China Telecom Corporation Limited
HKEx Stock Code: 728 NYSE Stock Code: CHA
Annual Report 2011
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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
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 scientifically
Care the staff and tap their potential to the full
Reward the society and be a responsible corporate citizen
Corporate Slogan
Connecting the World
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To know more about China Telecom,
please simply scan this QR code with
your smartphone right away.
Corporate Culture
4
1 Contents
2011 Milestones
2
3 Corporate Information
Financial Highlights
6 Chairman’s Statement
14 Directors, Supervisors and Senior Management
22 Business Review
32 Management’s Discussion and Analysis of
Financial Conditions and Results of Operations
37 Report of the Directors
49 Report of the Supervisory Committee
52 Recognition & Awards
54 Corporate Governance Report
72 Human Resources Development Report
78 Corporate Social Responsibility Report
87 Report of the Independent International Auditor
88 Consolidated Statement of Financial Position
90 Statement of Financial Position
92 Consolidated Statement of Comprehensive Income
93 Consolidated Statement of Changes in Equity
94 Consolidated Statement of Cash Flows
96 Notes to the Financial Statements
147 Financial Summary
149 Shareholder Information
2011 Milestones
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February
China Telecom pragmatically promoted the “Broadband China • Fibre Cities” project,
proactively built up premier broadband network resources.
March
The number of mobile subscribers successfully achieved a breakthrough of 100 million,
becoming the world’s largest CDMA mobile network operator.
April
As the sole global telecommunication partner of the Xi’an International Horticultural
Exposition, China Telecom, leveraging on the information technology and basic network
infrastructure, provided informatisation solutions and a rich variety of information service
applications to the Exposition.
July
As the sole full services telecommunications global partner, China Telecom formally
launched the full services telecommunications services and all-round communication
safety assurance for the 26th Summer Universiade.
August
China Telecom announced computing strategy, brand and solutions of “e-Surfing Cloud”
and became the first telecommunications operator in China to publish “Cloud” computing
strategy and solutions.
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, CDMA mobile network and broadband Internet 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 at the end of 2011, the Company has wireline access lines
in service of about 170 million, wireline broadband subscribers of about 77 million and mobile subscribers
of more than 126 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
Executive Directors
Wang Xiaochu (Chairman)
Yang Jie
Wu Andi
Zhang Jiping
Yang Xiaowei
Sun Kangmin
Non-Executive Director
Li Jinming
Independent Non-Executive Directors
Wu Jichuan
Qin Xiao
Tse Hau Yin, Aloysius
Cha May Lung, Laura
Xu Erming
Company Secretary & Qualified Accountant
Yung Shun Loy, Jacky
Audit Committee
Tse Hau Yin, Aloysius (Chairman)
Wu Jichuan
Qin Xiao
Xu Erming
Remuneration Committee
Xu Erming (Chairman)
Wu Jichuan
Qin Xiao
Tse Hau Yin, Aloysius
Nomination Committee
Wu Jichuan (Chairman)
Tse Hau Yin, Aloysius
Cha May Lung, Laura
Xu Erming
Supervisory Committee
Miao Jianhua (Chairman)
Zhu Lihao (Independent Supervisor)
Mao Shejun (Employee Representative)
Xu Cailiao
Han Fang
Du Zuguo
Legal Representative
Wang Xiaochu
International Auditor
KPMG
Legal Advisers
Jingtian & Gongcheng
Freshfields Bruckhaus Deringer
Sullivan & Cromwell LLP
Stock Code
HKEx: 728
NYSE: CHA
Company Website
www.chinatelecom-h.com
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Financial Highlights
Excluding amortisation of the upfront connection fees
Operating revenues (RMB millions)
EBITDA1 (RMB millions)
EBITDA margin2
Net profit3 (RMB millions)
Capital expenditure (RMB millions)
Total debt/Equity4
Earnings per share (RMB)
Dividend per share (HK$)
Net asset value4 per share (RMB)
20095
(restated)
208,219
82,068
40.5%
12,832
38,042
44.8%
0.159
0.085
2.920
Including amortisation of the upfront connection fees
Operating revenues (RMB millions)
EBITDA1 (RMB millions)
20095
(restated)
209,370
83,219
20105
(restated)
219,367
88,490
41.4%
14,850
43,037
30.0%
0.183
0.085
3.035
20105
(restated)
219,864
88,987
2011
244,943
94,266
40.8%
16,404
49,551
20.3%
0.203
0.085
3.164
2011
245,041
94,364
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1 For convenience of the investors’ analysis, EBITDA was calculated before CDMA network capacity lease fee.
2 EBITDA margin was calculated based on EBITDA divided by the operating revenues excluding mobile terminal sales.
3 Net profit represented profit attributable to equity holders of the Company.
4 Equity and net asset value represented equity attributable to equity holders of the Company.
5 In 2011, as the Group retrospectively adopted the amendment to IFRS 1, certain prior years figures were restated. Please refer to note 3 of the audited financial
statements in this annual report for details.
For further information, please browse our website at www.chinatelecom-h.com.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Financial Highlights
The charts below are based on financial figures excluding amortisation of the upfront connection fees
Operating Revenues
(RMB millions)
EBITDA1
(RMB millions)
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2010
2011
20095
20105
2011
Net Profit3
(RMB millions)
Dividend Per Share
(HK$)
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20105
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2009
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2011
NAV4 Per Share
(RMB)
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20095
20105
2011
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Chairman’s Statement
In the past three years, our people have continuously explored and improved
the mobile and full services integrated operation with their unwavering dedication
and passion for innovation. We successfully attained spectacular development with
net additions of 100 million mobile subscribers and 30 million wireline broadband
subscribers, becoming the world’s largest CDMA mobile operator as well as the world’s
largest broadband operator. The profitability was further enhanced. Grasping the golden
opportunities of the current fast proliferating mobile Internet and informatisation
applications, we shall leverage our strengths and strive to achieve scale development
breakthrough to create more value for our customers and shareholders through dual-
leadership in innovation and service provision.
In 2011, we firmly seized the valuable market opportunities arising
The revenue structure continued to be optimised, laying a solid
from the rapidly proliferating mobile Internet applications and
foundation for future sustainable development. Mobile service
the increasing demand of industry informatisation to continue to
revenue reached RMB68,248 million, an increase of 43.0% over last
deepen our strategic transformation. We pragmatically promoted
year, further increasing its proportion to 27.9% of total revenue and
the development of our Three New Roles – “a leader of intelligent
became the largest service of the Company. Revenue from wireline
pipeline, a provider of integrated platforms, and a participant in
broadband service was RMB60,801 million, an increase of 12.3%
content and application development” and proactively expanded
over last year and maintained rapid growth. Wireline voice revenue
into emerging areas such as mobile Internet. We accelerated the
optimisation of business structure and continuously enhanced
our operational and management capabilities, facilitating effective
promotion in the scale development of our mobile, wireline broadband
and industry informatisation services. Revenue and profit continued
was RMB49,764 million, its proportion to total revenue declined to
20.3% and the operating risks were further alleviated. EBITDA1,2 was
RMB94,266 million, an increase of 6.5% over last year while EBITDA
margin3 was 40.8%. The profit attributable to equity holders of the
Company was RMB16,404 million, an increase of 10.5% over last
to maintain robust growth and the Company’s overall competitive
year, demonstrating concurrent achievement in scale development
strengths have been further enhanced.
Operating Results
of subscriber and enhancement in profitability. Basic earnings
per share was RMB0.20. Capital expenditure was RMB49,551
million, accounted for 20.2% of revenue and free cash flow4 was
RMB20,288 million.
In 2011, the Company achieved favourable development. The
operating revenues amounted to RMB245,041 million. Excluding
Taking into account the return to shareholders, the Company’s cash
the amortisation of upfront connection fees, the operating revenues
flow and its capital requirements for the forthcoming acquisition of
were RMB244,943 million, an increase of 11.7% over last year.
mobile network assets from parent company, the Board of Directors
1
2
3
4
For convenience of investors’ analysis, EBITDA was calculated before CDMA network capacity lease fee.
Including the amortisation of upfront connection fees, EBITDA was RMB94,364 million, profit attributable to equity holders of the Company was RMB16,502 million, and
basic earnings per share was RMB0.20.
EBITDA margin was calculated based on EBITDA divided by the operating revenues excluding mobile terminal sales.
Free cash flow was calculated from EBITDA (excluding amortisation of the upfront connection fees) minus CDMA network capacity lease fee, capital expenditure and
income tax.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
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Chairman’s Statement
has decided to recommend at the forthcoming Annual General
Meeting that a dividend being an equivalent of HK$0.085 per share
be declared, which is the same as last year.
Full services development achieving new breakthroughs
Through more than three years of practice and exploration, we have
continuously deepened our understanding and grasp of the pattern
of full services operation and enriched our operating experience. We
effectively promoted the scale development of the Company’s three
core services, further consolidating and strengthening our competitive
advantages.
3G leading mobile service scale expansion
In 2011, China’s mobile telecommunications market has gradually
migrated from 2G to 3G services. With accelerated growth in 3G
services, the market potential was huge and the Company firmly
seized this historic opportunity for development. Through a series
of development initiatives such as comprehensively promoting the
terminal-driven marketing model, optimising channel distribution,
enhancing service capability, enriching mobile applications and
strengthening brand building, the Company effectively promoted scale
development of its mobile service; Through the transformation of
self-operated sales outlets to handset speciality stores like electronic
appliance stores to strengthen sales and marketing to enhance
customers’ experience, together with implementation of flexible
and effective incentive schemes to motivate open channel sales
initiatives, new addition of subscribers increased rapidly; Through
cooperation and incentive across terminal value chain to motivate
value chain participants, the variety of smartphones, in particular the
smartphones priced around RMB1,000, proliferated robustly. Sales
volume of 3G smartphones continued to rise, which well supported
the rapid expansion of 3G subscribers base; Through continuous
innovation in service measures and focusing on the enhancement
of electronic channel service capabilities to boost the mobile
service scale expansion; Strengthening cooperation with external
parties, constantly launching popular mobile Internet applications,
through sales and marketing to enhance customers’ experience and
continuous follow-up marketing strategies to increase the usage and
vigorousness level of the applications and promote the development
by applications; Targeting the youngster market, the brand “e-Surfing
Fly Young” was launched, gathering various resource advantages
such as network, applications, service, etc., in order to seize the
mobile Internet active user market. In 2011, the net addition of
mobile subscribers was 35.95 million, reaching a total of 126 million
and the Company became the world’s largest CDMA operator. Our
mobile subscriber market share further increased to 13.0%, with 3G
subscribers totalling 36.29 million and 3G subscriber market share
was 28.5%. The Company’s market influence was further enhanced,
demonstrating scale benefit driving enhancement in corporate overall
profitability.
While we are achieving the scale development of our mobile
subscribers base, with a firm foothold in the present and an outlook
to the future, we vigorously promoted the transformation from
voice-centric to data traffic operation and stand at the forefront for
future development: We leveraged our strengths and capabilities in
integrated platform and gathered popular Internet applications such
as instant messaging, Weibo, group buying and Best Tone services,
reinforcing application-driven usage and enriching data content. We
leveraged our “Cloud” computing service capability while proactively
exploring and expanding the development into emerging services
such as mobile payment and positioning services to enhance data
traffic value. We innovated the data traffic marketing model, through
strengthening sales and marketing to enhance customers’ experience
and cultivating users’ habit of usage to increase data revenue. In
2011, mobile data revenue was RMB29,620 million, an increase of
57.4% over last year.
Broadband upgrade boosting rapid development
Broadband network has become the most important infrastructure in
the informatisation society and broadband development will become
an important initiative to promote national economic growth. With
the growing demand for e-commerce, the continuously enriching
applications in the Internet of Things and continuous acceleration
in Three Networks Convergence, the demand from high-bandwidth
applications has become an important driver for bandwidth upgrade,
injecting new vitality into the Company’s broadband service
development. The Company duly launched the “Broadband China •
Fibre Cities” project and accelerated fibre rollout and the upgrade of
Fibre-to-the-Home (FTTH), comprehensively implementing bandwidth
upgrade to create a superior network for better customer experience,
further consolidating our competitive edges. By the end of 2011,
all cities in service areas basically had 8Mbps bandwidth access
capability, while 20Mbps bandwidth coverage reached 70%. In
addition to the broadband upgrade, we vigorously developed products
that demanded high bandwidth such as iTV, e-Surfing Video and
e-Cloud storage, constantly enriching the content of the “e-Surfing
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Chairman’s Statement
Broadband” brand. We also proactively introduced bandwidth
intensive contents and applications such as popular online games
and online videos from our external partners to provide users with a
differentiated perception of high-bandwidth, effectively promoting an
increase in broadband subscribers and value enhancement: In 2011,
the net addition of wireline broadband subscribers was 13.33 million
and the total number of wireline broadband subscribers reached
76.81 million.
Key industries – focused development expanding
informatisation applications
Industry informatisation is an important area in national economic
informatisation. Facing the rich gold mine of industry informatisation
applications market, we fully leverage our integrated strengths in
ICT and government & enterprise service teams. With the brand
“e-Surfing Navigator” as the lead, we focused on industries such as
government supervision and enforcement, finance, corporate clients
and clustered small to medium-sized enterprises. We developed key
applications such as e-Surfing RFID, e-office administration, transport
and logistics, digital campus and vehicle information services and
accelerated the scale replication and promotion of the products.
Riding on the opportunity of assisting customers to establish “digital
enterprises”, we achieved synergy in integrating our products such
as mobile 3G and broadband access into informatisation solutions,
effectively driving the scale development of our fundamental services.
At the same time, we proactively expanded and developed the “Cloud”
service market. We constructed the nationwide “Cloud” resources
service management platform on an efficient and centralised basis
and proactively promoted “Cloud” computing for industry applications
to continuously enhance our capabilities in providing industry
informatisation solutions.
Commitment to innovate, “Three New Roles” transformation
achieving substantive progress
We broke through from conventional thinking and reinforced our
awareness of and capability for innovation, striving to explore the
development patterns of emerging services, and increase our
innovation initiatives in networks, platforms, products, mechanisms
and system. We pragmatically implemented our “Three New Roles”
strategy and endeavoured to develop new differentiated competitive
edges to promote the scale development of our services.
We actively promoted intelligent pipeline construction: We strived to
achieve differentiated allocation of network resources, focusing on
enhancing our service assurance capabilities for high-end users,
relieving network capacity expansion pressure and saving on capital
expenditure. At the same time, we conducted trial of our intelligent
bandwidth upgrade products for broadband networks whereby
bandwidth resources can be quickly configured according to user’s
requirement, in order to achieve self-served bandwidth upgrade by
broadband access users so as to improve customer’s experience.
We accelerated the construction of integrated platforms and open
operations: We further optimised our platform structure, gradually
incorporating various types of application platform resources into the
integrated resource management platform for the implementation
of centralised efficient operations. We also increased our efforts in
transferring the platform resources into the “Cloud” so as to achieve
sharing of user information and capability resources. We built a
collective eco-environment for Internet applications and constantly
improved our basic support capabilities such as authentication,
positioning and billing for the integrated platform. We promoted
our capabilities in open platforms to external parties to accomplish
exchanging of revenue, subscribers and data traffic.
We strengthened our innovative strengths in content applications
and proactively expanded Internet applications: For self-developed
applications products, we constantly improved their penetration and
vigorousness levels through our integrated offering, preliminarily
accomplishing business scale expansion: The number of registered
users of five products, including iMusic, e-Surfing apps store and
e’game all exceeded 30 million respectively. Emerging services such
as e-Surfing Chat instant messaging and positioning services were
progressively launched to the market. We formed the “Open Mobile
Internet Alliance” and innovated new modes of cooperation. We also
proactively introduced premium third-party contents and applications
such as Tencent QQ, Weibo and UC Browser, and further promoted
collaborative development in areas like “Cloud” applications and
e-commerce.
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字元樣式已提供：英文100%, 75% 中文75%, 50%
Chairman’s Statement
We persisted to promote innovation in mechanism and system: In the
field of emerging services, we proactively explored corporatisation
reform. We accelerated the pace of the corporatisation reform of
emerging services such as business travel, video and payment while
implementing flexible incentive schemes to invigorise and create
professional corporates with competitive edges for the rapid better
development of the emerging services. We established a Business
Innovation Department to strengthen our centralised efficient
operation of innovative products. We also set up an incubator base
to create an internal environment to cultivate innovation and incubate
new products in the Internet area, thus initially forming a new system
of innovative business operations.
Precision management and improvement in efficiency
We persisted in the direction of value management and continued
to strengthen precision management, optimising resource allocation
and enhance operational capability: We focused on three aspects,
namely mobile network utilisation, marketing resource utilisation and
operational efficiency of sales outlets. We further deepened the sub-
division of performance evaluation units and diligently increased the
corporate operating efficiency. We optimised our investment structure,
fully leveraging on the functions of resource allocation in guiding
business development. We increased our investment in key networks
and services such as broadband and mobile and continuously
improved investment return.
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We acted in accordance with the development pattern of mobile
Internet to strengthen our co-ordination and centralised efficient
operations in areas such as sales and marketing systems and to
make a concerted effort to expand the market. We further perfected
our IT system, making every effort to achieve one-point access and
entire-network operation, effectively promoting the development of
our mobile Internet service.
We proactively embarked on “serving the public and achieving
excellence in performance” program. Based on customers’
perception, we enhanced our customer service capabilities in all
aspects to continuously improve customer satisfaction, gradually
establishing our differentiation advantages: We created superior
broadband services, further enhanced our service support capabilities
for broadband installation, maintenance and contract renewal and
maintained industry-leading service quality level. We focused on
3G service and innovative customer interfaces. Instant messaging
services such as QQ have reached scale operation, with the average
monthly service volume exceeding two million times. The service
capabilities of online channels such as on-line “Palm Service Centre”
have also significantly improved, and Weibo has become a key
channel to handle customer inquiries. The Company’s mobile Internet
service capabilities have begun to take shape.
Mr. Neil Osborn, the Publisher of Euromoney, presented the “No. 1 Best
Managed Company in Asia” award to Mr. Wang Xiaochu, Chairman
Corporate Governance and Social Responsibility
We continue to strive to maintain a high level of corporate governance
and corporate transparency to ensure healthy development of the
Company and enhance corporate value. In 2011, our persistent
efforts in corporate governance have been widely recognised by the
capital markets. We have been accredited with a number of awards
and appreciation, including “No. 1 Best Managed Company in Asia”
by Euromoney, being the first company receiving such honour for
three consecutive years, the “Overall Best Managed Company in Asia”
and “Best Telecom Company in Asia” by FinanceAsia, and “Asia’s
Best Companies in Corporate Governance” and “The Best Corporate
Social Responsibility in China” by Corporate Governance Asia.
We put great emphasis on environmental protection and vigorously
promoted technical improvement for energy savings as well as
collaborative building and sharing of mobile base stations. While
investing in the conservation of resources, we contributed to
energy saving and emission reduction for the community. We
proactively practise the concepts of environment-friendly and low-
carbon humanistic concept development, fully demonstrating our
new image as a green telecom operator. We successfully achieved
communications assurance for the Universiade in Shenzhen, the
International Horticultural Exposition in Xi’an, and disaster relief, which
demonstrated our efforts towards corporate social responsibility and
received a high degree of recognition from all sectors of society.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Chairman’s Statement
Outlook
At present, 3G service is entering a phase of accelerated growth and
will grow explosively. Wireline broadband service is still in a period
of high growth. The commercialisation of new services such as
mobile Internet, “Cloud” computing and Internet of Things is further
accelerating, which will open up a new area for the Company’s
development. The national policy of promoting cultural development
will also provide new development opportunities. However, at the
same time, we also face new challenges, such as the integration of
the information industry and intensifying market competition.
Looking forward, we are fully confident. The Company will ride on
the industry development trend, in alignment with the theme of
“promoting scale development through dual-leadership in innovation
and services” to create a differentiated competitive edge. We will
adhere to the principle of efficiency and continue to accelerate the
scale development of mobile, wireline broadband and informatisation
applications. We will strive to enhance our strengths in innovation,
service, efficient centralisation and operation management, and
take more solid steps towards the goal of being a “world-class
integrated information service provider” so as to create more value
for shareholders.
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 would also like to express my
sincere thanks to Mr. Shang Bing and Mr. Zhang Chenshuang for
their valuable contribution during their tenure of office as Executive
Directors of the Company.
Wang Xiaochu
Chairman and Chief Executive Officer
Beijing, China
20 March 2012
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“ Golden
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Detected!
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Fast prOliFeratinG smartphOnes
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enrichinG custOmers’ liFe anD value
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字元樣式已提供：英文100%, 75% 中文75%, 50%
Directors, Supervisors and Senior Management
Mr. Wang Xiaochu
Mr. Yang Jie
Mr. Wang Xiaochu Age 54, 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, President
of China Telecommunications Corporation, Chairman of the board of directors and a Non-executive Director of China Communications
Services Corporation Limited. He is also the Chairman 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 30 years of management experience in the telecommunications industry.
Mr. Yang Jie Age 50, is an Executive Director, President and Chief Operating Officer 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, 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 the President of China Telecommunications Corporation. Mr. Yang has 28
years of operational and managerial experience in the telecommunications industry in China.
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Directors, Supervisors and Senior Management
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Madam Wu Andi
Mr. Zhang Jiping
Mr. Li Ping
Madam Wu Andi Age 57, 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 Ministry of Posts and Telecommunications (“MPT”). She is also
a Vice President of China Telecommunications Corporation. Madam Wu has 30 years of economic and financial management experience
in the telecommunications industry in China.
Mr. Zhang Jiping Age 56, 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 Directorate General of
Telecommunications (“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 30 years of experience in network operation and management in the telecommunications industry in China.
Mr. Li Ping Age 58, 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 a 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 also 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 36 years of operational and managerial experience in the telecommunications industry in China.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
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Directors, Supervisors and Senior Management
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Mr. Yang Xiaowei
Mr. Sun Kangmin
Mr. Yang Xiaowei Age 48, 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.
Mr. Sun Kangmin Age 55, is an Executive Director and Executive Vice President of the Company. Mr. Sun is a senior engineer. He
holds a bachelor degree. Mr. Sun served as Deputy Director General and Chief Engineer of Chengdu Telecommunications Bureau, Deputy
Director General of Sichuan Posts and Telecommunications Administration, 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 28 years of operational and managerial
experience in the telecommunications industry in China.
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Mr. Ke Ruiwen
Mr. Li Jinming
Mr. Wu Jichuan
Mr. Ke Ruiwen Age 49, is an Executive Vice President of the Company. Mr. Ke obtained a doctorate degree in business administration
(DBA) from the ESC Rennes School of Business. Mr. Ke served as Deputy Director General of Jiangxi Posts and Telecommunications
Administration, Deputy General Manager of Jiangxi Telecom, Managing Director of the Marketing Department of the Company and China
Telecommunications Corporation, General Manager of Jiangxi Telecom, Managing Director of the Human Resources Department of the
Company and China Telecommunications Corporation. He is also a Vice President of China Telecommunications Corporation. Mr. Ke has
26 years of operational and managerial experience in the telecommunications industry in China.
Mr. Li Jinming Age 60, 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.
Mr. Wu Jichuan Age 74, is an Independent Non-executive Director of the Company. Mr. Wu is a professor-level senior engineer. Mr.
Wu is the Honorary Chairman of the 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 People’s Congress, a member of the Standing Committee of the Tenth National People’s Congress and Vice Chairman
of the Subcommittee of Education, Science, Culture, Health and Sports of the Tenth National People’s Congress.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
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Directors, Supervisors and Senior Management
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Mr. Qin Xiao
Mr. Tse Hau Yin, Aloysius
Mr. Qin Xiao Age 64, is an Independent Non-executive Director of the Company. Mr. Qin obtained his Ph.D. in economics from
University of Cambridge. He is the Independent Non-executive Director of HKR International Limited and AIA Group Limited and China
World Trade Center Company Limited. He is a member of the eleventh Chinese People’s Political Consultative Conference and 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. He served as the Chairman of China Merchants Bank Co., Ltd. and China Merchants Group Limited, 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. His papers and books in economics, management and social
transformation have been published in China and abroad.
Mr. Tse Hau Yin, Aloysius Age 64, is an Independent Non-executive Director of the Company. Mr. Tse is currently an Independent
Non-executive Director of CNOOC Limited, Wing Hang Bank Limited, Linmark Group Limited, Sinofert Holdings Limited and SJM Holdings
Limited. He was an independent non-executive director of China Construction Bank Corporation, which is listed on the HKSE Main Board
from 2004 to 2010. He is also 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 member 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.
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Madam Cha May Lung, Laura
Professor Xu Erming
Madam Cha May Lung, Laura Age 62, 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 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. She is
the Non-executive Deputy Chairman of The Hongkong and Shanghai Banking Corporation, the Asia Pacific subsidiary of HSBC Holdings
plc, of which she is a Non-executive Director. She is also an Independent Non-executive Director of Hong Kong Exchanges and Clearing
Limited and Tata Consultancy Services Limited. She is a member of the Banking & Capital Markets Industry Agenda Council 2011 of the
World Economic Forum and a member of the Yale School of Management Board of Advisors. Mrs. Cha served as Vice Chairman of CSRC
from January 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 62, is an Independent Non-executive Director of the Company. Mr. Xu is a 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 Electric
Company Limited (formerly known as 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. 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.
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Directors, Supervisors and Senior Management
Mr. Yung Shun Loy, Jacky Age 49, 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. Gao Jinxing Age 49, is the Financial Controller of the Company. Mr. Gao is a senior economist and has a master degree. Mr. Gao
served as the Deputy Chief Economist and Head of Financial Planning and Supply Department of Fuzhou Telecommunications Bureau,
Deputy Director General and Chief Accountant of Sanming Posts and Telecommunications Bureau, Deputy Director and Director of
Finance Department of the Posts and Telecommunications Administration of Fujian province, Deputy General Manager, the Financial
Controller and the chairman of the Labour Union of China Telecom Fujian branch.
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Directors, Supervisors and Senior Management
Supervisors
Mr. Miao Jianhua Age 60, 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 71, 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. Mao Shejun Age 58, is an Employee Representative Supervisor of the Supervisory Committee of the Company. Mr. Mao is currently
the Vice Chairman of the Labour Union of China Telecommunications Corporation and China Telecom Corporation Limited. Mr. Mao
holds a master degree in management from the Australian National University and has held positions as Human Resources Officer of
the former Hubei Posts and Telecommunications Administration and Managing Director of the Human Resources Department of China
Telecom Corporation Limited. Mr. Mao is a senior economist and has over 30 years of experience in operation and management in the
telecommunications industry.
Mr. Xu Cailiao Age 48, is a Supervisor of the Supervisory Committee of the Company. Mr. Xu is a senior manager of the Sideline
Industrial Management Department of China Telecommunications Corporation. He is also a Director of Strategic Marketing (Domestic)
Department of China Communications Services Corporation Limited. 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, Managing Director of the
Hong Kong branch of Irico Group and Director of the Corporate Strategy Department of the Company. 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 39, is a Supervisor of the Supervisory Committee of the Company. Madam Han is the Vice President of China
Telecom (Hong Kong) International Ltd. 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 17 years of finance and audit experience.
Mr. Du Zuguo Age 49, is a Supervisor of the Supervisory Committee of the Company. Mr. Du is a senior economist. He is the General
Manager of Zhejiang Financial Development Company (one of the domestic shareholders of China Telecom Corporation Limited),
Chairman and Chief Executive Officer of Zhejiang venture capital fund of funds management Co., Ltd. and the Chairman of Zhejiang SME
Re-guarantee Co., Ltd.. Mr. Du served as Section Chief, Deputy Director General and Director General of Zhoushan Finance and Local Tax
Bureau in Zhejiang province and now is a CCP Committee member of Zhejiang Provincial Department of Finance. Mr. Du has extensive
experience in government’s work and large-scale state-owned enterprise management.
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Business Review
The following table sets out key operating data for 2009, 2010 and 2011.
Mobile subscribers
of which: 3G subscribers
Wireline broadband subscribers
Access lines in service
Mobile voice usage
Mobile SMS usage
Unit
million
million
million
million
million minutes
million messages
Mobile Colour Ring Tone subscribers
million
Wireline local voice usage
million pulses
Wireline caller ID service subscribers
million
“One Home” subscribers
“BizNavigator” subscribers
million
million
2009
56.09
4.07
53.46
188.56
155,410
15,136
32.63
320,585
128.45
36.36
4.36
2010
90.52
12.29
63.48
175.05
295,885
33,116
54.15
251,425
118.99
48.45
4.99
Rate of change
2011
2011
over 2010
126.47
36.29
76.81
169.59
407,765
49,941
75.38
206,371
115.58
56.03
6.10
39.7%
195.3%
21.0%
-3.1%
37.8%
50.8%
39.2%
-17.9%
-2.9%
15.6%
22.2%
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Mr. Yang Jie, President delivered a speech at the press conference on Service Pledge.
In 2011, facing the complex macro-economic developments and
intensified market competition, China Telecom took advantage of
the opportunities arising from the rapid development of mobile
Internet to accelerate the development of high growth services
such as mobile, wireline broadband and wireline integrated
information services. As a result, mobile and 3G services
maintained high growth momentum, mobile data traffic operation
was pushed forward rapidly, broadband service’s competitive
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edges were further strengthened, the risks in wireline service
were effectively controlled, and the business structure continued
to be optimised. In the meantime, our competitive edges in the
markets have been continuously increasing.
