#1 INTERNA T I O N A L BESTSELLER
China Telecom Corporation Limited
HKEx Stock Code: 728
NYSE Stock Code: CHA
About
CHINA
TELECOM
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 2013, the Company
has wireline access lines in service of about 156 million, wireline broadband
subscribers of about 100 million and mobile subscribers of about 186 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.
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 scientifi cally
Care the staff and tap their potential to the full
Reward the society and be a responsible corporate citizen
Corporate Slogan
Connecting the World
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#1 INTERNATIONAL
BESTSELLER
#1World’s Largest
CDMA Mobile
Operator
>180 million
mobile subscribers
#1World’s Largest
Fixed-line
Operator
>150
million
access lines in service
#1World’s Largest
Wireline Broadband
Operator
>100 million
wireline broadband subscribers
Contents
2
3
4
9
10
16
27
34
42
60
62
Contents
Corporate Information
Financial Highlights
2013 Milestones
Chairman’s Statement
64
89
98
Corporate Governance Report
Human Resources Development Report
Corporate Social Responsibility Report
109
Independent Auditor’s Report
110 Consolidated Statement of Financial Position
Directors, Supervisors and Senior Management
112
Statement of Financial Position
Business Review
Management’s Discussion and Analysis of
Financial Conditions and Results of Operations
114 Consolidated Statement of
Comprehensive Income
115 Consolidated Statement of Changes in Equity
Report of the Directors
116 Consolidated Statement of Cash Flows
Report of the Supervisory Committee
118 Notes to the Financial Statements
Recognition & Awards
186
Financial Summary
188
Shareholder Information
Corporate Culture
2
China Telecom Corporation Limited Annual Report 2013
Corporate Information
Board of Directors
Executive Directors
Wang Xiaochu (Chairman)
Yang Jie
Wu Andi
Zhang Jiping
Yang Xiaowei
Sun Kangmin
Ke Ruiwen
Non-Executive Director
Xie Liang
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
Shao Chunbao (Chairman)
Zhu Lihao (Independent Supervisor)
Tang Qi (Employee Representative)
Zhang Jianbin (Employee Representative)
Hu Jing
Du Zuguo
Legal Representative
Wang Xiaochu
International Auditor
Deloitte Touche Tohmatsu
Legal Advisers
Jingtian & Gongcheng
Freshfields Bruckhaus Deringer
Sullivan & Cromwell LLP
Stock Code
HKEx: 728
NYSE: CHA
Company Website
www.chinatelecom-h.com
China Telecom Corporation Limited Annual Report 2013
3
Financial Highlights
Operating revenues (RMB millions)
245,149
283,176
321,584
2011 5
2012 5
2013
(restated)
(restated)
EBITDA1 (RMB millions)
EBITDA margin2
Net profit3 (RMB millions)
Capital expenditure (RMB millions)
Total debt/Equity4
Earnings per share (RMB)
Dividend per share (HK$)
Net asset value per share4 (RMB)
75,362
32.6%
16,494
49,584
20.3%
0.2038
0.085
3.165
70,874
27.4%
14,949
53,748
37.6%
0.1847
0.085
3.276
96,551
34.0%
17,545
79,992
39.7%
0.2168
0.095
3.432
1 EBITDA was calculated based on operating revenues minus operating expenses plus depreciation and amortisation.
2 EBITDA margin was calculated based on EBITDA divided by the operating revenues excluding mobile terminal sales.
3 Net profit represented profit attributable to equity holders of the Company.
4 Equity and net asset value represented equity attributable to equity holders of the Company.
5 Certain prior years figures were retrospectively restated due to the acquisition of China Telecom (Europe) Limited. Please refer to note 1
to the audited financial statements in this annual report for details.
For further information,
please browse our website
at www.chinatelecom-h.com.
4
China Telecom Corporation Limited Annual Report 2013
Financial Highlights
Operating Revenues
(RMB millions)
EBITDA1
(RMB millions)
EBITDA Margin2
(%)
321,584
96,551
32.6
34.0
283,176
245,149
75,362
70,874
27.4
20115
20125
2013
20115
20125
2013
20115
20125
2013
Net Profit3
(RMB millions)
Dividend Per Share
(HK$)
NAV Per Share4
(RMB)
16,494
14,949
17,545
0.085
0.085
0.095
3.165
3.276
3.432
20115
20125
2013
2011
2012
2013
20115
20125
2013
China Telecom Corporation Limited Annual Report 2013
5
COMMUNICATIONS &
INFORMATION
INDUSTRIES
Change
Development
Integration
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Mobile
Internet
OTT
FTTH
Cloud
Computing
Big
Data
leading
to
Big
Opportunities
as well as challenges
2013 Milestones
YiChat
April
June
August
November
December
A devastating earthquake of 7.0 magnitude
hit Lushan county, Ya’an in Sichuan
province. China Telecom quickly restored
the communications in the disaster area,
provided hotlines for missing families and video
conference assurance for the government,
vigorously supporting the disaster relief works
China Telecom successfully accomplished
the communications safety assurance of
Shenzhou – 10 spacecraft
China Telecom jointly launched “YiChat” with
NetEase, Inc. to create the new mobile Internet
portal. It marked a new stage of cooperation
between a telecommunications operator and
an Internet company on joint development
and operation of mobile instant messaging
products as well as capital collaboration
China Telecom’s 3G subscribers exceeded
100 million, accounting for more than 50% of
total mobile subscribers
China Telecom was granted the permit to
operate the LTE/4G digital cellular mobile
service (TD-LTE), officially embarking on the 4G
mobile operation era
China Telecom’s wireline broadband
subscribers exceeded 100 million
China Telecom Corporation Limited Annual Report 2013
9
Chairman’s Statement
Chairman’s Statement
Telecommunications industry is now undergoing Big Change, Big
Integration and Big Development, generating new opportunities and challenges.
Our people, instead of getting complacent with their past successes, proactively
liberate their own mindsets. They are keen to embrace the changes and innovate
for breakthroughs, striving to bring more compelling experience and delights to
our customers. Seeing their dedication to the success of the company, I feel so
encouraged and grateful. I also firmly believe that a vibrant, responsible and
innovative China Telecom is emerging and will be a legend again!
In 2013, the Company accurately captured the
development pattern of mobile Internet and
the integration trend of the industry. Deepened
transformation has enhanced its scale as well as
profitability, with progressive strengthening in market
position. Riding on the comprehensive implementation
of the “Three New Roles”1 strategy, the emerging
businesses experienced rapid growth while the
business structure optimisation has accelerated,
steadily enhancing our corporate development
capabilities. Adhering to the Internet’s spirit of
“openness, cooperation and innovation”, the Company
boldly explored and accelerated its evolution into a
mode of operation that integrated deepened efficiently-
centralised management and comprehensive sub-
division of performance evaluation units, leading to
pronounced improvement in corporate vitality and
efficiency. The Company also established its grand
blueprint of “creating a New China Telecom in five
years”. 4G licensing started a new era of mobile
Internet, bringing vast potential for future corporate
development.
Operating Results
In 2013, the Company continued to maintain its
healthy and rapid growth momentum. The operating
revenues amounted to RMB321.6 billion, representing
an increase of 13.6% over last year. Excluding the
mobile terminal sales, the operating revenues were
RMB284.1 billion, representing an increase of 10.0%
over last year, with revenue growth surpassing industry
average and revenue market share further increased.
Of which, mobile revenue accounted for approximately
50%, and the business structure continued to optimise.
Profitability has been significantly enhanced with the
profit attributable to the equity holders of the Company
reaching RMB17.5 billion, increased by 17.4% over
last year, and basic earnings per share were RMB0.22.
EBITDA2 was RMB96.6 billion, while EBITDA margin3
was 34.0%. Capital expenditure was RMB80.0 billion.
Free cash flow4 reached RMB11.1 billion.
1 The “Three New Roles” refers to the Leader of Intelligent Pipeline, the Provider of Integrated Platforms and the Participant of Content &
Application Development.
2 EBITDA is calculated based on operating revenues minus operating expenses plus depreciation and amortisation.
3 EBITDA margin is calculated based on EBITDA divided by the operating revenues excluding mobile terminal sales.
4 Free cash flow is calculated from EBITDA minus capital expenditure and income tax.
China Telecom Corporation Limited Annual Report 2013
11
Chairman’s Statement
Taking into account the return to shareholders, the
Company’s cash flow and its capital requirements
for future development, the Board of Directors has
decided to recommend at the forthcoming Annual
General Meeting that a dividend being an equivalent
of HK$0.095 per share for the year 2013 be declared.
Dividend per share increased by 11.8% compared to
2012.
Strong execution reinforcing corporate
strength
Fundamental services continued its scale
development
In 2013, the Company accelerated its scale expansion
and significantly increased its market influence by
fully leveraging the competitive strengths in network,
brand recognition and services edges in mobile
services and benefiting from the efficient unified
operation of the network assets and mobile services
as a whole. Persisting in a terminal-led approach
and reinforcing terminal segmentation, the Company
continuously expanded the variety of terminal models
and optimised the structure of the Company’s terminal
device offerings. Through the deepening of channel
distribution, the Company focused its strengths on
enhancing the coverage and the portion of sales
derived from open channels, which further improved
the overall capability and strength of open channels.
The Company’s subscriber base and quality continued
to enhance through initiatives such as strengthening
application-driven development, continued
improvement in functionalities and presentation of
applications, and refining customer acquisition strategy.
Mobile services revenue reached RMB113.8 billion this
year, representing an increase of 23% over last year,
which was the highest growth rate in the industry. The
net addition of mobile subscribers was approximately
25 million, with total mobile subscribers reaching
186 million. 3G subscribers had a net addition of
approximately 34 million, with a total exceeding 100
million. The number of 3G subscribers as a percentage
of total mobile subscribers increased to 56%, further
optimising the structure. The Company’s fundamental
was further strengthened, with its mobile subscriber
market share surpassing 15%.
The Company persisted in profitable scale development
and has seen a steady and healthy growth in its
wireline broadband services with its high-speed fibre
broadband services fully rolled-out. The Company
has comprehensively stepped up its efforts in its
wireline broadband network maintenance and service
quality enhancement, and has continued to promote
bandwidth upgrade. The Company introduced the
100Mbps home fibre broadband product, which
improved customer experience and network utilisation,
resulting in the steady growth in return. The Company
propelled the increase in its customer value by enriching
its high-bandwidth products portfolio, accelerating
the research, development and promotion of “Smart
Family” products and strengthening the premium
content and enriched value. The Company insisted on
rational competition and gained customers’ recognition
through high price-to-performance factors, defending
the value propositions of the industry, while reserving
room for future growth. Wireline broadband revenue
reached RMB70.8 billion this year, representing
an increase of 6% over last year. The total number
of wireline broadband subscribers exceeded 100
million, with a net addition of approximately 10 million.
Among these subscribers, the number of Fibre-to-
the-Home (FTTH) subscribers was close to 27 million,
representing an increase of over 70% year-on-year.
FTTH subscribers accounted for nearly 30% of the
total number of wireline broadband subscribers and the
subscriber structure has been further optimised.
Emerging businesses grew rapidly
In 2013, the Company prospected the industry
landscape and accelerated the strategic restructuring
of its business structure. Emerging businesses,
including mobile data traffic, Internet applications and
informatisation applications, experienced rapid growth
of nearly 30%, accounting for close to a quarter of the
total revenue. The new customer acquisition approach
led by applications and services achieved remarkable
results. The Company has duly implemented its
deepened strategic transformation.
Continued optimisation of data traffic operation
fostered the rapid growth in the scale and value of
data traffic. The Company reinforced its efforts in
targeted marketing and locked its sights on its targeted
customer groups through its continuous efforts to
reinforce its brand awareness and brand influence,
and offering data-focused, flexible and self-designed
packages to high value customers. By strengthening
the promotion of smart terminals, enhancing the pre-
installed applications and customer coaching and
enhancing customer experiences, the Company
cultivated and strengthened the customers’ data
usage habits. Relying on its intelligent pipeline and
integrated platform, the Company fully exploited the
12
China Telecom Corporation Limited Annual Report 2013
Chairman’s Statement
data-converging characteristics of its Internet portal-
type applications such as “YiChat” and “Best Pay”, to
strengthen its product offerings focusing on dedicated-
data traffic and data traffic backward monetisation
operation. During the year, smartphones sales
accounted for more than 80% of the total handset
sales, while the total data traffic by 3G handsets
increased by 142% over last year. The monthly average
data traffic per 3G handset subscriber reached 190MB,
representing an increase of 42% from last year. Internet
access revenue by handsets increased by 88% from
last year, while the 3G handset Internet access ARPU
accounted for 33% of the 3G ARPU.
The accelerated promotion of Internet applications and
industry-specific applications drove the robust scale
development. With a rapid scale expansion of “Best
Pay”, the penetration of customers, entrepreneurs
and financial system has progressively expanded. In
2013, the transaction amount of “Best Pay” reached
RMB133.1 billion, representing a growth of 226%
over the previous year. The Company also jointly
launched “YiChat” with NetEase, Inc. to promote the
development of product hosting channel and create
a new type of mobile Internet portal. At present, the
number of registered “YiChat” users is nearly 60 million.
To actively develop the cloud computing applications,
the Company proactively promoted the incorporation
of the “cloud” element into its existing products and
services to further enhance its product range. In order
to reinforce its efficiently-centralised development,
the Company completed the strategic planning of
16 application development centres covering eight
industries to promote the continuous optimisation of
the informatisation application system. Emphasising on
the Smart Cities project and key industry customers
expansion, the Company continued to strengthen
its edge on strategic cooperation in informatisation
applications. With a focus on customer experience,
the Company placed an equal emphasis on product
standardisation and differentiation. Through the
improvement of the functionalities of informatisation
applications and service quality, customer satisfaction
has been enhanced which effectively increased the
value of customers’ contribution. During the year, there
was a net addition of over 13 million mobile subscribers
driven by industry-specific applications, up by 30%
from last year, of which over 70% was generated
from its six major applications including the “e-Surfing
School” initiative.
