1,455)
(5)
100
(3,032)
(3,379)
(3)
57
Balance at 31 December 2009
(3,547)
(2,810)
(6,357)
Net book value at 31 December 2009
3,773
8,428
12,201
Net book value at 31 December 2008
3,471
10,676
14,147
China Telecom Corporation Limited Annual Report 2009
129
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
8. Investments in Subsidiaries
Unquoted investments, at cost
The Company
2009
RMB
millions
2008
RMB
millions
8,555
8,435
Pursuant to the resolution passed by the Company’s shareholders at an Extraordinary General Meeting held on 25 February
2008, certain of the Company’s subsidiaries were merged into the Company in an internal reorganisation. Details of the
Company’s principal subsidiaries at 31 December 2009 are as follows:
Name of Company
Type of
legal entity
Date of
incorporation
Place of
incorporation
and operation
China Telecom System
Limited Company
13 September 2001 PRC
Integration Co., Limited
Registered/
Issued capital
(in RMB millions
unless otherwise
stated) Principal activity
392 Provision of system
integration and
consulting services
China Telecom (Hong Kong)
Limited Company
25 February 2000
International Limited
Hong Kong Special
Administrative
Region of the PRC
HK$10,000 Provision of
international
value-added
network services
China Telecom (Americas)
Corporation
Limited Company
22 November 2001
The United States
of America
Limited Company
15 August 2007
PRC
US$43 million Provision of
telecommunication
services
350 Provision of Best Tone
information services
China Telecom Best Tone
Information Service Co.,
Limited
China Telecom (Macau)
Company Limited
(formerly known as
“China Unicom (Macau)
Company Limited”)
Tianyi Telecom Terminals
Company Limited
(formerly known as
“Unicom Huasheng
Telecommunications
Technology
Company Limited”)
China Telecom (Singapore)
Pte. Limited
Limited Company
15 October 2004
Macau Special
Administrative
Region of the PRC
MOP60 million Provision of
telecommunication
services
Limited Company
1 July 2005
PRC
500 Sales of
telecommunications
terminals
Limited Company
5 October 2006
Singapore
S$1 Provision of
international
value-added
network services
All of the above subsidiaries are directly or indirectly wholly-owned by the Company.
130 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
9. Interests in Associates
Unlisted equity investments, at cost
Share of post-acquisition changes in net assets
The Group
The Company
2009
RMB
millions
2008
RMB
millions
2009
RMB
millions
344
653
997
330
552
882
736
—
736
2008
RMB
millions
737
—
737
The Group’s and the Company’s interests in associates are accounted for under the equity method and the cost method
respectively, and are individually and in aggregate not material to the Group’s fi nancial condition or results of operations for all
periods presented. Details of the Group’s principal associates are as follows:
Name of company
Attributable
equity interest
Principal activities
Shenzhen Shekou Telecommunications
Company Limited
Shanghai Information Investment Incorporation
50%
Provision of telecommunications services
24%
Provision of information technology
consultancy services
The above associates are established in the PRC and are not traded on any stock exchange.
10. Investments
Available-for-sale equity securities
Other unlisted equity investments
The Group
The Company
2009
RMB
millions
2008
RMB
millions
2009
RMB
millions
690
32
722
85
92
177
138
10
148
2008
RMB
millions
85
92
177
Unlisted equity investments mainly represent the Group’s and the Company’s various interests in PRC private enterprises
which are mainly engaged in the provision of information technology services and Internet contents.
China Telecom Corporation Limited Annual Report 2009
131
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
11. Deferred Tax Assets and Liabilities
Deferred tax assets and deferred tax liabilities are attributable to the items set out below:
The Group:
Assets
Liabilities
Net balance
2009
RMB
millions
2008
RMB
millions
2009
RMB
millions
2008
RMB
millions
2009
RMB
millions
2008
RMB
millions
Current
Provisions and impairment losses,
primarily for doubtful debts
Non-current
Property, plant and equipment
Deferred revenues and installation costs
Land use rights
Available-for-sale equity securities
931
726
—
—
931
726
5,145
1,229
5,593
—
6,738
1,424
5,740
—
(1,748)
(732)
—
(133)
(1,982)
(821)
—
(13)
3,397
497
5,593
(133)
4,756
603
5,740
(13)
Deferred tax assets/(liabilities)
12,898
14,628
(2,613)
(2,816)
10,285
11,812
Movements in temporary differences are as follows:
Note
(i)
Current
Provisions and impairment losses,
primarily for doubtful debts
Non-current
Property, plant and equipment
Deferred revenues and installation costs
Land use rights
Available-for-sale equity securities
Net deferred tax assets
Balance
at 1 January
2008
RMB
millions
Acquisition
of CDMA
business
RMB
millions
Recognised in
statement of
comprehensive
income
RMB
millions
Balance at
31 December
2008
RMB
millions
559
(1,003)
768
5,872
(36)
6,160
23
—
—
—
—
23
144
726
5,759
(165)
(132)
23
4,756
603
5,740
(13)
5,629
11,812
132 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
11. Deferred Tax Assets and Liabilities (continued)
Balance at
1 January 2009
RMB
millions
Note
Recognised in
statement of
comprehensive
income
RMB
millions
Balance at
31 December
2009
RMB
millions
(i)
726
4,756
603
5,740
(13)
205
(1,359)
(106)
(147)
(120)
931
3,397
497
5,593
(133)
11,812
(1,527)
10,285
Current
Provisions and impairment losses,
primarily for doubtful debts
Non-current
Property, plant and equipment
Deferred revenues and installation costs
Land use rights
Available-for-sale equity securities
Net deferred tax assets
The Company:
Assets
Liabilities
Net balance
2009
RMB
millions
2008
RMB
millions
2009
RMB
millions
2008
RMB
millions
2009
RMB
millions
2008
RMB
millions
Current
Provisions and impairment losses,
primarily for doubtful debts
Non-current
Property, plant and equipment
Deferred revenues and installation costs
Land use rights
Available-for-sale equity securities
895
695
—
—
895
695
5,113
1,229
5,578
—
6,702
1,398
5,725
—
(1,742)
(732)
—
(27)
(1,978)
(811)
—
(13)
3,371
497
5,578
(27)
4,724
587
5,725
(13)
Deferred tax assets/(liabilities)
12,815
14,520
(2,501)
(2,802)
10,314
11,718
China Telecom Corporation Limited Annual Report 2009
133
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
11. Deferred Tax Assets and Liabilities (continued)
Movements in temporary differences are as follows:
Balance at
1 January 2008
RMB
millions
Note
Transferred
from
subsidiaries
RMB
millions
Recognised in
statement of
comprehensive
income
RMB
millions
Balance at
31 December
2008
RMB
millions
Current
Provisions and impairment losses,
primarily for doubtful debts
Non-current
Property, plant and equipment
Deferred revenues and installation costs
Land use rights
Available-for-sale equity securities
Net deferred tax assets
(i)
(ii)
Current
Provisions and impairment losses,
primarily for doubtful debts
Non-current
Property, plant and equipment
Deferred revenues and installation costs
Land use rights
Available-for-sale equity securities
—
—
—
—
—
—
527
(889)
631
5,856
(36)
168
695
5,613
(44)
(131)
23
4,724
587
5,725
(13)
6,089
5,629
11,718
Balance at
1 January 2009
RMB
millions
Note
Recognised in
statement of
comprehensive
income
RMB
millions
Balance at
31 December
2009
RMB
millions
695
4,724
587
5,725
(13)
200
(1,353)
(90)
(147)
(14)
895
3,371
497
5,578
(27)
(i)
Net deferred tax assets
11,718
(1,404)
10,314
Note:
(i)
In connection with the Restructuring and the Acquisitions, the land use rights of the Predecessor Operations, the First Acquired Group
and the Second Acquired Group were revalued as required by the relevant PRC rules and regulations. The tax bases of the land use
rights were adjusted to conform to such revalued amounts. The land use rights were not revalued for fi nancial reporting purposes and
accordingly, deferred tax assets were created with corresponding increases in other comprehensive income in previous years and
accumulated in shareholders’ equity under the caption of other reserves.
(ii)
As described in Note 1, the assets and liabilities of provincial subsidiaries were transferred to the Company’s branches in the respective
regions. As the tax bases of certain of these assets and liabilities were not conformed with the accounting bases after the merger,
deferred tax assets of RMB9,198 million and deferred tax liabilities of RMB3,109 million in respect of these temporary differences were
recognised in the Company’s statement of fi nancial position as at the effective date of transfer.
134 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
12. Inventories
Inventories represent:
Materials and supplies
Goods for resale
13. Accounts Receivable, Net
Accounts receivable, net, are analysed as follows:
Accounts receivable
Third parties
China Telecom Group
Other state-controlled telecommunications
operators in the PRC
Subsidiaries
Less: Allowance for impairment of doubtful debts
The Group
The Company
2009
RMB
millions
873
1,755
2008
RMB
millions
1,067
1,494
2009
RMB
millions
844
895
2008
RMB
millions
1,043
864
2,628
2,561
1,739
1,907
The Group
The Company
2009
RMB
millions
17,767
917
827
—
19,511
(2,073)
2008
RMB
millions
17,923
372
1,112
—
19,407
(2,118)
2009
RMB
millions
16,692
552
820
160
18,224
(1,994)
2008
RMB
millions
16,907
218
1,082
—
18,207
(2,022)
17,438
17,289
16,230
16,185
China Telecom Corporation Limited Annual Report 2009
135
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
13. Accounts Receivable, Net (continued)
The following table summarises the changes in allowance for impairment of doubtful debts:
At beginning of year
Transferred from subsidiaries
Acquisition of CDMA business
Allowance for impairment of doubtful debts
Accounts receivable written off
The Group
The Company
2009
RMB
millions
2,118
—
—
1,787
(1,832)
2008
RMB
millions
1,443
—
491
1,797
(1,613)
2009
RMB
millions
2,022
—
—
1,780
(1,808)
2008
RMB
millions
—
1,368
481
1,754
(1,581)
At end of year
2,073
2,118
1,994
2,022
Ageing analysis of accounts receivable from telephone and Internet subscribers is as follows:
Current, within 1 month
1 to 3 months
4 to 12 months
More than 12 months
Less: Allowance for impairment of doubtful debts
The Group
The Company
2009
RMB
millions
10,895
2,067
1,514
499
14,975
(1,920)
2008
RMB
millions
11,282
2,170
1,514
495
15,461
(2,009)
2009
RMB
millions
10,807
1,992
1,507
498
14,804
(1,911)
2008
RMB
millions
11,125
2,132
1,504
494
15,255
(1,998)
13,055
13,452
12,893
13,257
136 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
13. Accounts Receivable, Net (continued)
Ageing analysis of accounts receivable from telecommunications operators and enterprise customers is as follows:
Current, within 1 month
1 to 3 months
4 to 12 months
More than 12 months
Less: Allowance for impairment of doubtful debts
The Group
The Company
2009
RMB
millions
2008
RMB
millions
2009
RMB
millions
1,918
1,071
922
625
4,536
(153)
1,397
1,210
834
505
3,946
(109)
1,582
839
567
432
3,420
(83)
2008
RMB
millions
1,008
1,076
487
381
2,952
(24)
4,383
3,837
3,337
2,928
Ageing analysis of accounts receivable that are not impaired are as follows:
The Group
The Company
2009
RMB
millions
2008
RMB
millions
2009
RMB
millions
2008
RMB
millions
Not past due
16,021
15,402
14,846
14,370
Less than 1 month past due
1 to 3 months past due
869
548
1,220
667
852
532
1,157
658
1,417
1,887
1,384
1,815
17,438
17,289
16,230
16,185
Amounts due from the provision of telecommunications services to customers are generally due within 30 days from the date
of billing.