Key Operating Performance
broadband, the full services structure of the Company
was further optimised while the revenue from mobile
service, wireline broadband, wireline VAS and integrated
information services accounted for approximately 64.9%
of the operating revenues excluding upfront connection
fees, an increase of 5.6 percentage points over last year.
(1)
Operating revenues grew steadily and business
structure is further optimised
In 2011, the operating revenues (excluding upfront
connection fees) were RMB244,943 million, an increase
of 11.7% over last year. Excluding revenue from mobile
terminal sales, the operating revenues were RMB231,010
million, an increase of 8.1% over last year. Driven by
the high growth services such as mobile and wireline
(2) Mobile service maintained strong growth
momentum, leading to an expanded subscriber base
and further optimised subscriber structure
In 2011, focusing on 3G business development, the
Company developed differentiated edges in mobile
service. Led by growing smartphone proliferation and
strengthened open channels, presence in key target
markets was enhanced and mobile subscriber base was
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Rich mobile Internet applications available from China Telecom
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Mr. Yang Xiaowei, Executive Vice President presented a certificate
to the Company’s one hundred millionth mobile user
expanded. At the same time, the Company continuously
improved its capability to support scale development
of industrial applications promoting the expansion of
the mid-to-high end mobile subscriber base among its
government and enterprise customers. The number of
mobile subscribers reached 126.47 million, an increase
of 39.7% over the end of last year. Revenue from mobile
services reached RMB68,248 million, while mobile ARPU
and MOU basically remained steady.
(3)
(4)
Bandwidth upgrade to maintain leading edges in
broadband services
In 2011, the Company launched the “Broadband China
• Fibre Cities” project to increase the development
of optical fibre broadband services, establish premier
quality advantages of its broadband products and further
enhance the brand image of “e-Surfing Broadband”. By
introducing “bandwidth upgrade”, “content enrichment”,
“excellent service”, and promoting self-selected
convergent packages, the Company committed to lower
customers’ perception on the price of its broadband
services and enhance overall customers’ value so as to
maintain its leading edge in broadband services. The total
number of wireline broadband subscribers in 2011 was
76.81 million, a net increase of 13.33 million, or 21.0%
increase over last year. Revenue from wireline broadband
services was RMB60,801 million, an increase of 12.3%
over last year.
Cooperation and innovation push forward the
steady growth of wireline value-added services and
integrated information services
In 2011, the Company developed new innovative
initiatives such as crowdsourcing to set up the live search
+ information services alliance and to make Best Tone
as the brand of a leading integrated information services
portal for daily life, resulting in the continued growth of
integrated information search volume and specialised
operation of business travel services. Meanwhile, the
Company leveraged the development trend of the Internet
of Things, “Cloud” computing and mobile Internet to
strengthen initiatives such as coordinated marketing,
professional support delivery and one-stop service
and to accelerate the development of Information
Communications Technology (ICT), Internet Data Center
(IDC) and Internet TV (ITV) services, providing customers
with convenient, rich, differentiated and highly cost-
efficient integrated information services. Revenue from
wireline value-added services and integrated information
services reached RMB29,763 million, an increase of 5.1%
over last year, accounting for 12.2% of the total operating
revenues excluding upfront connection fees.
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Mobile Subscribers
(Millions)
Access Lines in Service
(Millions)
Wireline Broadband Subscribers
(Millions)
3 9 . 7 %
7
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2010
2011
2010
2011
2010
2011
n PAS
n Government & Enterprise
n Public Telephone n Household
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(5)
The operating risk of wireline voice services was
further alleviated
By deepening integration of wireline and mobile services
and the promotion of wireline voice usage operation, the
loss of wireline subscribers slowed down and the total
number of PAS subscribers fell below 11 million, and PAS
revenue accounted for 0.8% of the Company’s operating
revenues. The proportion of wireline voice services in the
Company’s total operating revenues further decreased,
which effectively alleviated business risk. Revenue
from wireline voice in 2011 was RMB49,764 million,
representing 20.3% of the total operating revenues
excluding upfront connection fees, decreased by 8.2
percentage points from last year.
Business Operating Strategies
In 2011, the Company continued to adhere to its operating
philosophy of “innovative differentiation and integration aiming
at profitable scale development” and actively implemented the
strategies of “handset-led marketing, open channel optimisation,
key target market expansion and promotion of mobile data traffic
operation”:
First, the Company promoted the handset-led business
model, resulting in the effective expansion of mobile
subscriber base.
Benefited from the growth of subscriber base and handset
sales and the initial prosperity of the handset value chain, the
Company proactively transformed to the handset-led sales
model. Starting from changing sales practices and optimising
of sales processes and capability, the Company grew its 3G
smartphone sales which drove the scale development of
mobile subscriber base and the optimisation of subscriber
structure. At the same time, the Company vigorously promoted
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its 3G packages and self-selected convergent packages,
which effectively enhanced customers’ value and improved
the Company’s capacity to acquire mobile subscribers. The
penetration rates of 3G and smartphone subscribers among the
total mobile subscribers reached 28.7% and 13.2%, increasing
by 15.1 and 11.4 percentage points respectively over the end
of last year. The average monthly net addition of broadband
subscribers reached 1.11 million, an increase of 33% over last
year. High-bandwidth (4Mbps or above) broadband subscribers
accounted for about 50% of the total wireline broadband
subscribers, increased by about 23 percentage points over the
beginning of 2011.
Second, the Company vigorously developed open channels,
continued to optimise channel structure and steadily
improved sales capabilities of various channels.
The Company focused on large chain-store networks and TOP10
channels expansion, increased its efforts to introduce CDMA
handsets into GSM stores, and provided strong support for open
channels in terms of marketing practice, incentive mechanism,
commission settlement, team-building and IT support. As a
result, the company realised good progress of scale development
driven by open channels. The Company entered almost 5,500
shops of sizable chain-store networks and TOP10 stores and
introduced CDMA handsets into over 9,700 GSM handset stores.
This resulted in mobile subscribers developed by open channels
accounting for 57.7% over the year.
We transformed self-operated outlets to enhance our capability
of customers’ experience marketing. Through active promotion
of outlet-style sales and holiday marketing, the sales efficiency
and capability of the self-operated outlets were significantly
improved. In 2011, the Company fully transformed its self-
operated outlets of tier-3 and above into sales outlets.
The Company also increased its efforts with regard to the
centralised operations of electronic channels to raise the service
level. In 2011, the Company officially developed the nationwide
and unified electronic portal and the portal for on-line “Mobile
Palm Service Centre”, realised centralised sales of standardised
3G packages, UIM card with mobile number, self-developed
product centre services and network-wide value-added services.
Third, the Company strengthened differentiation in
operations to enhance its competitiveness in the key target
markets.
Focusing on such key markets, namely, government
departments, large enterprise groups, financial industry, and
clustered small-and-medium-sized enterprises, the Company
developed informatisation applications to drive its mid-to-high-
end subscriber scale in the government and enterprise market.
In 2011, there was a net addition of about 8 million industrial
application mobile subscribers, accounting for about 22% of net
addition of mobile subscribers.
In the campus market, by fostering its product strengths in
smartphones, wireline broadband and e-Surfing RFID, the
Company carried out daily marketing in the campus market to
actively expand its campus subscriber base.
Madam Wu Andi, Executive Vice President conducted
field research at the frontline
Mr. Sun Kangmin, Executive Vice President outlined the
Company’s business to the partners
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Opening ceremony of 2011 e-Surfing 3G Internet cellphone fair and CDMA industry forum held by China Telecom
In the rural market, the Company promoted scale expansion by
improving sales channels, incentives and organising marketing
activities.
In overseas markets, the Company continued to build its
differentiated competitive strengths in the Asia-Pacific
region. Focusing on three major overseas customer groups,
namely overseas operators, overseas Chinese enterprises and
multinational corporations, the Company continuously expanded
its overseas customer base and the overseas operation channels
gradually improved. Also, the Company’s overseas network
coverage get expanded gradually.
Fourth, placing equal emphasis on centralised operation
and open cooperation, the Company steadily promoted its
mobile Internet data traffic operation.
While promoting scale development, the Company took
advantage of the trends in mobile Internet to actively nurture
its innovative services to drive revenue growth. By deepening
centralised operations and strengthening the capability in
developing mobile Internet products, the Company continuously
improved the convenience and ease of use of its self-operated
services. The number of subscribers of “e-Surfing Video”
exceeded 12 million, which increased by approximately 2.5
times over last year. The number of applications on “e-Surfing
apps store” (software store) exceeded 82,000 with the number
of registered users exceeding 43 million. The number of
registered users for “e’ reading” reached about 36 million, an
increase of nearly 13 times over last year. The number of users
of “e’ game” exceeded 40 million, an increase of 11 times over
last year. Finally, the number of users of “e-Surfing RFID” was
about 5.9 million, an increase of about 2 times over last year.
While growing its self-operated services, the Company expanded
its cooperation with mainstream application providers to increase
the introduction of popular applications with more attractive
content. By actively promoting new technologies application,
such as the Internet of Things and “Cloud” computing, the
Company enhanced its capability of integrated information
services in order to seize opportunities for growth in the field
of the mobile Internet and promote mobile Internet data traffic
operation.
In 2011, Internet traffic via 3G handset grew rapidly and an
average monthly data traffic per 3G handset subscriber reached
106Mbps.
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In 2011, the Company actively collaborated with terminal
manufacturers to meet the growth opportunities in the industry
value chain of 3G and smartphone upgrades. The Company
helped drive the development of the terminal industry value
chain by development through mobile subscriber scale expansion
and promoted supply scale of terminals by customised and
centralised purchasing, incentive offering, direct terminals supply
and open channel procurement and sales. The number of 3G
terminal models available for sale reached about 500 and the
number of smartphone models available for sale reached nearly
200 models.
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Mr. Wang Xiaochu, Chairman attended the press conference
on “e-Surfing Broadband • Wireless China”
Network and Operation Support
In 2011, the Company further optimised its resource allocation.
While focusing on improving efficiency and implementation
of risk management, the Company deepened precision
management, rapidly improved network infrastructure capacity,
actively promoted network evolution, and vigorously supported
the scale development of key services.
On network infrastructure capacity construction, the Company
further increased its investment in broadband services, massively
deployed Fibre-to-the-Home (FTTH) and upgraded customer
access bandwidth and service experience in order to effectively
support the scale development of the Company’s broadband
services. In 2011, the Company’s investment in broadband and
Internet services was RMB33,121 million, accounting for 66.8%
of the Company’s capital expenditure, up by 2.6 percentage
points from last year. The Company increased broadband access
capacity by 18.50 million ports. 20Mbps access bandwidth
connection coverage ratio in urban areas (including counties)
reached 70%, an improvement of 12 percentage points over the
previous year.
With regard to carrier networks, we accelerated the expansion
and optimisation of IP, transmission backbone and metropolitan
area networks, and actively carried out pilots on next-generation
Internet and high-performance transmission networks to set the
foundation for network and technological evolution.
China Telecom provides quality broadband service with multi-access modes
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With regard to promoting intelligent pipeline construction and
strengthening the service capabilities of integrated platforms,
the Company actively carried pilots on intelligent broadband
bandwidth acceleration and research on high-performance CDN
and mobile traffic routing. It speeded up platform integration and
integrated platform system construction, and created a cloud
resource pool to improve the comprehensive delivery capabilities
for the platforms.
Meanwhile, the Company continued to increase investment in
WiFi networks, promote unified identification and divert data
traffic from EV-DO to WiFi in order to fully utilise WiFi networks
as extensions to wireline broadband and supplement of 3G
networks. By the end of 2011, the number of WiFi access points
reached 600,000.
To effectively support 3G service development and full
services integrated operation, we strengthened the centralised
management of IT support systems to achieve sharing of data
among various service platforms and the Company at all levels.
We improved open channel centralised sales management
system to support centralised sales in sales outlet, providing
strong support for centralised sales efficiency and operating
control. IT support capabilities have been significantly
strengthened.
Development Measures and Highlights for 2012
In 2012, in order to grasp rapid growth opportunities of 3G
services and accelerated adoption of smartphones and tackle the
challenges brought by fierce competition in the existing mobile
and broadband markets and the emerging mobile Internet, the
Company will continue to adhere to its “Customer-Focused
Innovative Informatisation” strategy, steadily promote scale and
mobile data traffic operation and promote scale development
through dual-leadership in innovation and services.
In particular, we will build differentiated edges in 3G and
smartphones with increasing focus on mobile services, thereby
realising an explosive growth in high-value, high-traffic,
high-loyalty 3G subscribers and achieving quality and scale
development. We will persistently optimise channel structure,
deepen cooperation with quality open channel such as those
sizable chain-store networks, and continue to improve channel
sales capabilities. We will actively carry out mobile data traffic
operations and vigorously develop new services such as mobile
Internet, cloud computing and Internet of Things. We will
further promote the “Broadband China • Fibre Cities” project to
China Telecom launched “e-Surfing Fly Young” brand for young
people
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China Telecom’s launching ceremony of iPhone 4S
improve service quality and enrich content so as to maintain our
competitive position in broadband services. We will continuously
enhance the scale development of industrial applications to
promote the expansion of the mid-to-high-end subscribers
in governmental departments and enterprise customers. We
will take measures to further alleviate the risk of wireline
voice services to promote harmonious full services operation.
Meanwhile, we will continue to enhance our service capability
for centralised full services operation, and strengthen network
optimisation, operation and maintenance, aiming at forging
innovative and differentiated competitive edges while steadily
promoting the transformation towards mobile Internet operation
mode.
riding on a
smart Journey
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“nO. 1 best manaGeD cOmpany in asia” 2011
awarded by Euromoney
“nO. 1 best manaGeD cOmpany in asia” 2011
awarded by FinanceAsia
“asia’s mOst hOnOreD cOmpanies” 2011
awarded by Institutional Investor
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Management’s Discussion and
Analysis of Financial Conditions and Results of Operations
Summary
Operating Revenues
In 2011, the Group firmly seized the development opportunities,
further deepened the strategic transformation, vigorously
developed the mobile, broadband, and industry application
services, effectively promoted the scale development of full
services operation and continuously improved the profitability
of the Group. The Group’s operating revenues in 2011 were
RMB245,041 million, an increase of 11.5% from 2010;
operating expenses were RMB220,912 million, an increase of
12.5% from 2010; profit attributable to equity holders of the
Company was RMB16,502 million and basic earnings per share
was RMB0.20; EBITDA1 was RMB94,364 million and the EBITDA
margin2 was 40.8%.
Excluding the amortisation of upfront connection fees, the
operating revenues of the Group in 2011 were RMB244,943
million, an increase of 11.7% from 2010; profit attributable
to equity holders of the Company was RMB16,404 million, an
increase of 10.5% from RMB14,8503 million in 2010, basic
earnings per share was RMB0.20; EBITDA was RMB94,266
million and the EBITDA margin was 40.8%.
In 2011, facing the challenges from intense market competition,
the Group continued to improve its full services operation
standards, transform its mode of development and enhance
its comprehensive service. The operating revenues maintained
positive growth, and the revenue structure has been further
optimised. Operating revenues in 2011 were RMB245,041
million, an increase of 11.5% from 2010. Excluding the
amortisation of upfront connection fees of RMB98 million,
operating revenues in 2011 were RMB244,943 million, an
increase of 11.7% from 2010. Of this, the total mobile revenue
was RMB82,701 million, an increase of 53.3% from 2010.
The wireline services revenue was RMB162,242 million, a
decrease of 1.9% from 2010. The mobile service revenue4,
wireline broadband revenue, wireline value-added services
revenue and integrated information application services revenue
accounted for 27.9%, 24.8% and 12.2% of the total operating
revenues, respectively. The revenue structure has become more
reasonable.
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1
EBITDA was calculated from operating revenue 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 finance costs may have a significant
impact on the net profit of companies with similar operating results. Therefore, we believe EBITDA may be helpful in analyzing the operating results of
a telecommunications service provider such as the Company. Although EBITDA has been widely applied in the global telecommunications industry as a
benchmark to reflect operating performance, financial 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.
2
3
4
EBITDA margin was calculated from EBITDA divided by operating revenues excluding the revenue from mobile terminal sales.
In 2011, the Group retrospectively adopted the amendment to IFRS 1. Please refer to note 3 of the audited financial statements in this annual report for
details.
Mobile service revenue represents total mobile revenue minus other mobile revenue. Of this, in 2011, other mobile revenue amounted to RMB14,453
million.
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Management’s Discussion and Analysis of Financial Conditions and Results of Operations
The following table sets forth a breakdown of the operating revenues of the Group for 2010 and 2011, 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
For the year ended 31 December
2011
49,764
38,628
74,992
25,529
20,473
14,273
21,284
98
2010
62,498
28,906
63,985
22,571
15,519
12,389
13,499
497
245,041
219,864
Rate of
Change
(20.4%)
33.6%
17.2%
13.1%
31.9%
15.2%
57.7%
(80.3%)
11.5%
Wireline Voice
As the trend for substitution of wireline voice to mobile and
Internet services has intensified, revenue from wireline voice
service continued to decrease. In 2011, revenue from wireline
voice services was RMB49,764 million, a decrease of 20.4%
from RMB62,498 million in 2010, accounting for 20.3% of our
operating revenues.
Mobile Voice
The mobile service has maintained rapid growth in 2011. The
revenue from mobile voice services was RMB38,628 million, an
increase of 33.6% from RMB28,906 million in 2010, accounting
for 15.8% of our operating revenues. In 2011, the net increase
in the number of mobile subscribers was 35.95 million, reaching
126 million.
Internet
In 2011, revenue from Internet access services was RMB74,992
million, an increase of 17.2% from RMB63,985 million in 2010,
accounting for 30.6% of our operating revenues. Through the
“Broadband China • Fibre Cities” project, the Group upgraded
the network bandwidth, which effectively promoted the rapid
growth of broadband service. The revenue from our Internet
access services continued to grow. At the end of 2011, the
number of wireline broadband subscribers increased by 21.0%
to 76.81 million, a net increase of 13.33 million subscribers
from the end of 2010. In 2011, the wireline broadband revenue
of the Group was RMB60,801 million, an increase of 12.3%
from 2010. Revenue from mobile Internet access services was
RMB13,301 million, an increase of 47.5% from 2010.
Value-Added Services
In 2011, revenue from value-added services was RMB25,529
million, an increase of 13.1% from RMB22,571 million in 2010,
accounting for 10.4% of our operating revenues. The increase
in revenue was mainly attributable to the rapid growth of
mobile value-added services. Revenue from mobile value-added
services was RMB12,067 million, an increase of 53.6% from
2010. However, due to the decline in PAS services, revenue
from wireline value-added services decreased by 8.5% when
compared with 2010.
Integrated Information Application Services
In 2011, revenue from integrated information application
services was RMB20,473 million, an increase of 31.9% from
RMB15,519 million in 2010, accounting for 8.4% of our
operating revenues. The increase in revenue was mainly due to
the rapid development of the IT service and applications services
as well as “Best Tone” type of information services. Revenue
from mobile integrated information application services was
RMB4,172 million, an increase of 117.3% from 2010.
Managed Data and Leased Line
In 2011, revenue from managed data and leased line services
was RMB14,273 million, an increase of 15.2% from RMB12,389
million in 2010, accounting for 5.8% of our operating revenues.
As the demand from customers for network resources and
informatisation continues to increase, the revenue growth from
domestic leased circuits services, IP-VPN services and leased
optic fibre channel has increased relatively rapidly. Revenue
from mobile managed data and leased line services was RMB80
million.
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033
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Management’s Discussion and Analysis of Financial Conditions and Results of Operations
Others
In 2011, revenue from other services was RMB21,284 million,
an increase of 57.7% from RMB13,499 million in 2010,
accounting for 8.7% of our operating revenues. The growth of
revenue was mainly attributable to the sales revenue of mobile
terminal equipment. Revenue from other mobile services was
RMB14,453 million, an increase of 132.0% from 2010.
Upfront Connection Fees
Upfront connection fees received by the Group from subscribers
were amortised over an expected customer relationship period
of 10 years. Effective from 1 July 2001, the Group ceased to
charge new subscribers upfront connection fees. The termination
date for the amortisation of upfront connection fees was 30
June 2011. The amortised amount was RMB98 million in 2011,
representing a decrease of 80.3% from RMB497 million in
2010.
(RMB in millions, except percentage data)
Depreciation and amortisation
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034
Network operations and support expenses
Selling, general and administrative expenses
Personnel expenses
Other operating expenses
Total operating expenses
Depreciation and Amortisation
In 2011, depreciation and amortisation was RMB51,224
million, a decrease of 1.9% from RMB52,215 million in 2010,
accounting for 20.9% of our operating revenues. The decline
was due to the continuous prudent control of capital expenditure
by the Group.
Network Operations and Support Expenses
In 2011, network operations and support expenses were
RMB52,912 million, an increase of 11.6% from RMB47,432
million in 2010, accounting for 21.6% of our operating revenues.
The increase was mainly attributable to the increase in CDMA
network capacity lease fee. The CDMA network capacity lease
fee in 2011 amounted to RMB19,011 million, an increase of
42.7% from 2010.
Operating Expenses
In order to promote the scale development of full services
operation and increase our future competitiveness, the Group
has centralised resources deployment, appropriately increased
resources input, adhered to tilting more resources towards high
growth service, high-value customers and highly-profitable
regions. In the meantime, the Group has optimised its precision
management, continuously increased the efficiency in the use
of resources, and effectively promoted the dual increase in
the full services scale and profitability. In 2011, the operating
expenses of the Group were RMB220,912 million, an increase of
12.5% from 2010. The ratio of operating expenses to operating
revenues was 90.2%, which slightly increased when compared
to 2010.
The following table sets forth a breakdown of the operating
expenses of the Group in 2010 and 2011 and their respective
rates of change:
For the year ended 31 December
2011
51,224
52,912
48,741
39,167
28,868
2010
(restated)
52,215
47,432
42,130
35,529
19,106
220,912
196,412
Rate of
Change
(1.9%)
11.6%
15.7%
10.2%
51.1%
12.5%
Selling, General and Administrative Expenses
In 2011, selling, general and administrative expenses amounted
to RMB48,741 million, an increase of 15.7% from RMB42,130
million in 2010, accounting for 19.9% of our operating
revenues. The growth was mainly attributable to the increase
in the deployment of selling resources so as to promote the
scale development of mobile and broadband services, etc. In
the meantime, the Group continued to implement stringent
cost control measures on general and administrative expenses.
Compared to the same period of last year, general and
administrative expenses increased by 1.2%, which was lower
than the rate of increase in revenues of the same period.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Management’s Discussion and Analysis of Financial Conditions and Results of Operations
Personnel Expenses
In 2011, personnel expenses were RMB39,167 million, an
increase of 10.2% from RMB35,529 million in 2010, accounting
for 16.0% of our operating revenues. The increase in personnel
expenses was mainly due to the appropriate increased efforts in
motivating the talents and frontline employees.
Other Operating Expenses
In 2011, other operating expenses were RMB28,868 million,
an increase of 51.1% from RMB19,106 million in 2010,
accounting for 11.8% of our operating revenues. The increase
was mainly attributable to the increase in the cost of mobile
terminal equipment sold. The cost of mobile terminal equipment
sold amounted to RMB12,866 million in 2011, an increase of
159.2% from 2010.
Net Finance Costs
In 2011, the Group’s net finance costs were RMB2,254 million,
a decline of 37.4% from RMB3,600 million in 2010. Net
interest expenses fell by RMB1,085 million. The decrease was
mainly attributable to the significant decline of the Group’s
interest-bearing debt. Net exchange gains were RMB51 million in
2011, while net exchange losses were RMB92 million in 2010.
The change in net exchange gain/loss was mainly attributable to
the appreciation of the RMB against the Japanese Yen.
Profitability Level
Income Tax
The Group’s statutory income tax rate is 25%. In 2011, the
Group’s income tax expenses were RMB5,416 million with the
effective income tax rate of 24.6%. The effective income tax
rate of the Group was lower than the statutory income tax rate
(RMB millions)
Net cash flow from operating activities
Net cash used in investing activities
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
mainly because of the preferential income tax rate enjoyed by
our branches located in special economic zones of China and
some subsidiaries.
Profit Attributable To Equity Holders of the Company
In 2011, profit attributable to equity holders of the Company
was RMB16,502 million, an increase of 7.5% from RMB15,347
million in 2010. Excluding the amortisation of upfront connection
fees, profit attributable to equity holders of the Company was
RMB16,404 million, an increase of 10.5% from RMB14,850
million in 2010.
Capital Expenditure and Cash Flows
Capital Expenditure
In 2011, in order to promote the development and reinforce
the leading edge of broadband services, the Group continued
to increase the investment in broadband network construction,
and increase the penetration rate of fibre access and broadband
access speed. In the meantime, the Group emphasized
investment effectiveness, optimised investment structure, and
effectively controlled investments in wireline voice services and
infrastructure, etc. In 2011, capital expenditure of the Group
was RMB49,551 million, an increase of 15.1% from RMB43,037
million in 2010.
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Cash Flows
In 2011, net increase in cash and cash equivalents for the Group
was RMB1,649 million, while the net decrease in cash and cash
equivalents was RMB8,934 million in 2010.
035
The following table sets forth the cash flow position of the Group
in 2010 and 2011:
For the year ended 31 December
2011
73,006
(43,637)
(27,720)
1,649
2010
75,571
(45,734)
(38,771)
(8,934)
In 2011, the net cash inflow from operating activities was
RMB73,006 million, a decrease of RMB2,565 million from
RMB75,571 million in 2010.
In 2011, the net cash outflow for investing activities was
RMB43,637 million, a decrease of RMB2,097 million from
RMB45,734 million in 2010, mainly resulting from an increase
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036
Management’s Discussion and Analysis of Financial Conditions and Results of Operations
in proceeds from the disposal of assets compared to 2010,
and the repayment of CDMA business acquisition, amounting to
RMB5,374 million in 2010.
Group’s cash and cash equivalents amounted to RMB27,372
million, amongst which cash and cash equivalents denominated
in Renminbi accounted for 94.4% (2010: 91.2%).
In 2011, the net cash outflow for financing activities was
RMB27,720 million, a decrease of RMB11,051 million from
RMB38,771 million in 2010. The decrease in net cash outflow
was mainly due to the decrease in the Group’s repayment of the
bank loans and other loans when compared to 2010.
Working Capital
At the end of 2011, the Group’s working capital (total current
assets minus total current liabilities) deficit was RMB67,682
million, a reduction of deficit of RMB3,996 million from
RMB71,678 million in 2010. As at 31 December 2011, the
Group’s unutilised committed credit facilities was RMB118,970
million (2010: RMB98,576 million). At the end of 2011, the
Assets and Liabilities
In 2011, the Group continued to maintain a solid capital
structure. By the end of 2011, the total assets of the Group fell
to RMB419,115 million from RMB420,529 million at the end of
2010, while total indebtedness decreased to RMB52,103 million
from RMB73,576 million in 2010. The ratio of the Group’s total
indebtedness to total assets fell from 17.5% at the end of 2010
to 12.4% at the end of 2011.
Indebtedness
The indebtedness analysis of the Group as of the end of 2010
and 2011 is as follows:
(RMB millions)
Short-term debt
Long-term debt maturing within one year
Long-term debt (excluding current portion)
Total debt
By the end of 2011, the total indebtedness of the Group was
RMB52,103 million, a decrease of RMB21,473 million from
the end of 2010. The main reason for the decrease was the
Group’s repayment of a portion of bank loans and other loans.
Of the total indebtedness of the Group, the Company’s loans
in Renminbi, US Dollars, Japanese Yen and Euro accounted for
94.7% (2010: 96.0%), 1.3% (2010: 1.0%), 3.1% (2010: 2.2%),
and 0.9% (2010: 0.8%), respectively. 96.3% (2010: 98.5%) of
this indebtedness are loans with fixed interest rates, while the
remainders are loans with floating interest rates.
Contractual Obligations
For the year ended 31 December
2011
9,187
11,766
31,150
52,103
2010
20,675
10,352
42,549
73,576
As of 31 December 2011, the Group did not pledge any assets
as collateral for debt (2010: 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 significant risk exposure to foreign exchange
fluctuations.
(RMB millions)
Short-term debt
Long-term debt
Operating lease commitments
Capital commitments
Total contractual obligations
1 January
2012-
31 December
2012
1 January
2013-
31 December
2013
Payable in
1 January
2014-
31 December
2014
1 January
2015-
31 December
2015
9,391
13,513
18,182
6,369
47,455
–
–
11,592
21,019
782
–
600
–
12,374
21,619
–
96
413
–
509
Total
9,391
47,087
21,103
6,369
83,950
Thereafter
–
867
1,126
–
1,993
Note: Amounts of short-term debt and long-term debt include recognised and unrecognised interest payable, and are not discounted.
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 2011.
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 2011 and
the financial position of the Company and the Group as at that
date are set out in the audited financial statements on pages 88
to 146 in this annual report.
Dividend
The Board proposes a final dividend in the amount equivalent to
HK$0.085 per share (pre-tax), totalling approximately RMB5,583
million for the year ended 31 December 2011. The dividend
proposal will be submitted for consideration at the Annual
General Meeting to be held on 30 May 2012. 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 average offer rate of Renminbi to Hong Kong dollars
as announced by the People’s Bank of China for the week prior
to the date of declaration of dividends at the Annual General
Meeting. The proposed 2011 final dividends are expected to
be paid on or about 20 July 2012 upon approval at the Annual
General Meeting.