Reform and innovation accelerating the
creation of differentiated edges
Persistence in innovation and cooperation
brought remarkable results in the “Three
New Roles” strategy
The Company boldly created a new model of open
cooperation for the development of the emerging
businesses, and successfully introduced the essential
elements of mobile Internet into the model, leading to
a landmark breakthrough for the Company. With newly
set segregated operating systems and mechanisms for
the emerging businesses, the Company offered support
to a highly-efficient “Internet-business type” operating
environment and an effective incentive mechanism.
By adhering to its market-oriented and capital-driven
approach, the Company facilitated dynamic and flexible
resources allocation and effectively strengthened its
organic vibrancy. With the launch of “YiChat” as a
breakthrough, the Company leveraged the Internet
companies to rapidly power up its competitive
strengths. The Company also leveraged the resources
edges of the network, platform, customer services and
marketing channels, and the enriched experiences
in Internet-type product operation and online sales
in the cooperation. The Company has effectively
penetrated and integrated the current market influence
and customer base of both parties to converge the
strengths and opened up a new path for Internet-type
services.
Conforming to the industry convergence trends
and learning from the mobile Internet development
experience, the Company constructed an “Internet-
business type” model and accelerated the
comprehensive commercial implementation of the
“Three New Roles” strategy. The Company fully
enhanced the data traffic control and billing capabilities
based on customers and service identification. The
Company strengthened the self-determined bandwidth
upgrade-on-demand function for wireline broadband
subscribers. With the promotion of “Big Data”, the
Company started to monetise from its intelligent
pipeline by turning the edges of big volume of data
into edges of valuable services. By strengthening
the capabilities such as location-based services and
unified account operation, the Company sped up the
process of opening up its capabilities for cooperation
and progressively implemented the integrated platform.
The Company accelerated product development and
promotion, initiated three business groups: digital
entertainment, e-commerce and information services,
China Telecom Corporation Limited Annual Report 2013
13
Chairman’s Statement
and enriched their contents and application systems
progressively.
Focusing on efficiency and vitality to
accelerate the evolution of corporate
operation model
With our in-depth study and grasping the pattern, we
set vitality and efficiency as our core objectives on
developing a new operation model with the key features
of reasonable sub-division of performance evaluation
units and efficiently-centralised management operation,
for accelerated preparation to adapt to mobile Internet
development.
To promote the “market-driven” reform, the Company
continued to sub-divide performance evaluation units
to fully inspire employee vitality. With a perseverance
to explore, the Company further implemented the
sub-division of performance evaluation units in the
whole company from bottom to top including sales
outlets, rural sub-branches and investments units,
which allowed better matching between operation
responsibilities and authorities of resource allocation
such as cost and investment resources in the frontline
business units, and established a close and direct
linkage between the employee remuneration and the
integrated return of the frontline business unit. This
resulted in high degree of alignment of the operating
goals of the frontline business units with the overall
corporate goal and highly aligned the interests of the
employees with those of the Company. Over the past
year, the operational efficiency and profitability of the
frontline business units experienced a rapid growth.
Adapting to the development pattern of the mobile
Internet business, the Company further stepped
up its effort in efficiently-centralised management
to strengthen its entire-network operation and
management capabilities. The Company also
accelerated its network upgrade, and steadily
expanded its capabilities. Platform integration and
consolidation was strengthened and cloud resources
were deployed to further enhance the level of efficiently-
centralised operation of the network. The Company
further refined its package structure resulting in an
increase in the proportion of the sales of efficiently-
centralised packages. With a focus on the promotion of
“Best Pay”, “YiChat” and all sorts of livelihood-related
applications, the product management systems were
continuously optimised. The Company strengthened
the synergistic collaboration of channels, promoted the
efficiently-centralised control and resources exchange
of open channels such as large chain stores and
manufacturers, enhanced integrated operation and
development of electronic channels at group level
to further strengthen the overall capability in channel
sales. To lower the management costs, the Company
continuously improved its level of efficiently-centralised
management on procurement, IT, finance and other
areas. Through promoting the efficiently-centralised
operations of overseas businesses, profitability was
significantly enhanced. The Company recorded a 38%
growth in the revenues from overseas during the year.
The Company adopted various initiatives to improve
its operating efficiency and profitability. The Company
implemented a market-oriented approach internally by
focusing on the key evaluation metrics and optimising
its resources allocation model while creating an internal
competition mechanism for costs and investment
resources to tilt the resources towards high growth and
high returns areas. To adapt to a new operating model,
the Company restructured its front-end organisation,
and further strengthened the efficiently-centralised
operation and co-ordination from a vertical perspective
while enhancing the synergistic collaboration of various
sales channels to enhance the efficiency of its front-
end decision-making and execution. The Company
also innovated services approach with customer
experience as a core by launching multimedia customer
services on Internet through handset application,
“YiChat” and “Wechat” to achieve “one-point access
for entire-network service”. The Company progressively
promoted the mobility of service processing to further
improve service efficiency. The Company strengthened
precision management by actively enhancing the
utilisation and consolidation of its existing assets, as
well as increasing the level of capital centralisation,
strengthening its control over investment and costs
to increase the efficiency and return of the use of its
capital and assets.
Corporate Governance and Social
Responsibility
We continue to strive to maintain a high level of
corporate governance, attaching great importance to
risk management and control. We strive to enhance
corporate value and transparency to ensure our healthy
and orderly growth. Our persistent efforts in corporate
governance have been widely recognised by the capital
markets. We were accredited with a number of awards
and recognition, including being voted the “No. 1 Best
Managed Company in Asia” by FinanceAsia for three
14
China Telecom Corporation Limited Annual Report 2013
consecutive years, “No. 1 Most Honored Company in
Asia” by Institutional Investor, and also “Overall Best
Managed Company in Asia” by Euromoney five years in
a row.
We persisted in operating with integrity and proactively
fulfilled our corporate social responsibility while
promoting a healthy and orderly development of our
industry. Meanwhile, we enhanced the information
security assurance for our nation and customers, while
persistently maintaining a good network environment
by actively promoting Internet interconnections and
further strengthening energy conservation and emission
reduction. We also helped proactively with fighting
major natural disasters such as earthquakes and
typhoons, and have accomplished telecommunications
assurance services for significant events such as the
China-Eurasia Expo and the launch of Shenzhou-10
spacecraft, receiving high recognition and appreciation
from the society.
Outlook
At present, China’s deepening reform and
accelerating the adjustment and restructuring of
the national economy, together with accelerating
social informatisation process with the promotion
of information consumption and implementation
of “Broadband China” strategy, offers vast market
potential. The mobile Internet business in China has
undergone an explosive growth momentum. Coupled
with the accelerated evolution of technology and
industry chain, there is a rapid upgrade in smart
terminals and data usage habits. 4G licensing opens
up a brand new development space for mobile
Internet, bringing in a valuable opportunity for a full
scale transformation and upgrade in the information
industry. Meanwhile, the global economy is still in a
deep adjustment period. More industry reforms pushed
by integrated development are emerging. “Customer
flow, Data traffic flow and Capital flow” now become
the new key value of the industry development. The
value shifting in the industry is accelerated, while
competition is further intensified in respect of its scope
and magnitude with gradual roll-out of regulatory
policies such as amendments to wireline broadband
competition policies. As such, the Company will face
new challenges.
Chairman’s Statement
With the 4G licensing, China Telecom embraces the
best period of its full-services operations. We will grasp
the opportunity for rapid development, proactively and
appropriately tackle the challenges from regulatory
and policy changes such as national tax reform,
striving to create a New China Telecom. Based on the
characteristics of its own resources, the Company will
fully leverage the dual-technology strengths of wireline
broadband and wireless broadband and continue to
strengthen the wireline broadband network through the
IPv6 evolution and fibre broadband. The Company will
also actively apply for the permit of LTE FDD operation
and will deploy LTE network appropriately with regard
to the government policy and business development.
A seamless high-speed mobile network built through
the hybrid LTE network, coupled with highly efficient
and coordinated development of 4G and 3G, will
establish a full scene of network edge. The Company
will deepen the reform to create incremental value,
share the return with employees to fully unleash their
vibrancy, and accelerate the evolution towards an
Internet-business type operation model. Capitalising
on reform and innovation, the Company will firmly
persist in the implementation of the “Three New Roles”
strategy. With quality and efficiency enhancement,
the Company will promote dual enhancement in
scale development and profitability with continual
reinforcement in competitiveness. By proactively open
cooperation based on complementary resources and
edge, the Company will endeavour to achieve a win-win
cooperation in the industry value chain and accelerate
the strategic planning of emerging businesses. The
Company will strive to expand the value creation
areas and continue to be the forerunner in the mobile
Internet era, while continuously creating new values 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, and my gratitude to all our employees for
their hard work and their contribution to the Company.
Wang Xiaochu
Chairman and Chief Executive Officer
Beijing, China
19 March 2014
China Telecom Corporation Limited Annual Report 2013
15
Directors, Supervisors and Senior Management
Mr. Wang Xiaochu
Age 55, 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 51, 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 30 years of operational and
managerial experience in the telecommunications industry in China.
16
China Telecom Corporation Limited Annual Report 2013
Directors, Supervisors and Senior Management
Madam Wu Andi
Age 59, 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 32 years of economic and financial management experience in
the telecommunications industry in China.
Mr. Zhang Jiping
Age 58, 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 32 years of experience in network operation and
management in the telecommunications industry in China.
Mr. Yang Xiaowei
Age 50, 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
General and Deputy Director General of Chongqing Telecommunications
Bureau, a Deputy Director General of the Chongqing Telecommunications
Administration Bureau and a Director General of Chongqing Municipal
Communication Administration Bureau. Mr. Yang served as General Manager
of the Chongqing branch and the Guangdong branch of the Unicom Group,
Vice President of the Unicom Group, Director of the Unicom Group and
Executive Director and Vice President of China Unicom Limited. Mr. Yang also
served as Director and Vice President of China Unicom Corporation Limited
and Chairman of Unicom Huasheng Telecommunications Technology Co. Ltd..
He is also a Vice President of China Telecommunications Corporation. Mr. Yang
has extensive experience in management and telecommunications industry.
China Telecom Corporation Limited Annual Report 2013
17
Directors, Supervisors and Senior Management
Mr. Sun Kangmin
Age 56, 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 Communication Administration 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 30 years of operational and managerial experience in the
telecommunications industry in China.
Mr. Ke Ruiwen
Age 50, is an Executive Director and 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 28 years of
operational and managerial experience in the telecommunications industry in
China.
Mr. Gao Tongqing
Age 50, is an Executive Vice President of the Company. Mr. Gao graduated
from the Changchun Institute of Posts and Telecommunications with a major in
telecommunications engineering and received a doctorate degree in business
administration from the Hong Kong Polytechnic University. Mr. Gao served
as Deputy Director General of Xinjiang Uygur Autonomous Region Posts and
Telecommunications Administration, Deputy General Manager and General
Manager of Xinjiang Uygur Autonomous Region Telecom Company, General
Manager of China Telecom Jiangsu branch. He is also a Vice President of
China Telecommunications Corporation. Mr. Gao has extensive experience in
management and telecommunications industry.
18
China Telecom Corporation Limited Annual Report 2013
Directors, Supervisors and Senior Management
Mr. Xie Liang
Age 50, is a Non-executive Director of the Company. Mr. Xie is a senior
accountant and received an executive master degree of business administration
(EMBA) from Jinan University. Mr. Xie is the Vice President of Guangdong
Rising Assets Management Co., Ltd. (one of the domestic shareholders
of the Company). Mr. Xie served as the Deputy Director of the Corporate
Finance Division and the Corporate Audit Division of the Guangzhou Military
District Back-end Operation Management Department and the Vice Minister,
the Minister and the assistant to the President of Guangdong Rising Assets
Management Co., Ltd.. Mr. Xie has over 20 years of experience in corporate
management and extensive experience in corporate finance management.
Mr. Wu Jichuan
Age 76, 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 Expert Committee for Telecommunication Economy of MIIT, Honorary
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 Education, Science, Culture and Public
Health Committee of the National People’s Congress.
Dr. Qin Xiao
Age 66, is an Independent Non-executive Director of the Company. Dr. 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 and the Non-
executive Chairman of the Board of Amex Resources Limited. He is a part-time
professor at the School of Economics and Management of Tsinghua University
and PBC School of Finance, Tsinghua University, a non-official member
of the Financial Services Development Council of Hong Kong. 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 and
the Eleventh Chinese People’s Political Consultative Conference, an advisor on
the Foreign Currency Policy of the State Administration of Foreign Exchange, a
part-time professor at the Graduate School of the People’s Bank of China, 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.
China Telecom Corporation Limited Annual Report 2013
19
Directors, Supervisors and Senior Management
Mr. Tse Hau Yin, Aloysius
Age 66, 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, 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. Mr. Tse was appointed as an independent non-executive
director of CCB International (Holdings) Limited, a wholly owned subsidiary of
China Construction Bank Corporation in March 2013. 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 a former 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.