China Telecom Corporation Limited Annual Report 2009
137
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
14. Prepayments and Other Current Assets
Prepayments and other current assets represent:
The Group
The Company
2009
RMB
millions
2008
RMB
millions
2009
RMB
millions
Amounts due from China Telecom Group
Amounts due from subsidiaries
Amounts due from other state-controlled
telecommunications operators in the PRC
Amount due from China Unicom in relation to
the acquisition of CDMA business
Prepayments in connection with construction work
and equipment purchases
Prepaid expenses and deposits
Other receivables
935
—
240
—
745
1,177
813
700
—
1,052
3,471
836
720
607
892
498
240
—
543
962
670
2008
RMB
millions
698
344
1,052
3,471
720
649
492
3,910
7,386
3,805
7,426
15. Cash and Cash Equivalents
The Group
The Company
2009
RMB
millions
Cash at bank and in hand
Time deposits with original maturity within three months
27,235
7,569
2008
RMB
millions
21,916
5,950
2009
RMB
millions
20,246
7,280
2008
RMB
millions
17,546
4,010
34,804
27,866
27,526
21,556
16. Short-term and Long-term Debt
Short-term debt comprises:
Loans from state-controlled banks — unsecured
Other loans — unsecured
Short-term commercial paper — unsecured
Loans from China Telecommunications Corporation —
unsecured
The Group
The Company
2009
RMB
millions
11,138
245
—
2008
RMB
millions
9,693
—
9,979
2009
RMB
millions
11,138
245
—
2008
RMB
millions
9,688
—
9,979
40,267
63,776
40,267
63,776
Total short-term debt
51,650
83,448
51,650
83,443
138 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
16. Short-term and Long-term Debt (continued)
The weighted average interest rate of the Group’s and the Company’s total short-term debt as at 31 December 2009 was
4.0% (2008: 5.1%) and 4.0% (2008: 5.1%) respectively. As at 31 December 2009, the loans from state-controlled banks bear
interest at rates ranging from 2.0% to 7.5% (2008: 2.5% to 7.5%) per annum and are repayable within one year; the
commercial paper bears interest at a fi xed rate of 4.72% per annum and was repaid in August 2009; the loans from China
Telecommunications Corporation bear interest at fi xed rates ranging from 2.8% to 5.3% (2008: 3.9% to 7.3%) per annum and
are repayable within one year.
Long-term debt comprises:
Interest rates and fi nal maturity
The Group
The Company
2009
RMB
millions
2008
RMB
millions
2009
RMB
millions
2008
RMB
millions
Bank loans — unsecured
Renminbi denominated
Interest rates ranging from 3.60%
1,362
1,533
1,362
1,524
to 7.56% per annum with
maturities through 2050
US Dollars denominated
Interest rates ranging from 1.00%
816
877
816
877
to 8.30% per annum with
maturities through 2060
Japanese Yen denominated
Interest rates ranging from 1.49%
1,609
1,690
1,609
1,690
to 3.50% per annum with
maturities through 2026
Euro denominated
Interest rates ranging from 2.30%
658
686
658
686
to 4.75% per annum with
maturities through 2032
Other currencies denominated
40
43
40
43
Other loans — unsecured
Renminbi denominated
Medium-term notes — unsecured
(Note (i))
Amount due to China Telecommunications Corporation
— unsecured
In connection with the Second Acquisition — Renminbi denominated
(Note (ii))
Total long-term debt
Less: current portion
Non-current portion
4,485
4,829
4,485
4,820
1
1
1
1
49,769
19,811
49,769
19,811
—
15,150
—
15,150
54,255
39,791
54,255
39,782
(1,487)
(565)
(1,487)
(556)
52,768
39,226
52,768
39,226
China Telecom Corporation Limited Annual Report 2009
139
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
16. Short-term and Long-term Debt (continued)
Note:
(i)
On 22 April 2008, the Group issued three-year, 10 billion RMB denominated medium-term note with annual interest rate of 5.3% per
annum. The medium-term note is unsecured. On 23 October 2008, the Company issued five-year, 10 billion RMB denominated
medium-term note with annual interest rate of 4.15% per annum. The medium-term note is unsecured. On 16 November 2009, the
Group issued three-year, 10 billion RMB denominated medium-term note with annual interest rate of 3.65% per annum. The medium-
term note is unsecured. On 28 December 2009, the Group issued two batches of fi ve-year, 10 billion RMB denominated medium-term
notes with annual interest rate of 4.61% per annum. The medium-term note is unsecured.
(ii)
Represented the remaining balance of the deferred consideration payable to China Telecommunications Corporation in respect of the
Second Acquisition (Note 1). In March 2009, the Company repaid the remaining balance of RMB15,150 million to China
Telecommunications Corporation.
The aggregate maturities of the Group’s and the Company’s long-term debts subsequent to 31 December 2009 are as
follows:
Within 1 year
Between 1 to 2 years
Between 2 to 3 years
Between 3 to 4 years
Between 4 to 5 years
Thereafter
The Group
The Company
2009
RMB
millions
1,487
10,322
11,372
9,986
20,020
1,068
2008
RMB
millions
565
1,676
10,391
190
10,081
16,888
2009
RMB
millions
1,487
10,322
11,372
9,986
20,020
1,068
2008
RMB
millions
556
1,676
10,391
190
10,081
16,888
54,255
39,791
54,255
39,782
The Group’s short-term and long-term debts do not contain any fi nancial covenants. As at 31 December 2009, the Group and
the Company unutilised committed credit facilities amounted to RMB102,555 million (2008: RMB128,231 million) and
RMB102,555 million (2008: RMB128,231 million) respectively.
140 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
17. Accounts Payable
Accounts payable are analysed as follows:
Third parties
China Telecom Group
Other state-controlled telecommunications
operators in the PRC
Subsidiaries
The Group
The Company
2009
RMB
millions
26,402
7,526
393
—
2008
RMB
millions
27,698
6,387
373
—
2009
RMB
millions
23,291
7,396
390
1,106
2008
RMB
millions
25,271
6,358
372
1,107
34,321
34,458
32,183
33,108
Amounts due to China Telecom Group are repayable in accordance with contractual terms which are similar to those terms
offered by third parties.
Ageing analysis of accounts payable is as follows:
Due within 1 month or on demand
Due after 1 month but within 3 months
Due after 3 months but within 6 months
Due after 6 months
The Group
The Company
2009
RMB
millions
11,321
7,472
5,641
9,887
2008
RMB
millions
7,530
10,289
6,807
9,832
2009
RMB
millions
10,210
7,042
5,137
9,794
2008
RMB
millions
6,939
9,786
6,990
9,393
34,321
34,458
32,183
33,108
18. Accrued Expenses and Other Payables
Accrued expenses and other payables represent:
Amounts due to China Telecom Group
Amounts due to subsidiaries
Amounts due to other state-controlled
telecommunication operators in the PRC
Accrued expenses
Customer deposits and receipts in advance
Dividend payable
Purchase price payable to China Unicom for the
acquisition of CDMA business
The Group
The Company
2009
RMB
millions
1,694
—
103
14,608
30,407
—
2008
RMB
millions
1,448
—
102
15,452
23,060
426
2009
RMB
millions
1,425
2,089
103
14,111
29,604
—
2008
RMB
millions
1,237
1,921
102
14,953
22,412
426
5,381
13,140
5,381
13,089
52,193
53,628
52,713
54,140
China Telecom Corporation Limited Annual Report 2009
141
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
19. Deferred Revenues
Deferred revenues represent the unearned portion of upfront connection fees and installation fees for wireline services received
from customers and the unused portion of calling cards. Connection fees and installation fees are amortised over the
expected customer relationship period of 10 years. Beginning 1 July 2001, connection fees were no longer collected from
new customers.
Balance at beginning of year
Transferred from subsidiaries
Additions for the year
— installation fees
— calling cards
The Group
The Company
2009
RMB
millions
11,444
—
458
3,253
2008
RMB
millions
15,486
—
656
4,119
2009
RMB
millions
11,441
—
458
3,248
2008
RMB
millions
—
15,486
617
4,111
3,711
4,775
3,706
4,728
Reduction for the year
— amortisation of connection fees
— amortisation of installation fees
— usage of calling cards
(1,151)
(2,311)
(3,231)
(2,022)
(2,574)
(4,221)
(1,151)
(2,310)
(3,229)
(2,022)
(2,535)
(4,216)
Balance at end of year
8,462
11,444
8,457
11,441
Representing:
— current portion
— non-current portion
3,417
5,045
4,505
6,939
3,412
5,045
4,502
6,939
8,462
11,444
8,457
11,441
Included in other assets are primarily capitalised direct incremental costs associated with the installation of wireline services.
As at 31 December 2009, the unamortised portion of these costs was RMB4,312 million (2008: RMB5,584 million).
20. Share Capital
Registered, issued and fully paid
67,054,958,321 ordinary domestic shares of RMB1.00 each
13,877,410,000 overseas listed H shares of RMB1.00 each
All ordinary domestic shares and H shares rank pari passu in all material respects.