Pursuant to the Enterprise Income Tax Law of the People’s
Republic of China and the Implementation Rules of the Enterprise
Income Tax Law of the People’s Republic of China in 2008, the
Company shall be obliged to withhold and pay 10% enterprise
income tax when it distributes the proposed 2011 final dividends
to non-resident enterprise shareholders of overseas H shares
(including Hong Kong Securities Clearing Company Nominees
Limited, other corporate nominees or trustees, and other entities
or organisations) whose names appear on the Company’s H
share register of members on 12 June 2012.
According to regulations by the State Administration of Taxation
(Guo Shui Han [2011]No.348) and relevant laws and regulations,
if the individual H share shareholders who are Hong Kong
or Macau residents and those whose country of domicile is
a country which has entered into a tax treaty with the PRC
stipulating a dividend tax rate of 10%, the Company will finally
withhold and pay individual income tax at the rate of 10% on
behalf of the individual H share shareholders. If the individual H
share shareholder whose country of domicile is a country which
has entered into a tax treaty with the PRC stipulating a dividend
tax rate of less than 10%, the Company will finally withhold
and pay individual income tax at the rate of 10% on behalf of
the individual H share shareholders. If the individual H share
shareholders whose country of domicile is a country which has
entered into a tax treaty with the PRC stipulating a dividend tax
rate of more than 10% but less than 20%, the Company will
withhold and pay individual income tax at the actual tax rate
stipulated in the relevant tax treaty. If the individual H share
shareholders whose country of domicile is a country which has
entered into a tax treaty with the PRC stipulating a dividend tax
rate of 20%, or a country which has not entered into any tax
treaties with the PRC, or under any other circumstances, the
Company will withhold and pay individual income tax at the rate
of 20% on behalf of the individual H share shareholders.
The Company will determine the country of domicile of the
individual H share shareholders based on the registered address
as recorded in the register of members of the company on 12
June 2012 (the “Registered Address”). If the country of domicile
of an individual H share shareholder is not the same as the
Registered Address or if the individual H share shareholder
would like to apply for a refund of the additional amount of tax
finally withheld and paid, the individual H share shareholder
shall notify and provide relevant supporting documents to the
Company on or before 6 June 2012. Upon examination of
the supporting documents by the relevant tax authorities, the
Company will follow the guidance given by the tax authorities
to implement relevant tax withholding and payment provisions
and arrangements. Individual H share shareholders may
either personally or appoint a representative to attend to the
procedures in accordance with the requirements under the tax
treaties notice if they do not provide the relevant supporting
documents to the Company within the time period stated above.
The Company assumes no responsibility and disclaims all
liabilities whatsoever in relation to the tax status or tax treatment
of the individual H share shareholders and for any claims arising
from any delay in or inaccurate determination of the tax status
or tax treatment of the individual H share shareholders or any
disputes over the withholding mechanism or arrangements.
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037
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
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Report of the Directors
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
Chairman and Chief Executive Officer
Date of Appointment
20 December 2004
Wang Xiaochu
Yang Jie
Wu Andi
Zhang Jiping
Li Ping
Yang Xiaowei
Sun Kangmin
Ke Ruiwen
Li Jinming
Wu Jichuan
Qin Xiao
Tse Hau Yin, Aloysius
Cha May Lung, Laura
Xu Erming
Yung Shun Loy, Jacky
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038
Gao Jinxing
54
50
57
56
58
48
55
49
60
74
64
64
62
62
49
49
Executive Director, President and Chief Operating Officer*
20 October 2004
Executive Director, Executive Vice President and
Chief Financial Officer
Executive Director and Executive Vice President
Executive Vice President
10 September 2002
10 September 2002
10 September 2002
Executive Director and Executive Vice President
9 September 2008
Executive Director and Executive Vice President
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 October 2004
20 March 2012
20 December 2004
9 September 2008
9 September 2008
9 September 2005
9 September 2008
9 September 2005
1 February 2005
1 February 2012
*
On 2 November 2011, Mr. Yang Jie was appointed as the President and Chief Operating Officer of the Company.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Report of the Directors
On 13 July 2011, Mr. Shang Bing resigned as the President,
Chief Operating Officer and Executive Director and was
appointed as deputy minister of Ministry of Industry and
Information Technology of the People’s Republic of China.
On 2 November 2011, Mr. Yang Jie was appointed as the
President and Chief Operating Officer. On 1 February 2012,
Mr. Yang Jianqing resigned as Financial Controller due to job
rearrangement and Mr. Gao Jinxing was appointed as the
Financial Controller of the Company. On 20 March 2012, Mr.
Zhang Chenshuang retired as Executive Director and Executive
Vice President of the Company due to his age. On the same day,
the Board appointed Mr. Ke Ruiwen as Executive Vice President
and proposed to appoint Mr. Ke Ruiwen as Executive Director of
the Company. The proposed appointment of Mr. Ke Ruiwen as
Executive Director of the Company is subject to shareholders’
approval at Annual General Meeting to be held on 30 May 2012.
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
Mao Shejun
Xu Cailiao
Han Fang
Du Zuguo
Age
Position in the Company
60
71
58
48
39
49
Chairman of the Supervisory Committee
Independent Supervisor
Supervisor (Employee Representative)
Supervisor
Supervisor
Supervisor
Date of Appointment
29 December 2009
10 September 2002
20 May 2011
9 September 2005
9 September 2008
20 May 2011
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On 20 May 2011, Mr. Du Zuguo, the General Manager of
Zhejiang Financial Development Company, the Company’s
domestic shareholder, was elected as a Supervisor of the
Company at the Annual General Meeting. Mr. Ma Yuzhu,
the employee elected supervisor of the third session of the
Supervisory Committee resigned as supervisor of the Company
upon expiry of the term of office of the third session of the
Supervisory Committee on 20 May 2011 while Mr. Mao Shejun
Share category
Domestic shares (total):
Domestic shares held by:
China Telecommunications Corporation
Guangdong Rising Assets Management Co., Ltd.
Zhejiang Financial Development Company
Fujian Investment & Development Group Co., Ltd
Jiangsu Guoxin Investment Group Co., Ltd.
Total number of H shares (including ADSs)
Total
was elected by the employees of the Company democratically as
a supervisor of the Company representing the employees.
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Share Capital
039
The share capital of the Company as at 31 December 2011 was
RMB80,932,368,321, divided into 80,932,368,321 shares of
RMB1.00 each. As at 31 December 2011, the share capital of
the Company comprised:
Percentage of the
Number of shares
total number of shares
as at
in issue as at
31 December 2011
31 December 2011
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
80,932,368,321
(%)
82.85
70.89
6.94
2.64
1.20
1.18
17.15
100.00
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字元樣式已提供：英文100%, 75% 中文75%, 50%
Report of the Directors
Material Interests and Short Positions in Shares
and Underlying Shares of the Company
As at 31 December 2011, 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 shareholders
Number of
shares
Type of shares
Percentage of the
respective type
of shares
Percentage of the
total number of
shares in issue
Capacity
China Telecommunications
Corporation
57,377,053,317
(Long Position)
Domestic shares
85.57%
70.89% Beneficial owner
Guangdong Rising Assets
Management Co., Ltd.
5,614,082,653
(Long Position)
Domestic shares
8.37%
6.94% Beneficial owner
JPMorgan Chase & Co.
1,663,316,937
(Long Position)
H shares
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Commonwealth Bank
of Australia
Blackrock, Inc.
RFS Holdings B.V.
47,412,908
(Short Position)
1,153,289,082
(Shares available
for lending)
1,110,034,681
(Long Position)
1,006,713,763
(Long Position)
48,612,755
(Short Position)
907,191,530
(Long Position)
1,180,327,134
(Short Position)
H shares
H shares
H shares
H shares
H shares
H shares
H shares
11.99%
2.06% 131,001,855 shares
as beneficial owner;
379,026,000 shares
as investment
manager; and
1,153,289,082 shares
as security interest
holder/approved
lending agent
0.34%
0.06% Beneficial owner
8.31%
1.43% Security interest holder/
8.00%
7.25%
0.35%
6.54%
8.51%
approved lending
agent
1.37% Interest of controlled
corporation
1.24% Interest of controlled
corporation
0.06% Interest of controlled
corporation
1.12% Interest of controlled
corporation
1.46% Interest of controlled
corporation
Save as stated above, as at 31 December 2011, 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.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Report of the Directors
Directors’ and Supervisors’ Interests and Short
Positions in Shares, Underlying Shares and
Debentures
As at 31 December 2011, 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 2011, 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.
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 147 to 148 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 2011.
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.
Directors’ and Supervisors’ Interests in
Contracts
Capitalised Interest
For the year ended 31 December 2011, 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 2011.
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.
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Please refer to note 26 of the audited financial statements for
details of the Group’s capitalised interest for the year ended 31
December 2011.
Fixed Assets
041
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 2011.
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 accounting standards at a 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 2011, calculated on the above basis and before
deducting the proposed final dividends for 2011, amounted to
RMB67,623 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 2011.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Report of the Directors
Donations
Pre-Emptive Rights
For the year ended 31 December 2011, the Group made
charitable and other donations with a total amount of RMB13
million.
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.
Subsidiaries and Associated Companies
Major Customers and Suppliers
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
2011.
Changes in Equity
Please refer to the consolidated statement of changes in equity
as contained in the audited financial statements of this year
(page 93 of this annual report).
Retirement Benefits
For the year ended 31 December 2011, 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 2011, 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.
Please refer to note 37 of the audited financial statements for
details of the retirement benefits provided by the Group.
Continuing Connected Transactions
Stock Appreciation Rights
Please refer to note 38 of the audited financial statements for
details of the stock appreciation rights offered by the Company.
The following table sets out the amounts of continuing
connected transactions between the Group and China Telecom
Group for the year ended 31 December 2011:
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042
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”)1
Provision of IT services to China Telecom Group
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
Annual monetary cap
for continuing
Transaction Amounts
connected transactions
(RMB millions)
(RMB millions)
625
450
412
692
365
2,764
1,642
8,293
2,362
7,878
800
1,000
600
1,200
500
3,800
1,800
8,800
2,900
9,000
CDMA network capacity lease fee
15,8602
21,000
1
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.
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 RMB3,151 million.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Report of the Directors
Centralised Services Agreement
Pursuant to the centralised services agreement signed between
the Company and China Telecommunications Corporation on
10 September 2002 and the related supplemental agreements
subsequently entered into between the two parties (collectively,
the “Centralised Services Agreement”), centralised services
include centralised business management and operational
services provided by the Group to China Telecommunications
Corporation in relation to key corporate customers, its network
management centre and business support centre. Centralised
services also include the provision of certain premises by
China Telecommunications Corporation to the Group and the
common use of international telecommunications facilities
by both parties. The aggregate costs incurred by the Group
and China Telecommunications Corporation for the provision
of management and operation services will be apportioned
between the Group and China Telecommunications Corporation
on a pro rata basis according to the revenues generated by
each party. Where the Group uses the premises provided by
China Telecommunications Corporation, the Group will pay
premises usage fees to China Telecommunications Corporation
on a pro rata basis according to the apportioned actual area
allocated to the Group. The premises usage fees shall be
determined through negotiation between the two parties based
on comparable market rates. When both parties use international
telecommunications facilities provided by third parties and
accept services by such third parties (for example, restoration
maintenance costs, the annual utilisation fee and related
service costs) and when both parties use the international
telecommunications facilities of China Telecommunications
Corporation, the associated costs shall be shared on a pro rata
basis according to volume of the inbound and outbound voice
calls to and from international regions, Hong Kong, Macau and
Taiwan originating from each party divided by the proportion
of the aggregate volume of the inbound and outbound voice
calls to and from international regions, Hong Kong, Macau and
Taiwan originating from both parties. When the two parties use
international telecommunications facilities provided by a third
party and accept restoration maintenance costs, such fees shall
be determined according to the actual utilisation fee the each
year. The utilisation fee associated with the shared use of the
international telecommunications facilities provided by China
Telecommunications Corporation shall be determined through
negotiation between the two parties based on market rates.
The Company and China Telecommunications Corporation
entered into a supplemental agreement on 25 August 2010 to
renew the Centralised Services Agreement for a further term
expiring on 31 December 2012. No later than 30 days prior to
the expiry of the Centralised Services Agreement, the Company
is entitled to serve a written notice to China Telecommunications
Corporation to renew the Centralised Services Agreement, and
the parties shall consult and decide on matters relating to such
renewal.
Interconnection Settlement Agreement
Pursuant to the interconnection settlement agreement
signed between the Company and China Telecommunications
Corporation on 10 September 2002 and the related
supplemental agreements subsequently entered into between
the two parties (collectively, the “Interconnection Settlement
Agreement”), the telephone operator connecting a telephone
call made to its local access network shall be entitled to receive
from the operator from which the telephone call originated a fee
prescribed by the Ministry of Industry and Information Technology
from time to time, which is currently RMB0.06 per minute.
Interconnection charges are RMB0.06 per minute for local
calls originated from the Group to China Telecommunications
Corporation. The settlement regions include Beijing Municipality,
Tianjin Municipality, Hebei Province, Heilongjiang Province, Jilin
Province, Liaoning Province, Shanxi Province, Henan Province,
Shandong Province, Inner Mongolia Autonomous Region and
Tibet Autonomous Region.
The Company and China Telecommunications Corporation
entered into a supplemental agreement on 25 August 2010 to
renew the Interconnection Settlement Agreement for a further
term expiring on 31 December 2012. No later than 30 days
prior to the expiry of the Interconnection Settlement Agreement,
the Company is entitled to serve a written notice to China
Telecommunications Corporation to renew the Interconnection
Settlement Agreement, and the parties shall consult and decide
on matters relating to such renewal. In addition, the Company
and China Telecommunications Corporation have agreed that
interconnection settlement charges will be calculated according
to the rules and regulations of the relevant telecommunications
regulators. If the telecommunications regulators amend
existing, or promulgate new rules or regulations in respect of
interconnection settlement, the parties shall apply such amended
or new rules and regulations as acknowledged by both parties.
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043
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
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044
Report of the Directors
Property Leasing Framework Agreement
Pursuant to the property leasing framework agreement
signed between the Company and China Telecommunications
Corporation on 30 August 2006 and the related supplemental
agreement subsequently entered into between the two parties
(collectively, the “Property Leasing Framework Agreement”), the
Group and China Telecommunications Corporation and/or its
associates can lease properties from the other party for use as
business premises, offices, equipment storage facilities and sites
for network equipment. The rental charges under the Property
Leasing Framework Agreement shall be determined according to
market rates with reference to the standards set forth by local
pricing authorities. The rental charges are subject to review
every three years.
The Company and China Telecommunications Corporation
entered into a supplemental agreement on 25 August 2010 to
renew the Property Leasing Framework Agreement for a further
term expiring on 31 December 2012. No later than 30 days prior
to the expiry of the Property Leasing Framework Agreement,
the Company is entitled to serve a written notice to China
Telecommunications Corporation to renew the Property Leasing
Framework Agreement, and the parties shall consult and decide
on matters relating to such renewal.
IT Services Framework Agreement
Pursuant to the IT services framework agreement signed
between the Company and China Telecommunications
Corporation on 30 August 2006 and the related supplemental
agreements subsequently entered into between the two parties
(collectively, the “IT Services Framework Agreement”), the Group
and China Telecommunications Corporation and/or its associates
can provide the other party with information technology services
including office automation and software testing. Each of the
Group and China Telecommunications Corporation and/or its
associates is entitled to participate in bidding for the right
to provide information technology services to the other party
in accordance with the IT Services Framework Agreement.
The charges payable for such services shall be determined
by reference to the market rates or rates obtained through
a tender process. If the terms offered by the Group or China
Telecommunications Corporation and/or its associates are no
less favourable than those offered by an independent third-party
provider, the Group or China Telecommunications Corporation
and/or its associates may award the tender to the other party.
The Company and China Telecommunications Corporation
entered into a supplemental agreement on 25 August 2010
to renew the IT Services Framework Agreement for a further
term expiring on 31 December 2012. No later than 30 days
prior to the expiry of the IT Services Framework Agreement,
the Company is entitled to serve a written notice to China
Telecommunications Corporation to renew the IT Services
Framework Agreement, and the parties shall consult and decide
on matters relating to such renewal.
Community Services Framework Agreement
Pursuant to the community services framework agreement
signed between the Company and China Telecommunications
Corporation on 30 August 2006 and the related supplemental
agreements subsequently entered into between the two parties
(collectively, the “Community Services Framework Agreement”),
China Telecommunications Corporation and/or its associates
provide the Group with community services such as culture,
education, property management, vehicle service, health and
medical care, hotel and conference service, community and
sanitary service. The community services under the Community
Services Framework Agreement are provided at:
(1)
the government-prescribed prices (if any);
(2)
(3)
(4)
where there are no government-prescribed prices but
there are government-guided prices, the government-
guided prices;
where there are neither government-prescribed prices
nor government-guided prices, the market prices. Market
prices shall mean the prices at which the same type of
services are provided by independent third parties in the
ordinary course of business; or
where none of the above is applicable, the prices are to
be agreed between the parties based on the reasonable
costs incurred in providing the services plus reasonable
profit margin (for this purpose, “reasonable costs”
means such costs as confirmed by both parties after
negotiations).
The Company and China Telecommunications Corporation
entered into a supplemental agreement on 25 August 2010 to
renew the Community Services Framework Agreement for a
further term expiring on 31 December 2012. No later than 30
days prior to the expiry of the Community Services Framework
Agreement, the Company is entitled to serve a written notice to
China Telecommunications Corporation to renew the Community
Services Framework Agreement, and the parties shall consult
and decide on matters relating to such renewal.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Report of the Directors
Supplies Procurement Services Framework Agreement
Pursuant to the supplies procurement services framework
agreement signed between the Company and China
Telecommunications Corporation on 30 August 2006 and the
related supplemental agreements subsequently entered into
between the two parties (collectively, the “Supplies Procurement
Services Framework Agreement”), China Telecommunications
Corporation and/or its associates and the Group provide
each other with supplies procurement services, including
comprehensive procurement services, the sale of proprietary
telecommunications equipment, resale of third-party equipment,
management of tenders, verification of technical specifications,
storage, transportation and installation services.
Where the procurement services are provided on an agency
basis, the maximum commission for such procurement services
shall be calculated at:
(1)
not more than 1% of the contract value for procurement
of imported telecommunications supplies; or
(2)
not more than 3% of the contract value for the
procurement of domestic telecommunications supplies
and domestic non-telecommunications supplies.
The pricing basis of the services for the provision of supplies
procurement other than on an agency basis under the Supplies
Procurement Services Framework Agreement is the same as
those set out in the Community Services Framework Agreement.
The Company and China Telecommunications Corporation
entered into a supplemental agreement on 25 August 2010 to
renew the Supplies Procurement Services Framework Agreement
for a further term expiring on 31 December 2012. No later than
30 days prior to the expiry of the Supplies Procurement Services
Framework Agreement, the Company is entitled to serve a
written notice to China Telecommunications Corporation to renew
the Supplies Procurement Services Framework Agreement, and
the parties shall consult and decide on matters relating to such
renewal.
Engineering Framework Agreement
Pursuant to the engineering framework agreement signed
between the Company and China Telecommunications
Corporation on 30 August 2006 and the related supplemental
agreements subsequently entered into between the two parties
(collectively, the “Engineering Framework Agreement”), China
Telecommunications Corporation and/or its associates through
bids provide to the Group services such as construction, design,
equipment installation and testing and/or engineering project
supervision services. The charges payable for such engineering
services shall be determined by reference to market rates. The
charges payable for the design or supervision of engineering
projects with a value of over RMB500,000 or engineering
construction projects with a value of over RMB2 million shall be
determined by the tender award price.
The Company and China Telecommunications Corporation
entered into a supplemental agreement on 25 August 2010
to renew the Engineering Framework Agreement for a further
term expiring on 31 December 2012. No later than 30 days
prior to the expiry of the Engineering Framework Agreement,
the Company is entitled to serve a written notice to China
Telecommunications Corporation to renew the Engineering
Framework Agreement, and the parties shall consult and decide
on matters relating to such renewal.
Ancillary Telecommunications Services Framework
Agreement
Pursuant to the ancillary telecommunications services
framework agreement signed between the Company and China
Telecommunications Corporation on 30 August 2006 and
the related supplemental agreements subsequently entered
into between the two parties (collectively, the “Ancillary
Telecommunications Services Framework Agreement”), China
Telecommunications Corporation and/or its associates provide
the Group with certain repair and maintenance services,
including repair of telecommunications equipment, maintenance
of fire equipment and telephone booths, as well as other
customer services. The pricing terms for such services are the
same as those set out in the Community Services Framework
Agreement.
The Company and China Telecommunications Corporation
entered into a supplemental agreement on 25 August
2010 to renew the Ancillary Telecommunications Services
Framework Agreement for a further term expiring on 31
December 2012. No later than 30 days prior to the expiry
of the Ancillary Telecommunications Services Framework
Agreement, the Company is entitled to serve a written notice to
China Telecommunications Corporation to renew the Ancillary
Telecommunications Services Framework Agreement, and the
parties shall consult and decide on matters relating to such
renewal.
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045
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Report of the Directors
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 and the related supplemental
agreement subsequently entered into between the two parties
(collectively, the “CDMA Network Capacity Lease Agreement”),
China Telecommunications Corporation agreed to lease its
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 28% of the Company’s audited CDMA service
revenue per year (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 telecommunications products in connection
with the CDMA operations, as derived from the Company’s
financial statements). Regardless of the revenue of the CDMA
operations, the minimum annual leasing fee shall be 90% of
the total amount of the leasing fee paid by the Company to
China Telecommunications Corporation in the previous year.
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 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 Company and China Telecommunications Corporation
entered into a supplemental agreement on 25 August 2010
to renew the CDMA Network Capacity Lease Agreement for a
further term expiring on 31 December 2012.
Strategic Agreement between Our Company and China
Communications Services Corporation Limited
Pursuant to the strategic agreement signed between the
Company and China Communications Services Corporation
Limited (“China Communications Services”) on 30 August
2006 and the related supplemental agreements (collectively,
the “Strategic Agreement”), the Company agreed that, in the
period between 1 January 2007 and 31 December 2009, if
the service terms relating to the design, implementation and
supervision of the communications engineering projects 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 Communications
Services shall receive such services from the relevant wholly-
owned subsidiaries of China Communications Services annually
with a total annual value of no less than 10.6% of the total
annual capital expenditure of the relevant 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 such as design,
implementation and supervision of communications engineering
projects. Meanwhile, the Company agreed that, in the period
between 1 January 2007 and 31 December 2009, if the terms
relating 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 receive such services from the relevant wholly-owned
subsidiaries of China Communications Services with a total value
of not less than RMB1,780 million annually.
The business areas of the strategic alliance between the two
parties governed by the terms and conditions in the Strategic
Agreement include: design, implementation and supervision
of the communications engineering projects, maintenance
management service, contents application service, sales
channel service, usage of telecommunications service 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 PRC standards 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
under PRC laws, where the terms and conditions of services
provided by either party to the Strategic Agreement are as
favourable as those provided by an independent third party in
respect of the same services, the party under the Strategic
Agreement shall have the priority to be appointed as the service
provider by the other party.
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Report of the Directors
The Company and China Communications Services entered
into a supplemental agreement (the “2009 Supplemental
Agreement”) on 29 October 2009 to renew the Strategic
Agreement for a further term expiring on 31 December 2012.
Upon expiration, both parties may negotiate the renewal of
the Strategic Agreement which is subject to the requirements
of Chapter 14A of the Listing Rules (including disclosure and
independent shareholders’ approval requirements).
The Strategic Agreement does not set out any annual caps
for the transactions thereunder as China Telecommunications
Corporation, the holding company of China Communications
Services, has signed certain framework agreements with the
Company (including the Engineering Framework Agreement, the
Ancillary Telecommunications Services Framework Agreement
and the Community Services Framework Agreement), which
cover the transactions contemplated under the Strategic
Agreement. These frameworks agreements are subject to annual
caps, and the proposed annual caps for the transactions under
the Strategic Agreement are subsumed under the annual caps of
these framework agreements.
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.
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;
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The Company’s auditor was engaged to report on the Group’s
continuing connected transactions in accordance with Hong
Kong Standard on Assurance Engagements 3000 “Assurance
Engagements Other Than Audits or Reviews of Historical
Financial Information” and with reference to Practice Note 740
“Auditor’s Letter on Continuing Connected Transaction under the
Hong Kong Listing Rules” issued by the Hong Kong Institute of
Certified Public Accountants.
2.
3.
The Independent Non-executive Directors of the Company have
confirmed that all continuing connected transactions for the year
ended 31 December 2011 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;
have been entered into in accordance with the pricing
policies as stated in the relevant agreements; and
047
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.
Compliance with Code on Corporate Governance
Practices
Please refer to the “Corporate Governance Report” set out in
page 54 of this 2011 annual report of the Company for details
of our compliance with the Code on Corporate Governance
Practices.
Report of the Directors
Material Legal Proceedings
As at 31 December 2011, 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 2011. 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 re-appointment of KPMG and KPMG Huazhen
as the international and domestic auditors of the Company for
the year ending 31 December 2012 will be proposed at the
Annual General Meeting of the Company to be held on 30 May
2012.
By Order of the Board
Wang Xiaochu
Chairman and Chief Executive Officer
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Beijing, PRC
20 March 2012
Report of the Supervisory Committee
During the reporting period, all members of the Supervisory
Committee acted 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 and diligently
in carrying out their supervisory function to safeguard the
interests of shareholders and the Company.
During the reporting period, the Supervisory Committee held
two meetings. At the eighth meeting of the Third Session
of the Supervisory Committee held in March 2011, the
Supervisory Committee reviewed and approved six agenda
items, including the financial statements for the year 2010,
the independent auditor’s report, the profit distribution and
dividend proposal, the Supervisory Committee’s report for the
year 2010, the working plan of the Supervisory Committee
for the year 2011, and the re-election of the Supervisory
Committee. At the first meeting of the Fourth Session of the
Supervisory Committee held in August of the same year, the
Supervisory Committee elected Mr. Miao Jianhua to continue
his term of office as the Chairman of the Fourth Session of
the Supervisory Committee, reviewed the interim financial
statements and the independent auditor’s review report for
the year 2011, and also reviewed the remuneration proposal
for the Independent Supervisor of the Fourth Session of
the Supervisory Committee. During the reporting period,
members of the Supervisory Committee supervised the
major decision-making process of the Company and the
performance of duties by the members of the Board and the
senior management through their attendance at the relevant
meetings such as the 2010 Shareholders’ General Meeting,
meetings of the Board, and meetings of the Audit Committee.
The Supervisory Committee is of the view that in 2011,
despite fierce market competition, the Company continued
to deepen its strategic transformation, strengthened its
network infrastructure, increased its innovative strength,
refined its precision management, and optimised its resource
allocation. The operating revenues of the Company reached
RMB244,943 million (excluding the amortisation of upfront
connection fees, same below), an increase of 11.7% from
last year. The business structure continued to be optimised.
The revenue contributions from mobile service, wireline
broadband, and wireline value-added and integrated
information services accounted for 64.9% of the operating
revenues, representing an increase of 5.6 percentage
points from last year. EBITDA reached RMB94,266 million,
representing an increase of 6.5% from last year. Profit
attributable to equity holders of the Company reached
RMB16,404 million, representing an increase of 10.5% from
last year. In summary, China Telecom has achieved a head
start on the Twelfth Five-year Plan period, and has taken
another new step forward towards building an integrated
information service provider. Meanwhile, the Company
attached great importance to corporate governance and
operation in good faith. In accordance with Section 404 of
the US Sarbanes-Oxley Act of 2002 and other regulatory
rules, the Company stepped up the development of its
internal control system and strengthened the exercise of its
internal control. As a result, the internal control environment
and management of the Company continued to improve, and
the Company’s development is soundly and steadily on track.
The Supervisory Committee is satisfied with the performance
of the Company in 2011 and is confident of the Company’s
prospects.
The Supervisory Committee believes that during 2011, all
members of the Board and members of senior management
have complied with rules and regulations, upheld the
principles of diligence and integrity, safeguarded the interests
of shareholders, fulfilled their responsibilities fully in
accordance with the Articles of Association of the Company,
diligently implemented the resolutions of the shareholders’
general meetings and the Board meetings, and strictly
complied with the relevant regulations for listed companies.
The Supervisory Committee has not observed any behaviors
that breached the laws, rules, and Articles of Association of
the Company, or damaged the interests of shareholders.
Upon the review of the unqualified financial statements for
the year 2011 and other relevant information, which were
prepared in accordance with PRC Accounting Standards
for Business Enterprises and regulations and International
Financial Reporting Standards as audited by PRC certified
accountants and international auditors of the Company
and the review of the changes in accounting policies and
related retrospective adjustments as a result of adoption of
the amendment to IFRS 1 by the Company and proposed to
be submitted to the shareholders’ general meeting by the
Board, the Supervisory Committee is of the opinion that the
financial statements were prepared in accordance with the
principle of consistency and that they truly and fairly reflect
the Company’s financial position, results of operation and
cash flows, and that the significant changes in accounting
policies are in accordance with the requirements of IFRS,
and the related retrospective adjustments are reasonable and
accurate.
In 2012, the Supervisory Committee will continue to strictly
adhere to the Articles of Association of the Company and
relevant regulations, assume its responsibility to protect the
interests of the shareholders and the Company, monitor the
Company to fulfill its commitment to its shareholders, further
broaden the planning of supervision and strengthen its efforts
in monitoring to protect the interests of all investors.