Madam Cha May Lung, Laura
Age 64, is an Independent Non-Executive Director of the Company. Mrs. Cha
is currently a Hong Kong Delegate to the 12th National People’s Congress,
PRC, a Member of the Executive Council of the Government of the Hong
Kong Special Administrative Region and Chairman of the Financial Services
Development Council, Government of the HKSAR. 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 the Non-Executive Director of Unilever, PLC and Unilever,
N.V, and the Vice Chairman of the International Advisory Council of the China
Securities Regulatory Commission (“CSRC”), a Member of the International
Advisory Council of the China Banking Regulatory Commission. 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.
20
China Telecom Corporation Limited Annual Report 2013
Directors, Supervisors and Senior Management
Professor Xu Erming
Age 64, is an Independent Non-executive Director of the Company. Professor
Xu is a professor and Ph.D. supervisor of the Graduate School at the Renmin
University of China, 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 and Vice Chairman of
the Chinese Enterprise Management 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, the State-Level Class Two Teaching Award and the National Excellent
Course 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 the Hong Kong Polytechnic
University.
Mr. Yung Shun Loy, Jacky
Age 51, 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 50, 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.
China Telecom Corporation Limited Annual Report 2013
21
Directors, Supervisors and Senior Management
Supervisors
Mr. Shao Chunbao
Age 56, is the Chairman of the Supervisory
Committee of the Company. Mr. Shao is currently
the head of the Discipline Inspection Division of China
Telecommunications Corporation. Mr. Shao received
a doctorate degree from the Huazhong University
of Science and Technology. He served as Deputy
Office Director and Deputy Director of the Scientific
Research Division of the Shanxi Taiyuan Municipal
Party School, Director-grade Secretary in the General
Office of CPC Committee of Shanxi Province, Director-
grade investigator of the Organisation Department
of the Central Committee of CPC, Director General-
grade Deputy Director General of the Central Direct-
owned Institutions Management Office, Deputy
Secretary of the Municipal Party Committee of Jiujiang
of Jiangxi Province, Deputy Secretary of the Discipline
Commission and Director General of the Inspection
Bureau of the State Owned Assets Supervision and
Administration Commission of the State Council. Mr.
Shao has extensive government work experience and
management experience.
Madam Zhu Lihao
Age 73, 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. Tang Qi
Age 55, is an Employee Representative Supervisor of
the Supervisory Committee of the Company. Mr. Tang
is currently the Vice Chairman of the Labour Union of
China Telecommunications Corporation and China
Telecom Corporation Limited. Mr. Tang received a
doctorate degree in business administration (DBA) from
the Hong Kong Polytechnic University. Mr. Tang served
as the Director of the marketing department of the Posts
and Telecommunications Administration of Shandong
province, Manager of the marketing department of China
Telecommunications Corporation, General Manager of
China Telecom Shandong branch, General Manager of
China Telecom Chongqing branch. Mr. Tang is a senior
engineer and has extensive experience in operation and
management in the telecommunications industry.
Mr. Zhang Jianbin
Age 48, is an Employee Representative Supervisor
of the Supervisory Committee of the Company. Mr.
Zhang is currently the Deputy Managing Director of the
Corporate Strategy Department (Legal Department).
Mr. Zhang graduated from the Law School of Peking
University in 1989 and received LLB and LLM degrees.
He also had EMBA degree from the Guanghua School of
Management at Peking University in 2006. He previously
worked at the Department of Policy and Regulation of
the Ministry of Posts and Telecommunications (“MPT”)
and the Directorate General of Telecommunications
(“DGT”) of the MPT. He served as Deputy Director of
the General Office and Deputy Director of the Legal
Affairs Division of the DGT of the MPT, Director of the
Corporate Strategy Department (Legal Department) of
the Company. Mr. Zhang is a senior economist with over
20 years of experience in telecommunications legislation
and regulation, corporate governance, corporate legal
affairs and risk management.
22
China Telecom Corporation Limited Annual Report 2013
Directors, Supervisors and Senior Management
Mr. Hu Jing
Age 38, is a Supervisor of the Supervisory Committee
of the Company. Mr. Hu is currently the Director in the
audit department of the Company. Mr. Hu received a
bachelor’s degree in accounting from the Xi’an University
of Finance and Economics in 1997 and a master’s
degree in business administration from the Northwest
University in 2003. Mr. Hu served at various financial and
auditing positions at Shaanxi Telecom Company and
China Telecommunications Corporation. He is a member
of the Chinese Institute of Certified Public Accountants
and senior accountant with 16 years of experience in
finance and auditing.
Mr. Du Zuguo
Age 51, 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) and the Chairman
and General Manager of Zhejiang Province Financial
Holdings Company Limited. Mr. Du served as Director,
Deputy Director General, Deputy Secretary to the CCP
Committee, Director General and Secretary to the CCP
Committee 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.
China Telecom Corporation Limited Annual Report 2013
23
STRONG
BELIEF
De - Telecom
Breaking away from the constraints of traditional
telecommunications operation mindset
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A Dynamic Team:
Embracing change
Keen to Advance
Innovative
Business Review
The following table sets out key operating data for 2011, 2012 and 2013:
Unit
2011
2012
2013
Rate of change
over 2012
Mobile subscribers
million
126.47
160.62
185.58
of which: 3G subscribers
Wireline broadband subscribers
million
million
36.29
76.81
69.05
90.12
103.11
100.10
Access lines in service
million
169.59
163.00
155.80
Mobile voice usage
Mobile SMS usage
3G handset data traffic
Mobile Colour Ring Tone subscribers
million minutes
407,765
509,229
603,616
million messages
49,941
55,789
64,235
KTB
million
23.60
75.38
72.30
92.19
175.10
102.02
Wireline local voice usage
million pulses
206,371
172,175
148,690
15.5%
49.3%
11.1%
-4.4%
18.5%
15.1%
142.2%
10.7%
-13.6%
e-Surfing 3G Handset
Fair & Mobile Internet
Forum
China Telecom Corporation Limited Annual Report 2013
27
Business Review
In 2013, fully capitalising on the development
opportunities brought forth by the rapid growth of
3G and the mobile Internet, the Company continued
to deepen its strategic transformation, innovate
development models and create competitive edges,
leading to a continuous expansion of subscribers’ scale,
rapid growth of mobile services and steady growth of
broadband services, and achieving remarkable increase
in operating revenues, further optimising revenue
structure and reinforcing its competitive edges in the
market.
Key operating performance
Rapid growth in operating revenues, while
business structure continued to optimise
In 2013, the Company’s operating revenues increased
by 13.6% to RMB321,584 million. Excluding revenues
from mobile terminal sales, operating revenues were
RMB284,149 million, representing an annual growth of
10.0%. The Company’s revenue structure was further
optimised, with mobile revenues accounting for 47.0%
of operating revenues, and revenues from the mobile
and wireline broadband services accounting for close
to 70% of operating revenues.
Mobile revenues maintained rapid growth
and subscribers’ scale continued to expand,
while customers’ values were enhanced
In 2013, the Company persisted in the strategy that
is terminal-led and application-driven and placed
concurrent emphasis on integrated products and
efficiently-centralised single products. The Company
also strengthened cooperation with open channels and
raised the sales capacities of channels, continuously
expanding the mobile subscribers’ scale. At the
end of the year, the number of mobile subscribers
reached 186 million, with a net addition of 24.96 million
subscribers, and mobile service revenues increased by
22.6% to RMB113,751 million compared to last year.
Leveraging on the opportunity emerging from contact with
our mobile customers, the Company offered customers
coaching services on utilising mobile applications and
launched promotional campaigns to raise the penetration
and adoption of mobile applications, thereby increasing
data traffic and enhancing customers’ values. In 2013,
mobile average revenue per user (ARPU) was RMB54.8,
representing a year-on-year growth of 1.7%. 3G handset
data traffic stood at 175.1KTB, up 142.2% year-on-year,
and the monthly average data traffic per 3G handset
subscriber came to 190MB.
China Telecom provides
its customers with a wide
variety of products and
services
28
China Telecom Corporation Limited Annual Report 2013
Wireline services maintained positive growth
and wireline broadband service continued to
develop steadily
In 2013, the Company deepened the implementation
of wireline and mobile integration and stabilised the
wireline revenues base. Revenues from wireline services
were RMB170,398 million and up 3.1%, maintaining
positive growth.
In the wireline broadband service, the Company
reinforced its competitive edges by adopting the
development strategy of “Emphasising quality on the
high-end, significantly improving network speed for
the mainstream market, and improving market share
on the low-end”, with the deepened implementation of
the “Lightening Fibre Residential Areas” initiative and
“Broadband Excellence” programme, thereby further
improving the broadband subscriber structure and
achieving steady growth of subscribers’ scale and
revenues. In 2013, revenues from wireline broadband
services grew 6.1% to RMB70,821 million. The number
of wireline broadband subscribers reached 100 million,
with a net addition of 9.98 million subscribers, of which
the number of fibre broadband service subscribers was
close to 27 million, with subscribers of bandwidth of
4Mbps or above accounting for 80% of the total, up
7.0 percentage points compared with the beginning of
2013.
Business Review
The iTV, ICT and IDC services became three key drivers
of revenue growth of wireline value-added services
(VAS) and integrated information services. In 2013,
revenues from wireline VAS and integrated information
services were RMB34,274 million, up 11.6% over last
year. Riding on iTV, the Company promoted “Smart
Family” to enhance customers’ experience by offering
high-definition and intelligent products. By accelerating
ICT development, the Company continued to provide
customers with integrated information services that
were convenient, differentiated and with high price-
performance ratio. The deployment of six key Cloud
data centres of the Company was in place.
In 2013, revenues from wireline voice service as a
percentage of the Company’s operating revenues saw
a further decline, signalling an effective alleviation of
operational risks. Revenues from wireline voice service
were RMB38,633 million, representing 12.0% of the
operating revenues and a drop of 3.3 percentage
points from the previous year.
Business operating strategies
In 2013, the Company adhered to the operating theme
of “promoting dual enhancement in scale development
and profitability through dual-leadership in innovation
and service”, vigorously implemented the two key
strategies of scale operation and data traffic operation,
and carried out operational measures in “efficiently-
centralised marketing, terminal-led approach,
application-driven promotion, open channel expansion
and excellent services provision”.
First, strengthened efficiently-centralised
marketing intensity and raised sales
efficiency
In 2013, the Company further refined package design
to meet the customers’ demand, launching “e-Surfing
Young” data-only and “DIY” mobile packages. At
the same time, the Company optimised its package
structure and centralised marketing resources and
strategy that tilted towards high-valued clients and
services. To actively adopt non-cost marketing model,
the Company carried out various activities, including
vigorous development of pre-paid subscribers and
providing rebate to existing customers upon depositing
of fees in advance. The Company further strengthened
the centralised effort of marketing activities by
organising four unified marketing campaigns during the
year and substantially enhanced customer acquisition
and terminal sales.
China Telecom Corporation Limited Annual Report 2013
29
Business Review
Second, strengthened terminal-led approach
and optimised terminal portfolio structure
The Company continued to promote the “terminal-
led” strategy that facilitated the continued prosperity
of CDMA terminal industry value chain. For the whole
year, a total of 334 CDMA handset models were newly
launched, of which 270 were newly-launched 3G
smartphone models. The smartphone sales volume
accounted for 80.4% of the total sales volume, up
19 percentage points over last year. Through chipset
upgrade, screen enlargement and other initiatives, the
price-to-performance ratio of the smartphones priced
around RMB1,000 was enhanced, strengthening the
competitive edges of the market of smartphones priced
around RMB1,000. The Company also successfully
managed to participate in the global launches of various
star handsets, such as Apple’s 5S/5C, Samsung’s S4
and NOTE3 and raised its market share in the high-end
market. The Company also collaborated with upstream
chipset manufacturers to launch low-end smartphones
priced at RMB299, tackling the disadvantages of
the lack of presence for CDMA network standard
smartphones in the low-end market.
Third, the Company accelerated the
promotion of applications to create
differentiated competitive edges
The Company attached great importance to
development and promotion of the industry applications
for government and enterprise customers, and
development of livelihood applications and mobile
Internet applications. For industry application, the
Company focused on promoting e-Surfing School, work
unit e-Surfing RFID, field work assistant, integrated
office, busy-shop assistant and campus e-Surfing RFID
and the industry applications drove over 13 million
of net addition of mobile subscribers. For livelihood
application, the Company vigorously promoted
applications for water, electricity and gas bills payment,
gas refuel, traffic fines and public transport payments.
For mobile Internet applications, the Company sped up
the pace of corporatisation and equity restructuring of
emerging services such as product centre businesses
in order to establish competitive specialised corporates.
China Telecom actively worked with mobile Internet
companies and jointly launched “YiChat” with NetEase,
Inc., serving as the mobile Internet portal.
Mobile Subscribers
(million)
Access Lines in Service
(million)
Wireline Broadband Subscribers
(million)
185.58
163.0
160.62
15.5%
7.5
13.3
38.7
155.8
4.4%
PAS
Public
Telephone
Government
& Enterprise
103.5
Household
5.4
12.6
40.2
97.6
100.10
90.12
11.1%
2012
2013
2012
2013
2012
2013
30
China Telecom Corporation Limited Annual Report 2013
Business Review
Fourth, the Company stepped up synergy of
channels and improved sales capabilities of
channels
The Company strengthened the collaboration of
the three major channels, namely, direct sales,
physical outlets and electronic channels, to converge
the strengths and improve sales capabilities. For
government and enterprises customers, the Company
strengthened the training for direct sales managers and
enhanced the capability to secure sizable contracts.
At the same time, it adopted a synergistic marketing
approach that combined “channel manager + agent
+ physical outlet” to enhance coverage of small to
medium sized government and enterprise customers.