The Group and the Company
2009
RMB
millions
2008
RMB
millions
67,055
13,877
67,055
13,877
80,932
80,932
142 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
21. Reserves
The Group
Capital
reserve
RMB
millions
(Note (i))
Share
premium
RMB
millions
Re-valuation
reserve
RMB
millions
Statutory
reserves
RMB
millions
(Note (iii))
Other
reserves
RMB
millions
(Note (ii))
Exchange
reserve
RMB
millions
Retained
earnings
RMB
millions
Total
RMB
millions
(2,804)
10,746
11,972
52,367
8,327
(582)
63,563
143,589
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(562)
—
—
—
—
—
—
—
—
—
—
—
—
3,718
—
—
—
127
—
(132)
—
(535)
—
425
(5,557)
—
—
—
—
—
—
—
—
(69)
(83)
(127)
562
132
(6,125)
—
—
—
(6,125)
—
(535)
(3,718)
(425)
—
884
—
—
(5,557)
732
(2,804)
10,746
11,410
56,085
2,586
(665)
54,746
132,104
—
—
—
—
—
—
—
—
—
—
—
—
—
(547)
—
—
—
—
—
—
—
—
4,521
—
125
—
(147)
—
—
343
—
—
—
—
—
(125)
547
147
(6,067)
(4,521)
—
—
—
(6,067)
—
(2)
14,422
14,763
(2,804)
10,746
10,863
60,606
2,907
(667)
59,149
140,800
Balance as at 1 January 2008
Deferred tax on revaluation
surplus of property, plant
and equipment realised
Revaluation surplus realised
Deferred tax on land use rights
realised
Dividends (Note 31)
Distribution to China
Telecommunications
Corporation
Adjustment to statutory
reserves (Note (iv))
Transfer from retained earnings
to other reserves
Consideration for the
acquisition of the Fourth
Acquired Company (Note 1)
Total comprehensive income
for the year
Balance as at 31 December
2008, as restated
Deferred tax on revaluation
surplus of property, plant
and equipment realised
Revaluation surplus realised
Deferred tax on land use rights
realised
Dividends (Note 31)
Appropriations (Note (iii))
Total comprehensive income
for the year
Balance as at 31 December
2009
China Telecom Corporation Limited Annual Report 2009
143
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
21. Reserves (continued)
The Company
Balance as at 1 January 2008
Total comprehensive income for the year
(Note (v))
Appropriations (Note (iii))
Adjustment to statutory reserves (Note (iv))
Dividends (Note 31)
Capital
reserve
RMB
millions
(Note (i))
Share
premium
RMB
millions
Statutory
reserves
RMB
millions
(Note (iii))
Retained
earnings
RMB
millions
Total
RMB
millions
29,168
10,746
52,367
24,414
116,695
—
—
—
—
—
—
—
—
—
—
3,718
—
20,602
—
(3,718)
(6,125)
35,173
13,337
(4,521)
(6,067)
20,602
—
—
(6,125)
131,172
13,337
—
(6,067)
Balance as at 31 December 2008
29,168
10,746
56,085
Total comprehensive income for the year
Appropriations (Note (iii))
Dividends (Note 31)
—
—
—
—
—
—
—
4,521
—
Balance as at 31 December 2009
29,168
10,746
60,606
37,922
138,442
Note:
(i)
Capital reserve of the Group represents the sum of (a) the difference between the carrying amount of the Company’s net assets and the
par value of the Company’s shares issued upon its formation; and (b) the difference between the consideration paid by the Company
for the entities acquired from China Telecommunications Corporation as described in Note 1, which were accounted for as equity
transactions as disclosed in Note 1 to the fi nancial statements, and the historical carrying amount of the net assets of these acquired
entities.
Capital reserve of the Company represents the difference between the carrying amount of the Company’s net assets and the par value
of the Company’s shares issued upon its formation.
(ii)
Other reserves of the Group represent primarily the balance of the deferred tax assets recognised due to the revaluation of land use
rights for tax purposes (and not for fi nancial reporting purposes) as described in Note 11(i), the balance of the deferred tax liabilities
recognised due to the revaluation of property, plant and equipment for fi nancial reporting purposes (and not for tax purposes) and the
deferred tax liabilities recognised due to the change in fair value of available-for-sale equity securities.
(iii)
The statutory reserves consist of statutory surplus reserve and discretionary surplus reserve.
According to the Company’s Articles of Association, the Company is required to transfer 10% of its net profit, as determined in
accordance with the lower of the amount determined under the PRC Accounting Standards for Business Enterprises and the amount
determined under IFRS, to the statutory surplus reserve until such reserve balance reaches 50% of the registered capital. The transfer
to this reserve must be made before distribution of any dividend to shareholders. For the year ended 31 December 2009, the Company
transferred RMB1,292 million, being 10% of the year’s net profi t determined in accordance with the PRC Accounting Standards for
Business Enterprises, to this reserve. For the year ended 31 December 2008, the Company did not transfer any amount to this reserve
as it has net loss during the year determined in accordance with the PRC Accounting Standards for Business Enterprises.
According to the Company’s Articles of Association, the Directors authorised, subject to shareholders’ approval, the transfer of
RMB3,229 million for the year ended 31 December 2009, being 25% of the year’s net profi t determined in accordance with the PRC
Accounting Standards for Business Enterprises, to the discretionary surplus reserve. The Company did not transfer any amount to the
discretionary surplus reserve for the year ended 31 December 2008.
The statutory and discretionary surplus reserves are non-distributable other than in liquidation and can be used to make good of
previous years’ losses, if any, and may be utilised for business expansion or converted into share capital by issuing new shares to
existing shareholders in proportion to their shareholdings or by increasing the par value of the shares currently held by them, provided
that the remaining reserve balance after such issue is not less than 25% of the registered capital.
Upon the merger of certain subsidiaries of the Company into the Company in connection with an internal reorganisation, the
subsidiaries’ non-distributable profi ts at the date of the internal reorganisation were transferred from retained earnings to statutory
reserves of the Company as required by the Company’s Articles of Association.
Upon the internal reorganisation, certain subsidiaries of the Company were merged into the Company. Therefore, the Company’s profi t
for the year includes the difference between the net assets of these subsidiaries on the date of merger and the cost of investment in
these subsidiaries, which amounted to RMB20,770 million.
According to the Company’s Articles of Association, the amount of retained earnings available for distribution to shareholders of the
Company is the lower of the amount determined in accordance with the PRC Accounting Standards for Business Enterprises and the
amount determined in accordance with IFRS. At 31 December 2009, the amount of retained earnings available for distribution was
RMB37,922 million (2008: RMB35,173 million), being the amount determined in accordance with IFRS. Final dividend of approximately
RMB6,076 million in respect of the fi nancial year 2009 proposed after the end of the reporting period has not been recognised as a
liability at the end of the reporting period (Note 31).
(iv)
(v)
(vi)
144 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
22. Operating Revenues
Operating revenues represent revenues from the provision of telecommunications services. The components of the Group’s
operating revenues are as follows:
Wireline voice
Mobile voice
Internet
Value-added services
Integrated information application services
Managed data and leased line
Others
Upfront connection fees
Note
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
The Group
2009
RMB
millions
78,432
20,027
51,567
21,533
12,659
11,499
12,502
1,151
2008
RMB
millions
96,258
3,955
40,727
16,253
10,803
10,231
6,280
2,022
209,370
186,529
Note:
(i)
(ii)
Represent the aggregate amount of monthly fees, local usage fees, domestic long distance usage fees, international, Hong Kong,
Macau and Taiwan long distance usage fees, interconnections and upfront installation fees charged to customers for the provision of
wireline telephony services.
Represent the aggregate amount of monthly fees, local usage fees, domestic long distance usage fees, international, Hong Kong,
Macau and Taiwan long distance usage fees and interconnections fees charged to customers for the provision of mobile telephony
services.
(iii)
Represent amounts charged to customers for the provision of Internet access services.
(iv)
(v)
(vi)
Represent the aggregate amount of fees charged to customers for the provision of value-added services, which comprise primarily
caller ID services, short messaging services, back ring tone services (Colour Ring Tone), Internet data centre and IP-Virtual Private
Network services.
Represent primarily the aggregate amount of fees charged to customers for system integration and consulting services and Best Tone
information services, which comprise hotline enquiry and booking services.
Represent primarily the aggregate amount of fees charged to customers for the provision of managed data transmission services and
lease income from other domestic telecommunications operators and enterprise customers for the usage of the Group’s wireline
telecommunication networks and equipment.
(vii)
Represent primarily revenue from sale, rental and repairs and maintenance of equipment.
(viii) Represent the amortised amount of the upfront fees received for initial activation of wireline services.
China Telecom Corporation Limited Annual Report 2009
145
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
23. Personnel Expenses
Personnel expenses are attributable to the following functions:
Network operations and support
Selling, general and administrative
24. Other Operating Expenses
Other operating expenses consist of:
Interconnection charges
Cost of goods sold
Donations
Others
The Group
2009
RMB
millions
21,210
11,647
2008
RMB
millions
19,162
9,784
32,857
28,946
Note
(i)
(ii)
The Group
2009
RMB
millions
9,634
7,721
8
86
2008
RMB
millions
7,543
3,170
42
39
17,449
10,794
Note:
(i)
Interconnection charges represent amounts incurred for the use of other domestic and foreign telecommunications operators’ networks
for delivery of voice and data traffi c that originate from the Group’s wireline and mobile telecommunications networks.
(ii)
Cost of goods sold primarily represents cost of telecommunication equipment.
25. Total Operating Expenses
Total operating expenses for the year ended 31 December 2009 were RMB186,712 million (2008: RMB181,384 million) which
include auditor’s remuneration in relation to audit and non-audit services are RMB68 million and RMB3 million respectively
(2008: RMB80 million and RMB47 million).
146 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
26. Net Finance Costs
Net fi nance costs comprise:
Interest expense incurred
Less: Interest expense capitalised*
Net interest expense
Interest income
Foreign exchange losses
Foreign exchange gains
The Group
2009
RMB
millions
5,051
(327)
4,724
(282)
108
(175)
2008
RMB
millions
5,753
(417)
5,336
(430)
371
(201)
4,375
5,076
*
Interest expense was capitalised in construction in progress at the following rates per annum
2.5%-6.9%
2.7%-7.1%
27. Income Tax
Income tax in the profi t or loss comprises:
Provision for PRC income tax
Provision for income tax in other tax jurisdictions
Deferred taxation
The Group
2009
RMB
millions
3,105
37
1,407
2008
RMB
millions
4,792
21
(5,606)
4,549
(793)
China Telecom Corporation Limited Annual Report 2009
147
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
27. Income Tax (continued)
A reconciliation of the expected tax with the actual tax expense is as follows:
Profi t before taxation
Expected income tax expense at statutory tax rate of 25%
Differential tax rate on PRC subsidiaries’ and branches’ income
Differential tax rate on other subsidiaries’ income
Non-deductible expenses
Non-taxable income
Tax credit for domestic equipment purchases and other tax benefi ts
The Group
2009
RMB
millions
2008
RMB
millions
19,175
186
4,794
(433)
(17)
1,013
(776)
(32)
47
248
(19)
660
(1,071)
(658)
Note
(i)
(i)
(ii)
(iii)
(iv)
Actual income tax expense/(benefi t)
4,549
(793)
Note:
(i)
(ii)
The provision for PRC current income tax is based on the statutory rate of 25% of the assessable income of the Company, its
subsidiaries and branches as determined in accordance with the relevant income tax rules and regulations of the PRC, except for
certain subsidiaries and branches which are taxed at preferential rates of 15% or 20%.
Income tax provisions of the Company’s subsidiaries in Hong Kong and Macau Special Administrative Regions of the PRC, and in other
countries are based on the subsidiaries’ assessable income and income tax rates applicable in the respective tax jurisdictions which
range from 12% to 35%.
(iii)
Amounts represent miscellaneous expenses in excess of statutory deductible limits for tax purposes.
(iv)
Amounts primarily represent connection fees received from customers which are not subject to income tax.