By Order of the Supervisory Committee
Miao Jianhua
Chairman of the Supervisory Committee
Beijing, PRC
20 March 2012
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turbo-charged
for success
t
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“nOn-stOp” pOwerinG Our wOrlD-class
telecOmmunicatiOns netwOrks
world’s largest wireline operator
>169,000,000 access lines in services
world’s largest cDma mobile operator
>126,000,000 mobile subscribers
world’s largest broadband operator
>76,000,000 wireline broadband subscribers
turbo-charged
for success
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Recognition & Awards
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The Company has been voted by investors the “No. 1 Best Managed Company in Asia” across all industries in the “Asia Best Managed Companies 2011” by
Euromoney.
The Company has been voted by investors the “No. 1 Best Managed Company in China” in the “Asia Best Managed Companies 2011” by Euromoney.
The Company was awarded the “Overall Best Managed Company in Asia” by FinanceAsia in the Asia’s Best Companies Poll 2011.
Mr. Wang Xiaochu, Chairman and CEO was awarded the “Best CEO in China” by FinanceAsia in the Asia’s Best Companies Poll 2011.
Madam Wu Andi, Executive Vice President and CFO was awarded the “Best CFO in China” by FinanceAsia in the Asia’s Best Companies Poll 2011.
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Recognition & Awards
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The Company has been voted by professional investors as one of the “Most Honored Companies” in the All-Asia-Executive-Team ranking organised by
Institutional Investor.
The Company has been voted by professional investors as “Best Investor Relations Company” in the telecommunications sector in the All-Asia-Executive-
Team ranking organised by Institutional Investor.
The Company was awarded the Platinum Award for All-Round Excellence in 2011 “The Asset Corporate Awards”.
Mr. Wang Xiaochu, Chairman & CEO, was honoured with “Asian Corporate Director Recognition Awards 2011” by Corporate Governance Asia.
The Company was awarded “The Best of Asia” by Corporate Governance Asia’s Annual Recognition Awards 2011.
The corporate website of the Company (www.chinatelecom-h.com) has won the Gold Award for investor relations website in Asia Pacific in IR Global
Rankings 2011.
The Company’s 2010 annual report won total 6 gold awards in the “2011 International ARC Awards” and the “Vision Awards” Annual Report Competition by
The League of American Communications Professionals LLC (LACP).
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Corporate Governance Report
An Overview of Corporate Governance
The Company strives to maintain a high level of corporate
governance and inherited an excellent, prudent and efficient
corporate governance style and continuously improves its
corporate governance methodology, regulates its operations,
improves its internal control mechanism, implements sound
corporate governance and disclosure measures, and ensures
that the Company’s operations are in line with the long term
interests of the Company and its shareholders as a whole.
In 2011, the Shareholders’ General Meeting, the Board and
the Supervisory Committee maintained efficient operations
in accordance with the rules, and the Company continued
to optimise the organisational structure and has achieved a
breakthrough in its organisation structure, which well supported
the Company’s strategic transformation to the Three New Roles
– “a leader of intelligent pipeline, a provider of integrated
platforms, and a participant in content and application
development”. The Company further optimised its internal
control and integrated comprehensive risk management into
its operational practice. The sustained enhancement of the
Company’s corporate governance ensured alignment with the
long-term best interest of shareholders and firmly protected the
interests of shareholders.
As a company incorporated in the PRC, the Company adopts the
Company Law of the People’s Republic of China, the Securities
Law of the People’s Republic of China and other related laws
and regulations as the basic guidelines for the Company’s
corporate governance. As a company dual-listed 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”)
and the regulatory requirements for non-US companies listed in
the United States, and these rules serve as guidances for the
Company to improve the foundation of its corporate governance.
The Company has regularly published 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.
For the financial year ended 31 December 2011, save that the
roles of Chairman and Chief Executive Officer of the Company
were performed by the same individual, the Company has been
in compliance with all the code provisions as set out in Appendix
14 “Code on Corporate Governance Practices” of the Listing
Rules in the year 2011. 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 Officer 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.
In 2011, the Company’s continuous efforts in corporate
governance gained wide recognition from the capital market
and was accredited with a number of awards. The Company
was being voted the “No. 1 Best Managed Company in Asia” by
Euromoney for three consecutive years, while at the same time
being ranked as the “No. 1 Best Corporate Governance in Asia”,
the “No. 1 Most Convincing and Coherent Strategy in Asia” and
the “No. 1 Best Shareholder Value in Asia” in the individual
categories. The Company was accredited by the investors as
the “Overall Best Managed Company in Asia”, the “No. 1 Best
Managed Company in China” and the “No. 1 Best Investor
Relations in China” in the Asia’s Best Companies Poll 2011
organised by FinanceAsia. The Company was voted by investors
as one of the “Most Honored Companies” in the inaugural All-
Asia-Executive-Team ranking organised by Institutional Investor.
The Company was awarded the “Platinum Award for All-Round
Excellence” in 2011 The Asset “Corporate Awards”, for three
consecutive years. In addition, the Company was awarded the
“The Best of Asia” by Corporate Governance Asia, and Mr. Wang
Xiaochu, Chairman and Chief Executive Officer of the Company,
was awarded “Asian Corporate Director Recognition Awards
2011” by Corporate Governance Asia for two consecutive years.
The Company’s website has won the “Gold Award for investor
relations website in Asia Pacific” in IR Global Rankings 2011.
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Corporate Governance Report
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The Annual General Meeting held in Hong Kong on 20 May 2011
Overall Structure of the Corporate Governance
A double-tier structure has been adopted as the overall structure
for corporate governance: the Board and the Supervisory
Committee are established under the Shareholders’ General
Meeting. The Audit Committee, Remuneration Committee and
Nomination Committee were established under the Board. The
Board is authorised by the Articles of Association to make major
decisions on the Company’s operation and to oversee the daily
management and operations of the senior management. The
Supervisory Committee is mainly responsible for the supervision
of the performance of duties by the Board and the senior
management. Each of the Board and the Supervisory Committee
is independently accountable to the Shareholders’ General
Meeting.
Shareholders’ General Meeting
In 2011, the Company convened one shareholders’ general
meeting, the Annual General Meeting (“AGM”) for 2010. The
AGM held on 20 May 2011 reviewed and approved numerous
resolutions such as the financial statements for the year 2010,
Report of the Independent International Auditor, proposal for
profit and dividends distribution, authorisation to the Board
for the formulation of a budget for 2011, re-appointment and
remuneration of auditors, and authorisation to the Board to issue
debentures.
Since the Company’s listing in 2002, at each of the
shareholders’ general meetings, a separate shareholders’
resolution was proposed by the Company in respect of each
independent item. The circulars to shareholders also provided
details about the resolutions. All resolutions tabled at the
shareholders’ general meetings of the Company were already
conducted by poll and all voting results were published on the
websites of the Company and The Stock Exchange of Hong
Kong Limited. The Company attaches great importance to the
shareholders’ 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. At the end of 2011, the
Board adopted the shareholders communication policy to ensure
that the shareholders are provided with comprehensive, equal,
understandable and publicised information of the Company on a
timely basis and to strengthen the communication between the
Company, and the shareholders and investors.
Board of Directors
The fourth session of the Board currently comprises 12 Directors
with six Executive Directors, one Non-executive Director,
and five Independent Non-executive Directors. The Board is
composed of experts from various different professions such as
telecommunications, finance, economics and law, resulting in a
more comprehensive and balanced board structure and giving
more comprehensive and balanced viewpoints in the decision-
making process. The term of office for the fourth session of the
Board lasts for three years, starting from May 2011 until the day
of the Company’s Annual General Meeting in 2014, upon which
the fifth session of the Board will be elected.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
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Corporate Governance Report
The number of Independent Non-executive Directors constitutes
more than one-third of the members of the Board. Mr. Tse
Hau Yin, Aloysius, the Chairman of the Audit Committee, is
an internationally renowned financial expert with expertise in
accounting and financial management. The Audit Committee,
Remuneration Committee and Nomination Committee under the
Board all comprise solely Independent Non-executive Directors,
which ensures that the committees are able to provide sufficient
review and check and balance, and make effective independent
judgments 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 to rigorously regulate
the operating procedures of the Board and the committees
under it, and to ensure that the procedures of Board meetings
are in compliance with related rules in terms of organisation,
regulations and personnel. The Board responsibly and effectively
supervises the preparation of financial statements for each
financial period, so that such financial statements truly and fairly
reflect the operational position, the operating results and cash
flows of the Company for such period. In preparing the financial
statements for the year ended 31 December 2011, 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’ general meetings,
and its duties include the execution of resolutions, formulation
of major operational decisions, financial proposals and policies,
the Company’s basic management system, and the appointment
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 Board resolutions
and the annual operation plans and investment proposals
of the Company, formulating the proposal of the Company’s
internal administrative organisations and sub-organisations,
and performing other duties as authorised by the Articles of
Association and the Board. In order to maintain highly efficient
operations, as well as flexibility and swiftness in operational
decision-making, the Board may delegate its management and
administrative powers to the management when necessary, and
shall provide clear guidance regarding such delegation so as to
avoid seriously impeding or undermining the capabilities of the
Board of Directors in exercising its powers as a whole.
All members of the Board/Committees are informed of the
meeting schedule for the Board/Committees for the year at the
beginning of each year. In addition, all Directors will receive a
meeting notification at least 14 days prior to the meeting under
normal circumstances. The Company Secretary is responsible for
ensuring that the Board meetings comply with all procedures,
related rules and regulations while all Directors can make
inquiries to the Company Secretary for details to ensure that
they have received sufficient information on various matters set
out in the meeting agenda. In addition, the Company regularly
reminds the Directors of their functions and responsibilities by
providing them with information about the latest development of
the Listing Rules and other applicable regulations. To ensure that
the Directors are familiar with the Company’s latest operations
for decision-making, the Company arranges for key financial
data and operational data to be provided 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 arranges induction
activities, so that all newly appointed directors are provided
with updated data on industry development. The Directors also
pay regular visits to our provincial branches to exchange ideas
and study so as to achieve a better understanding of the latest
business developments and share their valuable experiences.
The Board meets at least four times a year. Additional Board
meetings will be held as necessary. In 2011, the Board played
a pivotal role in the Company’s operation, budgeting, decision-
making, supervision, internal control, organisational restructuring
and corporate governance. The Company convened four Board
meetings, four Audit Committee meetings, one Remuneration
Committee meeting and one Nomination Committee meeting in
this year.
At the Board meetings, the Board reviewed significant matters
including the Company’s annual, interim and quarterly financial
statements, annual operational, financial and investment
budgets, annual asset appraisals, internal control implementation
and assessment report, proposal for annual profit distribution,
annual report, interim report and quarterly reports, appointment
and remuneration of auditors and changes in accounting
policies.
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Corporate Governance Report
Attendance rates of individual directors at Board meetings in 2011 (including attendance by written proxies)
Number of Directors
14
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
The Third Session of
the Board of Directors
Number of Attendance/
Meeting
Attendance Rate
2/2
2/2
2/2
2/2
2/2
2/2
2/2
2/2
2/2
2/2
2/2
2/2
2/2
2/2
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
*
On 13 July 2011, Mr. Shang Bing resigned as the President, Chief Operating Officer and Executive Director and was appointed as Deputy Minister of
Ministry of Industry and Information Technology of the People’s Republic of China.
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Corporate Governance Report
Number of Directors
13
Directors
Executive Directors
Wang Xiaochu (Chairman)
Yang Jie*
Wu Andi
Zhang Jiping
Zhang Chenshuang**
Yang Xiaowei
Sun Kangmin
Independent Non-executive Directors
Wu Jichuan
Qin Xiao
Tse Hau Yin, Aloysius
Cha May Lung, Laura
Xu Erming
Non-executive Director
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Li Jinming
The Fourth Session of
the Board of Directors
Number of Attendance/
Meeting
Attendance Rate
2/2
2/2
2/2
2/2
2/2
2/2
2/2
2/2
2/2
2/2
2/2
2/2
2/2
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
*
On 2 November 2011, Mr. Yang Jie was appointed as the President and Chief Operating Officer of the Company.
**
On 20 March 2012, Mr. Zhang Chenshuang retired as Executive Director and Executive Vice President due to his age.
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 of The Stock Exchange of Hong
Kong Limited to govern securities transactions by the Directors.
Based on the written confirmation from the Directors, all of
the Company’s Directors have strictly complied with the Model
Code for Securities Transactions by Directors of Listed Issuers
in Appendix 10 of the Listing Rules regarding the requirements
for directors in conducting securities transactions. The Company
has received annual independence confirmations 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 defines the status, qualifications, 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 financial 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
supervision and review of the qualifications, selection and
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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,
qualifications and experience of staff fulfilling the accounting
and financial 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 is responsible to and regularly reports on its
work to the Board.
In 2011, pursuant to the requirements of the governing laws
and regulations of the places of listing and the Charter of
the Audit Committee, the Audit Committee fully assumed its
responsibilities within the scope of the clear mandate from the
Board. The Audit Committee proposed a number of practical
and professional recommendations for improvement based
on the 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 significant role in protecting
the interests of independent shareholders.
In 2011, the Audit Committee convened four meetings, in which
it reviewed important matters related to the Company’s financial
statements, assessment of the qualifications, independence and
performance of the external auditors and their appointments,
effectiveness of internal control, internal audit and connected
transactions. 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 the internal control assessment
report and the attestation report, followed up with the
recommendations proposed by the external auditors, reviewed
the U.S. annual report, and communicated independently with
the auditors twice a year.
Attendance rates of individual members of the Audit Committee in 2011 (including attendance by written proxies)
Number of Committee members
Percentage of Independent Non-executive Directors of the Committee
4
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Member of the Committee
Tse Hau Yin, Aloysius (Chairman of the Committee)
Wu Jichuan
Qin Xiao
Xu Erming
Member of the Committee
Tse Hau Yin, Aloysius (Chairman of the Committee)
Wu Jichuan
Qin Xiao
Xu Erming
The Third Session of
the Audit Committee
Number of Attendance/
059
Meeting
Attendance Rate
1/1
1/1
1/1
1/1
100%
100%
100%
100%
The Fourth Session of
the Audit Committee
Number of Attendance/
Meeting
Attendance Rate
3/3
3/3
3/3
3/3
100%
100%
100%
100%
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Remuneration Committee
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 of 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. One meeting was held by the Remuneration
Committee in year 2011, giving advice to the remuneration
policy of Directors for the fourth session of the Board.
The Charter for the Remuneration Committee was amended and
approved by the Board on 9 December 2011. The amended
Charter implements the recent proposed amendments of the Code
on Corporate Governance Practices in the Listing Rules, which
will become effective in April 2012. The amended Charter can be
browsed on our website at www.chinatelecom-h.com.
Attendance rates of individual members of the Remuneration Committee meeting in 2011 (including attendance by written proxies)
Number of Directors
Percentage of Independent Non-executive Directors of the Committee
4
100%
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the Remuneration Committee
Number of Attendance/
Directors
Meeting
Attendance Rate
060
Xu Erming (Chairman of the Committee)
Wu Jichuan
Qin Xiao
Tse Hau Yin, Aloysius
1/1
1/1
1/1
1/1
100%
100%
100%
100%
Nomination Committee
The Company’s Nomination Committee comprises 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
shall have no significant connection to the Company, and comply
with the regulatory requirements related to “independence”.
The Nomination Committee assists the Board to formulate
standardised, prudent and transparent procedures and
succession plans for the appointment of Directors, and to
further optimise the composition of the Board. The principal
duties of the Nomination Committee include regularly reviewing
the structure, number of members 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 and regularly
reports its work to the Board.
One meeting was held by the Nomination Committee in year
2011, advising on the change in the session of the Board.
The Charter for the Nomination Committee was amended and
approved by the Board on 9 December 2011. The amended
Charter implements the recent proposed amendments of the
Code on Corporate Governance Practices in the Listing Rules,
which will become effective in April 2012. The amended Charter
can be browsed on our website at www.chinatelecom-h.com.
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Attendance rates of individual members of the Nomination Committee in 2011 (including attendance by written proxies)
Number of Directors
Percentage of Independent Non-executive Directors of the Committee
4
100%
Directors
Wu Jichuan (Chairman of the Committee)
Cha May Lung, Laura
Tse Hau Yin, Aloysius
Xu Erming
The Fourth Session of
the Nomination Committee
Number of Attendance/
Meeting
Attendance Rate
1/1
1/1
1/1
1/1
100%
100%
100%
100%
Supervisory Committee
The Company’s Supervisory Committee comprises six
Supervisors, of which there is an External Independent
Supervisor and an Employee Representative Supervisor. On 20
May 2011, the third session of the Supervisory Committee ended
and the Supervisors of the third session of the Supervisory
Committee, namely Mr. Miao Jianhua, Madam Zhu Lihao, Mr. Xu
Cailiao and Madam Han Fang were re-appointed for the fourth
session of the Supervisory Committee of the Company and this
has been approved at the Annual General Meeting held on 20
May 2011. On the same day, Mr. Du Zuguo’s appointment as the
Supervisor of the fourth session of the Supervisory Committee
from 20 May 2011 has been approved at the Annual General
Meeting. Through the election of the Employees’ Representative
Congress, Mr. Mao Shejun has been elected as an Employee
Representative Supervisor of the fourth session of the
Supervisory Committee and Mr. Ma Yuzhu resigned as Supervisor
of the Company. Mr. Miao Jianhua was elected as the chairman
of the fourth session of the Supervisory Committee on the first
Supervisory Committee meeting held on 18 August 2011.
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 2011
The Third/Fourth Session of the Supervisory Committee
Number of Supervisors (Third/Fourth Session)
Number of meetings in 2011
Supervisors
Miao Jianhua (Chairman of the Committee)
Zhu Lihao (Independent Supervisor)
Ma Yuzhu (Employee Representative Supervisor of the third session of
the Supervisory Committee)
Mao Shejun (Employee Representative Supervisor of the fourth session of
the Supervisory Committee)
Xu Cailiao
Han Fang
Du Zuguo (Supervisor of the fourth session of the Supervisory Committee)
5/6
2
Number of Attendance/
Meetings
Attendance Rate
2/2
2/2
1/1
1/1
2/2
2/2
1/1
100%
100%
100%
100%
100%
100%
100%
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External Auditors
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 did not contravene 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 2011 is as follows:
Service item
Audit services
Non-audit services (mainly include internal control advisory and other advisory services)
Total
Fee
(RMB in millions)
68.00
3.91
71.91
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 Company for 2012,
and the proposal will be submitted for approval at the 2011
Annual General Meeting.
Internal Control
Internal Control System
The Board attaches great importance to the construction and
perfection of the internal control system, and takes effective
approaches to supervise the implementation of related
control measures, whilst enhancing operation efficiency and
effectiveness, and enhancing corporate governance, risk
assessment, risk management and internal control so as to
protect shareholders’ investment and ensure the safety of
the Company’s assets. 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 services and transactions of the
Company. The Company has formulated a code of conduct for
the senior management and employees which ensures their
ethical value and competency. The Company has formulated
its internal reporting system, which encourages anonymous
reporting of situations where employees, especially Directors
and senior management personnel, breach the rules.
Since the year 2003, based on the requirements of the U.S.
securities regulatory authorities and the COSO Internal Control
Framework, and with the assistance of KPMG Advisory (China)
Limited (Beijing office) and other advisory institutions, the
Company has formulated manuals, implementation rules and
related rules in relation to internal control, and has developed
the Policies on Internal Control Management and Internal
Control Accountability Management to ensure the effective
implementation of the above systems. Over more than eight
years, the Company has continuously revised and improved
the manuals and implementation rules in view of the ever
changing internal and external operation environment as well
as the requirements of business development. In particular, the
Company has further strengthened the control over key business
processes based on the distinguishing features of mobile
services since the commencement of the full services operation.
While continuing to improve the internal control related policies,
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.
In 2011, the Company supplemented, updated and improved
its internal control manuals on the basis of summing up the full
services operation practices, responding to the management
system renewal and organisational structure adjustment,
materialising the support to the front-end operation by finance
departments, and resolving problems detected in recent years.
The revised sections mainly included the amendments to the
internal control manual on content which are not applicable
to the existing business process; according to the need of
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Corporate Governance Report
business development, the Company has added the processes
of outsourcing management, operating data and financial data
reconciliation and client service management, etc., so as to
strengthen risk control on key areas. The applicability of internal
control manuals was further improved upon the perfection
of internal control procedures. In addition, the Company has
further strengthened the supervision and inspection of the
implementation of internal controls to promote the effectiveness
of implementation of internal control, as well as to prevent and
mitigate the financial risks.
Comprehensive Risk Management
The Company views comprehensive risk management as an
important task within the Company’s daily operation. Pursuant to
regulatory requirements in capital markets of the United States
and Hong Kong, the Company has formulated a unique five-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 refined the centralised 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 five years, China Telecom has
established a comprehensive risk management system and
has gradually perfected its comprehensive risk monitoring and
prevention mechanism.
In 2011, pursuant to the requirement of provision C2 of the
Code on Corporate Governance Practices of The Stock Exchange
of Hong Kong Limited, the Company further incorporated
comprehensive risk management into its daily operation. The
Company continued to strengthen the level-oriented, category-
oriented and centralised risk management, with resources
concentrated on the prevention of three types of major risk,
including the risk exposed in the external environment,
operational risk and asset risk, and has achieved satisfactory
results. In 2011, the Company was not confronted with any
major risks.
After rigorous risk identification, assessment and analysis,
the Company has conducted a preliminary assessment of
potential major risks to the Company in 2012, such as the
external environment risk and operational risk, and has put
forward detailed responding measures. Through the strict and
appropriate risk management procedures, the Company will
ensure 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 regulatory requirements
of its places of listing, including the United States and Hong
Kong, and strengthen its internal control while guarding against
operational risk, the Company’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 together with 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, evaluate the nature
of internal control deficiencies and reach a conclusion as to
the effectiveness of the internal control system. At the same
time, the Company rectifies any deficiencies found during the
assessment. By formulating “Interim Measures for the Internal
Control Assessment”, “Manual for the Self-Assessment of
Internal Control”, “Manual for the Independent Assessment
of Internal Control” and other documents, the Company has
ensured the assessment procedures are in compliance with
related rules and regulations.
In 2011, the Company’s internal audit department initiated and
coordinated the assessment of internal control at Company level,
and reported the results to the Audit Committee and the Board.
Self-assessment of internal control adopts a top-down approach
which reinforces assessment in respect of control points 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 2011, the Company, on
the basis of a comprehensive self-evaluation and by way of
encouraging active participation by the operational departments,
the supervision and control of the assessment process and the
monitoring and audit measures were reinforced, comprehensive
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monitoring control self-assessment was launched and self-
assessment covered 100% of the Company, which detected
and rectified the existing problems in time. At the same time,
in respect of significant areas of risk, the Company’s internal
audit department selected 69 key links covering its main
processes and organised independent assessment of the
internal controls of the Company’s ten provincial branches. It
kept track of the rectification of internal control deficiencies to
ensure its effectiveness. It organised specialised internal control
assessments for operating data and financial data reconciliation
to steer the Company towards further strengthening of its
standardised management in this regard. The above internal
control assessments were effective countermeasures against
risks to the Company and contributed to the perfection and
healthy development of the Company’s internal control system.
As for the independent assessment, the Company has put
forth the guiding principle that “independent assessment shall
focus on the major risks in relation to enterprise operation and
management and be based on complete internal control system,
so as to ensure that the nature of risks and problems will be
identified and captured, and to improve the overall efficiency
of auditing”, which has actively assisted all departments and
branches in raising the quality and efficiency of the independent
assessment since 2009. In 2011, in accordance with the
principle 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 during 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 independent
assessments and to incorporate 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 the internal control
assessment team and other relevant departments to closely
coordinate with the external auditors’ internal control audit
related to financial statements. The internal control 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 with the
management in respect of the audit results.
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 internal control audit) 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 its internal
control and successfully passed the year-end attestation
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 2011, 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-established
and effective. The annual review also considers the adequacy
of resources, qualifications and experience of staff fulfilling the
Company’s accounting and financial reporting functions, together
with the adequacy of the staff’s training programmes and the
relevant budget.
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
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2011 Annual Results Announcement on 20 March 2012
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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. The Company’s senior management presents
the annual results and interim results in Hong Kong every year.
Through various activities such as analyst meetings, press
conferences, global investor telephone conferences 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 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, operating expenses, EBITDA, net profit figures and
other key operational data, and the monthly announcements
of the number of access lines in service, mobile subscribers
(including 3G subscribers) and wireline broadband subscribers.
The Company attaches great importance to maintain daily
communication with shareholders, investors and analysts. In
2011, 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.
In 2011, the Company attended the following investors
conferences held by major international investment banks:
Date
January 2011
January 2011
January 2011
March 2011
April 2011
May 2011
May 2011
May 2011
May 2011
May 2011
May 2011
May 2011
May 2011
May 2011
May 2011
June 2011
June 2011
June 2011
June 2011
June 2011
June 2011
July 2011
July 2011
Name of Conference
Deutsche Bank Access China Conference 2011
UBS Greater China Conference 2011
DBS Vickers Pulse of Asia Conference 2011
Credit Suisse Asian Investment Conference 2011
Samsung Securities – Tablet & Smartphone Revolution Conference 2011
Jefferies Technology, Internet, Media & Telecom Conference 2011
Bank of New York Mellon/UBS Non-Deal Roadshow (US) 2011
Macquarie Great China Conference 2011
Morgan Stanley Hong Kong Investor Summit 2011
SWS Hong Kong Conference 2011
Daiwa Investment Conference 2011
DBS Vickers Corporate Access Day 2011
Goldman Sachs Telecom & Internet Corporate Day 2011
UBS Asian Telecom Conference 2011
CLSA China Investment Forum 2011
Nomura Asia Equity Forum 2011
J.P. Morgan 7th Annual China Conference 2011
RBS Non-Deal Roadshow (US) 2011
Daiwa Hong Kong China Investment Seminar 2011
J.P. Morgan’s 15th Annual Asia Pacific Equity Conference 2011
Credit Suisse China Investment Conference
Nomura Non-Deal Roadshow (Australia) 2011
RBS Hong Kong/China Investor Conference 2011
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
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Corporate Governance Report
Date
September 2011
September 2011
September 2011
September 2011
October 2011
October 2011
October 2011
November 2011
November 2011
November 2011
November 2011
November 2011
December 2011
Name of Conference
Mirae Asset Mobile Internet Access Day
Citigroup Greater China Mini Conference 2011
Daiwa Asian and Latin American ADR Conference 2011
CLSA Hong Kong Investors’ Forum 2011
BNP Paribas 18th Annual China Conference 2011
Citigroup Greater China Investor Conference 2011
Goldman Sachs-China Investment Frontier 2011
HSBC 3rd Annual Asia Investor Forum 2011
Barclays Capital Asia Investment Symposium 2011
Morgan Stanley Asia Pacific Investor Conference 2011
J.P. Morgan Asia Pacific TMT Conference 2011
Merrill Lynch China Investment Summit 2011
RBS 2nd Annual HK/China Access
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To access our mobile website, please
simply scan this QR code with your
smartphone right away.
Mobile version of the Company’s website (m.chinatelecom-h.com)
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
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Corporate Governance Report
The Company’s investor relations website (www.chinatelecom-h.com)
not only acts as an important channel for the Company to
disseminate press releases and corporate information to
investors and the capital market, but also plays a significant
role in the Company’s valuation and our compliance with
regulatory requirements for information disclosure. In 2011,
a number of new functions and contents were added to the
corporate website to further enhance the information disclosure
of the Company’s website to meet the international best
practices, including monthly net add of 3G subscribers and
quarterly key operational and financial interactive charts. In
addition, a mobile version of the Company’s website was also
launched, which allows the investors, shareholders, media and
the general public to easily browse the updated information
on the Company’s website through mobile devices at any
time and any place. The Company’s website not only won the
Gold Award for investor relations website in China, but also
the Gold Award in Asia Pacific in IR Global Rankings 2011,
indicating that the Company’s website is highly recognised by
professionals. The Company also took the initiative to actively
seek recommendations on how to improve the Company’s annual
report from shareholders through survey, and in accordance with
its shareholders’ recommendations prepared and distributed the
annual report in a more environmentally friendly and cost-saving
manner. The shareholders can ascertain their choice of receiving
the annual reports and communications by electronic means,
or receiving English version only, Chinese version only or both
English and Chinese versions.
The Company has always maintained a good information
disclosure mechanism. While keeping highly transparent
communications with media, analysts and investors, we
attach great importance to the handling of price sensitive
information. In general, the authorised speaker only makes
clarification and explanation on the data available on the
market, to avoid providing or divulging any unpublished price
sensitive information either by an individual or by a team. Before
conducting any external interview, if the authorised speaker has
any doubt about the data to be disclosed, he/she would seek
verification from the relevant person or the person-in-charge
of the relevant department, so as to determine if such data are
accurate. In addition, discussions on the Company’s principal
financial data or other financial indicators are avoided during the
black-out period.
Significant Differences Between the Corporate Governance
Practices followed by the Company and those followed by
NYSE-Listed U.S. Companies
The Company was established in the PRC and is currently listed
on The Stock Exchange of Hong Kong Limited and the New York
Stock Exchange (“NYSE”). As a foreign private issuer in respect
of its listing on the NYSE, the Company is not required to
comply with all 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
Stock Exchange of Hong Kong Limited, 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 12 Directors, of which 5 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 requirements of the Code on Corporate Governance Practices
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Corporate Governance Report
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 Stock Exchange of Hong
Kong Limited for the accounting year ended 31 December 2011.