For physical outlets, the Company continued to deepen
the implementation of “sub-division of performance
evaluation units” in the self-operated outlets to
motivate staff vitality and increase sales. The Company
extensively cooperated with open channels, especially
with chain stores and terminal manufacturers, as well as
strengthened the direct supply of terminals and calling
cards at the convenience outlets such as telephone
booths and service outlets in rural areas. For electronic
channels, the Company centralised its development
and operation, established dedicated marketing policy
and a B2B-focused distribution system, leading to
improvement of the electronic channel’s ability to
operate independently, and accelerating transformation
to be an e-commerce operator as well as the closer
cooperation with third party e-commerce companies.
The Company’s management attended
customer activities and market studies
China Telecom Corporation Limited Annual Report 2013
31
Business Review
Fifth, the Company focused on customers’
perception and improved customers’
satisfaction
To improve customers’ perception and enhance
their satisfaction, the Company implemented the
“Service of Excellence” strategy. Using service
standard as a starting point, the Company promoted
instant customer satisfaction feedback system in
10 pilot provinces, to evaluate services such as the
physical outlets and broadband service installation
and maintenance, strengthening the control over the
service delivery to enhance customers’ experience.
With focus on key services, the Company enhanced
3G service standardisation, optimised data traffic
queries, reminder service, credit control management
and service cancellation process, strengthened the
coaching of applications adoption and achieved EVDO
network optimisation in urban areas. In addition, it
provided customers of different tiers and clusters
with differentiated broadband services, enhancing
the efficiency of installation and maintenance, and
effectively promoting customer access bandwidth
upgrade. All these put the Company top in 3G and
broadband satisfaction survey. To provide convenient
and fast service, the Company enriched its service
channels by offering mobile “e-Surfing customer
service”, launching customer service platforms in
“YiChat” and “WeChat”.
Network and operation support
In 2013, the Company continued to uphold the “return-
focused” investment principal, optimised investment
structure, accelerated network upgrade and evolution
and progressively expanded capacity, supporting
business scale expansion and steadily enhancing
resource utilisation.
First, the Company continued to enhance the core
competitiveness of the mobile network. The Company
appropriately implemented a “rapid and targeted”
capacity expansion based on subscriber growth and
network traffic loads in 2G/3G network to ensure the
network quality and customers’ satisfaction, raising the
network utilisation by more than 2 percentage points.
Leveraging on the 4G licensing, the Company promptly
deployed LTE network in over 60 cities to provide
network assurance for its 4G operation.
China Telecom
announced the e-Surfing
mobile wallet service
32
China Telecom Corporation Limited Annual Report 2013
Second, the Company progressively promoted
fibre network in cities and bandwidth upgrade. The
Company focused on fibre network construction and
upgrade in the urban areas based on customers’
demand, enhancing the broadband network edges.
More than 90% of the urban areas were covered with
at least 20Mbps customer access bandwidth, with fibre
access port utilisation reaching 40%, an improvement
of 7.6 percentage points. In rural areas, the Company
deployed wireline, wireless and other means subject to
local conditions to meet the demand of new broadband
users, with more than 91% coverage with at least
4Mbps customer access bandwidth.
Third, the Company accelerated Cloud-based
development of open platforms and integrated
information services expansion. The Company was in
full efforts to promote its own platform integration and
improve the efficiency of the platform, accelerating the
construction of open integrated platforms and Cloud
data centres for raising the operating and cooperative
ability of Cloud resources. Riding on local government’s
implementation of “Smart Cities”, the Company actively
developed ICT services for government and enterprise
customers while continued to expand the depth and
breadth of ICT services.
Business Review
Development measures and highlights
for 2014
In 2014, 4G commercial launch, along with the
rapid growth of the new Internet-based information
consumption and e-commerce transactions, will bring
new market opportunities and room for information
consumption growth. The Company will accelerate
the deployment of 4G services and plan to launch 4G
products focusing on data traffic and multi-terminal
sharing. The 4G services positioning will be targeted
to mid-to-high-end users in mainly urban areas,
while 3G will be positioned to mid-to-low-end users
leveraging on the Company’s superior 3G network
coverage in rural areas with accelerated expansion of
rural subscribers. The Company continues to enhance
the utilisation of wireline broadband network through
upgrade of customer access bandwidth and quality
and iTV HD content enrichment to improve product
competitiveness and maintain the market leadership in
wireline broadband service. In addition, the Company
continues to accelerate the coverage of its open
channels, strengthen channels collaboration, and
raise marketing capabilities and sales per store. The
Company will actively expand in information services,
accelerate the emerging business development,
improve the data traffic product mechanism, cooperate
with Internet companies to promote the adoption of
heavy data traffic applications, such as video, and
vigorously expand “data traffic backward monetisation”.
To speed up the expansion of Internet applications, the
Company will strengthen the integrated platform as the
fundamental, build the core capabilities on payment,
location-based services and account operation and
leverage on “YiChat” as portal for building Internet
business system. The Company will reinforce traditional
advantages in the integrated outsourcing, IDC and
Cloud products, while nurturing new products in the
areas of big data and Internet of thing, etc. We will
also continue to optimise network resources, improve
operating and maintenance efficiency, enhance service
capabilities of full services and enhance customers’
satisfaction to attain continuous growth in customer
value and corporate value.
China Telecom Corporation Limited Annual Report 2013
33
Management’s Discussion and Analysis of Financial
Conditions and Results of Operations
Summary
Operating Revenues
In 2013, the Group firmly adhered to the main theme of
“promoting dual enhancement in scale and profitability
through dual-leadership in innovation and service”, and
further promoted the strategic transformation of “De-
telecom”, “Market Orientation and Differentiation” and
“Three New Roles”. The overall operating condition of
the Company was stable and healthy. With the double-
digit growth of both operating revenues and net profit,
the business structure continued to be optimised
and competitiveness continued to be enhanced. The
Group’s operating revenues in 2013 were RMB321,584
million, an increase of 13.6%1 from 2012; operating
expenses were RMB294,116 million, an increase of
12.3% from 2012; profit attributable to equity holders
of the Company was RMB17,545 million, an increase
of 17.4% from 2012; basic earnings per share were
RMB0.22; EBITDA2 was RMB96,551 million and the
EBITDA margin3 was 34.0%.
In 2013, the Group continued to firmly seize the
development opportunities, with the steady growth in
its subscribers’ scale, the operating revenues continued
to maintain at a high double-digit growth rate, the
Group’s market share steadily increased and the
revenue structure continued to be optimised. Operating
revenues in 2013 were RMB321,584 million, an
increase of 13.6% from 2012. Of this, the total mobile
revenue was RMB151,186 million, an increase of
28.3% from 2012. The wireline services revenues were
RMB170,398 million, an increase of 3.1% from 2012.
The aggregate of mobile service revenue4, wireline
broadband revenue, wireline value-added services and
integrated information application services revenue
accounted for 68.1% of the total operating revenues,
an increase of 0.9 percentage points from 2012.
1
2
3
4
In 2013, the Group acquired China Telecom (Europe) Limited. As the transaction was recognised as a combination of entities
under common control, the comparative figures of prior years have been restated accordingly. Please refer to note 1 to the audited
financial statements in this annual report for details.
EBITDA was calculated from operating revenues minus operating expenses plus depreciation and amortisation. As the
telecommunications business is a capital intensive industry, capital expenditure, the level of gearing and finance costs may have
a significant impact on the net profit of companies with similar operating results. Therefore, we believe EBITDA may be helpful in
analysing the operating results of a telecommunications service provider such as the Company. Although EBITDA has been widely
applied in the global telecommunications industry as a benchmark to reflect operating performance, debt raising ability and liquidity,
it is not regarded as a measure of operating performance and liquidity under generally accepted accounting principles. It also does
not represent net cash from operating activities. In addition, our EBITDA may not be comparable to similar indicators provided by
other companies.
EBITDA margin was calculated from EBITDA divided by operating revenues excluding the revenue from mobile terminal sales.
Mobile service revenue represents total mobile revenue minus other mobile revenue. Of this, in 2013, other mobile revenue
amounted to RMB37,435 million.
34
China Telecom Corporation Limited Annual Report 2013
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 2012 and 2013, together with
their respective rates of change:
(RMB millions, except percentage data)
Wireline voice
Mobile voice
Internet
Value-added services
Integrated information application services
Telecommunications network resource services and
lease of network equipment
Others
For the year ended
31 December
2013
38,633
58,217
99,394
36,230
25,233
17,586
46,291
2012
(restated)
43,369
49,166
87,662
31,137
23,181
15,737
32,924
Total operating revenues
321,584
283,176
Rates of
change
(10.9%)
18.4%
13.4%
16.4%
8.9%
11.7%
40.6%
13.6%
Wireline Voice
Through measures of convergent packages and
wireline monthly packages, the Group slowed down the
loss of wireline voice revenue and the negative effect
of wireline voice was further reduced. In 2013, revenue
from wireline voice services was RMB38,633 million, a
decrease of 10.9% from RMB43,369 million in 2012,
accounting for 12.0% of our operating revenues.
Mobile Voice
In 2013, the Group continued to strengthen its effort
on expanding the scale of mobile subscribers, and the
mobile service has maintained rapid growth. In 2013, the
net increase in the number of mobile subscribers was
24.96 million, reaching a total of 186 million. Revenue
from mobile voice services was RMB58,217 million, an
increase of 18.4% from RMB49,166 million in 2012,
accounting for 18.1% of our operating revenues.
China Telecom Corporation Limited Annual Report 2013
35
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
Internet
In 2013, revenue from Internet access services was
RMB99,394 million, an increase of 13.4% from
RMB87,662 million in 2012, accounting for 30.9%
of our operating revenues. On one hand, the Group
adopted the development strategy of “Emphasising
quality on the high-end, significantly improving network
speed for the mainstream market, and improving
market share on the low-end”, and continued to
deepen the implementation of the “Lightening Fibre
Residential Areas” initiative, formulated the “Broadband
Excellence” program and realised a quantum leap
of broadband service speed, and promote the rapid
development of broadband services. At the end of
2013, the number of wireline broadband subscribers
reached 100 million, the wireline broadband revenue
of the Group was RMB70,821 million, an increase of
6.1% from 2012. On the other hand, the Group fully
leveraged its advantage in 3G network and services,
and persisted in data traffic operation. Revenue from
mobile Internet access services was RMB27,962
million, an increase of 40.7% from 2012.
Value-Added Services
In 2013, revenue from value-added services was
RMB36,230 million, an increase of 16.4% from
RMB31,137 million in 2012, accounting for 11.3% of
our operating revenues. With the growth in the number
of mobile subscribers, mobile value-added services
such as SMS, MMS, and caller ID services developed
rapidly. Revenue from mobile value-added services was
RMB19,748 million, an increase of 17.2% from 2012.
Due to the rapid growth of the Internet Data Centre
services and iTV services, the revenue from wireline
value-added services increased by 15.3% from 2012.
Integrated Information Application Services
In 2013, revenue from integrated information application
services was RMB25,233 million, an increase of 8.9%
from RMB23,181 million in 2012, accounting for 7.8%
of our operating revenues. The increase in revenue was
mainly due to the rapid development of Information and
Communication Technology services. Revenue from
mobile integrated information application services was
RMB7,441 million, an increase of 10.3% from 2012.
Telecommunications Network Resource
Services and Lease of Network Equipment
In 2013, revenue from telecommunications network
resource services and lease of network equipment
was RMB17,586 million, an increase of 11.7% from
RMB15,737 million in 2012, accounting for 5.5% of our
operating revenues. As the demand from government
and enterprise customers for informatisation continued
to increase, the revenue growth from domestic and
international circuits services and lease of network
equipment has increased quite rapidly. Revenue from
lease of mobile network equipment was RMB383
million.
Others
In 2013, revenue from other services was RMB46,291
million, an increase of 40.6% from RMB32,924 million in
2012, accounting for 14.4% of our operating revenues.
With the growth in the scale of mobile subscribers,
the Group further increased the effort in the efficiently-
centralised procurement and sales of mobile terminal
equipment, especially “star” smartphones at different
price levels. Revenue from sales of mobile terminal
equipment was RMB37,435 million, an increase of
51.2% from 2012.
36
China Telecom Corporation Limited Annual Report 2013
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
Operating Expenses
While reasonably coordinating our resources, the Group further strengthened our cost control efforts, and promoted
profitable scale development of the enterprise. In 2013, operating expenses of the Group were RMB294,116 million,
an increase of 12.3% compared with 2012, and the rate of growth of operating expenses was lower than the revenue
growth rate. Operating expenses accounted for 91.5% of our operating revenues, a decrease of 1.0 percentage point
from 2012.
The following table sets forth a breakdown of the operating expenses of the Group in 2012 and 2013 and their
respective rates of change:
For the year ended
31 December
(RMB millions, except percentage data)
2013
Depreciation and amortisation
Network operations and support expenses
Selling, general and administrative expenses
Personnel expenses
Other operating expenses
Total operating expenses
2012
(restated)
49,666
65,979
63,099
42,857
40,367
Rates of
change
39.1%
(19.5%)
11.6%
9.0%
35.7%
12.3%
69,083
53,102
70,448
46,723
54,760
294,116
261,968
Depreciation and Amortisation
In 2013, depreciation and amortisation was RMB69,083
million, an increase of 39.1% from RMB49,666 million in
2012, accounting for 21.5% of our operating revenues.
The increase in depreciation and amortisation was
mainly due to the increase in depreciation as a result of
the acquisition of mobile network assets at the end of
2012.
Network Operations and Support Expenses
In 2013, network operations and support expenses
were RMB53,102 million, a decrease of 19.5% from
RMB65,979 million in 2012, accounting for 16.5% of
our operating revenues. The decline was mainly due
to the fact that the Group no longer needs to pay to
China Telecommunications Corporation the CDMA
network capacity lease fee after the completion of the
acquisition of mobile network assets.