148 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
28. Directors’ and Supervisors’ Remuneration
The following table sets out the remuneration received or receivable by the Company’s directors and supervisors:
Directors’/
supervisors’
fees
RMB
thousands
Salaries,
allowances
and benefi ts
in kind
RMB
thousands
Discretionary
bonuses
RMB
thousands
Retirement
scheme
contributions
RMB
thousands
Share-based
payments
RMB
thousands
Total
RMB
thousands
2009
Executive directors
Wang Xiaochu
Shang Bing
Wu Andi
Zhang Jiping
Zhang Chenshuang
Yang Xiaowei
Yang Jie
Sun Kangmin
Non-executive directors
Li Jinming
Independent non-executive
directors
Wu Jichuan
Qin Xiao
Tse Hau Yin
Cha May Lung
Xu Erming
Supervisors
Xiao Jinxue^
Miao Jianhua^
Ma Yuzhu
Xu Cailiao
Han Fang
Independent supervisor
Zhu Lihao
—
—
—
—
—
—
—
—
—
150
150
440
176
150
—
—
—
—
—
75
324
324
276
276
276
276
276
276
—
—
—
—
—
—
188
—
157
92
90
—
339
335
288
288
288
285
288
288
—
—
—
—
—
—
297
—
387
259
264
—
71
71
61
60
61
59
59
60
—
—
—
—
—
—
15
—
59
45
44
—
1,141
2,831
3,606
665
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
734
730
625
624
625
620
623
624
—
150
150
440
176
150
500
—
603
396
398
75
8,243
^
Mr. Xiao JinXue resigned as a supervisor of the Company and Mr. Miao Jianhua was appointed as the supervisor of the Company on
29 December 2009.
China Telecom Corporation Limited Annual Report 2009
149
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
28. Directors’ and Supervisors’ Remuneration (continued)
Directors’/
supervisors’
fees
RMB
thousands
Salaries,
allowances and
benefi ts in kind
RMB
thousands
Discretionary
bonuses
RMB
thousands
Retirement
scheme
contributions
RMB
thousands
Share-based
payments
RMB
thousands
Total
RMB
thousands
2008
Executive directors
Wang Xiaochu
Leng Rongquan^
Shang Bing^
Wu Andi
Zhang Jiping
Li Ping^
Yang Xiaowei^
Yang Jie
Sun Kangmin
Zhang Chenshuang
Non-executive directors
Li Jinming
Independent non-executive
directors
Wu Jichuan^
Qin Xiao^
Tse Hau Yin
Cha May Lung^
Xu Erming
Zhang Youcai^
Vincent Lo Hong Sui^
Shi Wanpeng^
Supervisors
Xiao Jinxue
Ma Yuzhu
Xu Cailiao
Wang Haiyun*
Han Fang*
Independent supervisor
Zhu Lihao
—
—
—
—
—
—
—
—
—
—
—
50
50
441
59
150
100
118
100
—
—
—
—
—
75
324
219
108
276
276
207
92
276
276
276
—
—
—
—
—
—
—
—
—
159
154
85
32
28
—
446
329
108
379
379
310
92
379
379
319
—
—
—
—
—
—
—
—
—
339
394
266
165
44
—
68
46
19
58
57
43
19
56
57
58
—
—
—
—
—
—
—
—
—
52
56
41
28
14
—
1,060
898
—
398
398
398
—
848
848
—
—
—
—
—
—
—
—
—
—
332
333
183
—
—
—
1,898
1,492
235
1,111
1,110
958
203
1,559
1,560
653
—
50
50
441
59
150
100
118
100
882
937
575
225
86
75
1,143
2,788
4,328
672
5,696
14,627
^
*
Mr. Leng Rongquan and Mr. Li Ping retired as an executive director of the Company and Mr. Zhang Youcai, Mr. Vincent Lo Hong Sui
and Mr. Shi Wanpeng retired as independent non-executive directors of the Company on 9 September 2008. Mr. Shang Bing and Mr.
Yang Xiaowei were appointed as the executive directors of the Company and Mr. Wu Jichuan, Mr. Qin Xiao and Ms. Cha May Lung
were appointed as independent non-executive directors of the Company on 9 September 2008.
Ms. Wang Haiyun retired as a supervisor of the Company on 9 September 2008. Ms. Han Fang was appointed as a supervisor of the
Company on 9 September 2008.
150 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
29. Individuals with Highest Emoluments
Of the fi ve highest paid individuals of the Group for the year ended 31 December 2009, none of them was director of the
Company. Of the fi ve highest paid individuals of the Group for the year ended 31 December 2008, one was director of the
Company and whose remuneration was disclosed in Note 28.
The aggregate of the emoluments in respect of the fi ve (2008: four) individuals are as follows:
Salaries, allowances and benefi ts in kind
Discretionary bonuses
Retirement scheme contributions
2009
RMB
thousands
2008
RMB
thousands
4,745
2,704
106
3,698
3,768
122
7,555
7,588
The emoluments of the fi ve (2008: four) individuals with the highest emoluments are within the following bands:
RMB1,000,001 — RMB1,500,000
RMB1,500,001 — RMB2,000,000
RMB2,000,001 — RMB2,500,000
2009
Number of
individuals
2008
Number of
individuals
3
1
1
—
2
2
None of these employees received any inducements or compensation for loss of offi ce, or waived any emoluments during the
periods presented.
30. Profi t Attributable to Equity Holders of the Company
For the year ended 31 December 2009, the consolidated profi t attributable to equity holders of the Company includes a profi t
of RMB13,295 million which has been dealt with in the stand-alone fi nancial statements of the Company.
For the year ended 31 December 2008, the consolidated profi t attributable to equity holders of the Company includes a loss
of RMB168 million which has been dealt with in the stand-alone fi nancial statements of the Company.
China Telecom Corporation Limited Annual Report 2009
151
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
31. Dividends
Pursuant to a resolution passed at the Directors’ meeting on 22 March 2010, a fi nal dividend of equivalent to HK$0.085 per
share totalling approximately RMB6,076 million for the year ended 31 December 2009 was proposed for shareholders’
approval at the Annual General Meeting. The dividend has not been provided for in the consolidated fi nancial statements for
the year ended 31 December 2009.
Pursuant to the shareholders’ approval at the Annual General Meeting held on 26 May 2009, a fi nal dividend of RMB0.074963
(equivalent to HK$0.085) per share totalling approximately RMB6,067 million in respect of the year ended 31 December 2008
was declared and paid on 30 June 2009.
Pursuant to the shareholders’ approval at the Annual General Meeting held on 30 May 2008, a fi nal dividend of RMB 0.075747
(equivalent to HK$0.085) per share totalling RMB6,125 million in respect of the year ended 31 December 2007 was declared,
of which RMB5,699 million and RMB426 million was paid on 16 June 2008 and 25 February 2009 respectively.
32. Basic Earnings Per Share
The calculation of basic earnings per share for the years ended 31 December 2009 and 2008 is based on the profit
attributable to equity holders of the Company of RMB14,422 million and RMB884 million respectively, divided by
80,932,368,321 shares.
The amount of diluted earnings per share is not presented as there were no dilutive potential ordinary shares in existence for
the periods presented.
33. Commitments and Contingencies
Operating lease commitments
The Group leases business premises and equipment through non-cancellable operating leases. Other than the CDMA network
lease arrangements as set out in Note 36(a), these operating leases do not contain provisions for contingent lease rentals.
None of the rental agreements contain escalation provisions that may require higher future rental payments nor impose
restrictions on dividends, additional debt and/or further leasing.
As at 31 December 2009 and 2008, the Group’s and the Company’s future minimum lease payments under non-cancellable
operating leases were as follows:
Within 1 year
Between 1 to 2 years
Between 2 to 3 years
Between 3 to 4 years
Thereafter
The Group
The Company
2009
RMB
millions
8,531
643
505
417
1,014
2008
RMB
millions
2009
RMB
millions
2008
RMB
millions
830
595
479
380
808
8,451
614
488
405
1,009
746
561
471
380
808
Total minimum lease payments
11,110
3,092
10,967
2,966
Total rental expense in respect of operating leases charged to profi t or loss for the year ended 31 December 2009 was
RMB10,757 million (2008: RMB3,645 million).
152 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
33. Commitments and Contingencies (continued)
Capital commitments
As at 31 December 2009 and 2008, the Group and the Company had capital commitments as follows:
The Group
The Company
2009
RMB
millions
2008
RMB
millions
2009
RMB
millions
2008
RMB
millions
376
629
376
629
4,166
3,283
4,089
3,282
4,542
3,912
4,465
3,911
739
764
739
764
4,364
3,857
4,354
3,790
5,103
4,621
5,093
4,554
Authorised and contracted for
— property
— telecommunications network plant
and equipment
Authorised but not contracted for
— property
— telecommunications network plant
and equipment
Contingent liabilities
(a)
The Company and the Group were advised by their PRC lawyers that, except for liabilities arising out of or relating to
the businesses of the Predecessor Operations and the Acquired Groups transferred to the Company in connection with
the Restructuring and the Acquisitions, no other liabilities were assumed by the Company or the Group, and the
Company or the Group are not jointly and severally liable for other debts and obligations incurred by China Telecom
Group prior to the Restructuring and the Acquisitions.
(b)
As at 31 December 2009 and 2008, the Group did not have contingent liabilities in respect of guarantees given to
banks in respect of banking facilities granted to other parties, or other forms of contingent liabilities.
As at 31 December 2009 and 2008, the Company did not have contingent liabilities in respect of guarantees given to banks in
respect of banking facilities granted to subsidiaries.
Legal contingencies
The Group is a defendant in certain lawsuits as well as the named party in other proceedings arising in the ordinary course of
business. Management has assessed the likelihood of an unfavourable outcome of such contingencies, lawsuits or other
proceedings and believes that any resulting liabilities will not have a material adverse effect on the fi nancial position, operating
results or cash fl ows of the Group.
China Telecom Corporation Limited Annual Report 2009
153
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
34. Financial Instruments
Financial assets of the Group include cash and cash equivalents, time deposits, investments, accounts receivable, advances
and other receivables. Financial liabilities of the Group include short-term and long-term debts, accounts payable, accrued
expenses and other payables. The Group does not hold nor issue fi nancial instruments for trading purposes.
(a) Fair Value
The amendments to IFRS 7, Financial Instruments: Disclosures, require disclosures relating to fair value measurements
of financial instruments across three levels of a “fair value hierarchy”. The fair value of each financial instrument is
categorised in its entirety based on the lowest level of input that is signifi cant to that fair value measurement. The levels
are defi ned as follows:
•
•
•
Level 1 (highest level): fair values measured using quoted prices (unadjusted) in active markets for identical
fi nancial instruments
Level 2: fair values measured using quoted prices in active markets for similar fi nancial instruments, or using
valuation techniques in which all signifi cant inputs are directly or indirectly based on observable market data
Level 3 (lowest level): fair values measured using valuation techniques in which any signifi cant input is not based
on observable market data
The fair values of the Group’s fi nancial instruments (other than long-term debt and available-for-sale equity investment
securities) approximate their carrying amounts due to the short-term maturity of these instruments.
The Group’s available-for-sale equity investment securities are categorised as level 1 fi nancial instruments. The fair value
of the Group’s available-for-sale equity investment securities is RMB690 million as at 31 December 2009 (2008: RMB85
million) was based on quoted market price on a PRC stock exchange. The Group’s long-term investments, other than
the available-for-sale equity investment securities, are unlisted equity interests for which no quoted market prices exist
in the PRC and accordingly, a reasonable estimate of their fair values could not be made without incurring excessive
costs.