Mechanism innovation of the Company
The Company has a long-term commitment towards solving
its mechanism impediments and defects in order to stimulate
business development through structure optimisation. In
2011, in order to make greater efforts to promote the rapid
development of its emerging services such as the mobile
Internet, the Company set up a Business Innovation Department
to take primary responsibility for coordinating and managing the
development of all the Group’s new services. Centred on Internet
application platforms, the new services perform intensified
operations mainly through the expansion of electronic channels
with the focus on mobile Internet value-added services. By
actively developing new service areas, new business models,
new channels and new mechanisms, the Company’s new
services achieved rapid growth, thus effectively pushing up
the Company’s overall revenue growth and promoting its
transformation.
In 2011, the Company further steered its emerging service
companies, including Besttone E-commerce Co., Ltd., E-Surfing
Pay Co., Ltd., and E-Surfing Media Co., Ltd., to establish
corporatised and specialised modes of operation and systems
of management. In 2011, E-Surfing Pay Co., Ltd. was granted
third-party payment licences by the People’s Bank of China for
mobile phone payments, payments for access lines in services
and bank card receipts.
In 2011, the Company has regulated and optimised the
organisational structure and operational mechanisms of all
county-level branches, clarified the position of county-level
branches’ sales services, publicised the production functions
and the capable managers, enriched the ranks of front-line sales
and marketing teams, which all further stimulated the vitality of
the county-level branches, and resolved the prominent problems
encountered during market development, such as shortage of
front-line employees, and the lack of relevant ability and drive of
these employees.
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, and improves the current
practices at the appropriate time; we strongly believe that by
adhering to good corporate governance principles, and improving
the transparency, independence and the establishment of the
effective accountability system, we can ensure the long-term
stable development of the Company and to seek sustainable
returns for the shareholders and investors.
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Delighting
customers every Day,
every moment
leaDinG services anD innOvative
prODucts by Our DeDicateD anD
JOyFul staFF
F
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Delighting
customers every Day,
every moment
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Human Resources Development Report
Summary
In 2011, our work on human resource management adhered
to the principle of developing and supporting our employees,
further deepened the transformation of human resources and
mechanism innovation while proactively devoted efforts to build
a team of talents. While adhering to the doctrine of people-
oriented strategy, the Company endeavoured to encourage
employees’ motivation for work, with an aim to ensure that solid
human resources are available to support the sound and rapid
development of the Company.
Firstly, we built a leadership team which is boldly innovative
and full of passion, possesses an awareness of openness
and cooperation and is able to adapt to the needs of the
mobile Internet era. We progressed the transition to a youthful
leadership team. With the implementation of performance
evaluation for all employees, we constantly improved on
the selection, assessment and evaluation processes for our
leadership staff. We strengthened our competitive recruitment
process while continuously optimising the leadership team
structure and stimulated the vitality of its members so as
to improve the degree of satisfaction on our selection and
appointment processes.
Secondly, we further deepened our human resource mechanism
innovation in order to resolve the problems faced by the
Company in this new development era. We established and
improved on the job benchmarking framework based on full
services operation so as to promote the adjustment and
optimisation of the Company’s position and personnel structure.
Each unit taking part in the transformation pilot re-assessed
Management, Finance and Administration
Sales and Marketing
Operations and Maintenance
Research and Development
Total
the value of the positions and determined their required
qualifications according to the new job benchmarking framework.
The units implemented a system of recruitment by competition
and assessment in order to ensure the correct match between
employees and positions.
Thirdly, we proactively built a high-skillset professional team
specialising in the mobile Internet domain. We formulated a plan
for building the team and formulated administrative measures for
such teams to further improve the mechanisms for the selection,
employment, motivation and cultivation of talented people.
We accelerated the recruitment of high-skillset professionals
such as those experienced in IP (IP technology-based network
personnel), IT/ICT (IT-based industry applications and enterprise
information technology personnel) and sales and marketing
personnel.
Fourthly, we adhered to the doctrine of people-oriented
strategy and cared for our employees. We established a sound
mechanism targeting different groups so that various categories
of employees were able to share in the achievements of the
Company’s development. We persisted in being frontline-oriented
and continued to improve the terms of employment for frontline
employees. Continuously improving their working conditions, we
helped employees solve their practical difficulties. Centred on
the “Production Safety Year” campaign, we further implemented
the accountability system for safety in production with focus on
identifying, eliminating and controlling hidden dangers in order
to ensure the safety of the Company’s working environment.
Employee Numbers
As at the end of 2011, the Group had 309,799 employees.
Numbers of employees working under each classification and
their respective proportions were as follows:
Number of
employees
49,455
159,374
98,801
2,169
309,799
Percentage
16.0%
51.4%
31.9%
0.7%
100%
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Mr. Wang Xiaochu, Chairman visited the frontline staff in
Qinghai
Mr. Yang Jie, President presented appreciation gifts to the
frontline staff
Corporate-Employee Relationship
Communication between Management and Employees
The Company strived to build harmonious labour relationships
by maintaining close contact with employees. The management
persisted in communication with the employees through various
methods and channels. The management regularly visited the
frontline employees to get first-hand information. Through a
variety of methods such as the “Mailbox of General Manager”,
the “Labour Union Chairman’s Mailbox”, “Face-to-Face with the
General Manager” and “Online Direct Train of Soul”, each level
of the Company listened to our employees’ views. Moreover, the
Company conscientiously carried out employee surveys on the
issues that employees are concerned about, analysed the key
problems, clarified and grasped their thoughts and ideas and
ensured that their demands were resolved in a reasonable and
timely manner.
Roles and Duties of Labour Unions
By persisting in the principle of “promoting both corporate
development and the employees’ growth” and following the
guideline of “focusing on the main goals of the Company, serving
the general interest, highlighting employee rights and enhancing
participation”, the labour unions played an important role in the
Company’s management, reform and full services operation. In
Mailbox of General Manager
Labour Union
Chairman’s Mailbox
Online Direct Train of Soul
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Human Resources Development Report
2011, the labour unions organised the “e-Surfing Flying” series
of skill competitions. At the provincial level, the labour unions
conducted more than 140 skill competitions with over one
million employees participating, which played an important role
in boosting the Company’s full services development.
organised the employees to participate in the decision-making
process on major employee-benefit matters and the formulation
of the relevant corporate rules and regulations of the Company.
As a result, the employee participation rate of congresses in
relation to employee-benefit matters has continuously increased.
According to the requirement of building a team of the “Four
First-Class” employees, namely employees with first-class
professionalism, first-class service skills, first-class work
style and first-class job performance, the labour unions of
the Company organised and conducted activities such as on-
the-job training, skills competitions and activities of building
learning teams to create a knowledge-sharing platform and to
summarise and promote excellent operating methods so as to
help employees improve their service skills. The labour unions
collected over 3,000 rationalisation proposals and adopted
nearly 1,000. Through on-the-job training, the Company not
only promoted the improvement of employees’ skills, but also
enhanced employees’ corporate identity.
Through democratic management systems, such as the
Employees’ Representative Congress, the labour unions
Coordination and Communication between the Company
and the Labour Unions
The Company continued to strengthen our efforts in caring
for our employees and promoting harmonious development,
reinforcing coordination and communication with the labour
unions. Through forming the Labour Emulation Committee, the
Company coordinated and communicated with the labour unions
in the organisation of activities such as skill competitions.
The Company deepened the implementation of the terms
of reference for the Employees’ Representative Congress of
the provincial branches, maximising the role of Employee
Representatives. Through the system of Joint Chairman of
Provincial Unions, the labour unions elected the Employee
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Group photo of the winners of the “e-Surfing Flying” customer service skills competition.
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Human Resources Development Report
Representative Supervisor to the Company’s Supervisory
Committee, reviewed and approved the Company’s annuity
plan and the supplementary provisions, thus safeguarding the
legitimate rights and interests of employees at the source.
The labour unions conducted collective negotiations with the
Company focusing on standardising the terms of employment
contracts, improving the effectiveness of collective contracts,
enhancing the system of Employees’ Representative Congress
and promoting employee participation in the Company’s
employee management and coordinating corporate-employee
relation. Moreover, the labour unions and the Company fully
leveraged on the Labour Disputes Mediation Committee to
enhance communication and coordination concerning labour
disputes and pragmatically promote the construction of the
labour rights protection mechanism.
Caring for Employees
In 2011, the Company comprehensively completed the
construction of the “Four Smalls”, namely small canteens, small
bathrooms, small activity rooms, and small washrooms at the
workplace to improve the working and living conditions of the
frontline units, easing the concerns that are most direct and
practical for frontline employees. By the end of 2011, 8,509
small canteens, 7,748 small bathrooms, 8,514 small activity
rooms and 10,589 small washrooms had been built; and another
1,320 small projects such as small flower gardens, small
vegetable gardens and small study rooms had been completed.
The Company at all levels and the labour unions vigorously
organised care delivery activities during the holidays, as well as
during critical production and operational periods and natural
disasters, comforting employees at the frontline of production.
During the New Year and Lunar New Year, the Company’s
leaders were organised into seven survey and visit units and
travelled to 11 provinces (including autonomous regions and
municipalities) such as Chongqing and Guizhou, and their
local branches, county-level and rural branches, visiting and
comforting employees in difficulties, employees at the frontline
of production, outstanding employees and retired employees.
Company-wide, we made a total of 177,000 visits to frontline
employees, employees in difficulties, employees affected by
disasters and model employees. We visited 10,991 frontline
production teams. All provincial branches established special
funds to provide timely assistance to employees in difficulty,
thus their most immediate difficulties and needs were effectively
tackled.
The Company organised various mass cultural and sports
activities with “Let’s go, I am healthy, I am happy” as the main
theme, satisfying cultural needs of employees. The Company
conducted China Telecom’s festival on the promotion of
exemplary employees through literary and artistic works and
contests to publicise exemplary employees through dances,
songs, comedies and other works, expanding the influence and
appeal of the exemplary employees among employees.
Strengthening Human Capital
Focusing on our strategic development priorities, the Company
continued to strengthen the development of talent teams and
actively promoted the improvement of the capability of our
operation managers, professionals and skilled personnel.
Developing Leadership Skills
Focusing on the two major themes of the “Three New Roles” (a
leader in intelligent pipelines, a provider of integrated platforms,
and a participant in content and application development) and
scale breakthroughs, the Company stepped up the training
for operation managers. In 2011, we organised one research
and study session for general managers at the provincial level,
four sessions for general managers of local branches, and two
sessions for deputy general managers at the provincial level.
A total of 550 mid-to-high level managers attended these
seminars. At the same time, the Company continued to organise
and perfect the advanced leadership courses and its rank of
instructions, driving the development of focused courses for
mid-to-high level leadership and instructor certification, while
promoting learning programmes such as “Transformation
Leadership” and “Strategy Decoding” to the local branches’
leadership teams. We continued to hold leadership training
courses for district and county-level chiefs and rural branch
Mr. Wang Xiaochu, Chairman delivered a lecture on
“Leadership” to the senior staff
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Human Resources Development Report
chiefs and to enhance leadership development for frontline
management personnel.
Cultivating Professional Talents
In 2011, an aggregate of 155 face-to-face professional training
courses were conducted for 7,750 professionals in aggregate.
Targeted at the establishment of teams of talents in the field of
network development and construction, we conducted courses
in areas of the introduction of “Cloud” computing technology
and “Cloud” computing product procurement management.
Targeted at establishing our industry applications sales and
marketing teams, we launched 13 training programmes,
including training courses for industry application development
experts for the government and enterprises channel. A total of
650 employees attended the training which basically covered
the core services in various key positions of industry application
sales and marketing in headquarters and provincial and local
branches. We held five overseas professional training courses
and organised 100 professionals from product development,
channel management, customer service, IT support and industry
applications development to attend training at renowned
international telecom companies. The Company made full use of
China Telecom E-University for distance training, seminars and
case knowledge sharing, which created an effective platform for
enhancing the Company’s professional capacities.
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Enhancing Employees’ Skills
We actively implemented the Company’s “Broadband China •
Fibre Cities” strategic plan. Focusing on building the capacity
of our Fibre-to-the-Home (FTTH) installation and maintenance
teams, we conducted 18 optical access network installation and
maintenance “train the trainer” courses for more than 910 in-
Staff actively participating in a business training course
house instructors. We also provided online “FTTH technology and
application” study courses through China Telecom E-University.
We started certification for FTTH network construction staff and
linked the outsourcing company qualification to the number of
qualified construction staff in their qualification management.
We set up a 172-member certification development team and
provincial in-house instructor teams, and organised instructors
to develop certification standards and training materials. As
at the end of 2011, the FTTH construction, installation and
maintenance certification system had been basically established,
and curriculum development and in-house instructor training
were largely in place.
Focusing on enhancing the selling and maintenance skills
for our frontline employees, we organised and conducted
skills certification for five types of positions, namely network
maintenance, government and enterprises, “Best Tone”, wireless
network optimisation and VIP customer service, involving 14
job benchmarks. A total of 35,338 employees in 39 batches
participated in the certification examinations. The training,
certifications and skill competition were combined together
to form synergic linkage effects. We organised about 20,000
“10000” call service officers and 10,000 VIP customer service
managers to participate in trainings as well as competitions. In
addition, 8,522 employees attended the VIP customer manager
(Grade 4) certification theory examination. There were also
competitions combining installation and maintenance with
access network maintenance skills. We developed a series of
training courses, which provided training to more than 70,000
employees.
As at the end of 2011, the Company had 628 senior technical
experts, 4,900 technical experts and 33,993 senior technicians.
12 of them were awarded the title of “National Technical Master
of China”, 81 people were honoured as “Technical Master of
China’s State-owned Enterprises”, and 127 people awarded the
title of “Technical Master of China Telecom”.
Remuneration and Performance Management
The salary of the Company’s employees comprises the base
salary and performance-based salary, taking into account
both short and medium-to-long term incentives. The Company
adheres to the principle that input in respect of personnel
costs must be consistent with efficient growth of financial
performance. By continually updating and optimising our method
of allocating personnel costs, we encourage our branches
to achieve cost-effective scale development. We explicitly
require our branches’ salary distribution to tilt towards frontline
employees and linking it to employees’ job performance to
stimulate their work enthusiasm for work. The Company’s
performance evaluation system, based on key performance
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
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Human Resources Development Report
indicators (KPI), is improving over time. With our corporate
strategy as the starting point, the various performance targets
are clear and specific and have been broken-down and applied
to each and every level of the Company to ensure that they
apply to individuals and all levels of the Company. Performance
evaluation achieves synergy when combined with employee
selection, education, appointment and retention, forming a
complete performance management system so that employees’
personal development aligns with the Company’s development.
According to the principles of “objective, fair, democratic, open,
and result-oriented”, the Company conducts open recruitment
and competitions for job vacancies. It has built-up post-centred
management with flexible promotions and demotions, and
flexible recruitment and dismissal for the scientific and rational
allocation of human resources.
Guaranteeing Employee Welfare
The Company strictly abides by the laws and regulations such
as the “Labour Law of the People’s Republic of China” and the
“Labour Contract Law of the People’s Republic of China” to
regulate its employment practices. The Company offers equality
of remuneration and work, implements special regulations
to protect female employees’ rights and interests with no
gender discrimination policies and regulation, and there are no
circumstance whereby child labour or forced labour is employed.
The Company has strengthened the training on knowledge
and capability for the Employee Assistance Programme (EAP)
and organised psychological health lectures and psychological
counselling to ease the pressure on the employees and increase
their capacities for self-adjustment.
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Staff participating in a maintenance skill competition
077
Mr. Ke Ruiwen, Executive Vice President, invigilated at the site of
leadership quality evaluation
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The Road of Responsibility
Model of Corporate Social Responsibility
As the main national telecommunications operator in China,
China Telecom has always adhered to its core philosophy of
“comprehensive innovation, pursuing truth and pragmatism,
respecting people and creating value together”. It operates its
business according to the law with integrity and perseveres
in scientific development. While conscientiously fulfilling its
responsibility to shareholders, rewarding them and maintaining
stable development, the Company has been active in fulfilling
its social responsibilities, serving its customers, caring for its
employees, protecting the environment and offering returns to
the society. The Company has integrated its corporate social
responsibilities into the provision of products and services and
associated its development with sustainable economic, social
and environmental development, aiming to promote harmony and
advancement of the society.
Operating with integrity and in compliance
with the law
The Company operates with integrity and in compliance with
relevant national laws and regulations, industry regulations,
social ethics and business ethics. We have established an all-
rounded and seamless compliance system featuring legal
education, industrial regulation compliance, internal audit and
control, anti-corruption and comprehensive risk management. We
have created a lasting, effective and standard communication
mechanism in order to enhance information disclosure and
increase company transparency. We have taken the initiative in
receiving government regulation and social supervision. In 2011,
we continued to strengthen system construction, supervision and
inspection, and made timely rectification when problems were
discovered.
Fulfilling our essential responsibilities as a
telecom operator
China Telecom regards the construction of a complete
and comprehensive basic networks, developing universal
telecommunications services, guaranteeing emergency
communications, maintaining information health and promoting
industrial development as our essential responsibilities.
Promoting the “Broadband China • Fibre Cities” project
A broadband network is an important foundation for economic
and social development. As an initiator and key player for
constructing China’s broadband network, China Telecom
launched its “Broadband China • Fibre Cities” project in February
2011 and plans to install optical fibres for all cities within three
years and increase users’ access bandwidths by more than ten
times in three to five years. By the end of the “Twelfth Five-
Year Plan” period, families and government and enterprises
customers in urban areas in the south will have full optical
network coverage, and access bandwidth will generally reach
more than 20Mbps for families in urban areas. Through unified
accounts, our customers will be able to log onto China Telecom’s
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wireline broadband, e-Surfing 3G network and WiFi network to
enjoy seamless broadband access services conveniently in all
areas.
In 2011, China Telecom continued to deepen its “fibre rollout”
project, accelerate progress with FTTH, and substantially
upgrade access bandwidths. By the end of the year, 70%
coverage of 20Mbps bandwidth access capability had been
achieved for broadband lines in urban areas of 20 provinces in
the south, an increase of 12 percentage points over the end of
2010.
Progressing the “Village-to-Village” Projects
It is a shared responsibility of all telecommunications operators
to bridge the digital divide between cities and the countryside
and to guarantee the rights to fundamental telecommunications
for all citizens. China Telecom continued the implementation of
the “Village-to-Village” projects to speed up the construction
of service outlets in rural areas and raise the standard
of informatisation for township governments, agricultural
enterprises and individual farmers. In 2011, the installation
of broadband lines in 10,500 administrative villages was
completed.
Rural residents use the broadband services provided by China
Telecom and enjoy an informatised lifestyle
Securing Emergency Communications
China Telecom is dedicated to securing smooth national
communications as a top priority. Facing natural disasters
such as snowstorms, earthquakes, floods and landslides,
China Telecom has fully leveraged its strengths in emergency
communications systems deployment and robust network
capabilities to conduct repairs, rescues and communication
services restoration, offering the earliest support for the nation
and the public while minimising damages. In 2011, there were
formidable tasks of flood control and drought relief. Attaching
equal importance to both prevention and protection, China
Telecom worked conscientiously in such areas as ideological
understanding, organisational systems, pre-arranged planning
measures, safety checks, team supplies and disaster reporting,
in order to guarantee smooth communications and the safety of
lives and property.
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Access lines disaster relief technicians urgently spliced optic
fibre cables
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Supporting Major Public Events
As the only full services global communication partner of
the 2011 Universiade in Shenzhen, China Telecom organised
a thousand technicians to build and open for traffic “three
major systems” for event scoring, event management and
event command, and “four specialised networks” namely the
competition, event management, security transmission, and
radio and television signal transmission networks, as well as IT
facilities in 56 venues, to ensure uninterrupted communication
services. Our work received high recognition from the Organising
Committee, athletes, media and other parties. We were awarded
the honours of “Advanced Unit” and “Innovative Business Award”
by the Universiade for communications support and service.
Promoting Healthy Information
China Telecom has been leading a “green” and healthy culture
on the Internet and mobile phones, actively guarding against
the online spread of unhealthy content while strongly promoting
those that facilitate the healthy and orderly development
of society. In 2011, China Telecom was actively involved in
carrying out civilised text messaging activities with the theme
of “cultivating self-discipline to be a cultured person” to guide
the public in creating or forwarding civilised text messages
and spread excellent culture. Through “e-Surfing Reading”, we
conducted “Reading for All” series of activities, including “digital
reading auditorium for all” and “teachers and students reading
the same good book”, to encourage a society where everyone
loves to read.
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China Telecom wholeheartedly provided services for Universiade
The Company’s management presented at Universiade
providing work guidance
As the only global communication partner of the 2011 Xi’an
International Horticultural Exposition, China Telecom fully
deployed a metropolitan optical network based on optical fibre
communication technology in the Expo park. With full e-Surfing
3G network plus WiFi coverage in hotspots, users were able
to enjoy everywhere and all-rounded seamless broadband
services. We provided nine main information application systems
including the intelligent master control system, command and
conferencing system and ticketing office building automation
system to ensure the successful hosting of the International
Horticultural Exposition and realised the information service
philosophy of “Broadband China, Optical Network Expo Park,
Technology Expo Park and Information Expo Park”.
Fulfilling the responsibility towards our
customers
Adhering to the operation philosophy of “pursuing the mutual
growth of corporate value and customer value” and the service
philosophy of “Customer First, Service Foremost” with customer
perception as a starting point, China Telecom continuously
enhanced its service quality and perfected the methods of
service to provide all our customers, whether individuals,
families, corporates, government or social undertakings, with
a high-quality and convenient information service and let the
customers fully enjoy a new informatisation lifestyle.
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Activities to implement the campaign to “serve the public
and achieve excellence in performance”
In 2011, China Telecom centrally conducted the campaign to
“serve the public and achieve excellence in performance”.
We actively enhanced the service capability of our customer
interface window, standardised our business counter service,
improved our electronic channel service, optimised our “10000”
service process and implemented our reward service. We provide
a meticulous and detailed broadband installation, removal
and maintenance service. In line with our goal of enabling our
broadband customers to enjoy anxiety-free usage, we refined
our broadband installation, removal and maintenance services,
actively explored solutions to any emerging customer service
issues after fibre rollout, and continuously improved the quality
of our broadband network and installation and maintenance
service capability in order to give them peace of mind when
installing, using, repairing and renewing our broadband services.
We broadly strengthened our capability to provide transparent
services to enable our customers to use our services with
confidence, paying close attention to the compliance rate for
basic services and standardising our CP/SP management to fulfil
our commitment to provide “single billing, clear consumption,
one-click access, convenient communication, one-stop service,
first inquiry responsibility, single-point queries, independent
subscription/termination, single reminder, and friendliness and
care”. Through conducting activities, China Telecom provided
our customers with service quality that is more satisfactory and
excellent, resulting in a higher rate of satisfaction for installation
and maintenance services and a lower rate of customer
complaints.
Provision of leading informatisation services for all
customers
China Telecom made full use of advanced communications
and information technology tools to work hand in hand with
our business partners to provide all categories of customers
with integrated information services, including mobile
communications, Internet access and applications, fixed-line
telephone, satellite communications and integrated information
services, such as ICT integration, to meet their informatisation
needs.
For industry and corporate customers, China Telecom focused on
their needs and continued to improve our integrated information
service capability to actively introduce new-generation IT
applications such as mobile Internet, “cloud” computing and the
Internet of Things, integrate informatisation and industrialisation
and promote the usage of informatisation applications of
various industries. In 2011, we focused on three major areas,
namely administrative supervision, society and livelihood, and
industries and enterprises, together with ten major industries,
namely e-office administration, urban management, public
security, industry and commerce, justice, environmental
protection, taxation, medical care, transport and logistics and
digital enterprises to further enhanced our professional service
capabilities. We created a batch of differentiated, integrated
products and integrated informatisation application solutions to
better meet our customers’ growing demand for informatisation,
including Mega-Eye, e-Surfing BlackBerry, e-Surfing Push to
Talk, encrypted communications, integrated office, cooperative
communications, sales manager, e-Surfing RFID and busy-shop
assistant.
For public customers, China Telecom relied on leading
broadband networks, 3G networks and WiFi hotspots to provide
an abundant wealth of information services such as those
for communications, lifestyle and entertainment. In 2011, by
upgrading broadband for homes, we enabled our household
customers to more fully experience different kinds of broadband-
based services. We set up the Business Innovation Department
to increase the support for eight major innovative service bases,
including e-Surfing Video, iMusic, e’game and e-Surfing apps
store, and strengthened our cooperation with business partners
to provide stylish 3G applications for individual customers so
that they can enjoy the wonderful world of mobile Internet.
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Corporate Social Responsibility Report
Fulfilling our responsibility towards our
employees
We consider our employees to be our most valuable resource.
China Telecom adheres to the principle of respecting people
and cherishes every employee. In accordance with relevant
state laws and regulations, we safeguard the interests of our
employees and focus on the establishment of harmonious
labour relations. We support labour unions in carrying out
their functions and encourage our employees to participate
in management and protect their right to be masters of their
own affairs. In 2011, we continued to carry out production
safety publicity, education and training to fully implement our
production safety accountability system and safety management
system to standardise production safety so as to create a
favourable safety environment. We actively conducted staff
training, expanded staff career development paths and further
improved working and living conditions in order to continue
strengthening the Company’s solidarity and cohesion.
Fulfilling our responsibility towards the
environment
China Telecom has established the concept of “Low-
Carbon Telecommunications and Environmentally Friendly
Development” and is committed to being an “Environmentally
Friendly Information Service Provider”. It is systematically
promoting energy saving and emission reduction in the areas
of procurement, operations, informatisation products and
community activities. In 2011, we further strengthened our three
main systems of organisational assurance, statistical monitoring,
Mr. Zhang Jiping, Executive Vice President presented awards to
the representatives of exemplary employees.
and assessment, rewards and punishments to synchronise our
planning and implementation of energy saving and emission
reduction with production management and investment activities.
Combined with the technological evolution of networks and
technological progress, we scale deployed more energy-efficient
technologies and equipments on a large scale to effectively
control the growth of energy consumption.
In 2011, China Telecom focused its efforts on constructing a
environmentally friendly procurement management system,
covering areas such as procurement management, supplier
management, logistics management and fundamental
management. It is making every effort to reduce energy
consumption and emissions during the full life cycle of materials
so as to create environmentally friendly supply chain that is
conducive to business, society and environment. We also further
reduced the energy consumption per unit of newly purchased
equipments.
China Telecom actively promoted network technological evolution
and technological innovation to speed up the retirement or
upgrading of old high-energy consumption and low-energy
efficiency equipment so as to lower energy consumption per
unit of network capacity. In 2011, we cleaned up and reduced
the capacity of idle TDM equipment. Combining with “cloud”
computing technology, we carried forward service platform
integration, and withdrew or consolidated inactive or light-
load service platforms, as well as replacing and retiring old IT
equipment. We also continued to promote the energy-saving
technological transformation of support facilities such as
equipment rooms, power supplies and air conditioning units.
China Telecom actively worked with the various
telecommunications operators on the collaborative construction
and sharing of network infrastructures in order to reduce the
construction of duplicated telecommunications infrastructures,
improve telecommunications infrastructure utilisation, protect
the natural environment and landscapes and reduce the
consumption of land, energy and raw materials.
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While promoting its environmentally friendly operation, China
Telecom continued to increase its efforts on promoting
environmental informatisation products such as Environmental
Protection e-Pass and video conferencing in 2011 to help our
customers’ energy saving and emission reduction efforts as well
as environmentally friendly development.
Contributing to Community Well-being
China Telecom was consciously involved in social welfare
undertakings. Through various forms of public service activities,
we supported the development of science and technology,
education, culture and sports undertakings, cared for vulnerable
groups in society and helped those in distress and poverty.
We advocated and encouraged our employees to foster the
volunteering spirit and participate in various forms of voluntary
service activities.
In 2011, several major natural disasters occurred throughout
China such as earthquakes at Yingjiang in Yunnan and Yadong in
Tibet as well as droughts and floods. China Telecom consciously
lent a helping hand to the disaster areas, and mobilised our
employees to donate money and materials to help solve the
practical problems of the people there. We organised “Twelfth
Five-Year Plan” activities for public welfare poverty alleviation
and aid for Tibet whereby China Telecom employees raised
funds by voluntary contributions. During the “Twelfth Five-
Year Plan” period, we specifically funded the “New Great Wall
• China Telecom Self-improvement Class for Senior High
School Students” and “Self-improvement University Students
in Extreme Poverty” programmes in Yanyuan and Muli, and the
“Care Package” programme for the primary school students in
Yanyuan, Muli and Bianba County. We also provided financial
assistance to poor university and high school students in Bianba
County and supplied rice for the prevention and treatment of
Kashin-Beck disease to children there.
In the future, in the process of deepening business
transformation, China Telecom will shoulder our own
responsibilities and responsibilities towards our shareholders,
customers, employees, environment and public welfare in a
coordinated manner. We will continue to foster our strengths
as a large-scale telecommunications company and integrated
information services provider to achieve continuous and stable
development so as to make due contributions to various
customers’ lives and undertakings, industrialisation and
informatisation integration, and the construction and harmonious
development of a resource-efficient and environment-friendly
society!