China Telecom Corporation Limited Annual Report 2013
37
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
Selling, General and Administrative Expenses
In 2013, selling, general and administrative expenses
amounted to RMB70,448 million, an increase of 11.6%
from RMB63,099 million in 2012, accounting for 21.9%
of our operating revenues. The growth was mainly
attributable to the Group’s increased efforts to expand
social channels and appropriately increased marketing
initiatives. Commission and service expenses for third
parties amounted to RMB25,519 million, an increase of
30.6% from 2012. Advertising and promotion expenses
amounted to RMB36,490 million, an increase of 4.5%
from 2012. The cost of terminal equipment offered
to customers for free or at a nominal price amounted
to RMB22,795 million in 2013, an increase of 4.8%
from 2012. At the same time, the Group continued
its prudent control on general and administrative
expenses. Compared to last year, general and
administrative expenses decreased by 2.5%.
Personnel Expenses
In 2013, personnel expenses were RMB46,723 million,
an increase of 9.0% from RMB42,857 million in 2012,
accounting for 14.6% of our operating revenues. The
ratio of personnel expenses to operating revenues
decreased by 0.5 percentage points when compared
to 2012. While the Group strengthened the control
on personnel expenses, it appropriately increased the
remuneration for frontline staff to increase their passion
and promote business development. For details of
the number of employees, remuneration policies and
training schemes, please refer to the Human Resources
Development Report in this annual report.
Other Operating Expenses
In 2013, other operating expenses were RMB54,760
million, an increase of 35.7% from RMB40,367 million
in 2012, accounting for 17.0% 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 RMB35,227 million, an increase of 52.5% from
2012.
Net Finance Costs
In 2013, the Group’s net finance costs were RMB5,153
million, an increase of 229.9% from RMB1,562 million
in 2012. The increase was mainly due to the interest
expenses arising from the deferred consideration of the
mobile network assets acquisition and new short-term
loans. Net exchange losses were RMB3 million in 2013.
Profitability Level
Income Tax
The Group’s statutory income tax rate is 25%. In 2013,
the Group’s income tax expenses were RMB5,422
million with the effective income tax rate of 23.5%.
The difference between the effective income tax rate
and the statutory income tax rate was mainly due to
the preferential income tax rate, which was lower than
the statutory income tax rate, enjoyed by some of its
branches with operations in the western region of China
and some of its subsidiaries.
Profit Attributable To Equity Holders of the
Company
In 2013, profit attributable to equity holders of the
Company was RMB17,545 million, an increase of
17.4% from RMB14,949 million in 2012.
38
China Telecom Corporation Limited Annual Report 2013
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
Capital Expenditure and Cash Flows
Capital Expenditure
In 2013, in order to seize the development
opportunities of mobile services, reinforce the
advantages of broadband networks and enhance
the core-competitiveness of the network, the Group
increased its capital expenditure but at the same
time emphasised the optimisation of its investment
structure, with particular emphasis on investment in
high growth services, while investment in traditional
wireline services were strictly controlled. In 2013,
capital expenditure of the Group was RMB79,992
million, an increase of 48.8% from RMB53,748 million
in 2012. The increase in capital expenditure was mainly
attributable to the Group’s obligation to invest into the
mobile network after completion of the mobile network
assets acquisition at the end of 2012.
Cash Flows
In 2013, net decrease in cash and cash equivalents for the Group was RMB13,960 million, while the net increase in
cash and cash equivalents was RMB2,625 million in 2012.
The following table sets forth the cash flow position of the Group in 2012 and 2013:
(RMB millions)
Net cash flow from operating activities
Net cash used in investing activities
Net cash from/(used in) financing activities
Net (decrease)/increase in cash and cash equivalents
For the year ended 31 December
2013
2012
(restated)
88,351
(107,948)
5,637
(13,960)
70,722
(48,295)
(19,802)
2,625
China Telecom Corporation Limited Annual Report 2013
39
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
In 2013, the net cash inflow from operating activities
was RMB88,351 million, an increase of RMB17,629
million from RMB70,722 million in 2012. The increase
was mainly due to the increase in operating revenues
and that no CDMA network capacity lease fee was
payable after the acquisition of mobile network assets.
In 2013, the net cash outflow used in investing activities
was RMB107,948 million, an increase of RMB59,653
million from RMB48,295 million in 2012, mainly resulting
from an increase in capital expenditures compared to
2012 and the payment of part of the consideration for
the acquisition of mobile network assets.
In 2013, the net cash inflow from financing activities
was RMB5,637 million. In 2012, the net cash outflow
used in financing activities was RMB19,802 million. The
reason of the fluctuation was mainly due to the increase
in short-term loans.
Working Capital
The Group consistently upheld prudent financial
principles and strict fund management policies. At
the end of 2013, the Group’s working capital (total
current assets minus total current liabilities) deficit
was RMB147,315 million, an increase in deficit of
RMB19,080 million from RMB128,235 million in
2012. The increase in deficit was mainly because
medium-term notes amounting to RMB20,000 million
will become mature in 2014, thus reclassified from
non-current liabilities to current liabilities. As at 31
December 2013, the Group’s unutilised credit facilities
was RMB157,694 million (2012: RMB163,130 million).
At the end of 2013, the Group’s cash and cash
equivalents amounted to RMB16,070 million, amongst
which cash and cash equivalents denominated in
Renminbi accounted for 94.3% (2012: 97.2%).
Assets and Liabilities
In 2013, the Group continued to maintain a solid
financial position. By the end of 2013, the total assets
of the Group decreased to RMB543,239 million from
RMB545,291 million at the end of 2012, while total
indebtedness increased to RMB110,377 million from
RMB99,808 million in 2012. The ratio of the Group’s
total indebtedness to total assets increased to 20.3%
at the end of 2013 from 18.3% at the end of 2012,
mainly resulting from the increase in short-term loans.
40
China Telecom Corporation Limited Annual Report 2013
Management’s Discussion and Analysis of Financial Conditions
and Results of Operations
Indebtedness
The indebtedness analysis of the Group as of the end of 2012 and 2013 is as follows:
(RMB millions)
Short-term debt
Long-term debt maturing within one year
Long-term debt and payable
Finance lease obligations (including current portion)
Total debt
By the end of 2013, the total indebtedness of the
Group was RMB110,377 million, an increase of
RMB10,569 million from the end of 2012. This is mainly
due to the increase in short-term loans. Of the total
indebtedness of the Group, loans denominated in
Renminbi, US Dollars and Euro accounted for 99.1%
(2012: 98.9%), 0.5% (2012: 0.6%), and 0.4% (2012:
0.5%), respectively. 43.3% (2012: 37.5%) 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
2013
27,687
20,072
62,617
1
110,377
2012
6,523
10,212
83,070
3
99,808
As at 31 December 2013, the Group did not pledge
any assets as collateral for debt (2012: 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.
1 January
2014 –
31 December
2014
1 January
2015 –
31 December
2015
1 January
2016 –
31 December
2016
1 January
2017 –
31 December
2017
1 January
2018 –
31 December
2018
Thereafter
(RMB millions)
Short-term debt
Long-term debt and payable
Finance lease obligation
Operating lease commitments
Capital commitments
Total
28,279
99,135
1
7,573
7,738
Total contractual obligations
142,726
63,128
28,279
24,874
1
2,236
7,738
–
3,951
–
1,516
–
5,467
–
3,950
–
1,087
–
5,037
–
65,660
–
779
–
66,439
–
80
–
611
–
691
–
620
–
1,344
–
1,964
Note: Amounts of short-term debt, long-term debt and payable, and finance lease obligation include recognised and unrecognised interest
payable, and are not discounted.
China Telecom Corporation Limited Annual Report 2013
41
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 2013.
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
2013 and the financial position of the Company and the
Group as at that date are set out in the audited financial
statements on pages 110 to 185 of this annual report.
Dividend
The Board proposes a final dividend in the amount
equivalent to HK$0.095 per share (pre-tax), totalling
approximately RMB6,098 million for the year ended 31
December 2013. The dividend proposal will be submitted
for consideration at the Annual General Meeting to be
held on 29 May 2014. 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
final dividends are expected to be paid on or about 18
July 2014 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 2013 final dividends to non-
resident enterprise shareholders of overseas H shares
(including HKSCC Nominees Limited, other corporate
nominees or trustees, and other entities or organisations)
whose names appear on the Company’s H share
register of members on 11 June 2014.
42
China Telecom Corporation Limited Annual Report 2013
Report of the Directors
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 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 shareholder 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 shareholder 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 11 June 2014 (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 5 June 2014. 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.
China Telecom Corporation Limited Annual Report 2013
43
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
Date of Appointment
Wang Xiaochu
Yang Jie
55
51
Chairman and Chief Executive Officer
20 December 2004
Executive Director, President and
20 October 2004
Chief Operating Officer
Wu Andi
59
Executive Director, Executive Vice President and
10 September 2002
Zhang Jiping
Yang Xiaowei
Sun Kangmin
Ke Ruiwen
Gao Tongqing
Xie Liang
Wu Jichuan
Qin Xiao
Tse Hau Yin, Aloysius
Cha May Lung, Laura
Xu Erming
Yung Shun Loy, Jacky
58
50
56
50
50
50
76
66
66
64
64
51
Chief Financial Officer
Executive Director and Executive Vice President
10 September 2002
Executive Director and Executive Vice President
9 September 2008
Executive Director and Executive Vice President
20 October 2004
Executive Director and Executive Vice President
30 May 2012
Executive Vice President
Non-executive Director
21 June 2013
29 May 2013
Independent Non-executive Director
9 September 2008
Independent Non-executive Director
9 September 2008
Independent Non-executive Director
9 September 2005
Independent Non-executive Director
9 September 2008
Independent Non-executive Director
9 September 2005
Assistant Chief Financial Officer,
1 February 2005
Qualified Accountant and Company Secretary
Gao Jinxing
50
Financial Controller
1 February 2012
44
China Telecom Corporation Limited Annual Report 2013
Report of the Directors
On 20 March 2013, Mr. Chen Liangxian resigned as
Non-executive Director of the Company due to change
in work arrangement. On the same date, the Board
proposed to appoint Mr. Xie Liang as Non-executive
Director of the Company. The proposed appointment of
Mr. Xie Liang as Non-executive Director of the Company
was approved by the Annual General Meeting held on
29 May 2013. On 21 June 2013, Mr. Li Ping resigned
as Executive Vice President of the Company due to
change in work arrangement. On the same day, the
Board appointed Mr. Gao Tongqing as Executive Vice
President of the Company.
Supervisors of the Company
The following table sets out certain information of the
Supervisors of the Company as at the date of this
Report:
Name
Age
Position in the Company
Date of Appointment
Shao Chunbao
Zhu Lihao
Tang Qi
Zhang Jianbin
Hu Jing
Du Zuguo
56
73
55
48
38
51
Chairman of the Supervisory Committee
16 October 2012
Independent Supervisor
10 September 2002
Supervisor (Employee Representative)
19 August 2013
Supervisor (Employee Representative)
16 October 2012
Supervisor
Supervisor
16 October 2012
20 May 2011
China Telecom Corporation Limited Annual Report 2013
45
Report of the Directors
On 19 August 2013, Mr. Mao Shejun, an Employee
Representative Supervisor of the Supervisory
Committee, retired from his position as a Supervisor
of the Company due to his age, and on the same
day, Mr. Tang Qi was elected by the employees of the
Company democratically as an Employee Representative
Supervisor of the Company.
Share Capital
The share capital of the Company as at 31 December
2013 was RMB80,932,368,321, divided into
80,932,368,321 shares of RMB1.00 each. As at 31
December 2013, the share capital of the Company
comprised:
Share category
Domestic shares (total):
Domestic shares held by:
China Telecommunications Corporation
Guangdong Rising Assets Management Co., Ltd.
Zhejiang Financial Development Company
Fujian Investment & Development Group Co., Ltd
Jiangsu Guoxin Investment Group Co., Ltd.
Total number of H shares (including ADSs)
Total
Number of shares
as at
31 December 2013
Percentage of the
total number of shares
in issue as at
31 December 2013
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
46
China Telecom Corporation Limited Annual Report 2013
Report of the Directors
Material Interests and Short Positions
in Shares and Underlying Shares of the
Company
As at 31 December 2013, 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
Guangdong Rising
Assets Management
Co., Ltd.
Commonwealth Bank
of Australia
JPMorgan Chase & Co.
Blackrock, Inc.
57,377,053,317
(Long Position)
5,614,082,653
(Long Position)
2,080,867,924
(Long Position)
1,536,081,879
(Long Position)
32,826,934
(Short Position)
1,157,450,630
(Shares available
for lending)
1,301,821,443
(Long Position)
8,676,000
(Short Position)
Domestic shares
85.57%
70.89% Beneficial owner
Domestic shares
8.37%
6.94% Beneficial owner
H shares
14.99%
2.57% Interest of controlled
corporation
H shares
11.07%
1.90% 135,957,249 shares as
beneficial owner;
242,674,000 shares as
investment manager; and
1,157,450,630 shares as
custodian corporation/
approved lending agent
H shares
0.24%
0.04% Beneficial owner
H shares
8.34%
1.43% Custodian corporation/
approved lending agent
H shares
9.38%
1.61% Interest of controlled
corporation
H shares
0.06%
0.01% Interest of controlled
corporation
Save as stated above, as at 31 December 2013, 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.
China Telecom Corporation Limited Annual Report 2013
47
Report of the Directors
Directors’ and Supervisors’ Interests and
Short Positions in Shares, Underlying
Shares and Debentures
Emoluments of the Directors and
Supervisors
As at 31 December 2013, 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 2013, 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.