The fair values of long-term indebtedness are estimated by discounting future cash fl ows using current market interest
rates offered to the Group for debt with substantially the same characteristics and maturities. The interest rates used in
estimating the fair values of long-term debt, having considered the foreign currency denomination of the debt, ranged
from 1.0% to 5.76% (2008: 1.5% to 5.94%). As at 31 December 2008 and 2009, the carrying amounts and fair values
of the Group’s long-term debt were as follows:
2009
2008
Carrying
amount
RMB
millions
Fair value
RMB
millions
Carrying
amount
RMB
millions
Fair value
RMB
millions
Long-term debt
54,255
52,213
39,791
38,871
During the year, there were no transfers among instruments in level 1, level 2 or level 3.
154 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
34. Financial Instruments (continued)
(b) Risks
The Group’s fi nancial instruments are exposed to three main types of risks, namely, credit risk, liquidity risk and market
risk (which comprises of interest rate risk and foreign currency exchange rate risk). The Group’s overall risk management
programme focuses on the unpredictability of fi nancial markets and seeks to minimise potential adverse effects on the
Group’s fi nancial performance. Risk management is carried out under policies approved by the Board of Directors. The
Board provides principles for overall risk management, as well as policies covering specifi c areas, such as liquidity risk,
credit risk, and market risk. The Board regularly reviews these policies and authorises changes if necessary based on
operating and market conditions and other relevant risks. The following summarises the qualitative and quantitative
disclosures for each of the three main types of risks:
(i) Credit risk
Credit risk refers to the risk that a counterparty will be unable to pay amounts in full when due. For the Group, this
arises mainly from deposits it maintains at fi nancial institutions and credit it provides to customers for the provision
of telecommunication services. To limit exposure to credit risk relating to deposits, the Group primarily places
cash deposits only with large state-owned fi nancial institution in the PRC with acceptable credit ratings. For
accounts receivable, management performs ongoing credit evaluations of its customers’ fi nancial condition and
generally does not require collateral on accounts receivable. Furthermore, the Group has a diversifi ed base of
customers with no single customer contributing more than 10% of revenues for the periods presented. Further
details of the Group’s credit policy and quantitative disclosures in respect of the Group’s exposure on credit risk
for trade receivables are set out in Note 13.
The amounts of cash and cash equivalents, time deposits, accounts receivable and other receivables represent
the Group’s maximum exposure to credit risk in relation to fi nancial assets.
(ii) Liquidity risk
Liquidity risk refers to the risk that funds will not be available to meet liabilities as they fall due, and results from
timing and amount mismatches of cash infl ow and outfl ow. The Group manages liquidity risk by maintaining
suffi cient cash balances and adequate amount of committed banking facilities to meet its funding needs, including
working capital, principal and interest payments on debts, dividend payments, capital expenditures and new
investments for a set minimum period of between 3 to 6 months.
China Telecom Corporation Limited Annual Report 2009
155
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
34. Financial Instruments (continued)
(b) Risks (continued)
(ii) Liquidity risk (continued)
The following table sets out the remaining contractual maturities at the end of the reporting period of the Group’s
financial liabilities, which are based on contractual undiscounted cash flows (including interest payments
computed using contractual rates or, if fl oating, based on prevailing rates at the end of the reporting period) and
the earliest date the Group would be required to repay:
2009
Total
contractual
undiscounted
cash fl ow
RMB
millions
Within 1 year
or on demand
RMB
millions
More than
1 year but
less than
2 years
RMB
millions
More than
2 years but
less than
5 years
RMB
millions
(52,294)
(62,764)
(34,321)
(52,193)
(18)
(52,294)
(3,742)
(34,321)
(52,193)
(18)
—
(12,260)
—
—
—
—
(45,486)
—
—
—
Carrying
amount
RMB
millions
51,650
54,255
34,321
52,193
18
More than
5 years
RMB
millions
—
(1,276)
—
—
—
192,437
(201,590)
(142,568)
(12,260)
(45,486)
(1,276)
2008
Total
contractual
undiscounted
cash fl ow
RMB
millions
Within 1 year
or on demand
RMB
millions
More than
1 year but
less than
2 years
RMB
millions
More than
2 years but
less than
5 years
RMB
millions
(85,576)
(48,407)
(34,458)
(53,628)
(40)
(85,576)
(2,498)
(34,458)
(53,628)
(22)
—
(3,558)
—
—
(18)
—
(24,813)
—
—
—
Carrying
amount
RMB
millions
83,448
39,791
34,458
53,628
40
More than
5 years
RMB
millions
—
(17,538)
—
—
—
211,365
(222,109)
(176,182)
(3,576)
(24,813)
(17,538)
Short-term debt
Long-term debt
Accounts payable
Accrued expenses and other
payables
Finance lease obligations
Short-term debt
Long-term debt
Accounts payable
Accrued expenses and other
payables
Finance lease obligations
Management believes that the Group’s current cash on hand, expected cash fl ows from operations and available
credit facilities from banks (Note 16) will be suffi cient to meet the Group’s working capital requirements and repay
its borrowings and obligations when they become due.
156 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
34. Financial Instruments (continued)
(b) Risks (continued)
(iii)
Interest rate risk
The Group’s interest rate risk exposure arises primarily from its short-term and long-term debts. Debts carrying
interest at variable rates and at fi xed rates expose the Group to cash fl ow interest rate risk and fair value interest
rate risk respectively. The Group manages its exposure to interest rate risk by maintaining high proportion of fi xed
rate debts.
The following table sets out the interest rate profi le of the Group’s debt at the end of the reporting period:
2009
2008
Effective
interest rate
%
4.0
4.5
4.1
4.9
Effective
interest rate
%
5.1
4.8
5.2
RMB
millions
47,732
53,592
101,324
3,918
663
105,905
RMB
millions
83,448
24,012
107,460
—
15,779
123,239
Fixed rate debt:
Short-term debt
Long-term debt
Variable rate debt:
Short-term debt
Long-term debt
Total debt
Fixed rate debt as a percentage of
total debt
95.7%
87.2%
As at 31 December 2009, it is estimated that an increase of 100 basis points in interest rate, with all other
variables held constant, would decrease the Group’s net profi t for the year and retained earnings by approximately
RMB34 million (2008: RMB118 million).
The above sensitivity analysis has been prepared on the assumptions that the change in interest rate had
occurred at the end of the reporting period and the change was applied to the Group’s debt in existence at that
date with exposure to cash fl ow interest rate risk. The analysis is prepared on the same basis for 2008.
(iv) Foreign currency exchange rate risk
Foreign currency exchange rate risk arises on fi nancial instruments that are denominated in a currency other than
the functional currency in which they are measured. The Group’s foreign currency risk exposure relates to bank
deposits and borrowings denominated primarily in US dollars, Euros, Japanese Yen and Hong Kong dollars.
Management does not expect the appreciation or depreciation of the Renminbi against foreign currencies will
materially affect the Group’s financial position and result of operations because 94.7% (2008: 94.2%) of the
Group’s cash and cash equivalents and 96.9% (2008: 97.2%) of the Group’s short-term and long-term debt as at
31 December 2009 are denominated in Renminbi. Details of bank loans denominated in other currencies are set
out in Note 16.
China Telecom Corporation Limited Annual Report 2009
157
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
35. Capital Management
The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so
that it can continue to provide investment returns for shareholders and benefi ts for other stakeholders, by pricing products
and services commensurately with the level of risk and by securing access to fi nance at a reasonable cost.
Management regularly reviews and manages its capital structure to maintain a balance between the higher shareholder returns
that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position,
and makes adjustments to the capital structure in light of changes in economic conditions.
Management monitors its capital structure on the basis of total debt-to-total assets ratio. For this purpose the Group defi nes
total debt as the sum of short-term debt, long-term debt and fi nance lease obligations. As at 31 December 2009, the Group’s
total debt-to-total assets ratio was 24.8% (2008: 28.0%), which is within the range of management’s expectation.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
36. Related Party Transactions
Companies are considered to be related if one company has the ability, directly or indirectly, to control or jointly control the
other company or have signifi cant infl uence over the other company in making fi nancial and operating decisions. Companies
are also considered to be related if they are subject to common control.
(a) Transactions with China Telecom Group
The Group is a part of companies under China Telecommunications Corporation, a company owned by the PRC
government, and has signifi cant transactions and relationships with members of China Telecom Group.
The principal transactions with China Telecom Group which were carried out in the ordinary course of business are as
follows:
Purchases of telecommunications equipment and materials
Sales of telecommunications equipment and materials
Construction and engineering services
Provision of IT services
Receiving IT services
Receiving community services
Receiving ancillary services
Receiving comprehensive services
Operating lease expenses
Net transaction amount of centralised service
Interconnection revenues
Interconnection charges
Interest on amounts due to and loans from China Telecom Group
CDMA network capacity lease fee
Reimbursement of capacity maintenance related costs of
CDMA network
2009
RMB
millions
2008
RMB
millions
1,956
940
5,970
249
520
2,324
6,044
—
387
534
69
667
2,933
8,383
1,163
145
—
7,877
—
457
2,297
4,536
1,190
378
250
78
677
3,537
1,504
107
Note
(i)
(i)
(ii)
(iii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(ix)
(x)
(xi)
(xii)
158 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
36. Related Party Transactions (continued)
(a) Transactions with China Telecom Group (continued)
Note:
(i)
The amount for the year ended 31 December 2008 represents commission paid and payable for procurement services provided
by China Telecom Group. On 15 December 2008, the Company and China Telecommunications Corporation entered into a
supplemental agreement, which is effective from 1 January 2009, to expand the scope of procurement services to include the
amount of telecommunications equipment and materials purchased from/sold to China Telecom Group.
(ii)
Represent construction and engineering as well as design and supervisory services provided by China Telecom Group.
(iii)
Represent IT services provided by and received by China Telecom Group.
(iv)
(v)
(vi)
Represent amounts paid and payable to China Telecom Group in respect of cultural, educational, hygiene and other community
services.
Represent amounts paid and payable to China Telecom Group in respect of ancillary services such as repairs and maintenance
of telecommunications equipment and facilities and certain customer services.
The amount for the year ended 31 December 2008 represents amounts paid and payable to entities of China Telecom Group
which were not within the scope of other related party service agreements in respect of services for procurement of
telecommunications equipment, network design, software upgrade, system integration and manufacturing of calling cards. The
comprehensive service agreement signed between the Company and China Telecommunications Corporation expired on 31
December 2008 and has not been renewed. The various types of cross-provincial transactions set out under the comprehensive
services framework agreement have been classifi ed into other existing related party transactions based on the nature of such
transactions. Therefore, no transaction amount is reported in this category for the year ended 31 December 2009.
(vii)
Represent net amounts paid and payable to China Telecom Group for leases of business premises and inter-provincial
transmission optic fi bres.
(viii) Represent net amount shared between the Company and China Telecom Group for costs associated with centralised services.
The amount for the year ended 31 December 2009 represents amounts received or receivable for the net amount of centralised
service. The amount for the year ended 31 December 2008 represents amounts paid or payable for the net amount of
centralised service.
(ix)
Represent amounts charged from/to China Telecom Group for interconnection of local and domestic long distance calls.