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tO create Greater value FOr Our
custOmers anD sharehOlDers
Flying-off
to a bright Future
Flying-off
to a bright Future
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Financial Statements
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 financial statements of China Telecom Corporation Limited (“the Company”) and its subsidiaries (together “the
Group”) set out on pages 88 to 146, which comprise the consolidated and company statements of financial position as at 31 December 2011, and
the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash
flows for the year then ended, and a summary of significant accounting policies and other explanatory information.
Directors’ responsibility for the consolidated financial statements
The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view 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, and for such internal control as the directors determine is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial 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 Certified Public Accountants.
Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.
The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation of the consolidated financial statements that give a true and fair view 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 consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31
December 2011 and of the Group’s profit and cash flows 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
Certified Public Accountants
8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong
20 March 2012
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Consolidated Statement of Financial Position
at 31 December 2011 (Amounts in millions)
31 December
2011
RMB
Note
31 December
2010
RMB
(restated)
1 January
2010
RMB
(restated)
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 finance lease obligations
Current portion of deferred revenues
Total current liabilities
Net current liabilities
Total assets less current liabilities
4
5
6
7
9
10
11
19
12
13
14
15
16
16
17
18
19
268,877
18,448
26,280
29,918
7,715
985
648
3,068
3,600
359,539
4,840
2,425
18,471
4,664
1,804
27,372
59,576
272,478
14,445
27,078
29,920
9,968
1,123
854
5,022
4,396
365,284
3,170
1,882
17,328
5,073
1,968
25,824
55,245
283,550
11,567
27,790
29,922
12,311
997
722
6,839
5,322
379,020
2,628
1,714
17,438
3,910
442
34,804
60,936
419,115
420,529
439,956
9,187
11,766
44,358
59,372
482
–
2,093
127,258
(67,682)
291,857
20,675
10,352
40,039
52,885
327
–
2,645
126,923
(71,678)
293,606
51,650
1,487
34,321
52,193
395
18
3,417
143,481
(82,545)
296,475
The notes on pages 96 to 146 form part of these financial statements.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Consolidated Statement of Financial Position
at 31 December 2011 (Amounts in millions)
Non-current liabilities
Long-term debt
Deferred revenues
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Equity
Share capital
Reserves
Note
16
19
11
20
21
Total equity attributable to equity holders of the Company
Non-controlling interests
Total equity
Total liabilities and equity
Approved and authorised for issue by the Board of Directors on 20 March 2012.
31 December
2011
RMB
31,150
2,712
1,117
34,979
31 December
2010
RMB
(restated)
42,549
3,558
1,375
47,482
1 January
2010
RMB
(restated)
52,768
5,045
1,510
59,323
162,237
174,405
202,804
80,932
175,158
256,090
788
256,878
419,115
80,932
164,696
245,628
496
246,124
420,529
80,932
155,372
236,304
848
237,152
439,956
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Wang Xiaochu
Chairman
and
Chief Executive Officer
Yang Jie
Executive Director,
President
and
Chief Operating Officer
Wu Andi
Executive Director,
Executive Vice President
and
Chief Financial Officer
089
The notes on pages 96 to 146 form part of these financial statements.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Statement of Financial Position
at 31 December 2011 (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
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Total current assets
Total assets
090
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 finance lease obligations
Current portion of deferred revenues
Total current liabilities
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Long-term debt
Deferred revenues
Deferred tax liabilities
Total non-current liabilities
Total liabilities
The notes on pages 96 to 146 form part of these financial statements.
31 December
2011
RMB
Note
31 December
2010
RMB
(restated)
1 January
2010
RMB
(restated)
4
5
6
7
8
9
10
11
19
12
13
14
15
16
16
17
18
19
16
19
11
266,848
18,174
26,262
29,877
7,534
6,178
619
644
2,945
3,546
362,627
2,364
2,375
17,114
4,172
375
19,905
46,305
271,077
14,243
27,072
29,877
9,852
5,272
777
849
4,923
4,367
368,309
2,000
1,878
15,923
4,720
373
19,939
44,833
280,851
11,475
27,691
29,877
12,201
8,555
736
148
6,771
5,272
383,577
1,739
1,711
16,230
3,805
135
27,526
51,146
408,932
413,142
434,723
9,187
11,766
40,523
57,363
353
–
2,091
121,283
(74,978)
287,649
31,150
2,712
1,002
34,864
20,675
10,352
37,620
51,225
198
–
2,645
122,715
(77,882)
290,427
42,549
3,558
1,276
47,383
51,650
1,487
32,183
52,713
215
18
3,412
141,678
(90,532)
293,045
52,768
5,045
1,398
59,211
156,147
170,098
200,889
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Statement of Financial Position
at 31 December 2011 (Amounts in millions)
Equity
Share capital
Reserves
Total equity
Total liabilities and equity
Note
20
21
31 December
2011
RMB
80,932
171,853
252,785
408,932
31 December
2010
RMB
(restated)
80,932
162,112
243,044
413,142
1 January
2010
RMB
(restated)
80,932
152,902
233,834
434,723
Approved and authorised for issue by the Board of Directors on 20 March 2012.
Wang Xiaochu
Chairman
and
Chief Executive Officer
Yang Jie
Executive Director,
President
and
Chief Operating Officer
Wu Andi
Executive Director,
Executive Vice President
and
Chief Financial Officer
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The notes on pages 96 to 146 form part of these financial statements.
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2011 (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
Total operating expenses
Operating profit
Net finance costs
Investment income
Share of profits of associates
Profit before taxation
Income tax
Profit for the year
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Other comprehensive income 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 financial statements of subsidiaries
outside mainland China
092
Share of other comprehensive income from associates
Other comprehensive income for the year, net of tax
Note
22
23
24
25
26
27
2011
RMB
245,041
(51,224)
(52,912)
(48,741)
(39,167)
(28,868)
2010
RMB
(restated)
219,864
(52,215)
(47,432)
(42,130)
(35,529)
(19,106)
(220,912)
(196,412)
24,129
(2,254)
40
99
22,014
(5,416)
16,598
(205)
51
(103)
–
(257)
23,452
(3,600)
328
131
20,311
(4,846)
15,465
132
(48)
(48)
(25)
11
Total comprehensive income for the year
16,341
15,476
Profit attributable to:
Equity holders of the Company
Non-controlling interests
Profit for the year
Total comprehensive income attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income for the year
Basic earnings per share
Number of shares (in millions)
16,502
96
16,598
16,245
96
16,341
0.20
80,932
15,347
118
15,465
15,358
118
15,476
0.19
80,932
32
32
The notes on pages 96 to 146 form part of these financial statements.
Consolidated Statement of Changes in Equity
for the year ended 31 December 2011 (Amounts in millions)
Attributable to equity holders of the Company
Note
Share
capital
RMB
Capital
reserve
RMB
Share
premium
RMB
Re-
valuation
reserve
RMB
Statutory
reserves
RMB
Other
reserves
RMB
Exchange
reserve
RMB
Retained
earnings
RMB
Non-
controlling
interests
RMB
Total
RMB
Total
equity
RMB
Balance as at 1 January 2010,
as previously reported
Change in accounting policy
Balance as at 1 January 2010,
as restated
Profit for the year, as restated
Other comprehensive income
Total comprehensive income,
as restated
Distributions to non-controlling interests
Acquisition of non-controlling interests
Disposal of a subsidiary
Dividends
Appropriations
Balance as at 31 December 2010,
as restated
Profit for the year
Other comprehensive income
Total comprehensive income
Distributions to non-controlling interests
Acquisition of non-controlling interests
Acquisition of the Fifth Acquired Group
Acquisition of a subsidiary
Disposal of a subsidiary
Dividends
Appropriations
80,932
–
(2,804)
19,571
10,746
–
10,863
(10,863)
60,606
–
2,907
(2,525)
3
80,932
–
–
16,767
–
–
10,746
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
80,932
16,767
10,746
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
31
21
1
31
21
60,606
–
–
–
–
–
–
–
2,028
62,634
–
–
–
–
–
–
–
–
–
1,682
382
–
59
59
–
(3)
–
–
–
438
–
(154)
(154)
–
(1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(667)
–
(667)
–
(48)
59,149
8,389
221,732
14,572
881
(33)
222,613
14,539
67,538
15,347
–
236,304
15,347
11
848
118
–
237,152
15,465
11
(48)
15,347
15,358
–
–
–
(6,031)
(2,028)
–
(3)
–
(6,031)
–
118
(110)
(41)
(319)
–
–
15,476
(110)
(44)
(319)
(6,031)
–
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093
74,826
245,628
496
246,124
16,502
–
16,502
(257)
16,502
16,245
–
–
(19)
–
–
(5,763)
(1,682)
–
(1)
(19)
–
–
(5,763)
–
96
–
96
(57)
(1)
–
264
(10)
–
–
16,598
(257)
16,341
(57)
(2)
(19)
264
(10)
(5,763)
–
–
–
–
–
–
(715)
–
(103)
(103)
–
–
–
–
–
–
–
64,316
283
(818)
83,864
256,090
788
256,878
Balance as at 31 December 2011
80,932
16,767
10,746
The notes on pages 96 to 146 form part of these financial statements.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Note
(a)
1
1
2011
RMB
73,006
(48,495)
(6)
(60)
3,234
487
1,040
10
(1,804)
1,968
–
(11)
(43,637)
–
23,876
(45,329)
(6,174)
–
(1)
(27)
(65)
(27,720)
1,649
25,824
(101)
27,372
2010
RMB
(restated)
75,571
(41,597)
(41)
(111)
2,738
176
1
–
(1,968)
442
(5,374)
–
(45,734)
(18)
53,518
(86,001)
(5,608)
(535)
(27)
–
(100)
(38,771)
(8,934)
34,804
(46)
25,824
Consolidated Statement of Cash Flows
for the year ended 31 December 2011 (Amounts in millions)
Net cash from operating activities
Cash flows used in 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
Proceeds from return 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
Payment for acquisition of a subsidiary
Net cash used in investing activities
Cash flows used in financing activities
Principal element of finance lease payments
Proceeds from bank and other loans
Repayment of bank and other loans
Payment of dividends
Distribution to China Telecommunications Corporation in connection with
the Fourth Acquisition
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Payment for acquisition of non-controlling interests
Payment for the acquisition price of the Fifth Acquisition
Net cash distributions to non-controlling interests
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Effect of changes in foreign exchange rate
Cash and cash equivalents at 31 December
The notes on pages 96 to 146 form part of these financial statements.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Consolidated Statement of Cash Flows
for the year ended 31 December 2011 (Amounts in millions)
(a) Reconciliation of profit before taxation to net cash from operating activities
Profit before taxation
Adjustments for:
Depreciation and amortisation
Impairment losses on property, plant and equipment
Impairment losses for doubtful debts
Write down of inventories
Investment income
Share of profits of associates
Interest income
Interest expense
Unrealised foreign exchange (gain)/loss
Gain on retirement and disposal of property, plant and equipment
Operating profit before changes in working capital
Increase in accounts receivable
Increase 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
Net cash from operating activities
2011
RMB
22,014
51,224
–
1,367
96
(40)
(99)
(405)
2,710
(51)
(2,436)
74,380
(2,546)
(1,764)
(3,018)
795
6,324
6,943
(1,398)
79,716
396
(3,084)
42
(4,064)
73,006
2010
RMB
(restated)
20,311
52,215
139
1,593
87
(328)
(131)
(287)
3,795
92
(430)
77,056
(1,475)
(629)
(1,203)
928
4,120
6,003
(2,259)
82,541
292
(3,824)
10
(3,448)
75,571
The notes on pages 96 to 146 form part of these financial statements.
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
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096
Notes to the Financial Statements
For the year ended 31 December 2011
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 and Xinjiang Uygur Autonomous Region of the People’s Republic of China (the “PRC”). Following
the acquisition of Code Division Multiple Access (“CDMA”) mobile telecommunications business in October 2008, the Group also provides
mobile telecommunications and related services in the mainland China and Macau Special Administrative Region (“Macau”) of the PRC. The
Group also provides leased line and other related services in certain countries of the Asia Pacific, South America and North America regions.
The operations of the Group in the mainland China are subject to the supervision and regulation by the PRC government. The Ministry
of Industry and Information Technology of the PRC (the “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
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.
On 31 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 (hereinafter, referred to as the “First Acquisition”).
On 30 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 (hereinafter, referred to as the “Second Acquisition”).
On 30 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”).
On 30 June 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”).
As at 31 December 2009, the purchase price of the above acquisitions was fully settled.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
1. PRINCIPAL ACTIVITIES, ORGANISATION AND BASIS OF PRESENTATION (continued)
Organisation (continued)
On 1 August 2011 and 1 December 2011, the subsidiaries of the Company, E-surfing Pay Co., Ltd and E-surfing Media Co., Ltd., acquired
the e-commerce business and video media business (collectively the “Fifth Acquired Group”) from China Telecommunications Corporation
and its subsidiaries for a total purchase price of RMB61 million (hereinafter, referred to as the “Fifth Acquisition”). The purchase price has
not been fully settled at the end of the reporting period.
Hereinafter, the First Acquired Group, the Second Acquired Group, the Third Acquired Group, the Fourth Acquired Company and the Fifth
Acquired Group 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 acquisitions of the Acquired Groups 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 financial statements of the Group prior to
the acquisitions are combined with the financial statements of the Acquired Groups. The considerations for the acquisition of these entities
are accounted for as an equity transaction in the consolidated statements 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.
2. SIGNIFICANT 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 financial statements are prepared on the historical cost basis as modified by the revaluation of certain available-for-sale equity
securities (Note 2(m)). The accounting policies described below have been consistently applied by the Group, except those disclosed
in Note 3.
The preparation of 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 management
believes are 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 may differ from those estimates.
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097
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
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098
Notes to the Financial Statements
For the year ended 31 December 2011
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
(a) Basis of preparation (continued)
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 significant effect on the financial statements and major
sources of estimation uncertainty are discussed 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 financial and operating policies of an entity so as to obtain benefits from its activities.
The financial results of subsidiaries are included in the consolidated financial statements from the date that control commences
until the date that control ceases, and the profit attributable to non-controlling interests is separately presented on the face of the
consolidated statement of comprehensive income as an allocation of the profit or loss for the year between the non-controlling
interests and the equity holders of the Company. Non-controlling interests represent the equity in subsidiaries not attributable directly
or indirectly to the Company. For each business combination, the Group measures the non-controlling interests at fair value of the
subsidiary’s net identifiable assets. Non-controlling interests at the end of the reporting period are presented in the consolidated
statement of financial position within equity and consolidated statement of changes in equity, separately from the equity of the
Company’s equity holders. Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for
as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated
equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognised. When
the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain
or loss being recognised in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognised
at fair value and this amount is regarded as the fair value on initial recognition of a financial asset or, when appropriate, the cost on
initial recognition of an investment in an associate or jointly controlled entity.
An associate is an entity, not being a subsidiary, in which the Group exercises significant influence, but not control, over its
management. Significant influence is the power to participate in the financial 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 financial statements under the equity method and is initially
recorded at cost, adjusted for any excess of the Group’s share of the acquisition-date fair values of the investee’s net identifiable
assets over the cost of the investment (if any). Thereafter, the investment is adjusted for the Group’s equity share of the post-
acquisition changes in the associate’s net assets. When the Group ceases to have significant influence over an associate, it is
accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognised in profit or loss. Any
interest retained in that former investee at the date when significant influence is lost is recognised at fair value and this amount is
regarded as the fair value on initial recognition of a financial asset.
All significant intercompany balances and transactions and 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.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Translation of foreign currencies
The accompanying consolidated financial statements are presented in Renminbi (“RMB”). The functional currency of the Company
and its subsidiaries in mainland China is RMB. The functional currency of CT (HK), CT Americas, China Telecom (Macau) Company
Limited (“CT Macau”), China Telecom (Singapore) Pte. Limited (“CT Singapore”) and China Telecom (Australia) Pty Ltd (“CT Australia”)
is Hong Kong dollars (HK$), US dollars (US$), Macau Pataca (MOP), Singapore dollars (S$) and Australia dollars (AUD), 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 profit or
loss. For the periods presented, no exchange differences were capitalised.
When preparing the Group’s consolidated financial statements, the results of operations of CT (HK), CT Americas, CT Macau, CT
Singapore and CT Australia are translated into RMB at average rate prevailing during the year. Assets and liabilities of CT (HK), CT
Americas, CT Macau, CT Singapore and CT Australia are translated into RMB 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
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Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost using the effective interest
method, less allowance for doubtful debts (Note 2(o)) unless the effect of discounting would be immaterial, in which case they are
stated at cost.
099
(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 specific identification 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, the estimated costs to make the sale and the related
tax expenses.
(g) Property, plant and equipment
Property, plant and equipment are 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 benefits 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.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) Property, plant and equipment (continued)
Assets acquired under leasing agreements which effectively transfer substantially all the risks and benefits incidental to ownership
from the lessor to the lessee are classified as assets under finance leases. Assets held under finance 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 finance lease obligation. Assets held under finance leases are amortised over their
estimated useful lives on a straight-line basis. As at 31 December 2011, the carrying amount of assets held under finance leases
was RMB76 million (2010: RMB64 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 profit or loss on the
date of disposal.
Depreciation is provided to write off the cost 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, fixture, motor vehicles and other equipment
Depreciable lives
primarily range from
8 to 30 years
6 to 10 years
5 to 10 years
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Where parts of an item of property, plant and equipment have different useful lives, the cost 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 or deemed cost and then charged to
profit 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 charge, 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.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
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Notes to the Financial Statements
For the year ended 31 December 2011
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
(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
business (as defined in Note 6) 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 profit or loss on disposal.
(k)
Intangible assets
The Group’s intangible assets comprise computer software and customer relationships acquired in the CDMA business (as defined in
Note 6) 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 five years.
The customer relationships acquired in the CDMA business acquisition are recorded at the acquisition-date fair value and amortised
on a straight-line basis over the expected customer relationship of five years.
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(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 profit 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 profit or loss in
equal installments over the accounting periods covered by the lease term, except where an alternative basis is more representative
of the pattern of benefits 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 profit or loss in the accounting period in which
they are incurred.
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
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Notes to the Financial Statements
For the year ended 31 December 2011
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
(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. Objective evidence of impairment includes observable data that comes to
the attention of the Group about one or more of the following loss events:
–
–
–
–
significant financial difficulty of the debtor;
a breach of contract, such as a default or delinquency in interest or principal payments;
it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;
significant changes in the technological, market, economic or legal environment that have an adverse effect on the
debtor; and
–
a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
If such evidence exists, the impairment loss is measured as the difference between the asset’s carrying amount and the
estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of
discounting is material, and is recognised as an expense in profit or loss. Impairment losses for trade and other receivables
are reversed through profit or loss if in a subsequent period the amount of the impairment losses decreases. Impairment
losses for equity securities are not reversed.
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(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 inflows independently (i.e. a cash-generating unit). In determining
the value in use, expected future cash flows generated by the assets are discounted to their present value using a pre-
tax discount rate that reflects current market assessments of time value of money and the risks specific 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.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
(o)
Impairment (continued)
(ii)
Impairment of long-lived assets (continued)
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 profit or loss. Impairment loss recognised in respect
of cash-generating units is allocated first 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.
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 and amortisation had the write-down
not occurred. For the years presented, no reversal of impairment loss was recognised in profit 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)
(ii)
Revenue derived from local, domestic long distance and international, Hong Kong, Macau and Taiwan long distance usage are
recognised as the services are provided.
Upfront fees received for activation of wireline services and wireline installation charges are deferred and recognised over the
expected customer relationship period. The direct costs associated with the installation of wireline services are deferred to the
extent of the installation fees and are amortised over the same expected customer relationship period.
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(iii) Monthly service fees are recognised in the month during which the services are provided to customers.
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(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 traffic processed.
(viii)
Lease income from operating leases is recognised over the term of the lease.
(ix)
(x)
Revenue derived from integrated information application services are recognised when the services are provided to
customers.
Sale of equipment is recognised on delivery of the equipment to customers and when the significant risks and rewards
of ownership and title have been transferred to the customers. Revenue from repair and maintenance of equipment is
recognised when the service is provided to customers.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
2. SIGNIFICANT 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 RMB27,498 million for the year ended 31
December 2011 (2010: RMB23,363 million).
(r) Net finance costs
Net finance 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 2011, research and development
expense was RMB558 million (2010: RMB540 million).
(t)
Employee benefits
The Group’s contributions to defined contribution retirement plans administered by the PRC government are recognised in profit 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 profit 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 profit 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 profit 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.
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
(w) Provisions and contingent liabilities
A provision is recognised in the consolidated statement of financial position when the Group has a legal or constructive obligation as
a result of a past event, and it is probable that an outflow of economic benefits 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 outflow of economic benefits will be required, or the amount cannot be estimated reliably, the
obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations,
whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as
contingent liabilities unless the probability of outflow of economic benefits is remote.
(x)
Income tax
Income tax for the year comprises current tax and movement in deferred tax assets and liabilities. Income tax is recognised in profit
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 financial 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 profit 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 benefit will be
realised.
(y) Dividends
Dividends are recognised as a liability in the period in which they are declared.
(z) Related parties
(a)
A person, or a close member of that person’s family, is related to the Group if that person:
(i)
has control or joint control over the Group;
(ii)
has significant influence over the Group; or
(iii)
is a member of the key management personnel of the Group or the Group’s parent.
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
(z) Related parties (continued)
(b)
An entity is related to the Group if any of the following conditions applies:
(i)
(ii)
The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow
subsidiary is related to the others);
The entity is an associate or joint venture of the Group (or an associate or joint venture of a member of a group of
which the Group is a member); or the Group is an associate or joint venture of the entity (or an associate or joint
venture of a member of a group of which the entity is a member);
(iii)
The entity and the Group are joint ventures of the same third party;
(iv)
The entity is a joint venture of a third entity and the Group is an associate of the third entity; or the Group is a joint
venture of a third entity and the entity is an associate of the third entity;
(v)
The entity is controlled or jointly controlled by a person identified in (a);
(vi)
A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel
of the entity (or of a parent of the entity).
Close members of the family of a person are those family members who may be expected to influence, or be influenced by,
that person in their dealings with the entity.
(aa) Segmental reporting
An operating segment is a component of an entity that engages in business activities from which revenues are earned and expenses
are incurred, and is identified on the basis of the internal financial reports that are regularly reviewed by the 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 one operating segment as the Group is only engaged in an integrated telecommunications business.
The location of the Group’s assets and operating revenues derived from activities outside mainland China are less than 1% of the
Group’s assets and operating revenues, respectively. No geographical area information has been presented as such amount is
immaterial. No single external customer accounts for 10 percent or more of the Group’s operating revenues.
3. CHANGES IN ACCOUNTING POLICIES
The IASB has issued a number of amendments to IFRSs and one new Interpretation that are effective for accounting period beginning on or
after 1 January 2011. Of these, the following developments are relevant to the Group’s financial statements:
•
•
IAS 24 (revised 2009), “Related Party Disclosures”
Improvements to IFRSs (2010)
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
3. CHANGES IN ACCOUNTING POLICIES (continued)
The Group has not yet applied any new and revised standard or interpretation that is not yet effective for the current accounting period (Note
40).
(i)
(ii)
IAS 24 (revised 2009), “Related Party Disclosures”
IAS 24 (revised 2009), “Related Party Disclosures” revises the definition of a related party. As a result, the Group has re-assessed the
identification of related parties and concluded that the revised definition does not have any material impact on the Group’s related
party disclosures in the current and previous periods. The revised standard also provides limited relief from disclosure of information
by government-related entities in respect of transactions with the government to which the Group is related or transactions with
other entities related to the same government. As such, the adoption of IAS 24 (revised 2009), “Related Party Disclosures” has
resulted in a change in the disclosures for the related party transactions with government-related entities in the financial statements.
Improvements to IFRSs (2010)
Improvements to IFRSs (2010) omnibus standard introduces an amendment to IFRS 1, “First-time adoption of International
Financial Reporting Standards”. In the amendment to IFRS 1, a first-time adopter of IFRSs is allowed to use an event-driven fair
value measurement as deemed cost for some or all of its assets and liabilities, even when the measurement date is after the IFRS
transition date, provided that the measurement date is during the period covered by the entity’s first IFRS financial statements. This
amendment can be adopted retrospectively by existing IFRS reporters at the latest in the annual period beginning on or after 1
January 2011.
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The accounting periods covered by the first IFRS financial statements of the Predecessor Operations, the First Acquired Group and
the Second Acquired Group are from 1 January 1999 to 31 December 2001, from 1 January 2001 to 30 June 2003 and from 1
January 2001 to 31 December 2003, respectively. During the Restructuring, the First Acquisition and the Second Acquisition, as
required by the applicable laws and regulations of the PRC, the Group’s financial statements prepared under Accounting Standards
for Business Enterprises and other relevant rules (collectively “PRC GAAP”), accounted for property, plant and equipment and lease
prepayments at deemed cost based on the valuations performed by China Enterprise Appraisals Co., Ltd. as at 31 December 2001,
31 December 2002 and 31 December 2003, respectively. As the valuations were performed as at a date later than the respective
dates of transition to IFRSs, the Group was not permitted at that time to adopt these valuations as deemed cost for the respective
IFRS financial statements and instead adopted the following IFRS accounting policies:
–
–
property, plant and equipment were recognised at carrying amounts determined in accordance with IAS 16 at the respective
dates of transition to IFRS and subsequently carried at revalued amount, being its fair value at the dates of revaluations; and
lease prepayments were recognised at historical cost and therefore, the related revaluation gains arising from the revaluation
in 2001, 2002 and 2003 as mentioned above were not recognised.
As a result of the amendment to IFRS 1, the Group has:
–
retrospectively adjusted the amounts reported for previous periods in the respective IFRS financial statements to be consistent
with the retrospective recognition of property, plant and equipment and lease prepayments acquired during the Restructuring,
the First Acquisition and the Second Acquisition at their deemed costs in the respective first IFRS financial statements based
on the results of valuations, with consequential adjustments for depreciation and amortisation charged in subsequent periods;
and
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
3. CHANGES IN ACCOUNTING POLICIES (continued)
(ii)
Improvements to IFRSs (2010) (continued)
–
changed its accounting policy for property, plant and equipment from the revaluation model to the cost model. The revaluation
surplus and deficit related to the revaluations performed in 2004 and 2007, has also been adjusted retrospectively. This
change is to align the Group’s accounting policy with industry peers to provide more relevant financial information to the users
of the Group’s consolidated financial statements and to eliminate the differences between the Group’s financial statements
under IFRS and those under PRC GAAP.