Please refer to note 29 of the audited financial
statements for details of the emoluments of all Directors
and Supervisors of the Company in 2013.
Purchase, Sale and Redemption of
Shares
Neither the Company nor any of its subsidiaries has
purchased, sold or redeemed any securities of the
Company during the reporting period.
Public Float
As at the date of this Report, based on the information
that is publicly available to the Company and within
the knowledge of the Directors, the Company has
maintained the prescribed public float under the Listing
Rules and as agreed with The Stock Exchange of Hong
Kong Limited.
Directors’ and Supervisors’ Interests in
Contracts
Summary of Financial Information
For the year ended 31 December 2013, 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 of compensation (other
than statutory compensation).
Please refer to pages 186 to 187 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 2013.
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.
48
China Telecom Corporation Limited Annual Report 2013
Report of the Directors
Capitalised Interest
Subsidiaries and Associated Companies
Please refer to note 27 of the audited financial
statements for details of the Group’s capitalised interest
for the year ended 31 December 2013.
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 2013.
Fixed Assets
Please refer to note 4 of the audited financial statements
for movements in the fixed assets of the Group for the
year ended 31 December 2013.
Reserves
Pursuant to Article 147 of the Company’s articles of
association (the “Articles of Association”), where the
financial statements prepared in accordance with the
China Accounting Standards for Business Enterprises
and regulations, materially differ from those prepared
in accordance with either the International Financial
Reporting Standards, or accounting standards at a place
outside the PRC where the 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 2013,
calculated on the above basis and before deducting
the proposed final dividends for 2013, amounted to
RMB84,341 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 2013.
Donations
For the year ended 31 December 2013, the Group made
charitable and other donations with a total amount of
RMB11 million.
Changes in Equity
Please refer to the consolidated statement of changes in
equity as contained in the audited financial statements of
this year (page 115 of this annual report).
Retirement Benefits
Please refer to note 38 of the audited financial
statements for details of the retirement benefits provided
by the Group.
Stock Appreciation Rights
Please refer to note 39 of the audited financial
statements for details of the stock appreciation rights
offered by the Company.
Pre-Emptive Rights
There are no provisions for pre-emptive rights in the
Articles of Association requiring the Company to offer
new shares to the existing shareholders in proportion to
their shareholdings.
Major Customers and Suppliers
For the year ended 31 December 2013, sales to the
five largest customers of the Group accounted for an
amount no more than 30% of the operating revenues of
the Group.
China Telecom Corporation Limited Annual Report 2013
49
Report of the Directors
For the year ended 31 December 2013, purchases from
the five largest suppliers of the Group accounted for
approximately 42.3% of the total annual purchases of
the Group.
to maintain close cooperation with E-surfing Media to
promote the data traffic operation and the development
of mobile Internet service of the Company, so as to
enhance the value of the Company.
For the year ended 31 December 2013, purchases from
the Group’s largest supplier accounted for approximately
13.5% of the total annual purchases of the Group.
The amount of the Group’s annual purchases mainly
includes terminals purchases, equipment purchases and
investments in infrastructure.
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.
Connected transactions
Disposal of 80% of the share capital in
E-surfing Media Co., Ltd. (“E-surfing Media”)
The Company and the controlling shareholder of the
Company, China Telecommunications Corporation,
entered into an agreement on 26 April 2013, pursuant
to which the Company has agreed to sell and China
Telecommunications Corporation has agreed to
purchase 80% of the share capital in E-surfing Media, a
subsidiary of the Company. Pursuant to the agreement,
the initial consideration for the disposal of the E-surfing
Media Shares was RMB1,195 million. The relevant
consideration was adjusted in accordance with the
relevant clauses in the agreement and was settled by
cash. Please refer to note 1 to the audited financial
statements for details.
E-surfing Media is primarily engaged in the provision
of video media services. Upon the completion of the
disposal, the Company realised a gain of approximately
RMB670 million. Meanwhile, the Company continues
Acquisition of 100% of the share capital in
China Telecom (Europe) Limited (“China
Telecom Europe”)
China Telecom Global Limited, the wholly-owned
subsidiary of the Company, and the controlling
shareholder of the Company, China Telecommunications
Corporation, entered into an agreement on 16 December
2013, pursuant to which China Telecommunications
Corporation has agreed to sell and China Telecom
Global Limited has agreed to purchase 100% of the
share capital in China Telecom Europe, a wholly-
owned subsidiary of China Telecommunications
Corporation. Pursuant to the acquisition agreement, the
initial consideration was RMB261 million. The relevant
consideration was adjusted in accordance with the
relevant clauses in the agreement and was settled by
cash. Please refer to note 1 to the audited financial
statements for details.
China Telecom Europe is primarily engaged in
providing international leased line service, Internet
service, voice wholesale service and other value-added
telecommunications services in Europe, the Middle East
and Africa. On completion, China Telecom Europe has
become a wholly-owned subsidiary of China Telecom
Global Limited and an indirect wholly-owned subsidiary
of the Company. At present, the overseas business of
the Company, primarily including Asia-Pacific region
and the Americas, is operated by China Telecom Global
Limited. As a result of the acquisition, the Company will
further strengthen its competitive position in the overseas
telecommunications market, improve and integrate the
operation of its overseas business, take full advantage
of the synergy benefits, expand its service regions and
increase its profitability.
50
China Telecom Corporation Limited Annual Report 2013
Report of the Directors
Continuing Connected Transactions
The following table sets out the amounts of continuing connected transactions between the Group and China
Telecommunications Corporation for the year ended 31 December 2013:
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 by the Group
Provision of supplies procurement services by
China Telecom Group
Provision of supplies procurement services by the 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
Transaction Amounts
(RMB millions)
Annual monetary cap
for continuing
connected transactions
(RMB millions)
616
350
719
1,136
192
3,563
3,885
14,543
2,826
11,208
800
1,000
800
1,300
500
4,500
4,500
16,000
3,500
14,000
1 China Telecommunications Corporation is a controlling shareholder of the Company. Each of China Telecommunications Corporation and
its subsidiaries (except for the Group) constitutes a connected person of the Company under the Listing Rules.
China Telecom Corporation Limited Annual Report 2013
51
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. In accordance with the
Centralised Services Agreement, 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
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 agreed on 22 August 2012 to renew the
Centralised Services Agreement in accordance with
its provisions for a further term of three years expiring
on 31 December 2015. 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.
52
China Telecom Corporation Limited Annual Report 2013
Report of the Directors
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 Xizang Autonomous Region.
The Company and China Telecommunications
Corporation agreed on 22 August 2012 to renew the
Interconnection Settlement Agreement in accordance
with its provisions for a further term of three years
expiring on 31 December 2015. 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 the
interconnection settlement, the parties shall apply such
amended or new rules and regulations as acknowledged
by both parties.
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 agreed on 22 August 2012 to renew the
Property Leasing Framework Agreement in accordance
with its provisions for a further term of three years
expiring on 31 December 2015. 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.
China Telecom Corporation Limited Annual Report 2013
53
Report of the Directors
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 agreed on 22 August 2012 to renew the
IT Services Framework Agreement in accordance with
its provisions for a further term of three years expiring
on 31 December 2015. 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) where there are no government-prescribed prices
but there are government-guided prices, the
government-guided prices;
(3) 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
(4) 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).
54
China Telecom Corporation Limited Annual Report 2013
Report of the Directors
The Company and China Telecommunications
Corporation agreed on 22 August 2012 to renew
the Community Services Framework Agreement in
accordance with its provisions for a further term of three
years expiring on 31 December 2015. No later than
30 days prior to the expiry of the Community Services
Framework Agreement, the Company is entitled to
serve a written notice to China Telecommunications
Corporation to renew the Community Services
Framework Agreement, and the parties shall consult and
decide on matters relating to such renewal.
Supplies Procurement Services Framework
Agreement
Pursuant to the supplies procurement services
framework agreement signed between the Company
and China Telecommunications Corporation on 30
August 2006 and the related supplemental agreements
subsequently entered into between the two parties
(collectively, the “Supplies Procurement Services
Framework Agreement”), China 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 agreed on 22 August 2012 to renew the
Supplies Procurement Services Framework Agreement
in accordance with its provisions for a further term of
three years expiring on 31 December 2015. 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.
China Telecom Corporation Limited Annual Report 2013
55
Report of the Directors
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 Group does not accord any priority to China
Telecommunications Corporation and/or its associates to
provide such services, and the tender may be awarded
to an independent third party. However, if the terms of
an offer from China Telecommunications Corporation
and/or its associates are at least as favourable as those
offered by other tenderers, the Group may award the
tender to China Telecommunications Corporation and/or
its associates.
The Company and China Telecommunications
Corporation agreed on 22 August 2012 to renew the
Engineering Framework Agreement in accordance with
its provisions for a further term of three years expiring
on 31 December 2015. 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.
56
China Telecom Corporation Limited Annual Report 2013
Report of the Directors
(4) 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 Internet Applications Channel Services Framework
Agreement became effective from 1 January 2014 and
will expire on 31 December 2015. No later than 30 days
prior to the expiry of the Internet Applications Channel
Services Framework Agreement, the Company is entitled
to serve a written notice to China Telecommunications
Corporation to renew the Internet Applications Channel
Services Framework Agreement, and the parties shall
consult and decide on matters relating to such renewal.
The Company confirms that it has complied with the
disclosure requirements in accordance with Chapter 14A
of the Listing Rules in respect of the above connected
transactions.
The Company’s auditor was engaged to report on the
Group’s continuing connected transactions for the
year ended 31 December 2013 in accordance with the
Hong Kong Standard on Assurance Engagements 3000
“Assurance Engagements Other Than Audits or Reviews
of Historical Financial Information” and with reference
to Practice Note 740 “Auditor’s Letter on Continuing
Connected Transactions under the Hong Kong Listing
Rules” issued by the Hong Kong Institute of Certified
Public Accountants.
China Telecom Corporation Limited Annual Report 2013
57
The Company and China Telecommunications
Corporation agreed on 22 August 2012 to renew the
Ancillary Telecommunications Services Framework
Agreement in accordance with its provisions for a further
term of three years expiring on 31 December 2015.
No later than 30 days prior to the expiry of the Ancillary
Telecommunications Services Framework Agreement,
the Company is entitled to serve a written notice to
China Telecommunications Corporation to renew the
Ancillary Telecommunications Services Framework
Agreement, and the parties shall consult and decide on
matters relating to such renewal.
Internet Applications Channel Services
Framework Agreement
Pursuant to the Internet Applications Channel Services
Framework Agreement signed between the Company
and China Telecommunications Corporation on 16
December 2013, the Company agreed to provide
Internet applications channel services to China
Telecommunications Corporation and/or its associates.
The channel services mainly include the provision of
telecommunications channel and applications support
platform, provision of billing and deduction services,
coordination of sales promotion and development of
customers services, etc.
The charges payable for the services under the Internet
Applications Channel Services Framework Agreement
are calculated on the following basis:
(1) the government-prescribed prices (if any);
(2) where there are no government-prescribed prices
but there are government-guided prices, the
government-guided prices;
(3) 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
Report of the Directors
The Independent Non-executive Directors of the
Company have confirmed that all continuing connected
transactions for the year ended 31 December 2013 to
which the Group was a party:
1. had been entered into, and the agreements
governing those transactions were entered into,
by the Group in the ordinary and usual course of
business;
2. had been entered into either:
(i) on normal commercial terms; or
(ii) if there are not sufficient comparable transactions
to judge whether they are on normal commercial
terms, on terms no less favourable to the
Company than those available to or (if applicable)
from independent third parties; and
3. had been entered into in accordance with the
relevant terms that are fair and reasonable and in the
overall interests of the shareholders of the Company
as a whole.
The Independent Non-executive Directors have further
confirmed that:
The values of continuing connected transactions for the
year ended 31 December 2013 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 for the year ended
31 December 2013 and have confirmed to the Board
that the transactions:
1. have received the approval of the Board;
2. have been entered into in accordance with the
pricing policies as stated in the relevant agreements;
and
3. have been entered into in accordance with the terms
of the agreements governing such transactions; and
the values of continuing connected transactions
entered into between the Group and its connected
persons which are subject to annual caps have not
exceeded their respective annual caps.
Compliance with the Corporate
Governance Code
Please refer to the “Corporate Governance Report”
set out on page 64 of this 2013 annual report of
the Company for details of our compliance with the
Corporate Governance Code.
58
China Telecom Corporation Limited Annual Report 2013
Report of the Directors
Material Legal Proceedings
As at 31 December 2013, 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
Deloitte Touche Tohmatsu and Deloitte Touche
Tohmatsu Certified Public Accountants LLP were
appointed as the international and domestic auditors
of the Company, respectively for the year ended 31
December 2013. Deloitte Touche Tohmatsu has audited
the accompanying financial statements, which have been
prepared in accordance with the International Financial
Reporting Standards. The Company has appointed
Deloitte Touche Tohmatsu and Deloitte Touche
Tohmatsu Certified Public Accountants LLP since 29
May 2013. The relevant re-appointment of Deloitte
Touche Tohmatsu and Deloitte Touche Tohmatsu
Certified Public Accountants LLP as the Company’s
international and domestic auditors, respectively for the
year ending 31 December 2014 will be proposed to the
Annual General Meeting of the Company to be held on
29 May 2014.
By Order of the Board
Wang Xiaochu
Chairman and Chief Executive Officer
Beijing, PRC
19 March 2014
China Telecom Corporation Limited Annual Report 2013
59
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 carried out
their supervisory function to safeguard the interests of
shareholders, the Company and the employees.