(x)
(xi)
Represent interest paid and payable to China Telecom Group with respect to the amounts due to China Telecom Group and
loans from China Telecommunications Corporation (Note 16).
Represent amounts paid and payable to China Telecom Group for lease of CDMA mobile communication network capacity (“CDMA
network”).
(xii)
Represent amounts shared between the Company and China Telecom Group for the capacity maintenance related costs in
connection with the CDMA network capacity used by the Company.
Amounts due from/to China Telecom Group included in the following balances are summarised as follows:
Accounts receivable
Prepayments and other current assets
2009
RMB
millions
917
935
2008
RMB
millions
372
700
Total amounts due from China Telecom Group
1,852
1,072
Accounts payable
Accrued expenses and other payables
Short-term debt
Long-term debt
7,526
1,694
40,267
—
6,387
1,448
63,776
15,150
Total amounts due to China Telecom Group
49,487
86,761
China Telecom Corporation Limited Annual Report 2009
159
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
36. Related Party Transactions (continued)
(a) Transactions with China Telecom Group (continued)
Amounts due from/to China Telecom Group, other than short-term debt and long-term debt, bear no interest, are
unsecured and are repayable in accordance with contractual terms which are similar to those terms offered by third
parties. The term and conditions associated with short-term debt and long-term debt payable to China Telecom Group
are set out in Note 16.
As at 31 December 2009 and 2008, no allowance for impairment of doubtful debts was recognised in respect of
amounts due from China Telecom Group.
On 30 August 2006, the Company entered into a strategic agreement (“the Agreement”) with China Communication
Services Corporation Limited (“CCS”), a company under the common control of China Telecommunications Corporation.
The Agreement was approved by the Company’s independent shareholders at an Extraordinary General Meeting held
on 25 October 2006. The Agreement is effective from 1 January 2007 to 31 December 2009, pursuant to which the
Company’s subsidiaries (and their successors) in the Shanghai, Guangdong, Zhejiang, Fujian, Hubei and Hainan regions
procure design, construction and engineering services provided by CCS for at least 12.5% of these subsidiaries’ annual
capital expenditure. In return, CCS agreed to provide an additional price discount of at least 5% for the above services.
In addition, the above subsidiaries will also procure facilities management services provided by CCS of not less than
RMB1,330 million during the effective period of the Agreement.
As a result of the expansion of services areas of CCS, an amendment to the strategic agreement (“the Supplemental
Agreement”) was approved by the Company’s independent shareholders at an Extraordinary General Meeting held on 7
August 2007. The Supplemental Agreement extends the scope of the Agreement to the Company’s subsidiaries (and
their successors) in the Jiangsu, Anhui, Jiangxi, Hunan, Guangxi, Chongqing, Sichuan, Guizhou, Yunnan, Shaanxi,
Gansu, Qinghai and Xinjiang regions, amends that the Company’s subsidiaries will on an annual basis, procure design,
construction and engineering services provided by CCS for at least 10.6% of these subsidiaries’ annual capital
expenditure, and increases the commitment for facilities management services provided by CCS by RMB450 million.
The Supplemental Agreement is effective from 1 January 2007 to 31 December 2009.
On 29 October 2009, the Company renewed the Agreement and its Supplemental Agreement in accordance with their
respective provisions for a further term of three years expiring on 31 December 2012 and to amend certain provisions of
the Agreement to refl ect the current structure of the Group and CCS.
On 16 September 2008, the Company’s independent shareholders approved at an Extraordinary General Meeting the
CDMA network capacity lease agreement (“the CDMA Network Lease”) with China Telecommunications Corporation.
The lease is effective from 1 October 2008 to 31 December 2010 and can be renewed at the option of the Company,
pursuant to which the Company agreed to lease the capacity on the constructed CDMA network from China Telecom
Group for the provision of CDMA mobile communication services. The lease fee for the capacity on the constructed
CDMA network shall be 28% of the CDMA service revenue (which is calculated by the total revenue from the CDMA
business minus any upfront non-refundable revenue arising out of the CDMA business and any revenue from sale of
telecommunication products) for the period from 1 October 2008 to 31 December 2008 and for each of the years
ending 31 December 2009 and 2010. There is no minimum annual lease fee for the period ended 31 December 2008
and the year ending 31 December 2009. For the year ending 31 December 2010, the minimum lease fee is 90% of the
total amount of the lease fee paid by the Company to China Telecom Group in the year ending 31 December 2009. The
Group accounts for the CDMA Network Lease as an operating lease.
Under the CDMA Network Lease, China Telecommunications Corporation has granted to the Company an option to
purchase the CDMA network. The option may be exercised, at the discretion of the Company, at any time during the
term of the CDMA Network Lease or within one year after the expiry of the CDMA Network Lease. The purchase price
will be determined with reference to the appraised value of the CDMA network in accordance with applicable PRC laws
and regulations and taking into account prevailing market conditions and other factors, provided that the purchase price
would enable China Telecommunications Corporation to recover its investment in the CDMA network plus an internal
rate of return on the investment not to exceed 8%.
160 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
36. Related Party Transactions (continued)
(a) Transactions with China Telecom Group (continued)
In addition, in accordance with the CDMA Network Lease, the Company shall be responsible for the operation,
management and maintenance of the CDMA network. The capacity maintenance related costs, which comprise the
rental fees for the exchange centres and the base stations and other related costs such as water and electricity
charges, heating charges and fuel charges for the relevant equipment as well as the maintenance costs of a non-capital
nature, shall be shared between the Company and China Telecommunications Corporation. The proportion of the
constructed capacity related costs to be borne by the Company shall be calculated on a monthly basis by reference to
the followings:
(i)
the actual number of cumulative CDMA subscribers of the Company at the end of the month prior to the
occurrence of the costs divided by 90%, divided by
(ii)
the total capacity available on the CDMA network.
(b) Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning, directing and controlling
the activities of the Group, directly or indirectly, including directors and supervisors of the Group.
Key management personnel compensation of the Group is summarised as follows:
Short-term employee benefi ts
Post-employment benefi ts
Equity-based compensation benefi ts
2009
RMB
thousands
2008
RMB
thousands
8,142
726
—
8,397
687
5,696
8,868
14,780
The above remuneration is included in personnel expenses.
(c) Contributions to post-employment benefi t plans
The Group participates in various defined contribution post-employment benefit plans organised by municipal,
autonomous regional and provincial governments for its employees. Further details of the Group’s post-employment
benefi t plans are disclosed in Note 37.
China Telecom Corporation Limited Annual Report 2009
161
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
36. Related Party Transactions (continued)
(d) Transactions with other state-controlled entities in the PRC
The Group is a state-controlled enterprise and operates in an economic regime currently dominated by entities directly
or indirectly controlled by the State through government authorities, agencies, affiliations and other organisations
(collectively referred to as “state-controlled entities”).
Apart from transactions with parent company and its affi liates, the Group has transactions with other state-controlled
entities which include but not limited to the following:
—
sales and purchases of goods, properties and other assets
—
rendering and receiving services
—
lease of assets
—
depositing and borrowing money
—
use of public utilities
These transactions are conducted in the ordinary course of the Group’s business on terms comparable to the terms of
transactions with other entities that are not state-controlled. The Group prices its telecommunications services and
products based on government-regulated tariff rates, where applicable, or based on commercial negotiations. The
Group has also established procurement policies and approval processes for purchases of products and services,
which do not depend on whether the counterparties are state-controlled entities or not.
Having considered the transactions potentially affected by related party relationships, the entity’s pricing strategy,
procurement policies and approval processes, and the information that would be necessary for an understanding of the
potential effect of the related party relationships on the fi nancial statements, the directors are of the opinion that the
following related party transactions require disclosure of numeric details:
(i) Transactions with other state-controlled telecommunications operators in the PRC
The Group’s telecommunications networks interconnect with the networks of other state-controlled
telecommunications operators. The Group also leases telecommunications networks to these operators in the
normal course of business. The interconnection and leased line charges are regulated by the MIIT. The extent of
the Group’s interconnection and leased line transactions with other state-controlled telecommunications operators
in the PRC is summarised as follows:
Interconnection revenues
Interconnection charges
Leased line revenues
2009
RMB
millions
11,342
7,377
596
2008
RMB
millions
11,257
4,912
786
162 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
36. Related Party Transactions (continued)
(d) Transactions with other state-controlled entities in the PRC (continued)
(i) Transactions with other state-controlled telecommunications operators in the PRC
(continued)
Amounts due from/to other state-controlled telecommunications operators in the PRC included in the following
balances are summarised as follows:
Accounts receivable
Prepayments and other current assets
Total amounts due from other state-controlled telecommunications
operators in the PRC
Accounts payable
Accrued expenses and other payables
Total amounts due to other state-controlled telecommunications
operators in the PRC
2009
RMB
millions
827
240
2008
RMB
millions
1,112
4,523
1,067
5,635
393
5,484
373
13,242
5,877
13,615
Amounts due from/to other state-controlled telecommunications operators in the PRC bear no interest, are
unsecured and are repayable in accordance with normal commercial terms.
As at 31 December 2009 and 2008, there were no material allowance for impairment of doubtful debts in respect
of amounts due from other state-controlled telecommunications operators in the PRC.
(ii) Transactions with state-controlled banks
The Group deposits its cash balances primarily with several state-controlled banks in the PRC and obtains short-
term and long-term loans from these banks in the ordinary course of business. The interest rates of these bank
deposits and loans are regulated by the People’s Bank of China. The Group’s interest income earned from
deposits with and interest expenses incurred on loans from state-controlled banks in the PRC are as follows:
Interest income
Interest expense
2009
RMB
millions
281
827
2008
RMB
millions
428
1,550
China Telecom Corporation Limited Annual Report 2009
163
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
36. Related Party Transactions (continued)
(d) Transactions with other state-controlled entities in the PRC (continued)
(ii) Transactions with state-controlled banks (continued)
The amounts of cash deposited with and loans from state-controlled banks in the PRC are summarised as
follows:
Cash at bank
Time deposits with original maturity within three months
Time deposits with original maturity over three months
2009
RMB
millions
26,867
7,569
442
2008
RMB
millions
21,674
5,950
397
Total deposits with state-controlled banks in the PRC
34,878
28,021
Short-term loans
Long-term loans
11,138
4,485
9,693
4,829
Total loans with state-controlled banks in the PRC
15,623
14,522
Further details of the interest rates and repayment terms of loans from state-controlled banks are set out in
Note 16.
The directors believe the above information provides meaningful disclosure of related party transactions.
37. Post-Employment Benefi ts Plans
As stipulated by the regulations of the PRC, the Group participates in various defi ned contribution retirement plans organised
by municipall, autonomous regional and provincial governments for its employees. The Group is required to make
contributions to the retirement plans at rates ranging from 18% to 20% of the salaries, bonuses and certain allowances of the
employees. A member of the plan is entitled to a pension equal to a fi xed proportion of the salary prevailing at the member’s
retirement date. The Group has no other material obligation for the payment of pension benefi ts associated with these plans
beyond the annual contributions described above.
The Group’s contributions for the year ended 31 December 2009 were RMB2,933 million (2008: RMB2,647 million).