The following table summarises the retrospective adjustments that have been made in accordance with the amendment to IFRS 1 to
each of the line items in the financial statements:
Increase/(decrease) on items of consolidated statement of financial position
31 December 2010
RMB millions
1 January 2010
RMB millions
Assets
Property, plant and equipment
Lease prepayments
Deferred tax assets
Liabilities
Deferred tax liabilities
Equity
Capital reserves
Other reserves
Revaluation reserve
Retained earnings
Non-controlling interest
Increase/(decrease) on items of consolidated statement
of comprehensive income
Depreciation and amortisation
Network operations and support
Investment income
Income tax
Profit attributable to equity holders of the Company
Total comprehensive income
Basic earnings per share for profit attributable to equity holders of the Company
(2,770)
21,701
(5,757)
(2,778)
22,273
(6,059)
(986)
(1,103)
19,571
(2,475)
(10,339)
7,403
–
19,571
(2,525)
(10,863)
8,389
(33)
2011
RMB millions
2010
RMB millions
498
30
–
(133)
(395)
(395)
(0.01)
559
5
(33)
(185)
(412)
(412)
(0.01)
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
4. PROPERTY, PLANT AND EQUIPMENT, NET
The Group
Telecomm-
unications
network
plant and
equipment
RMB millions
Furniture,
fixture,
motor vehicles
and other
equipment
RMB millions
Buildings and
improvements
RMB millions
Total
RMB millions
87,178
(4,972)
82,206
186
2,560
(428)
(46)
84,478
49
213
1,768
(200)
1
622,138
(10,511)
611,627
1,055
33,427
(18,400)
(47)
627,662
370
1,058
39,221
(14,234)
124
22,230
3
22,233
722
1,420
(1,328)
93
23,140
20
1,045
1,241
(811)
(125)
731,546
(15,480)
716,066
1,963
37,407
(20,156)
–
735,280
439
2,316
42,230
(15,245)
–
Cost/Deemed cost:
Balance at 1 January 2010, as previously reported
Change in accounting policy
Balance at 1 January 2010, as restated
Additions
Transferred from construction in progress
Disposals, as restated
Reclassification
Balance at 31 December 2010, as restated
Additions through acquisition of a subsidiary
Additions
Transferred from construction in progress
Disposals
Reclassification
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Balance at 31 December 2011
86,309
654,201
24,510
765,020
Accumulated depreciation and impairment:
Balance at 1 January 2010, as previously reported
Change in accounting policy
Balance at 1 January 2010, as restated
Depreciation charge for the year, as restated
Provision for impairment
Written back on disposal, as restated
Reclassification
Balance at 31 December 2010, as restated
Additions through acquisition of a subsidiary
Depreciation charge for the year
Written back on disposal
Reclassification
109
(26,914)
898
(26,016)
(3,538)
(3)
341
42
(29,174)
(40)
(3,634)
154
(2)
(403,991)
11,783
(392,208)
(42,254)
(135)
16,208
50
(418,339)
(251)
(41,111)
13,019
(1)
(14,313)
21
(14,292)
(2,141)
(1)
1,237
(92)
(15,289)
(14)
(2,149)
685
3
(445,218)
12,702
(432,516)
(47,933)
(139)
17,786
–
(462,802)
(305)
(46,894)
13,858
–
Balance at 31 December 2011
(32,696)
(446,683)
(16,764)
(496,143)
Net book value at 31 December 2011
Net book value at 31 December 2010, as restated
Net book value at 1 January 2010, as restated
53,613
55,304
56,190
207,518
209,323
219,419
7,746
7,851
7,941
268,877
272,478
283,550
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字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
4. PROPERTY, PLANT AND EQUIPMENT, NET (continued)
The Company
Telecomm-
unications
network
plant and
equipment
RMB millions
Furniture,
fixture,
motor vehicles
and other
equipment
RMB millions
Buildings and
improvements
RMB millions
Total
RMB millions
86,281
(4,972)
81,309
659
2,518
(362)
(2)
84,122
128
1,683
(184)
1
618,072
(10,513)
607,559
1,936
33,335
(16,905)
24
625,949
859
39,064
(14,188)
124
21,412
3
21,415
693
1,387
(1,035)
(22)
22,438
740
1,171
(780)
(125)
725,765
(15,482)
710,283
3,288
37,240
(18,302)
–
732,509
1,727
41,918
(15,152)
–
Cost/Deemed cost:
Balance at 1 January 2010, as previously reported
Change in accounting policy
Balance at 1 January 2010, as restated
Additions
Transferred from construction in progress
Disposals, as restated
Reclassification
Balance at 31 December 2010, as restated
Additions
Transferred from construction in progress
Disposals
Reclassification
Balance at 31 December 2011
85,750
651,808
23,444
761,002
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Accumulated depreciation and impairment:
Balance at 1 January 2010, as previously reported
Change in accounting policy
Balance at 1 January 2010, as restated
Depreciation charge for the year, as restated
Provision for impairment
Written back on disposal, as restated
Reclassification
Balance at 31 December 2010, as restated
Depreciation charge for the year
Written back on disposal
Reclassification
Balance at 31 December 2011
Net book value at 31 December 2011
Net book value at 31 December 2010, as restated
Net book value at 1 January 2010, as restated
(26,535)
898
(25,637)
(3,471)
(3)
28
(2)
(29,085)
(3,574)
138
(2)
(401,723)
11,785
(389,938)
(41,927)
(135)
14,572
–
(417,428)
(40,973)
13,005
(1)
(13,879)
22
(13,857)
(2,018)
(1)
955
2
(14,919)
(2,000)
682
3
(442,137)
12,705
(429,432)
(47,416)
(139)
15,555
–
(461,432)
(46,547)
13,825
–
(32,523)
(445,397)
(16,234)
(494,154)
53,227
55,037
55,672
206,411
208,521
217,621
7,210
7,519
7,558
266,848
271,077
280,851
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字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
5. CONSTRUCTION IN PROGRESS
Balance at 1 January 2010
Additions
Transferred to property, plant and equipment
Transferred to intangible assets
Balance at 31 December 2010
Additions
Transferred to property, plant and equipment
Transferred to intangible assets
Balance at 31 December 2011
6. GOODWILL
The Group
RMB millions
The Company
RMB millions
11,567
41,386
(37,407)
(1,101)
14,445
47,442
(42,230)
(1,209)
18,448
11,475
41,102
(37,240)
(1,094)
14,243
47,020
(41,918)
(1,171)
18,174
Cost:
Goodwill arising from acquisition
of CDMA business
The Group
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
29,918
29,920
29,877
29,877
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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, which was fully settled as at 31 December 2010.
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.
111
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
telecommunications business.
For the purpose 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 telecommunications business. The recoverable amount of the Group’s
telecommunications business is estimated based on the value in use model, which considers the Group’s financial budgets covering a
five-year period and a pre-tax discount rate of 11.5% (2010: 11.2%). Cash flows beyond the five-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 financial information and operational data.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
7.
INTANGIBLE ASSETS
The Group
Cost:
Balance at 1 January 2010
Additions
Transferred from construction in progress
Disposals
Balance at 31 December 2010
Additions
Transferred from construction in progress
Disposals
Balance at 31 December 2011
Accumulated amortisation and impairment:
Balance at 1 January 2010
Amortisation charge for the year
Provision for impairment
Written back on disposal
Balance at 31 December 2010
Amortisation charge for the year
Provision for impairment
Written back on disposal
Balance at 31 December 2011
Net book value at 31 December 2011
Net book value at 31 December 2010
Computer
software
RMB millions
Customer
relationships
RMB millions
Total
RMB millions
7,587
119
1,101
(182)
8,625
199
1,209
(140)
9,893
(3,704)
(1,303)
(1)
171
(4,837)
(1,372)
(8)
107
(6,110)
3,783
3,788
11,238
–
–
–
11,238
–
–
–
11,238
(2,810)
(2,248)
–
–
(5,058)
(2,248)
–
–
(7,306)
3,932
6,180
18,825
119
1,101
(182)
19,863
199
1,209
(140)
21,131
(6,514)
(3,551)
(1)
171
(9,895)
(3,620)
(8)
107
(13,416)
7,715
9,968
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Notes to the Financial Statements
For the year ended 31 December 2011
7.
INTANGIBLE ASSETS (continued)
The Company
Cost:
Balance at 1 January 2010
Additions
Transferred from construction in progress
Disposals
Balance at 31 December 2010
Additions
Transferred from construction in progress
Disposals
Balance at 31 December 2011
Accumulated amortisation and impairment:
Balance at 1 January 2010
Amortisation charge for the year
Provision for impairment
Written back on disposal
Balance at 31 December 2010
Amortisation charge for the year
Provision for impairment
Written back on disposal
Balance at 31 December 2011
Net book value at 31 December 2011
Net book value at 31 December 2010
8.
INVESTMENTS IN SUBSIDIARIES
Unquoted investments, at cost
Computer
software
RMB millions
Customer
relationships
RMB millions
Total
RMB millions
7,320
82
1,094
(148)
8,348
101
1,171
(59)
9,561
(3,547)
(1,266)
(1)
138
(4,676)
(1,329)
(8)
54
(5,959)
3,602
3,672
11,238
–
–
–
11,238
–
–
–
11,238
(2,810)
(2,248)
–
–
(5,058)
(2,248)
–
–
(7,306)
3,932
6,180
18,558
82
1,094
(148)
19,586
101
1,171
(59)
20,799
(6,357)
(3,514)
(1)
138
(9,734)
(3,577)
(8)
54
(13,265)
7,534
9,852
The Company
2011
RMB millions
2010
RMB millions
6,178
5,272
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字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
8.
INVESTMENTS IN SUBSIDIARIES (continued)
Details of the Company’s principal subsidiaries at 31 December 2011 are as follows:
Name of Company
Type of legal entity
Date of incorporation
Place of incorporation
and operation
Registered/Issued
capital (in RMB millions
unless otherwise stated) Principal activities
Limited Company
15 October 2004
Macau Special
Administrative Region
of the PRC
MOP60 million Provision of telecommunications
services
China Telecom System
Limited Company
13 September 2001
PRC
Limited Company
25 February 2000
Limited Company
22 November 2001
Hong Kong Special
Administrative Region
of the PRC
The United States
of America
Limited Company
15 August 2007
PRC
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Integration Co., Limited
China Telecom (Hong Kong)
International Limited
China Telecom (Americas)
Corporation
China Telecom Best Tone
Information Service Co.,
Limited
China Telecom (Macau)
Company Limited
Tianyi Telecom Terminals
Company Limited
China Telecom (Singapore)
Pte. Limited
Besttone E-Commerce
Co., Ltd
Limited Company
1 July 2005
PRC
Limited Company
5 October 2006
Singapore
Limited Company
17 December 2010
PRC
E-surfing Pay Co., Ltd
Limited Company
3 March 2011
E-surfing Media Co., Ltd
Limited Company
11 March 2011
Limited Company
5 May 1984
PRC
PRC
PRC
Shenzhen Shekou
Telecommunications
Company Limited
China Telecom (Australia)
Pty Ltd
Limited Company
10 January 2011
Australia
392 Provision of system integration
and consulting services
HK$10,000 Provision of international
value-added network services
US$43 million Provision of telecommunications
services
350 Provision of Best Tone information
services
500 Sales of telecommunications
terminals
S$1 Provision of international
value-added network services
100 Provision of e-commerce and
booking services
300 Provision of e-commerce services
250 Provision of video media services
91 Provision of telecommunications
services
AUD1 Provision of international
value-added network services
Except for Shenzhen Shekou Telecommunications Company Limited which is 51% owned by the Company, all of the above subsidiaries are
directly or indirectly wholly-owned by the Company.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
9.
INTERESTS IN ASSOCIATES
Unlisted equity investments, at cost
Share of post-acquisition changes in net assets
The Group
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
233
752
985
385
738
1,123
619
–
619
777
–
777
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 financial condition or results of operations for all periods presented. Details of
the Group’s principal associate are as follows:
Name of company
Shanghai Information Investment
Incorporation
Attributable
equity interest Principal activities
24% Provision of information technology
consultancy services
The above associate is established in the PRC and is not traded on any stock exchange.
10. INVESTMENTS
Available-for-sale equity securities
Other unlisted equity investments
The Group
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
617
31
648
822
32
854
617
27
644
822
27
849
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.
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
11. DEFERRED TAX ASSETS AND LIABILITIES
The components of deferred tax assets and deferred tax liabilities recognised in the consolidated statement of financial position and
statement of financial position and the movements are as follows:
The Group
Assets
Liabilities
Net balance
31 December
31 December
1 January
31 December
31 December
1 January
31 December
31 December
1 January
2011
2010
2010
2011
2010
2010
2011
2010
2010
Note
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
(restated)
(restated)
(restated)
(restated)
(restated)
(restated)
Current
Provisions and impairment
losses, primarily for
doubtful debts
Non-current
Property, plant and equipment
Deferred revenues and
installations costs
Land use rights
Available-for-sale equity
securities
(i)
1,009
1,145
1,047
931
2,882
4,679
914
1,093
1,229
–
–
–
–
–
–
Deferred tax assets/(liabilities)
3,068
5,022
6,839
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
Note
(i)
–
(425)
(562)
–
–
(534)
(660)
–
(130)
(1,117)
(181)
(1,375)
–
1,009
1,047
931
(645)
(732)
–
(133)
(1,510)
720
352
–
(130)
1,951
2,348
4,034
433
–
(181)
3,647
497
–
(133)
5,329
Balance at
1 January
2010
RMB millions
(restated)
Recognised in
statement of
comprehensive
income
RMB millions
(restated)
Balance at
31 December
2010
RMB millions
(restated)
931
4,034
497
–
(133)
5,329
116
(1,686)
(64)
–
(48)
(1,682)
1,047
2,348
433
–
(181)
3,647
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
11. DEFERRED TAX ASSETS AND LIABILITIES (continued)
The Group (continued)
Balance at
1 January
2011
RMB millions
(restated)
Acquired
from the Fifth
Acquired Group
RMB millions
Note
Recognised in
statement of
comprehensive
income
RMB millions
Balance at
31 December
2011
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
(i)
Net deferred tax assets
The Company
1,047
2,348
433
–
(181)
3,647
–
5
–
–
–
5
(38)
(1,633)
(81)
–
51
(1,701)
1,009
720
352
–
(130)
1,951
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Assets
Liabilities
Net balance
31 December
31 December
1 January
31 December
31 December
1 January
31 December
31 December
1 January
2011
2010
2010
2011
2010
2010
2011
2010
2010
Note
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
(restated)
(restated)
(restated)
(restated)
(restated)
(restated)
Current
Provisions and impairment
losses, primarily for
doubtful debts
Non-current
Property, plant and equipment
Deferred revenues and
installations costs
Land use rights
Available-for-sale equity
securities
(i)
965
997
895
1,066
2,833
4,647
914
1,093
1,229
–
–
–
–
–
–
Deferred tax assets/(liabilities)
2,945
4,923
6,771
–
(401)
(562)
–
–
(526)
(660)
–
–
(639)
(732)
–
965
665
352
–
(39)
(1,002)
(90)
(1,276)
(27)
(1,398)
(39)
1,943
997
895
2,307
4,008
433
–
(90)
3,647
497
–
(27)
5,373
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
11. DEFERRED TAX ASSETS AND LIABILITIES (continued)
The Company (continued)
Balance at
1 January
2010
RMB millions
(restated)
Recognised in
statement of
comprehensive
income
RMB millions
(restated)
Balance at
31 December
2010
RMB millions
(restated)
895
4,008
497
–
(27)
5,373
102
(1,701)
(64)
–
(63)
(1,726)
997
2,307
433
–
(90)
3,647
Recognised in
statement of
comprehensive
income
RMB millions
Balance at
31 December
2011
RMB millions
Balance at
1 January
2011
RMB millions
(restated)
997
2,307
433
–
(90)
3,647
(32)
(1,642)
(81)
–
51
(1,704)
965
665
352
–
(39)
1,943
Note
(i)
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
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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
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. Prior to the adoption of the amendment to IFRS 1, the land use rights were not revalued for financial 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.
As a result of the adoption of amendment to IFRS 1 (Note 3), the revalued amounts of land use rights of the Predecessor Operations, the First Acquired Group
and the Second Acquired Group were adopted as deemed costs. Therefore, the tax bases and the amounts for financial reporting purpose of the land use rights
were the same, and accordingly the respective deferred tax assets were eliminated retrospectively.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
12. INVENTORIES
Inventories represent:
Materials and supplies
Goods for resale
13. ACCOUNTS RECEIVABLE, NET
Accounts receivable, net, are analysed as follows:
Note
(i)
Accounts receivable
Third parties
China Telecom Group
Other telecommunications operators
in the PRC
Subsidiaries
Less: Allowance for doubtful debts
Note:
The Group
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
970
3,870
4,840
874
2,296
3,170
951
1,413
2,364
861
1,139
2,000
The Group
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
18,040
1,803
570
–
20,413
(1,942)
18,471
17,466
1,182
704
–
19,352
(2,024)
17,328
16,680
1,358
554
395
18,987
(1,873)
17,114
16,398
565
692
223
17,878
(1,955)
15,923
(i)
China Telecommunications Corporation together with its subsidiaries other than the Group are referred to as “China Telecom Group”.
The following table summarises the changes in allowance for doubtful debts:
At beginning of year
Allowance for doubtful debts
Accounts receivable written off
At end of year
The Group
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
2,024
1,383
(1,465)
1,942
2,073
1,567
(1,616)
2,024
1,955
1,365
(1,447)
1,873
1,994
1,553
(1,592)
1,955
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
13. ACCOUNTS RECEIVABLE, NET (continued)
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 doubtful debts
The Group
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
10,872
2,120
1,444
432
14,868
(1,797)
13,071
10,769
2,049
1,384
495
14,697
(1,831)
12,866
10,767
2,054
1,435
431
14,687
(1,787)
12,900
10,665
2,033
1,374
492
14,564
(1,822)
12,742
Ageing analysis of accounts receivable from other telecommunications operators and enterprise customers is as follows:
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1 to 3 months
4 to 12 months
More than 12 months
120
Less: Allowance for doubtful debts
The Group
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
2,763
899
1,287
596
5,545
(145)
5,400
1,844
1,161
998
652
4,655
(193)
4,462
2,271
852
745
432
4,300
(86)
4,214
1,481
756
633
444
3,314
(133)
3,181
Ageing analysis of accounts receivable that are not impaired is as follows:
Not past due
Less than 1 month past due
1 to 3 months past due
Amounts past due
The Group
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
16,687
1,081
703
1,784
18,471
15,694
1,086
548
1,634
17,328
15,395
1,053
666
1,719
17,114
14,309
1,074
540
1,614
15,923
Amounts due from the provision of telecommunications services to customers are generally due within 30 days from the date of billing.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
14. PREPAYMENTS AND OTHER CURRENT ASSETS
Prepayments and other current assets represent:
The Group
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
1,091
–
195
765
1,578
1,035
4,664
1,044
–
232
716
1,384
1,697
5,073
1,088
491
195
396
1,186
816
4,172
996
470
232
443
1,128
1,451
4,720
Amounts due from China Telecom Group
Amounts due from subsidiaries
Amounts due from other telecommunications
operators in the PRC
Prepayments in connection with construction
work and equipment purchases
Prepaid expenses and deposits
Other receivables
15. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Time deposits with original maturity within
three months
The Group
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
24,470
2,902
27,372
24,071
1,753
25,824
18,942
963
19,905
19,452
487
19,939
16. SHORT-TERM AND LONG-TERM DEBT
Short-term debt comprises:
The Group
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
Loans from banks – unsecured
Other loans – unsecured
Loans from China Telecom Group – unsecured
Total short-term debt
8,123
244
820
9,187
11,578
80
9,017
20,675
8,123
244
820
9,187
11,578
80
9,017
20,675
The weighted average interest rate of the Group’s and the Company’s total short-term debt as at 31 December 2011 was 5.9% (2010:
4.3%) and 5.9% (2010: 4.3%) respectively. As at 31 December 2011, the loans from banks and other loans bear interest at rates ranging
from 3.9% to 7.2% (2010: 3.5% to 5.8%) per annum and are repayable within one year; the loans from China Telecom Group bear interest
at fixed rates ranging from 3.9% to 4.9% (2010: 3.9%) per annum and are repayable within one year.
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
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Notes to the Financial Statements
For the year ended 31 December 2011
16. SHORT-TERM AND LONG-TERM DEBT (continued)
Long-term debt comprises:
Interest rates and final maturity
The Group
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
Interest rates ranging from
3.60% to 7.04% per annum
with maturities through 2020
Interest rates ranging from
1.00% to 8.30% per annum
with maturities through 2060
Interest rates ranging from
1.49% to 1.58% per annum
with maturities through 2012
Interest rates ranging from
2.30% to 4.75% per annum
with maturities through 2032
Bank loans – unsecured
Renminbi denominated
US Dollars denominated
Japanese Yen denominated
Euro denominated
Other currencies denominated
Other loans – unsecured
Renminbi denominated
Medium-term notes
– unsecured (Note (i))
Total long-term debt
Less: Current portion
Non-current portion
Note:
409
279
409
279
648
733
648
733
1,441
1,447
1,441
1,447
485
559
485
559
29
3,012
36
3,054
29
3,012
36
3,054
1
1
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1
39,903
49,846
39,903
49,846
42,916
52,901
42,916
52,901
(11,766)
31,150
(10,352)
42,549
(11,766)
31,150
(10,352)
42,549
(i)
On 22 April 2008, the Company issued three-year, 10 billion RMB denominated medium-term note with annual interest rate of 5.30% per annum. This
medium-term note was repaid by the Company on 23 April 2011.
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.
On 16 November 2009, the Company issued three-year, 10 billion RMB denominated medium-term note with annual interest rate of 3.65% per annum.
On 28 December 2009, the Company issued two batches of five-year, 10 billion RMB denominated medium-term notes with annual interest rate of 4.61% per
annum.
All of the above medium-term notes are unsecured.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
16. SHORT-TERM AND LONG-TERM DEBT (continued)
The aggregate maturities of the Group’s and the Company’s long-term debt subsequent to 31 December 2011 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
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
11,766
10,188
20,049
89
89
735
42,916
10,352
11,518
10,015
20,040
92
884
52,901
11,766
10,188
20,049
89
89
735
42,916
10,352
11,518
10,015
20,040
92
884
52,901
The Group’s short-term and long-term debt do not contain any financial covenants. As at 31 December 2011, the Group and the Company
have unutilised committed credit facilities amounting to RMB118,970 million (2010: RMB98,576 million) and RMB118,970 million (2010:
RMB98,576 million) respectively.
17. ACCOUNTS PAYABLE
Accounts payable are analysed as follows:
Third parties
China Telecom Group
Other telecommunications operators in the PRC
Subsidiaries
The Group
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
34,748
8,911
699
–
44,358
30,838
8,571
630
–
40,039
30,182
8,199
697
1,445
40,523
27,697
8,021
629
1,273
37,620
Amounts due to China Telecom Group are payable 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
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
13,074
11,610
8,054
11,620
44,358
10,308
8,626
9,830
11,275
40,039
10,568
11,260
7,794
10,901
40,523
8,967
8,047
9,693
10,913
37,620
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
18. ACCRUED EXPENSES AND OTHER PAYABLES
Accrued expenses and other payables represent:
The Group
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
312
–
78
14,280
44,695
7
59,372
389
–
85
14,401
37,577
433
52,885
222
272
78
13,509
43,282
–
57,363
319
125
85
13,691
36,587
418
51,225
Amounts due to China Telecom Group
Amounts due to subsidiaries
Amounts due to other telecommunications
operators in the PRC
Accrued expenses
Customer deposits and receipts in advance
Dividend payable
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.
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Balance at beginning of year
Additions for the year
– installation fees
– calling cards
Reductions for the year
– amortisation of connection fees
– amortisation of installation fees
– usage of calling cards
Balance at end of year
Representing:
– current portion
– non-current portion
The Group
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
6,203
373
1,275
1,648
(98)
(1,660)
(1,288)
4,805
2,093
2,712
4,805
8,462
395
1,568
1,963
(497)
(2,021)
(1,704)
6,203
2,645
3,558
6,203
6,203
373
1,267
1,640
(98)
(1,660)
(1,282)
4,803
2,091
2,712
4,803
8,457
395
1,568
1,963
(497)
(2,021)
(1,699)
6,203
2,645
3,558
6,203
Included in other assets are primarily capitalised direct costs associated with the installation of wireline services. As at 31 December 2011,
the unamortised portion of these costs was RMB2,444 million (2010: RMB3,236 million).
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字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
20. SHARE CAPITAL
The Group and the Company
2011
RMB millions
2010
RMB millions
67,055
13,877
80,932
67,055
13,877
80,932
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.
21. RESERVES
The Group
Capital
Share
Revaluation
Statutory
Other
Exchange
Retained
reserve
Total
RMB millions RMB millions RMB millions RMB millions RMB millions RMB millions RMB millions RMB millions
premium
earnings
reserves
reserves
reserve
reserve
(Note (i))
(Note (iii))
(Note (ii))
(Note (i))
Balance as at 1 January 2010,
as previously reported
(2,804)
10,746
10,863
60,606
2,907
(667)
59,149
140,800
Change in accounting policy
(Note 3)
19,571
–
(10,863)
–
(2,525)
–
8,389
14,572
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Balance as at 1 January 2010,
as restated
16,767
10,746
Acquisition of non-controlling
interests
Dividends (Note 31)
Appropriations (Note (iii))
Total comprehensive income for
the year, as restated
Balance as at 31 December 2010,
as restated
Dividends (Note 31)
Acquisition of non-controlling
interests
Acquisition of the Fifth Acquired
Group (Note 1)
Appropriations (Note (iii))
Total comprehensive income for
the year
–
–
–
–
–
–
–
–
16,767
10,746
–
–
–
–
–
–
–
–
–
–
Balance as at 31 December 2011
16,767
10,746
–
–
–
–
–
–
–
–
–
–
–
–
60,606
382
(667)
67,538
155,372
125
–
–
2,028
–
62,634
–
–
–
1,682
–
64,316
(3)
–
–
59
438
–
(1)
–
–
(154)
283
–
–
–
–
(6,031)
(2,028)
(3)
(6,031)
–
(48)
15,347
15,358
(715)
74,826
164,696
–
–
–
–
(5,763)
(5,763)
–
(19)
(1,682)
(1)
(19)
–
(103)
(818)
16,502
16,245
83,864
175,158
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Notes to the Financial Statements
For the year ended 31 December 2011
21. RESERVES (continued)
The Company
Capital
reserve
RMB millions
(Note (i))
Share
premium
RMB millions
Statutory
reserves
RMB millions
(Note (iii))
Retained
earnings
RMB millions
Total
RMB millions
Balance as at 1 January 2010,
as previously reported
Change in accounting policy
Balance as at 1 January 2010, as restated
Total comprehensive income for the year,
as restated
Appropriations (Note (iii))
Dividends (Note 31)
29,168
–
29,168
–
–
–
10,746
–
10,746
–
–
–
Balance as at 31 December 2010, as restated
29,168
10,746
Total comprehensive income for the year
Appropriations (Note (iii))
Dividends (Note 31)
–
–
–
–
–
–
Balance as at 31 December 2011
29,168
10,746
60,606
–
60,606
–
2,028
–
62,634
–
1,682
–
64,316
37,922
14,460
52,382
15,241
(2,028)
(6,031)
59,564
15,504
(1,682)
(5,763)
67,623
138,442
14,460
152,902
15,241
–
(6,031)
162,112
15,504
–
(5,763)
171,853
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, other than the
Fifth Acquired Group, from China Telecommunications Corporation as described in Note 1, which were accounted for as equity transactions as disclosed in Note
1 to the financial statements, and the historical carrying amount of the net assets of these acquired entities.
The difference between the consideration paid by the Company and the historical carrying amount of the net assets of the Fifth Acquisition was recorded as a
deduction of retained earnings.
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 change in the fair value of available-for-sale equity securities 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 2011, the Company transferred RMB1,572 million, being 10% of the year’s net profit determined in accordance with IFRS, to
this reserve. For the year ended 31 December 2010, the Company transferred RMB1,525 million, being 10% of the year’s net profit determined in accordance
with the PRC Accounting Standards for Business Enterprises.
According to the Company’s Articles of Association, the Company transferred RMB110 million for the year ended 31 December 2011, being 0.7% of the year’s
net profit determined in accordance with IFRS, to the discretionary surplus reserve. The Company transferred RMB503 million for the year ended 31 December
2010, being 3.3% of the year’s net profit determined in accordance with the PRC Accounting Standards for Business Enterprises.
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.
(iv)
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. As at 31
December 2011, the amount of retained earnings available for distribution was RMB67,623 million (2010: RMB59,564 million), being the amount determined
in accordance with IFRS. Final dividend of approximately RMB5,583 million in respect of the financial year 2011 proposed after the end of the reporting period
has not been recognised as a liability at the end of the reporting period (Note 31).
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
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:
Note
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
The Group
2011
RMB millions
2010
RMB millions
49,764
38,628
74,992
25,529
20,473
14,273
21,284
98
62,498
28,906
63,985
22,571
15,519
12,389
13,499
497
245,041
219,864
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(i)
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 fees and amortised amount of upfront installation fees charged to customers for the provision of wireline telephony
services.
(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 and interconnections fees charged to customers for the provision of mobile telephony services.
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(iii)
Represent amounts charged to customers for the provision of Internet access services.
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(iv)
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, Colour Ring Tone, Internet data centre and Virtual Private Network services.
(v)
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.
(vi)
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 telecommunications 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.
23. PERSONNEL EXPENSES
Personnel expenses are attributable to the following functions:
Network operations and support
Selling, general and administrative
The Group
2011
RMB millions
2010
RMB millions
25,924
13,243
39,167
23,129
12,400
35,529
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
24. OTHER OPERATING EXPENSES
Other operating expenses consist of:
Interconnection charges
Cost of goods sold
Donations
Others
Note:
Note
(i)
(ii)
The Group
2011
RMB millions
2010
RMB millions
13,042
15,728
13
85
28,868
11,130
7,909
21
46
19,106
(i)
Interconnection charges represent amounts incurred for the use of other domestic and foreign telecommunications operators’ networks for delivery of voice
and data traffic that originate from the Group’s telecommunications networks.
(ii)
Cost of goods sold primarily represents cost of telecommunications equipment sold.
25. TOTAL OPERATING EXPENSES
Total operating expenses for the year ended 31 December 2011 were RMB220,912 million (2010: RMB196,412 million) which include
auditor’s remuneration in relation to audit and non-audit services are RMB68 million and RMB4 million respectively (2010: RMB67 million
and RMB7 million).
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26. NET FINANCE COSTS
Net finance costs comprise:
Interest expense incurred
Less: Interest expense capitalised*
Net interest expense
Interest income
Foreign exchange losses
Foreign exchange gains
The Group
2011
RMB millions
2010
RMB millions
3,023
(313)
2,710
(405)
48
(99)
2,254
4,057
(262)
3,795
(287)
178
(86)
3,600
* Interest expense was capitalised in construction in progress at
the following rates per annum
2.5% – 5.6%
2.5% – 4.7%
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
27. INCOME TAX
Income tax in the profit or loss comprises:
Provision for PRC income tax
Provision for income tax in other tax jurisdictions
Deferred taxation
A reconciliation of the expected tax expenses with the actual tax expense is as follows:
The Group
2011
RMB millions
3,635
29
1,752
5,416
2010
RMB millions
(restated)
3,165
47
1,634
4,846
Profit 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
Other tax benefits
Actual income tax expense
Note:
Note
(i)
(i)
(ii)
(iii)
(iv)
The Group
2011
RMB millions
2010
RMB millions
(restated)
22,014
20,311
5,503
(255)
(3)
489
(291)
(27)
5,416
5,078
(579)
(11)
832
(444)
(30)
4,846
(i)
Except for certain subsidiaries and branches which are taxed at preferential rates of 15% or 24%, the provision for mainland China income tax is based on a
statutory rate of 25% of the assessable income of the Company, its mainland China subsidiaries and branches as determined in accordance with the relevant
income tax rules and regulations of the PRC.
(ii)
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 miscellaneous income which are not subject to income tax.