The work status of the Supervisory
Committee of the Company
During the reporting period, the Supervisory Committee
held two meetings. At the fifth meeting of the Fourth
Session of the Supervisory Committee held on 13
March 2013, the Supervisory Committee reviewed
and approved five agenda items, including the financial
statements for the year 2012, the independent auditor’s
report, the profit distribution and dividend proposal, the
Supervisory Committee’s report for the year 2012, the
working plan of the Supervisory Committee for the year
2013, and passed the relevant resolutions. Regarding
major adjusted items, internal control assessment within
the organisation, establishment and implementation
of a system of accountability, change in related party
transactions, audit and supervision of the subsidiaries
by internal audit, the Supervisory Committee has
communicated with the Finance Department, Internal
Audit Department and external auditors and raised
certain recommendations. At the sixth meeting of the
Fourth Session of the Supervisory Committee held on
19 August 2013, the Supervisory Committee reviewed
and approved the interim financial statements and the
independent auditor’s review report for the six months
ended 30 June 2013. Regarding changes in major figures
in the reports, review of interim financial statements,
control of related party transactions, development and
control of mobile service, the Supervisory Committee
has communicated with the Finance Department,
Internal Audit Department, external auditors and raised
certain recommendations. 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 Board meetings and meetings
of the Audit Committee. Led by the Chairman of the
Supervisory Committee, Mr. Shao Chunbao, Supervisors
including Madam Zhu Lihao, Mr. Tang Qi, Mr. Zhang
Jianbin and Mr. Hu Jing visited provincial branches for
exchange of ideas in August 2013. Throughout the trip,
they had a deeper understanding of the effectiveness of
corporate development, listened to the difficulties and
problems faced by the frontline employees, explored
the relevant questions which need to be addressed
by the Supervisory Committee and fostered the self-
development of the Supervisory Committee.
The overall assessment of the operation
management and performance during
the reporting period
The Supervisory Committee believes that during
the reporting period, all members of the Board and
members of senior management have complied with
rules and regulations, upheld the principles of diligence
and integrity, safeguarded the interests of shareholders,
fulfilled their responsibilities fully in accordance with
the Articles of Association of the Company, diligently
implemented the resolutions of the Shareholders’
General Meetings and the Board meetings, and
strictly complied with the relevant regulations for listed
companies. The Supervisory Committee has not
observed any behaviours that breached the laws, rules,
and Articles of Association of the Company, or damaged
the interests of shareholders.
During the reporting period, the Company persisted
in deepening its transformation, firmly adhered to
the main theme of “promoting scale development
through dual-leadership in innovation and service”,
pragmatically fostered “De-telecom”, “Market
Orientation and Differentiation” and “Three New Roles”.
New emerging services realised a rapid growth with
accelerated adjustment in business structure, resulting
in significant achievement in scale development. In
2013, the operating revenues of the Company reached
RMB321,584 million, an increase of 13.6% from last year.
Excluding mobile terminal sales, the operating revenues
reached RMB284,149 million, an increase of 10.0% over
last year, which exceeded the industry average in the
60
China Telecom Corporation Limited Annual Report 2013
Report of the Supervisory Committee
mainland. Mobile revenues accounted for approximately
50% of the total revenues, with further optimisation in
business structure. EBITDA was RMB96,551 million,
an increase of 36.2% over last year. Profit attributable
to equity holders of the Company reached RMB17,545
million, representing an increase of 17.4% from last year.
Free cash flows amounted to RMB11,137 million. In
summary, the Company accurately grasped the trends
in mobile Internet development and industry value chain
integrated development. The profitability was enhanced
significantly, with rapid improvement in operational
efficiency. The core competitiveness had been
remarkably strengthened and the corporate development
is full of vitality. Meanwhile, while conscientiously
fulfilling its responsibility to shareholders, the Company
voluntarily committed itself to the sustainable economic,
social and environmental development and excelled in
fulfilling its own corporate responsibilities, responsibilities
towards customers, responsibilities towards employees,
environmental responsibilities and public welfare
responsibilities.
The independent opinion on the relevant
matters during the reporting period
The opinion raised by the Supervisory
Committee on the compliance of the operation
of the Company with laws and regulations
Pursuant to the relevant laws and regulations of the
PRC, the Supervisory Committee monitored the
convening procedures and resolutions of the meetings
of the Board, the implementation by the Board of the
resolutions approved by the Shareholders’ General
Meetings, the performance of duties by the Company’s
senior management, and the Company’s management
policies. The Supervisory Committee is of the view that
the Directors and the senior management, in performing
their duties, strictly complied with the relevant rules
and regulations, safeguarded the lawful interests of the
Company and the shareholders as a whole and especially
those of the minority shareholders, actively procured
the regulated operations of the Company, enhanced
the level of governance of the Company, followed lawful
procedures in their decision-making, implemented
resolutions of the Shareholders’ General Meetings,
and the Supervisory Committee was not aware of any
behaviours of the Directors or the senior management
which violated the laws, regulations, the Articles of
Association of the Company or were detrimental to the
interests of the Company.
The opinion raised by the Supervisory
Committee on the financial implementations
of the Company
Through the supervision and inspection of the
Company’s financial policies and financial condition, the
Supervisory Committee is of the view that the Company
is able to strictly comply with the regulatory requirements
such as section 404 of the US Sarbanes-Oxley Act and
to continue to enhance its internal controls over financial
reporting, while effectively controlling and managing
the Company in accordance with rules and regulations.
Upon the review of the unqualified financial statements
for the year 2013 and other relevant information, which
were prepared in accordance with the China Accounting
Standards for Business Enterprises and the International
Financial Reporting Standards as audited by PRC
certified accountants and international auditors of the
Company, the Supervisory Committee is of the opinion
that the financial statements truly and fairly reflect the
Company’s financial position, operating results and cash
flows.
In 2014, 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, firmly grasp the three
key points including reform and innovation, open
cooperation and quality and efficiency enhancement,
further broaden the planning of the work of the
Supervisory Committee and strengthen its efforts in
monitoring to protect the interests of all investors.
By Order of the Supervisory Committee
Shao Chunbao
Chairman of the Supervisory Committee
Beijing, PRC
19 March 2014
China Telecom Corporation Limited Annual Report 2013
61
Recognition & Awards
1
2
3
4
5
10
11
12
1. The Company was awarded the “No. 1 Best
Managed Company in Asia” by FinanceAsia in the
Asia’s Best Companies Poll 2013.
2. Mr. Wang Xiaochu, Chairman and CEO, was
awarded the “Best CEO in China” by FinanceAsia in
the Asia’s Best Companies Poll 2013.
3. Madam Wu Andi, Executive Vice President and
CFO, was awarded the “Best CFO in China” by
FinanceAsia in the Asia’s Best Companies Poll 2013.
4. The Company has been voted by investors the
“Overall Best Managed Company in Asia” across
all industries in the “Best Managed and Governed
Companies – Asia Poll 2013” by Euromoney.
15
5. The Company has been voted by investors the “Best
Managed Company in Asia’s Telecommunications
Sector” in the “Asia Best Managed Companies 2013”
by Euromoney.
6. The Company has been voted by professional
investors as the “No.1 Most Honored Company
in Asia” in 2013 All-Asia-Executive-Team ranking
organised by Institutional Investor.
7. Mr. Wang Xiaochu, Chairman and CEO, was voted
by professional investors as “Asia’s Best CEO in
Telecommunications Sector” in 2013 All-Asia-
Executive-Team ranking organised by Institutional
Investor.
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6
13
7
8
9
14
8. Madam Wu Andi, Executive Vice President and CFO,
was voted by professional investors as “Asia’s Best
CFO in Telecommunications Sector” in 2013 All-Asia-
Executive-Team ranking organised by Institutional
Investor.
9. The Company has been voted by professional
investors as “Asia’s Best Investor Relations
Company in Telecommunications Sector” in 2013
All-Asia-Executive-Team ranking organised by
Institutional Investor.
10. The Company was awarded the “Platinum Award for
All-Round Excellence” in 2013 The Asset Corporate
Awards.
11. The Company was awarded “The Best of Asia-Icon
on Corporate Governance” by Corporate Governance
Asia’s Annual Recognition Awards 2013.
12. Mr. Wang Xiaochu, Chairman and CEO, was
honoured with “Asian Corporate Director Recognition
Awards 2013” by Corporate Governance Asia.
13. The Company was honoured with the “No. 5 in
The Global Top 50”, in “IR Magazine’s annual surveys
of investors and analysts 2013”.
14. The Company was honoured with the “Grand Prix
for Best Overall Investor Relations for Large-cap
Companies”, at the IR Magazine Awards – Greater
China 2013.
15. The Company’s 2012 annual report won gold awards
in the “2013 International ARC Awards” and the
“Vision Awards” Annual Report Competition by The
League of American Communications Professionals
LLC (LACP).
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26/3/2014 19:38:13
Corporate Governance Report
An Overview of Corporate Governance
The Company strives to maintain a high level of
corporate governance and has 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 2013, the Shareholders’ General
Meeting, the Board and the Supervisory Committee
maintained efficient operations in accordance with the
operating specifications, and the Company continued
to optimise the organisation structure and has achieved
a breakthrough in its mechanism innovation, 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 of
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
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 2013, save
that the roles of Chairman and Chief Executive Officer of
the Company were performed by the same individual,
the Company has been in compliance with all the code
provisions under the Corporate Governance Code
as set out in Appendix 14 to the Listing Rules. In the
Company’s opinion, through supervision by 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 capturing
business opportunities. Many leading international
corporations also have similar arrangements.
In 2013, the Company’s continuous efforts in corporate
governance gained wide recognition from the capital
markets and the Company was accredited with a
number of awards. The Company was voted the “Overall
Best Managed Company in Asia” by Euromoney for five
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 Most Transparent Accounts in Asia” in
the individual categories. The Company was accredited
by the investors as the “No. 1 Best Managed Company
in Asia”, the “No. 1 Best Managed Company in China”
and the “No. 1 Best Investor Relations in China” for
three consecutive years in the Asia’s Best Companies
Poll 2013 organised by FinanceAsia. The Company was
voted by investors as the “No.1 Most Honored Company
in Asia” and “Asia’s Best Investor Relations Company in
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China Telecom Corporation Limited Annual Report 2013
Corporate Governance Report
telecommunications sector” in 2013 All-Asia-Executive-
Team ranking organised by Institutional Investor. In
addition, Mr. Wang Xiaochu, Chairman and CEO, was
voted as “Asia’s Best CEO in telecommunications
sector” and Madam Wu Andi, Executive Vice
President and CFO was voted as “Asia’s Best CFO
in telecommunications sector”. The Company swept
several top awards including the “Grand Prix for Best
Overall Investor Relations for Large-cap Companies”
and the “Best Investor Relations by a mainland Chinese
company” for two consecutive years at the IR Magazine
Awards – Greater China 2013. In addition, based on
IR Magazine’s annual surveys of investors and analysts
for its awards in the US, Canada, Europe, Greater
China, South East Asia and Brazil, the Company was
ranked No.5 in The Global Top 50 and was the only
Asian company among the top 10 companies. The
Company was accredited the “Platinum Award for All-
Round Excellence” in the poll of Corporate Awards 2013
by the Asset for five consecutive years. In addition, the
Company was awarded the “The Best of Asia – Icon
on Corporate Governance” by Corporate Governance
Asia and Mr. Wang Xiaochu, Chairman and CEO of
the Company, was awarded “Asian Corporate Director
Recognition Awards 2013” by Corporate Governance
Asia for four consecutive years.
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.
China Telecom Corporation Limited Annual Report 2013
65
Corporate Governance Report
Shareholders’ General Meeting
In 2013, the Company convened one Shareholders’
General Meeting, the Annual General Meeting (“AGM”)
for the year 2012. The AGM held on 29 May 2013
reviewed and approved numerous resolutions such as
the financial statements for the year 2012, Report of the
Independent International Auditor, proposal for profit
and dividends distribution, authorisation to the Board for
the formulation of a budget for 2013, appointment and
remuneration of auditors, authorisation to the Board to
issue debentures and appointment of a director.
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 votes on
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. 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
As at 31 December 2013, the Board comprises 13
Directors with seven Executive Directors, one Non-
executive Director and five Independent Non-executive
Directors. The Audit Committee, Remuneration
Committee and Nomination Committee under the
Board all consist solely of Independent Non-executive
Directors, which ensure that the committees are able
to provide sufficient review and check and balance and
make effective judgments to protect the interests of
shareholders and the Company as a whole. The number
of Independent Non-executive Directors constitutes more
The below sets out the analysis of the composition of the Board as at the date of this report:
14
12
10
8
6
4
2
0
Female
66-76
11-15
Male
MM
Independent
Non-Executive
eveivutcuecxeEnoNN
Directors
Non-Executive
Director
55-65
it
Executive
EE
Directors
44-54
6-10
6
6-10
1-5
Gender
Designation
Age Group Duration of service (years)
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China Telecom Corporation Limited Annual Report 2013
Corporate Governance Report
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
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.
In August 2013, the Company adopted the Board
diversity policy. The Company believes that Board
diversity will contribute significantly to the enhancement
of the level of performance of the Company. In order
to achieve a sustainable and balanced development,
the Company views the increasing Board diversity as
a key element for supporting its strategic goals and
maintaining sustainable development. In determining
the composition of the Board, the Company takes
into account diversity of the Board from a number of
perspectives, including but not limited to gender, age,
education background or professional experience, skills,
knowledge, duration of service, etc. All appointments
made or to be made by the Board are merit-based,
and candidates are selected based on objective
criteria, giving full consideration to the benefits in terms
of Board diversity. Final decisions are based on each
candidate’s attributes and the contributions to be made
to the Board. The Nomination Committee oversees the
implementation of policies, reviews existing policies as
and when appropriate, and recommends proposals
for revisions for the Board’s approval. Biographical
details of existing Directors are set out in the “Directors,
Supervisors and Senior Management” section of this
Annual Report. The Company believes that the Board
currently comprises experts from diversified professions
such as telecommunications, finance, economics, law
and management, and is diversified in terms of gender,
age, duration of service, etc., which contributes to the
enhanced management standard and more regulated
operation of corporate governance of the Company, and
results in a more comprehensive and balanced Board
structure and decision-making process.