The amount payable for contributions to defi ned contribution retirement plans as at 31 December 2009 was RMB235 million
(2008: RMB257 million).
38. Stock Appreciation Rights
The Group implemented a stock appreciation rights plan for members of its management to provide incentives to these
employees. Under this plan, stock appreciation rights are granted in units with each unit representing one H share. No shares
will be issued under the stock appreciation rights plan. Upon exercise of the stock appreciation rights, a recipient will receive,
subject to any applicable withholding tax, a cash payment in RMB, translated from the Hong Kong dollar amount equal to the
product of the number of stock appreciation rights exercised and the difference between the exercise price and market price
of the Company’s H shares at the date of exercise based on the applicable exchange rate between RMB and Hong Kong
dollar at the date of the exercise. The Company recognises compensation expense of the stock appreciation rights over the
applicable vesting period.
164 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
38. Stock Appreciation Rights (continued)
In March 2003, the Company’s compensation committee approved the granting of 276.5 million stock appreciation right units
to eligible employees. Under the terms of this grant, all stock appreciation rights had a contractual life of six years from date of
grant and an exercise price of HK$1.48 per unit. A recipient of stock appreciation rights may not exercise the rights in the fi rst
18 months after the date of grant. As at each of the third, fourth, fi fth and sixth anniversary of the date of grant, the total
number of stock appreciation rights exercisable may not in aggregate exceed 25%, 50%, 75% and 100%, respectively, of the
total stock appreciation rights granted to such person.
In April 2005, the Company’s compensation committee approved the granting of 560.0 million stock appreciation right units to
eligible employees. Under the terms of this grant, all stock appreciation rights had a contractual life of six years from date of
grant and an exercise price of HK$2.78 per unit. A recipient of stock appreciation rights may not exercise the rights in the fi rst
24 months after the date of grant. As at each of the third, fourth, fi fth and six anniversary of the date of grant, the total number
of stock appreciation rights exercisable may not in aggregate exceed 25%, 50%, 75% and 100%, respectively, of the total
stock appreciation rights granted to such person.
In January 2006, the Company’s compensation committee approved the granting of 837.3 million stock appreciation right
units to eligible employees. Under the terms of this grant, all stock appreciation rights had a contractual life of six years from
date of grant and an exercise price of HK$2.85 per unit. A recipient of stock appreciation rights may not exercise the rights in
the fi rst 24 months after the date of grant. As at each of the third, fourth, fi fth and sixth anniversary of the date of grant, the
total number of stock appreciation rights exercisable may not in aggregate exceed 25%, 50%, 75% and 100%, respectively,
of the total stock appreciation rights granted to such person.
During the year ended 31 December 2009, 0.2 million (2008: 346 million) stock appreciation right units were exercised. For
the year ended 31 December 2009, compensation expense of RMB56 million was recognised by the Group in respect of
stock appreciation rights. For the year ended 31 December 2008, reversal of compensation expense of RMB148 million was
recognised by the Group in respect of stock appreciation rights as a result of decline in share price of the Company.
As at 31 December 2009, the carrying amount of the relating liability arising from stock appreciation rights was RMB422
million (2008: RMB366 million). As at 31 December 2009, 555 million stock appreciation right units became vested but not yet
exercised. The carrying amount of the corresponding liability was RMB276 million. As at 31 December 2008, all vested stock
appreciation rights were exercised.
39. Accounting Estimates and Judgements
The Group’s fi nancial position and results of operations are sensitive to accounting methods, assumptions and estimates that
underlie the preparation of the consolidated fi nancial statements. Management bases the assumptions and estimates on
historical experience and on other factors that the management believes to be reasonable and which form the basis for
making judgements about matters that are not readily apparent from other sources. On an on-going basis, management
evaluates its estimates. Actual results may differ from those estimates as facts, circumstances and conditions change.
The selection of signifi cant accounting policies, the judgements and other uncertainties affecting application of those policies
and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when reviewing
the consolidated fi nancial statements. The signifi cant accounting policies are set forth in Note 2. Management believes the
following signifi cant accounting policies involve the most signifi cant judgements and estimates used in the preparation of the
consolidated fi nancial statements.
Revenue recognition for upfront connection and installation fees
The Group defers the recognition of upfront fees for activation of wireline services and wireline installation fees and amortises
such fees over the expected customer relationship period of ten years. The related direct incremental customer acquisition
costs (including direct costs of installation) are also deferred and amortised over the same expected customer relationship
period. Management estimates the expected customer relationship period based on the historical customer retention
experience with consideration of the expected level of future competition, the risk of technological or functional obsolescence
of its services, technological innovation, and the expected changes in the regulatory and social environment. If management’s
estimate of the expected customer relationship period changes as a result of increased competition, changes in
telecommunications technology or other factors, the amount and timing of recognition of deferred revenue and deferred
customer acquisition costs would change for future periods. There have been no changes to the estimated customer
relationship period for the years presented.
China Telecom Corporation Limited Annual Report 2009
165
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
39. Accounting Estimates and Judgements (continued)
Allowance for impairment of doubtful debts
Management estimates allowance for impairment of doubtful debts resulting from the inability of the customers to make the
required payments. Management bases its estimates on the ageing of the accounts receivable balance, customer credit-
worthiness, and historical write-off experience. If the fi nancial condition of the customers were to deteriorate, actual write-offs
might be higher than expected and could signifi cantly affect the results of future periods.
Impairment of long-lived assets
If circumstances indicate that the carrying amount of a long-lived asset may not be recoverable, the asset may be considered
“impaired”, and an impairment loss would be recognised in accordance with accounting policy for impairment of long-lived
assets as described in Note 2(o). The carrying amounts of the Group’s long-lived assets, including property, plant and
equipment, intangible assets and construction in progress are reviewed periodically to determine whether there is any
indication of impairment. These assets are tested for impairment whenever events or changes in circumstances indicate that
their recorded carrying amounts may not be recoverable. For goodwill, the impairment testing is performed annually at the end
of each reporting period. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and the
net selling price. When an asset does not generate cash fl ows largely independent of those from other assets, the recoverable
amount is determined for the smallest group of assets that generates cash infl ows independently (i.e. a cash-generating unit).
In determining the value in use, expected future cash fl ows generated by the assets are discounted to their present value. An
impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable
amount. It is diffi cult to precisely estimate selling price of the Group’s long-lived assets because quoted market prices for such
assets may not be readily available. In determining the value in use, expected future cash fl ows generated by the asset are
discounted to their present value, which requires signifi cant judgement relating to level of revenue, amount of operating costs
and applicable discount rate. Management uses all readily available information in determining an amount that is a reasonable
approximation of recoverable amount, including estimates based on reasonable and supportable assumptions and projections
of revenue and amount of operating costs.
For the year ended 31 December 2009, provision for impairment losses of RMB753 million were made against the carrying
value of property, plant and equipment (Note 4) (2008: RMB24,167 million). In determining the recoverable amount of these
equipment, signifi cant judgments were required in estimating future cash fl ows, level of revenue, amount of operating costs
and applicable discount rate.
Changes in these estimates could have a signifi cant impact on the carrying value of the assets and could result in additional
impairment charge or reversal of impairment in future periods.
Depreciation and amortisation
Property, plant and equipment is depreciated on a straight-line basis over the estimated useful lives of the assets, after taking
into account their estimated residual value. Management reviews the estimated useful lives and residual values of the assets
annually in order to determine the amount of depreciation expense to be recorded during any reporting period. The useful lives
and residual values are based on the Group’s historical experience with similar assets and take into account anticipated
technological changes. The depreciation expense for future periods is adjusted if there are signifi cant changes from previous
estimates.
Amortisation of customer relationships is recognised on a straight-line basis over the expected customer relationship period of
five years. Management reviews the expected customer relationship period annually in order to estimate the amount of
amortisation expense to be recorded during any reporting period. The expected customer relationship period is based on the
estimate period over which future economic benefi ts will be received by the Group and takes into account the level of future
competition, the risk of technological or functional obsolescence of its services, and the expected changes in the regulatory
and social environment. The amortisation expense for future periods is adjusted if there are signifi cant changes from previous
estimates.
166 China Telecom Corporation Limited Annual Report 2009
Notes to the Financial Statements (continued)
For the year ended 31 December 2009
40. Possible Impact of Amendments, New Standards and Interpretations
Issued But Not Yet Effective for the Annual Accounting Period Ended
31 December 2009
Up to the date of issue of these fi nancial statements, the IASB has issued the following amendments, new standards and
interpretations which are not yet effective for the annual accounting period ended 31 December 2009:
Effective for accounting
period beginning
on or after
Improvements to IFRSs 2008
IFRS 1 (revised), “First-time adoption of International Financial Reporting Standards”
IFRS 3 (revised), “Business combinations”
Amendments to IAS 27, “Consolidated and separate fi nancial statements”
Amendments to IAS 39, “Financial instruments: Recognition and measurement
— Eligible hedged items”
IFRIC 17, “Distributions of non-cash assets to owners”
IFRIC 18, “Transfer of assets from customers”
Improvements to IFRSs 2009
Amendments to IFRS 1, “First-time adoption of International Financial Reporting Standards
— Additional exemptions for fi rst-time adopters”
Amendments to IFRS 2, “Share-based payment — Group cash-settled share-based
payment transactions”
Amendment to IAS 32, “Financial instruments: Presentation—Classifi cation of rights issues”
IFRIC 19, “Extinguishing fi nancial liabilities with equity instruments”
IAS 24 (revised), “Related party disclosures”
Amendments to IFRIC 14, IAS 19, “The limit on a defi ned benefi t asset, minimum funding
requirements and their interaction — Prepayments of a minimum funding requirement”
IFRS 9, “Financial instruments”
1 July 2009
1 July 2009
1 July 2009
1 July 2009
1 July 2009
1 July 2009
1 July 2009
1 July 2009 or
1 January 2010
1 January 2010
1 January 2010
1 February 2010
1 July 2010
1 January 2011
1 January 2011
1 January 2013
The Group has not early adopted the above amendments, new standards and new interpretations. Management is in the
process of making an assessment of what the impact of these amendments, new standards and new interpretations is
expected to be in the period of initial application. So far management believes that amendments to IFRS 1, amendments to
IAS 39, amendment to IAS 32, IFRIC 19 and amendments to IFRIC 14 are not applicable to the Group’s operations and the
remaining above amendments, new standards and new interpretations are unlikely to have a signifi cant impact on the Group’s
results of operations and fi nancial position.
41. Parent and Ultimate Holding Company
The parent and ultimate holding company of the Group as at 31 December 2009 is China Telecommunications Corporation, a
state-owned enterprise established in the PRC. This entity does not produce fi nancial statements available for public use.