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Notes to the Financial Statements
For the year ended 31 December 2011
28. DIRECTORS’ AND SUPERVISORS’ REMUNERATION
The following table sets out the remuneration paid or payable to the Company’s directors and supervisors:
Directors’/
supervisors’
fees
RMB
thousands
Salaries,
allowances
and benefits
in kind
RMB
thousands
Discretionary
bonuses
RMB
thousands
Retirement
scheme
contributions
RMB
thousands
Share-based
payments
RMB
thousands
Total
RMB
thousands
–
–
–
–
–
–
–
–
–
176
178
405
184
176
–
–
–
–
–
–
350
311
237
304
304
304
304
304
–
–
–
–
–
–
304
166
–
69
93
92
339
305
227
305
305
305
305
305
–
–
–
–
–
–
305
450
–
319
307
302
88
1,207
–
3,142
–
4,079
60
52
50
53
52
53
52
52
–
–
–
–
–
–
53
53
–
27
43
42
–
642
1,400
1,120
–
1,120
1,120
–
–
1,120
–
–
–
–
–
–
–
933
–
–
513
513
2,149
1,788
514
1,782
1,781
662
661
1,781
–
176
178
405
184
176
662
1,602
–
415
956
949
–
7,839
88
16,909
2011
Executive directors
Wang Xiaochu
Yang Jie
Shang Bing1
Wu Andi
Zhang Jiping
Zhang Chenshuang2
Yang Xiaowei
Sun Kangmin
Non-executive director
Li Jinming
Independent non-executive
directors
Wu Jichuan
Qin Xiao
Tse Hau Yin
Cha May Lung
Xu Erming
Supervisors
Miao Jianhua
Mao Shejun3
Du Zuguo3
Ma Yuzhu3
Xu Cailiao
Han Fang
Independent supervisor
Zhu Lihao
1
2
3
Mr. Shang Bing resigned as an executive director of the Company on 13 July 2011.
Mr. Zhang Chenshuang retired as an executive director of the Company on 20 March 2012.
Mr. Ma Yuzhu resigned as a supervisor of the Company on 20 May 2011. Mr. Mao Shejun and Mr. Du Zuguo were appointed as supervisors of the Company on
20 May 2011.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
28. DIRECTORS’ AND SUPERVISORS’ REMUNERATION (continued)
Directors’/
supervisors’
fees
RMB
thousands
Salaries,
allowances
and benefits
in kind
RMB
thousands
Discretionary(1)
bonuses
RMB
thousands
Retirement
scheme
contributions
RMB
thousands
Share-based(2)
payments
RMB
thousands
Total
RMB
thousands
–
–
–
–
–
–
–
–
–
150
150
426
170
150
–
–
–
–
75
1,121
340
340
289
289
289
289
289
289
–
–
–
–
–
–
289
166
93
91
–
3,053
1,083
692
920
920
773
588
920
920
–
–
–
–
–
–
589
415
289
286
–
8,395
73
73
63
63
63
62
61
62
–
–
–
–
–
–
63
61
48
47
–
739
1,414
–
352
352
–
–
1,131
1,131
–
–
–
–
–
–
–
294
162
162
2,910
1,105
1,624
1,624
1,125
939
2,401
2,402
–
150
150
426
170
150
941
936
592
586
–
4,998
75
18,306
2010
Executive directors
Wang Xiaochu
Shang Bing
Wu Andi
Zhang Jiping
Zhang Chenshuang
Yang Xiaowei
Yang Jie
Sun Kangmin
Non-executive director
Li Jinming
Independent non-executive
directors
Wu Jichuan
Qin Xiao
Tse Hau Yin
Cha May Lung
Xu Erming
Supervisors
Miao Jianhua
Ma Yuzhu
Xu Cailiao
Han Fang
Independent supervisor
Zhu Lihao
1
Including deferred performance bonus for the term of office from 2007 to 2009. According to the Company’s remuneration guideline for senior management
approved by the Board of Directors and the Remuneration Committee, in 2010 the Company conducted appraisals of the relevant personnel based on their
performance during such term of office and the Board of Directors approved the deferred performance bonus being paid in 2010.
2
The respective stock appreciation rights were granted in 2005 and 2006. The fair value of the liability related to share-based payments was affected by the
increase in the share prices of the Company in 2010.
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
29. INDIVIDUALS WITH HIGHEST EMOLUMENTS
Of the five highest paid individuals of the Group for the year ended 31 December 2011, three of them were directors of the Company and
whose remuneration was disclosed in Note 28. Of the five highest paid individuals of the Group for the year ended 31 December 2010,
three of them were directors of the Company and whose remuneration was disclosed in Note 28.
The aggregate of the emoluments in respect of the other two (2010: two) individuals (non-directors) are as follows:
Salaries, allowances and benefits in kind
Discretionary bonuses
Retirement scheme contributions
Share-based payment
2011
RMB thousands
2010
RMB thousands
2,035
931
226
1,201
4,393
2,461
1,204
202
–
3,867
The emoluments of the other two (2010: two) individuals (non-directors) 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
2011
Number of
individuals
2010
Number of
individuals
0
0
2
0
1
1
1
1
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None of these employees received any inducements or compensation for loss of office, or waived any emoluments during the periods
presented.
30. PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
For the year ended 31 December 2011, the consolidated profit attributable to equity holders of the Company includes a profit of
RMB15,722 million which has been dealt with in the stand-alone financial statements of the Company.
For the year ended 31 December 2010, the consolidated profit attributable to equity holders of the Company includes a profit of
RMB15,052 million which has been dealt with in the stand-alone financial statements of the Company.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
31. DIVIDENDS
Pursuant to a resolution passed at the Directors’ meeting on 20 March 2012, a final dividend of equivalent to HK$0.085 per share totaling
approximately RMB5,583 million for the year ended 31 December 2011 was proposed for shareholders’ approval at the Annual General
Meeting. The dividend has not been provided for in the consolidated financial statements for the year ended 31 December 2011.
Pursuant to the shareholders’ approval at the Annual General Meeting held on 20 May 2011, a final dividend of RMB0.071208 (equivalent
to HK$0.085) per share totaling approximately RMB5,763 million in respect of the year ended 31 December 2010 was declared and paid
on 30 June 2011.
Pursuant to the shareholders’ approval at the Annual General Meeting held on 25 May 2010, a final dividend of RMB0.074514 (equivalent
to HK$0.085) per share totaling approximately RMB6,031 million in respect of the year ended 31 December 2009 was declared and of
which RMB5,608 million was paid on 30 June 2010 and the remaining amounts were settled by June 2011.
32. BASIC EARNINGS PER SHARE
The calculation of basic earnings per share for the years ended 31 December 2011 and 2010 is based on the profit attributable to equity
holders of the Company of RMB16,502 million and RMB15,347 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 2011 and 2010, 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
Total minimum lease payments
The Group
2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
18,182
782
600
413
1,126
21,103
13,525
11,531
577
439
1,108
27,180
18,076
711
560
391
1,111
20,849
13,447
11,479
542
414
1,095
26,977
Total rental expense in respect of operating leases charged to profit or loss for the year ended 31 December 2011 was RMB22,536 million
(2010: RMB16,332 million).
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
33. COMMITMENTS AND CONTINGENCIES (continued)
Capital commitments
As at 31 December 2011 and 2010, the Group and the Company had capital commitments as follows:
Authorised and contracted for
– property
– telecommunications network plant
and equipment
Authorised but not contracted for
– property
– telecommunications network plant
and equipment
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2011
RMB millions
2010
RMB millions
The Company
2011
RMB millions
2010
RMB millions
674
5,695
6,369
801
5,927
6,728
395
4,729
5,124
716
4,928
5,644
674
5,669
6,343
801
5,830
6,631
394
4,720
5,114
716
4,928
5,644
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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 Fifth Acquired Group transferred to the Group in connection with the Fifth Acquisition, no other contingent 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 Fifth Acquisition.
134
(b)
As at 31 December 2011 and 2010, 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 2011 and 2010, 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 based on
such assessment, believes that any resulting liabilities will not have a material adverse effect on the financial position, operating results or
cash flows of the Group.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
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 financial 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 significant to that fair value measurement. The levels are defined as follows:
•
•
•
Level 1 (highest level): fair values measured using quoted prices (unadjusted) in active markets for identical financial
instruments
Level 2: fair values measured using quoted prices in active markets for similar financial instruments, or using valuation
techniques in which all significant inputs are directly or indirectly based on observable market data
Level 3 (lowest level): fair values measured using valuation techniques in which any significant input is not based on
observable market data
The fair values of the Group’s financial 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 financial instruments. The fair value of the
Group’s available-for-sale equity investment securities is RMB617 million as at 31 December 2011 (2010: RMB822 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.
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
34. FINANCIAL INSTRUMENTS (continued)
(a) Fair Value (continued)
The fair values of long-term indebtedness are estimated by discounting future cash flows 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 7.51% (2010: 1.0% to
5.88%). As at 31 December 2010 and 2011, the carrying amounts and fair values of the Group’s long-term debt were as follows:
2011
2010
Carrying amount
RMB millions
Fair value
RMB millions
Carrying amount
RMB millions
Fair value
RMB millions
Long-term debt
42,916
41,698
52,901
50,630
During the year, there were no transfers among instruments in level 1, level 2 or level 3.
(b) Risks
The Group’s financial 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 financial markets and seeks to minimise potential adverse effects on the Group’s financial 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 specific 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:
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(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 financial institutions and credit it provides to customers for the provision of
telecommunications services. To limit exposure to credit risk relating to deposits, the Group primarily places cash deposits only
with large state-owned financial institutions in the PRC with acceptable credit ratings. For accounts receivable, management
performs ongoing credit evaluations of its customers’ financial condition and generally does not require collateral on accounts
receivable. Furthermore, the Group has a diversified 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 accounts receivable are set out in Note 13.
(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 inflow and outflow. The Group manages liquidity risk by maintaining sufficient 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.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
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 floating, based on prevailing rates at the end of the reporting period) and the earliest date the Group would be
required to repay:
2011
Total
More than
More than
contractual
Within
1 year but
2 years but
Carrying
undiscounted
1 year or
less than
less than
More than
amount
cash flow
on demand
2 years
5 years
5 years
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
9,187
42,916
44,358
(9,391)
(47,087)
(44,358)
(9,391)
(13,513)
(44,358)
59,372
(59,372)
(59,372)
–
–
(11,592)
(21,211)
–
–
–
–
–
(771)
–
–
155,833
(160,208)
(126,634)
(11,592)
(21,211)
(771)
2010
Total
More than
More than
contractual
Within
1 year but
2 years but
Carrying
undiscounted
1 year or
amount
cash flow
on demand
less than
2 years
less than
More than
5 years
5 years
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
20,675
52,901
40,039
(20,924)
(59,560)
(40,039)
(20,924)
(12,802)
(40,039)
52,885
(52,885)
(52,885)
–
–
(13,261)
(32,556)
–
–
–
–
–
(941)
–
–
166,500
(173,408)
(126,650)
(13,261)
(32,556)
(941)
Short-term debt
Long-term debt
Accounts payable
Accrued expenses and
other payables
Short-term debt
Long-term debt
Accounts payable
Accrued expenses and
other payables
Management believes that the Group’s current cash on hand, expected cash flows from operations and available credit
facilities from banks (Note 16) will be sufficient to meet the Group’s working capital requirements and repay its borrowings
and obligations when they become due.
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
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 fixed rates expose the Group to cash flow interest rate risk and fair value interest rate risk respectively.
The Group manages its exposure to interest rate risk by maintaining high level of fixed rate debts.
The following table sets out the interest rate profile of the Group’s debt at the end of the reporting period:
2011
Effective
interest rate
%
RMB millions
2010
Effective
interest rate
%
RMB millions
5.8
4.1
6.1
1.5
7,471
42,712
50,183
1,716
204
1,920
52,103
96.3%
4.2
4.3
4.5
4.9
19,842
52,646
72,488
833
255
1,088
73,576
98.5%
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
As at 31 December 2011, 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 profit for the year and retained earnings by approximately RMB14 million (2010:
RMB8 million).
The above sensitivity analysis has been prepared on the assumptions that the change of interest rate was applied to the
Group’s debt in existence at the end of the reporting period with exposure to cash flow interest rate risk. The analysis is
prepared on the same basis for 2010.
(iv) Foreign currency exchange rate risk
Foreign currency exchange rate risk arises on financial 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 94.4% (2010: 91.2%) of the Group’s cash and
cash equivalents and 94.7% (2010: 96.0%) of the Group’s short-term and long-term debt as at 31 December 2011 are
denominated in Renminbi. Details of bank loans denominated in other currencies are set out in Note 16.
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
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 benefits for other stakeholders, by pricing products and services
commensurately with the level of risk and by securing access to finance 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 defines total debt as
the sum of short-term debt and long-term debt. As at 31 December 2011, the Group’s total debt-to-total assets ratio was 12.4% (2010:
17.5%), 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
(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
significant transactions and business relationships with members of China Telecom Group.
The principal transactions with China Telecom Group are as follows. The majority of these transactions also constitute continuing
connected transactions under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. Further
details of these continuing connected transactions are disclosed under the paragraph “Connected Transactions” in the report of
directors.
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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
Operating lease expenses
Net transaction amount of centralised services
Interconnection revenues
Interconnection charges
Interest on loans from China Telecom Group
CDMA network capacity lease fee
Reimbursement of capacity maintenance related costs of CDMA network
Note
(i)
(i)
(ii)
(iii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(viii)
(ix)
(x)
(xi)
2011
RMB millions
2010
RMB millions
139
2,764
1,642
8,293
365
692
2,362
7,878
395
625
48
498
208
19,011
3,151
2,215
993
6,415
295
556
2,185
6,838
385
466
55
571
896
13,320
1,755
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字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
36. RELATED PARTY TRANSACTIONS (continued)
(a) Transactions with China Telecom Group (continued)
Note:
(i)
Represent the amount of telecommunications equipment and materials purchased from/sold to China Telecom Group and commission paid and
payable for procurement services provided by 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 from China Telecom Group.
(iv)
Represent amounts paid and payable to China Telecom Group in respect of cultural, educational, health care and other community services.
(v)
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.
(vi)
Represent net amounts paid and payable to China Telecom Group for leases of business premises and the amounts paid and payable to China Telecom
Group for inter-provincial transmission optic fibres.
(vii)
Represent net amount shared between the Company and China Telecom Group for costs associated with centralised services. The amount represents
amounts received or receivable for the net amount of centralised services.
(viii)
Represent amounts received and receivable from/paid and payable to China Telecom Group for interconnection of local and domestic long distance
calls.
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(ix)
Represent interest paid and payable to China Telecom Group with respect to the loans from China Telecom Group (Note 16).
(x)
Represent amounts paid and payable to China Telecom Group for lease of CDMA mobile telecommunications network (“CDMA network”) capacity.
(xi)
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 are summarised as follows:
Accounts receivable
Prepayments and other current assets
Total amounts due from China Telecom Group
Accounts payable
Accrued expenses and other payables
Short-term debt
Total amounts due to China Telecom Group
2011
RMB millions
2010
RMB millions
1,803
1,091
2,894
8,911
312
820
1,182
1,044
2,226
8,571
389
9,017
10,043
17,977
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
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 terms 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 2011 and 2010, no material allowance for doubtful debts was recognised in respect of amounts due from China
Telecom Group.
On 25 August 2010, the Company and China Telecommunications Corporation entered into supplemental agreements to
renew the CDMA network capacity lease agreement (“the 2010 CDMA Network Lease”), which it first entered into with China
Telecommunications Corporation and which were approved by the Company’s independent shareholders at an Extraordinary General
Meeting held on 16 September 2008, for a further term of two years expiring on 31 December 2012. Pursuant to the 2010 CDMA
Network Lease, the lease fee for the capacity on the constructed CDMA network shall be 28% of the CDMA service revenue. For the
year ending 31 December 2011 and 2012, 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 previous year.
(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 benefits
Post-employment benefits
Equity-based compensation benefits
2011
RMB thousands
2010
RMB thousands
9,037
696
8,959
18,692
13,778
802
5,351
19,931
The above remuneration is included in personnel expenses.
(c) Contributions to post-employment benefit 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 benefit plans are disclosed in Note 37.
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141
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
36. RELATED PARTY TRANSACTIONS (continued)
(d) Transactions with other government-related entities in the PRC
The Group is a government-related enterprise and operates in an economic regime currently dominated by entities directly or
indirectly controlled by the People’s Republic of China through government authorities, agencies, affiliations and other organisations
(collectively referred to as “government-related entities”).
Apart from transactions with parent company and its affiliates (Note 36(a)), the Group has, collectively but not individually, significant
transactions with other government-related entities, which include but not limited to the following:
–
–
–
–
–
rendering and receiving services, including but not limited to telecommunications services
sales and purchases of goods, properties and other assets
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 government-related. 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 government-related entities or not.
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142
The directors believe the above information provides appropriate disclosure of related party transactions.
37. POST-EMPLOYMENT BENEFITS PLANS
As stipulated by the regulations of the PRC, the Group participates in various defined contribution retirement plans organised by municipal,
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 fixed proportion of the salary prevailing at the member’s retirement date. The Group has no other material obligation for
the payment of pension benefits associated with these plans beyond the annual contributions described above.
The Group’s contributions for the year ended 31 December 2011 were RMB3,498 million (2010: RMB3,144 million).
The amount payable for contributions to defined contribution retirement plans as at 31 December 2011 was RMB210 million (2010:
RMB206 million).
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
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.
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 first 18 months after the date of grant.
As at each of the third, fourth, fifth 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 first 24 months after the date of grant.
As at each of the third, fourth, fifth 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 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 first 24 months after the date of grant.
As at each of the third, fourth, fifth 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 2011, 412 million (2010: 483 million) stock appreciation right units were exercised. For the year
ended 31 December 2011, compensation expense of RMB328 million was recognised by the Group in respect of stock appreciation
rights. For the year ended 31 December 2010, compensation expense of RMB592 million was recognised by the Group in respect of stock
appreciation rights.
As at 31 December 2011, the carrying amount of the liability arising from stock appreciation rights was RMB28 million (2010: RMB412
million). As at 31 December 2011, all stock appreciation right units vested were exercised. As at 31 December 2010, 417 million stock
appreciation right units vested but were not exercised and the carrying amount of the corresponding liability was RMB412 million.
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
39. ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group’s financial position and results of operations are sensitive to accounting methods, assumptions and estimates that underlie the
preparation of the consolidated financial 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 significant 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
financial statements. The significant accounting policies are set forth in Note 2. Management believes the following significant accounting
policies involve the most significant judgements and estimates used in the preparation of the consolidated financial 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 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.
Allowance for doubtful debts
Management estimates an allowance for 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 financial condition of the customers were to deteriorate, actual write-offs might be higher than expected and could
significantly 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 flows largely independent of those from
other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-
generating unit). In determining the value in use, expected future cash flows 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 difficult 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 flows generated by the asset are discounted to their present value,
which requires significant 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.
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全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Notes to the Financial Statements
For the year ended 31 December 2011
39. ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
Impairment on long-lived assets (continued)
For the year ended 31 December 2011, no provision for impairment losses was made against the carrying value of property, plant and
equipment (2010: RMB139 million) (Note 4). In determining the recoverable amount of these equipment, significant judgments were
required in estimating future cash flows, level of revenue, amount of operating costs and applicable discount rate.
Changes in these estimates could have a significant 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 significant 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 benefits 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 significant changes from previous estimates.
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40. POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED
BUT NOT YET EFFECTIVE FOR THE ANNUAL ACCOUNTING PERIOD ENDED 31 DECEMBER
2011
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Up to the date of issue of these financial 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 2011:
145
Amendments to IFRS 1, “First-time Adoption of International Financial Reporting Standards
– Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters”
Amendments to IFRS 7, “Financial instruments: Disclosures – Transfers of Financial Assets”
Amendments to IAS 12, “Income taxes – Deferred Tax: Recovery of Underlying Assets”
Amendments to IAS 1, “Presentation of financial statements – Presentation of Items of
Other Comprehensive Income”
IFRS 10, “Consolidated Financial Statements”
IFRS 11, “Joint Arrangements”
IFRS 12, “Disclosure of Interests in Other Entities”
IFRS 13, “Fair Value Measurement”
IAS 27, “Separate Financial Statements (2011)”
IAS 28, “Investments in Associates and Joint Ventures (2011)”
Revised IAS 19, “Employee Benefits”
IFRIC Interpretation 20, “Stripping costs in the production phase of a surface mine”
Amendments to IFRS 7, “Financial instruments: Disclosures – Offsetting financial assets and
financial liabilities”
Amendments to IFRS 1, “First-time Adoption of International Financial Reporting Standards
– Government Loans”
Amendments to IAS32, “Financial instruments: Presentation – Offsetting financial assets and
financial liabilities”
IFRS 9, “Financial Instruments”
Effective for accounting
period beginning on or
after
1 July 2011
1 July 2011
1 January 2012
1 July 2012
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2014
1 January 2015
Notes to the Financial Statements
For the year ended 31 December 2011
40. POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED
BUT NOT YET EFFECTIVE FOR THE ANNUAL ACCOUNTING PERIOD ENDED 31 DECEMBER
2011 (continued)
The Group is in the process of making an assessment of the impact that will result from adopting the amendments, new standards and
interpretations issued by the IASB which are not yet effective for the accounting period ended on 31 December 2011. So far the Group
believes that the adoption of these amendments, new standards and interpretations may result in new or amended disclosures, it is unlikely
to have a significant impact on its financial position and the results of operations.
41. COMPARATIVE FIGURES
As a result of the adoption of amendment to IFRS 1, certain comparative figures have been adjusted to conform to current year’s
presentation. Further details of this development are disclosed in Note 3. In addition, certain comparative figures have been reclassified to
conform to current year’s presentation.
42. PARENT AND ULTIMATE HOLDING COMPANY
The parent and ultimate holding company of the Group as at 31 December 2011 is China Telecommunications Corporation, a state-owned
enterprise established in the PRC.
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146
Financial Summary
(Amounts in millions, except per share data)
Results of operation
Wireline voice
Mobile voice
Internet
Managed data and leased line
Value-added services, integrated information
application services and others
Upfront connection fees
Operating revenues
Depreciation and amortisation
Network operations and support
Selling, general and administrative
Personnel expenses
Other operating expenses
Operating expenses
Operating profit
Net finance costs
Investment income
Share of profits of associates
Profit/(loss) before taxation
Income tax
Profit for the year
Other comprehensive income 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 financial
statements of subsidiaries outside mainland China
Share of other comprehensive income from associates
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Profit attributable to
Equity holders of the Company
Non-controlling interests
Profit for the year
Total comprehensive income attributable to
Equity holders of the Company
Non-controlling interests
Total comprehensive income for the year
Basic earnings per share
Year ended 31 December
2011
RMB
49,764
38,628
74,992
14,273
67,286
98
245,041
51,224
52,912
48,741
39,167
28,868
220,912
24,129
(2,254)
40
99
22,014
(5,416)
16,598
(205)
51
(103)
–
(257)
16,341
16,502
96
16,598
16,245
96
16,341
0.20
2010
RMB
(restated)
62,498
28,906
63,985
12,389
51,589
497
219,864
52,215
47,432
42,130
35,529
19,106
196,412
23,452
(3,600)
328
131
20,311
(4,846)
15,465
132
(48)
(48)
(25)
11
15,476
15,347
118
15,465
15,358
118
15,476
0.19
2009
RMB
(restated)
78,432
20,027
51,567
11,499
46,694
1,151
209,370
52,784
43,721
40,507
32,857
17,449
187,318
22,052
(4,375)
791
101
18,569
(4,382)
14,187
538
(120)
(2)
–
416
14,603
13,983
204
14,187
14,324
279
14,603
0.17
2008
RMB
(restated)
96,258
3,955
40,727
10,231
33,336
2,022
186,529
54,488
60,433
27,501
28,946
10,794
182,162
4,367
(5,076)
5
112
(592)
983
391
(92)
23
(83)
–
(152)
239
296
95
391
144
95
239
0.004
2007
RMB
(restated)
111,573
–
31,802
9,183
24,952
3,294
180,804
53,313
29,862
24,130
27,419
9,051
143,775
37,029
(4,288)
83
215
33,039
(7,214)
25,825
78
(14)
(103)
–
(39)
25,786
25,728
97
25,825
25,689
97
25,786
0.32
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Financial Summary
(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
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Total equity attributable to equity holders of
the Company
Non-controlling interests
Total equity
Total liabilities and equity
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2011
RMB
268,877
18,448
72,214
29,176
30,400
419,115
127,258
34,979
162,237
256,090
788
256,878
419,115
Year ended 31 December
2010
RMB
(restated)
272,478
14,445
78,361
27,792
27,453
420,529
126,923
47,482
174,405
245,628
496
246,124
420,529
2009
RMB
(restated)
283,550
11,567
83,903
35,246
25,690
439,956
143,481
59,323
202,804
236,304
848
237,152
439,956
2008
RMB
(restated)
296,376
13,615
88,596
28,263
27,236
454,086
176,790
47,770
224,560
228,047
1,479
229,526
454,086
2007
RMB
(restated)
326,663
13,626
43,142
21,649
22,461
427,541
140,245
45,758
186,003
240,120
1,418
241,538
427,541
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148
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
2011 share price
Share price change in 2011
HK$ per H share
High
5.28
Low
4.05
Close
4.42
+8.6%
US$ per ADS
Low
52.31
High
67.97
Close
57.13
+9.3%
Number of issued shares: (as at 31 December 2011)
80,932,368,321
Market capitalization: (as at 31 December 2011)
HK$357.7 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 2011.
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600
500
400
300
200
100
0
2
v-0
o
N
3
v-0
o
N
4
v-0
o
N
5
v-0
o
N
6
v-0
o
N
China Telecom
7
v-0
o
N
HSI
8
v-0
o
N
9
v-0
o
N
MSCI
0
v-1
o
N
1
v-1
o
N
149
China Telecom (+204.8%)
HSI (+86.9%)
MSCI (+29.6%)
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Shareholder Information
Distribution of shares and shareholdings
The share capital of the Company as at 31 December 2011 was RMB80,932,368,321, divided into 80,932,368,321 shares of RMB1.00 each. As
at 31 December 2011, 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 Investment & Development Group Co., Ltd
Jiangsu Guoxin Investment Group Co., Ltd.
Total number of H shares (including ADSs):
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
80,932,368,321
Percentage of
the total number of shares
82.85
70.89
6.94
2.64
1.20
1.18
17.15
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 2011:
Number of shares
1,663,316,937
1,110,034,681
1,006,713,763
907,191,530
Percentage of the total
number of H shares in issue
11.99
8.00
7.25
6.54
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Name of shareholder
JPMorgan Chase & Co.
Commonwealth Bank of Australia
150
Blackrock, Inc.
RFS Holdings B.V.
全書所有英文字只可有2種condenesd 幅度:100% 或75%, 而全書所有中文字只可有2種condenesd 幅度:75%或50% 請不要用其他condenesd 幅度
字元樣式已提供：英文100%, 75% 中文75%, 50%
Shareholder Information
Dividend History
Financial Year
Ex-Dividend Date Shareholder Approval Date
Payment Date
Dividend per Share
2002 Final
2003 Final
2004 Final
2005 Final
2006 Final
2007 Final
2008 Final
2009 Final
2010 Final
2011 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
18 April 2011
5 June 2012
20 June 2003
3 May 2004
25 May 2005
23 May 2006
29 May 2007
30 May 2008
26 May 2009
25 May 2010
20 May 2011
30 May 2012
10 July 2003
20 May 2004
23 June 2005
15 June 2006
15 June 2007
16 June 2008
30 June 2009
30 June 2010
30 June 2011
20 July 2012
(HK$)
0.00837 *
0.065
0.065
0.075
0.085
0.085
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 30 May 2012.
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 file
an annual report in Form 20-F for the year 2011 with the United States Securities and Exchange Commission by 30 April 2012.
2011 Annual Report Survey
Annual Report is a key communication channel between shareholders and the Company. Last year, we received around 100 questionnaires
of “Your Views on Annual Report 2010”. Each of these responses benefited 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$10,000 to the charitable organisation, World Wide Fund for Nature Hong
Kong. 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 report 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 Annual Report 2011”, as attached in this annual report, and
return it by post or fax to us at +852 2877 0988. You can also fill in the electronic form at our website, www.chinatelecom-h.com.
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151
Shareholder Information
Annual General Meeting
To be held at 11 a.m. on 30 May 2012 in Conrad Hong Kong Hotel
Registered office
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:
Investor Relations Department
Tel:
Fax:
Email:
852 2877 9777
852 2877 0988
ir@chinatelecom-h.com
Any enquiries relating to your shareholding, for example transfers of shares, change of name or address, loss of share certificates, please contact
the H share registrar:
H share registrar
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Computershare Hong Kong Investor Services Limited
Address:
152
Tel:
Fax:
Email:
Shops 1702-1706, 17th Floor
Hopewell Centre
183 Queen’s Road East
Wanchai
Hong Kong
852 2862 8555
852 2865 0990
hkinfo@computershare.com.hk
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
Tel:
Email:
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, financial condition or results of operations of China Telecom Corporation Limited (the “Company”) to be materially
different from any future performance, financial 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
filed with the U.S. Securities and Exchange Commission (the “SEC”) and in the Company’s other filings with the SEC.
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China Telecom Corporation Limited
31 Jinrong Street, Xicheng District, Beijing, PRC, 100033
www.chinatelecom-h.com
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