China Telecom Corporation Limited Annual Report 2009
167
Financial Summary
(Amounts in millions, except per share data)
Results of operation
Wireline voice
Mobile voice
Internet
Managed data and leased line
Upfront connection fees
Value-added services, integrated information
application services and others
Operating revenues
Depreciation and amortisation
Network operations and support
Selling, general and administrative
Personnel expenses
Other operating expenses
Impairment loss on property, plant and equipment
Year ended 31 December
2009
RMB
2008
RMB
(restated)
2007
RMB
(restated)
2006
RMB
(restated)
2005
RMB
78,432
20,027
51,567
11,499
1,151
96,258
3,955
40,727
10,231
2,022
111,573
—
31,802
9,183
3,294
121,492
—
24,308
7,920
4,971
123,897
—
18,347
7,741
6,781
46,694
33,336
24,952
18,527
14,450
209,370
52,243
42,903
40,507
32,857
17,449
753
186,529
53,880
36,096
27,501
28,946
10,794
24,167
180,804
52,607
29,856
24,130
27,419
9,051
—
177,218
51,690
29,487
22,442
26,390
8,209
—
171,216
49,980
29,553
20,241
25,232
7,068
—
Operating expenses
186,712
181,384
143,063
138,218
132,074
Operating profi t
Defi cit on revaluation of property, plant and equipment
Net fi nance costs
Investment income/(loss)
Share of profi ts of associates
Profi t before taxation
Income tax
Profi t for the year
Other comprehensive income/(loss) for the year
Change in fair value of available-for-sale securities
Deferred tax on change in fair value of
available-for-sale equity securities
Exchange difference on translation of fi nancial
statements of subsidiaries outside mainland PRC
Effect of changes in tax rates
Surplus on revaluation of property, plant and equipment
Deferred tax on revaluation surplus
22,658
—
(4,375)
791
101
19,175
(4,549)
14,626
538
(120)
(2)
—
—
—
5,145
—
(5,076)
5
112
186
793
979
(92)
23
(83)
—
—
—
37,741
(2,755)
(4,288)
83
215
30,996
(6,704)
39,000
—
(4,472)
(25)
61
34,564
(6,919)
39,142
—
(4,872)
(7)
62
34,325
(6,222)
24,292
27,645
28,103
78
(14)
(103)
(1,577)
4,809
(1,136)
66
(22)
(309)
5
—
—
(260)
—
—
(187)
(5)
—
—
(192)
Other comprehensive (loss)/income for the year, net of tax
416
(152)
2,057
Total comprehensive income for the year
15,042
827
26,349
27,385
27,911
Profi t attributable to
Equity holders of the Company
Minority interests
Profi t for the year
Total comprehensive income attributable to
Equity holders of the Company
Minority interests
Total comprehensive income for the year
Basic earnings per share
14,422
204
14,626
14,763
279
15,042
0.18
884
95
979
732
95
827
0.01
24,195
97
27,562
83
28,061
42
24,292
27,645
28,103
26,252
97
27,302
83
27,869
42
26,349
27,385
27,911
0.30
0.34
0.35
Note: As a result of the adoption of IFRIC 13 which is effective for accounting period beginning on or after 1 July 2008, operating revenues, selling,
general and administrative expenses, as well as other operating expenses have been restated accordingly.
168 China Telecom Corporation Limited Annual Report 2009
Financial Summary (continued)
(Amounts in millions, except per share data)
Financial condition
Property, plant and equipment, net
Construction in progress
Other non-current assets
Cash and bank deposits
Other current assets
Year ended 31 December
2009
RMB
2008
RMB
2007
RMB
2006
RMB
2005
RMB
286,328
11,567
67,689
35,246
25,690
299,159
13,615
72,064
28,263
27,236
329,292
13,626
26,303
21,649
22,461
330,436
19,563
28,187
23,492
22,179
330,300
24,923
28,774
19,898
21,949
Total assets
426,520
440,337
413,331
423,857
425,844
Current liabilities
Non-current liabilities
143,481
60,426
176,790
48,999
140,245
47,114
159,451
53,609
159,437
77,205
Total liabilities
203,907
225,789
187,359
213,060
236,642
Total equity attributable to equity holders of the Company
Minority interests
221,732
881
213,036
1,512
224,521
1,451
209,349
1,448
187,758
1,444
Total equity
222,613
214,548
225,972
210,797
189,202
Total liabilities and equity
426,520
440,337
413,331
423,857
425,844
China Telecom Corporation Limited Annual Report 2009
169
Shareholder Information
Share Information
Share Listing
China Telecom Corporation Limited’s H shares were listed on The Stock Exchange of Hong Kong Limited on 15 November 2002
and New York Stock Exchange as American Depositary Shares (ADSs) on 14 November 2002. ADSs are issued by The Bank of
New York Mellon. Each ADS traded in the United States represents 100 ordinary H shares.
Stock Code
The Stock Exchange of Hong Kong Limited
New York Stock Exchange
728
CHA
Share Price Performance
2009 share price
HK$ per H share
US$ per ADS
High
Low
Close
High
Low
Close
4.35
2.58
3.24
55.53
32.11
41.42
Share price change in 2009
+12%
+9%
Number of issued shares: (as at 31 December 2009)
80,932,368,321
Market capitalisation: (as at 31 December 2009)
HK$262.2 billion
Share price performance of China Telecom on The Stock Exchange of Hong Kong Limited versus Hang Seng Index (HSI) and MSCI
World Telecom Service Sector Index (MSCI) from IPO on 15 November 2002 to 31 December 2009.
170 China Telecom Corporation Limited Annual Report 2009
Shareholder Information (continued)
Distribution of shares and shareholdings
The share capital of the Company as at 31 December 2009 was RMB80,932,368,321, divided into 80,932,368,321 shares of
RMB1.00 each. As at 31 December 2009, the share capital of the Company comprised:
Total number of Domestic shares:
Domestic shares held by:
China Telecommunications Corporation
Guangdong Rising Assets Management Co., Ltd.
Zhejiang Financial Development Company
Fujian State-owned Assets Investment Holdings Co., Ltd.
Jiangsu Guoxin Investment Group Co., Ltd.
Total number of H shares (including ADSs):
Number of shares
% of the total
number of shares
67,054,958,321
57,377,053,317
5,614,082,653
2,137,473,626
969,317,182
957,031,543
13,877,410,000
82.85
70.89
6.94
2.64
1.20
1.18
17.15
Total
80,932,368,321
100.00
Major shareholders of H shares
The following table shows the major shareholders that exercised or controlled the exercise of 5% or above of H shares as at 31
December 2009:
Name of shareholder
Capital Research and Management Company
Blackrock, Inc.
RFS Holdings B.V.
JPMorgan Chase & Co.
UBS AG
Number of shares
% of the total
number of
H shares in issue
1,254,424,000
1,198,985,251
907,191,530
845,413,761
707,680,334
9.04
8.64
6.54
6.09
5.10
China Telecom Corporation Limited Annual Report 2009
171
Shareholder Information (continued)
Dividend History
Financial Year
Ex-Dividend Date
Shareholder
Approval Date
Payment Date
2002 Final
2003 Final
2004 Final
2005 Final
2006 Final
2007 Final
2008 Final
2009 Final
16 May 2003
1 April 2004
21 April 2005
20 April 2006
26 April 2007
28 April 2008
23 April 2009
22 April 2010
20 June 2003
3 May 2004
25 May 2005
23 May 2006
29 May 2007
30 May 2008
26 May 2009
25 May 2010
10 July 2003
20 May 2004
23 June 2005
15 June 2006
15 June 2007
16 June 2008
30 June 2009
30 June 2010
Dividend
per Share
(HK$)
0.00837*
0.065
0.065
0.075
0.085
0.085
0.085
0.085**
*
On the basis of HK$0.065 per share, pro-rated based on the number of days the Company’s shares have been listed during the year of 2002.
**
The dividend proposal is subject to shareholders’ approval at the annual general meeting to be held on 25 May 2010.
Annual Reports
Our annual reports in both English and Chinese are now available through the Internet at http://www.chinatelecom-h.com.
The Company will fi le an annual report in Form 20-F for the year 2009 with the United States Securities and Exchange Commission
by 30 June 2010.
2009 Annual Report Survey
Annual Report is a key communication channel between shareholders and the Company. Last year, we received over 200
questionnaires of “Your Views on 2008 Annual Report”. Each of these responses benefi ted us in enhancing and further improving
our annual reports. We are deeply indebted to the respondents for their constructive responses. In accordance with our
commitment, we have to donate HK$50 for each questionnaire received. In this regard, we have donated a sum of HK$20,000 to
the charitable organisation, “UNICEF”. In addition, we have already implemented the suggestion of allowing shareholders to choose
means of receipt and language of corporate communication to enhance environmental protection and cost savings.
We value and are eager to keep hearing your comments on our annual reports for our further improvement in the future. It is highly
appreciated if you could spare your precious time to complete the questionnaire of “Your Views on 2009 Annual Report”, as
attached in this annual report, and return it by post or fax to us at +852 2877 0988. You can also fi ll in the electronic form at our
website, www.chinatelecom-h.com.
172 China Telecom Corporation Limited Annual Report 2009
Shareholder Information (continued)
Annual General Meeting
To be held at 11 a.m. on 25 May 2010 in Conrad Hong Kong Hotel
Registered offi ce
Address:
Tel:
Fax:
31 Jinrong Street
Xicheng District
Beijing
PRC 100033
86 10 6642 8166
86 10 6601 0728
Any enquiries relating to the strategic development or
operations of China Telecom Corporation Limited, please
contact the Investor Relations Department or Offi ce of the
Board of Directors:
Investor Relations
Investor Relations Department
Tel:
Fax:
Email:
852 2877 9777
852 2877 0988
ir@chinatelecom-h.com
Offi ce of the Board of Directors
Tel:
Fax:
Email:
86 10 6642 8166
86 10 6601 0728
ir@chinatelecom.com.cn
Any enquiries relating to your shareholding, for example
transfers of shares, change of name or address, loss of share
certifi cates, please contact the H share registrar:
H share registrar
Computershare Hong Kong Investor Services Limited
Address:
17M Floor
Hopewell Centre
183 Queen’s Road East
Wanchai
Hong Kong
852 2862 8555
852 2865 0990
hkinfo@computershare.com.hk
Tel:
Fax:
Email:
Tel:
Email:
Any enquiries relating to ADSs, please contact the depositary:
ADS depositary
The Bank of New York Mellon
Address:
Investor Services
P.O. Box 11258
Church Street Station
New York, NY 10286-1258
1-888-269-2377 (toll free in USA)
1-212-815-3700 (international)
shareowners@bankofny.com
Forward-Looking Statements
Certain statements contained in this document may be viewed as “forward-looking statements” within the meaning of Section 27A of the U.S.
Securities Act of 1933 (as amended) and Section 21E of the U.S. Securities Exchange Act of 1934 (as amended). Such forward-looking statements
are subject to known and unknown risks, uncertainties and other factors, which may cause the actual performance, fi nancial condition or results of
operations of China Telecom Corporation Limited (the “Company”) to be materially different from any future performance, fi nancial condition or results
of operations implied by such forward-looking statements. In addition, we do not intend to update these forward-looking statements. Further
information regarding these risks, uncertainties and other factors is included in the Company’s most recent Annual Report on Form 20-F fi led with the
U.S. Securities and Exchange Commission (the “SEC”) and in the Company’s other fi lings with the SEC.
China Telecom Corporation Limited
31 Jinrong Street, Xicheng District, Beijing, PRC, 100033
www.chinatelecom-h.com
This report is printed on environmentally friendly paper
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