The Company strictly complies with the Corporate
Governance Code under the Listing Rules to rigorously
regulate the operating procedures of the Board and its
committees, and to ensure that the procedures of 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 condition, the operating results and cash
flows of the Company for such period. In preparing the
financial statements for the year ended 31 December
2013, 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 mainly include the
execution of resolutions, formulation of major operational
decisions, financial proposals and policies, formulation
of the Company’s basic management system, and the
appointment of managers and other senior management
personnel of the Company. The Articles of Association
also 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 when exercising its powers as a whole.
China Telecom Corporation Limited Annual Report 2013
67
Corporate Governance Report
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.
The Board meets at least four times a year. Additional
Board meetings will be held as necessary. In 2013, 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 Nomination Committee
meeting and several board and committee written
resolutions were passed 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, internal control
implementation and assessment report, annual proposal
for profit distribution, annual report, interim report and
quarterly reports, connected transactions, continuing
connected transactions and the annual caps applicable
thereto and appointment and remuneration of auditors.
All directors performed their fiduciary duties and
devoted sufficient time and attention to the affairs of the
Company.
The Company determines the Directors’ remuneration
with reference to factors such as their respective
responsibilities and duties in the Company, as well as
their experiences and market conditions at the relevant
time.
The Board should develop and review the Company’s
policies and practices on corporate governance; review
and monitor the training and continuous professional
development of directors and senior management;
review and monitor the Company’s policies and practices
on compliance with legal and regulatory requirements;
develop, review and monitor the code of conducts for
employees; review the Company’s compliance with
the Corporate Governance Code and disclosure in the
Corporate Governance Report.
Directors’ training and continuous
professional development
The Company also arranges induction activities including
the duties and continuing obligations of directors,
relevant laws and regulations, the operation and
business of the Company, so that all newly appointed
Directors are provided with updated data on industry
development. 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 since 2009. 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. In addition, the Company reminds
the Directors of their functions and responsibilities by
continuously providing them with information about
the latest development of the Listing Rules and other
applicable regulations. The Directors also pay regular
visits to our provincial branches to exchange ideas and
to study so as to achieve a better understanding of the
latest business developments and to share their valuable
experiences. The Directors actively participate in training
and continuous professional development to develop
and refresh their knowledge and skills to ensure their
contribution to the Company.
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China Telecom Corporation Limited Annual Report 2013
Corporate Governance Report
In 2013, the Directors have participated in training and continuous professional development activities and the summary is
as follows:
Directors
Executive Directors
Wang Xiaochu
Yang Jie
Wu Andi
Zhang Jiping
Yang Xiaowei
Sun Kangmin
Ke Ruiwen
Non-Executive Director
Chen Liangxian (resigned on 20 March 2013)
Xie Liang (appointed on 29 May 2013)
Independent Non-executive Directors
Wu Jichuan
Qin Xiao
Tse Hau Yin, Aloysius
Cha May Lung, Laura
Xu Erming
Training categories
A, B
A, B
A, B
A, B
A, B
A, B
A, B
B
A, B
A, B
A, B
A, B
A, B
A, B
A: attending relevant seminars and/or conferences and/or forums; delivering speeches at relevant seminars and/or conferences and/or forums
B: reading or writing relevant newspapers, journals and articles relating to general economy, general business, telecommunications, corporate
governance or directors’ duties
Compliance with the Model Code for
Securities Transactions by Directors and
Supervisors
The Company has adopted the Model Code for
Securities Transactions by Directors of Listed Issuers
as set out in Appendix 10 to the Listing Rules to govern
securities transactions by the Directors and Supervisors.
Based on the written confirmation from the Directors
and Supervisors, all of the Company’s Directors and
Supervisors have strictly complied with the Model
Code for Securities Transactions by Directors of Listed
Issuers in Appendix 10 to the Listing Rules regarding
the requirements in conducting securities transactions.
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, Mr. Tse Hau Yin, Aloysius as
the chairman and Mr. Wu Jichuan, Dr. Qin Xiao and
China Telecom Corporation Limited Annual Report 2013
69
Corporate Governance Report
Mr. Xu Erming as the members. 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
systems 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 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 its work to the
Board.
In 2013, 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 2013, the Audit Committee convened four meetings,
in which it reviewed important matters related to the
Company’s annual, interim and quarterly 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 implementation procedures of the
recommendations proposed by the external auditors,
reviewed the U.S. annual report, and communicated
independently with the auditors twice a year.
Remuneration Committee
The Remuneration Committee comprises four
Independent Non-executive Directors. Mr. Xu Erming
as the chairman and Mr. Wu Jichuan, Dr. Qin Xiao
and Mr. Tse Hau Yin, Aloysius as the members. 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
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China Telecom Corporation Limited Annual Report 2013
Corporate Governance Report
establish related 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, giving
recommendations to the Board in respect of the overall
remuneration policy and structure for the Company’s
Directors and senior management personnel and the
establishment of a formal and transparent procedure for
developing remuneration policy, and determining, with
delegated responsibility by the Board, the remuneration
packages of individual Executive Directors and senior
management including benefits in kind, pension
rights and compensation payments (including any
compensation payable for loss or termination of their
office or appointment). Its responsibilities comply with the
requirements of the Corporate Governance Code. The
Remuneration Committee is responsible to and regularly
reports its work to the Board. No meeting was held by
the Remuneration Committee in year 2013.
Nomination Committee
The Company’s Nomination Committee comprises four
Independent Non-executive Directors, Mr. Wu Jichuan as
the chairman and Mr. Tse Hau Yin, Aloysius, Madam Cha
May Lung, Laura and Mr. Xu Erming as the members.
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 for the appointment and succession plans of
Directors, and to further optimise the composition of the
Board. The principal duties of the Nomination Committee
include regularly reviewing the structure, number of
members, composition and diversity of the Board;
identifying candidates and advising the Board with the
appropriate qualifications for the position of Directors;
reviewing the Board Diversity Policy as appropriate to
ensure its effectiveness; evaluating the independence
of 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 2013, and
it performed a review of the structure and operations
of the Board and discussed the appointment of the
Non-executive Director.
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Corporate Governance Report
The Company will identify suitable candidates through
multiple channels such as internal recruitment and
recruiting from the labour market. The criteria of
identifying candidates include, but are not limited to, their
gender, age, educational background or professional
experience, skills, knowledge and length of service and
capability to commit to the affairs of the Company and,
in case of Independent Non-executive Director, the
candidates should fulfill the independence requirements
set out in the Listing Rules from time to time. Upon
the Nomination Committee and the Board reviewed
and resolved to appoint the appropriate candidate, the
relevant proposal will be put forward to the Shareholders’
General Meeting in writing for approval.
Directors shall be elected at the Shareholders’ General
Meeting for a term of three years. At the expiry of a
Director’s term, the Director may stand for re-election
and re-appointment. According to the Articles of
Association, before the convening of the Annual General
Meeting, shareholders holding 5% or more of the total
voting shares of the Company shall have the right to
propose new motions (such as election of directors) in
writing, and the Company shall place such proposed
motions on the agenda for such Annual General Meeting
if there are matters falling within the functions and powers
of shareholders in general meetings. According to the
Articles of Association, shareholders can also request for
the convening of extraordinary general meeting provided
that the shareholders holding in aggregate 10% or more
of the shares carrying the right to vote at the meeting
sought to be held and they shall sign one or more written
requisitions in the same format and with the same
content, requiring the Board to convene an extraordinary
general meeting and stating the resolutions of meeting
(such as election of directors). The Board shall convene
an extraordinary general meeting within two months.
The minimum period during which written notice given
to the Company of the intention to propose a person for
election as a director, and during which written notice
to the Company by such person of his willingness to
be elected may be given, will be at least seven days.
Such period will commence no earlier than the day
after the despatch of the notice of the meeting for the
purpose of considering such election and shall end no
later than seven days prior to the date of such meeting.
The ordinary resolution to approve the appointment of
Directors shall be passed by votes representing more
than one-half of the voting rights represented by the
shareholders (including proxies) present at the meeting.
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The number of attendance/meetings of the members of the Board and committees in
year 2013
Executive Directors
Wang Xiaochu (Chairman)
Yang Jie
Wu Andi
Zhang Jiping
Yang Xiaowei
Sun Kangmin
Ke Ruiwen
Non-Executive Directors
Chen Liangxian*
Xie Liang*
Independent Non-Executive Directors
Wu Jichuan
Qin Xiao
Tse Hau Yin, Aloysius
Cha May Lung, Laura
Xu Erming
Board
Audit
Committee
Nomination
Committee
Annual
General
Meeting
4/4
4/4
4/4
2/4
3/4
4/4
2/4
N/A
2/2
3/4
3/4
4/4
4/4
4/4
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
3/4
3/4
4/4
N/A
3/4
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1/1
N/A
1/1
1/1
1/1
1/1
0/1
1/1
0/1
1/1
0/1
1/1
N/A
N/A
1/1
1/1
1/1
0/1
1/1
Note: Certain Executive Directors and Independent Non-executive Directors did not attend the Annual General Meeting and some of the
meetings of the Board and the Committees due to other business commitments or being overseas.
*
Mr. Chen Liangxian resigned as the Non-executive Director of the Company due to change in work arrangement on 20 March 2013.
The appointment of Mr. Xie Liang as the Non-executive Director of the Company was approved at the Annual General Meeting held on
29 May 2013.
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Corporate Governance Report
Supervisory Committee
The Company’s Supervisory Committee comprises six
Supervisors, with one External Independent Supervisor
and two Employee Representative Supervisors. On 19
August 2013, Mr. Mao Shejun retired as the Employee
Representative Supervisor due to his age. On the same
date, Mr. Tang Qi has been elected by the employees
of the Company democratically as an Employee
Representative Supervisor.
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 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.
The number of attendance/meetings of members of the Supervisory Committee in
year 2013
Number of Supervisors
Number of meetings in 2013
Supervisors
6
2
Number of
Attendance/Meetings
Shao Chunbao (Chairman of the Supervisory Committee)
Zhu Lihao (Independent Supervisor)
Mao Shejun (Employee Representative Supervisor, retired on 19 August 2013)
Tang Qi (Employee Representative Supervisor, appointed on 19 August 2013)
Zhang Jianbin (Employee Representative Supervisor)
Hu Jing
Du Zuguo
2/2
2/2
2/2
N/A
2/2
2/2
2/2
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External Auditors
The international and domestic auditors of the
Company are Deloitte Touche Tohmatsu and Deloitte
Touche Tohmatsu Certified Public Accountants LLP,
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 2013 is as follows:
Service item
Audit services
Non-audit services (mainly include internal control advisory and other advisory services)
Fee
(RMB millions)
59.8
1.4
61.2
Total
The Directors of the Company are responsible for
the preparation of consolidated financial statements
that give a true and fair view in accordance with the
International Financial Reporting Standards as issued by
the International Accounting Standards Board and the
disclosure requirements of the Hong Kong Companies
Ordinance, and for such internal control as the Directors
determine is necessary to enable the preparation of
consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
The statements by the external auditors of the Company,
Deloitte Touche Tohmatsu, regarding their reporting
responsibilities on the financial statements of the
Company is set out in the Independent Auditors’ Report
on page 109.
The service term of KPMG and KPMG Huazhen (Special
General Partnership), the international and domestic
auditors of the Company for 2012, expired at the
Annual General Meeting for 2012 (29 May 2013). The
appointment of Deloitte Touche Tohmatsu and Deloitte
Touche Tohmatsu Certified Public Accountants LLP as
the international and domestic auditors for the financial
year 2013 has been approved at the Annual General
Meeting for year 2012. The Audit Committee and the
Board have resolved to re-appoint Deloitte Touche
Tohmatsu and Deloitte Touche Tohmatsu Certified
Public Accountants LLP as the international and
domestic auditors for the financial year 2014, subject to
the approval at the 2013 Annual General Meeting.
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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 construction, optimisation 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 (1992), 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 ten 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 2013, the Group further enhanced the construction
of its internal control system, made additional efforts
in its implementation, and strengthened risk control in
key areas. With a focus on supporting the development
of emerging services and pursuing ways to promptly
address market needs and solve new problems arising
in the course of innovations in business, operations and
cooperation, the Company made revisions to the internal
control manuals during the year. We also established
and enhanced our internal control on the three emerging
services, namely data traffic, Internet applications and
ICT, and regulated the business processes in e-Surfing
broadband WIFI management, e-channels management,
“Best Pay” service management and IDC business
management. Internal control for key businesses and key
scopes of risks were strengthened, while the risk control
on certain key aspects such as business cooperation,
agency management and supplies procurement was
reinforced. At the same time, critical control points were
further refined and internal control processes were
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China Telecom Corporation Limited Annual Report 2013
Corporate Governance Report
optimised to improve the operational efficiency of the
Company. We also organised the implementation of a
project for setting up an internal support system, which
would become the Group’s first efficiently-centralised
system under its MSS project, and achieved a unified
platform for the provincial branches’ internal control
supporting system, the physical centralisation of system
hardware and centralisation of the work processes, and
further strengthened and regulated the internal control
system construction. We supported the establishment
and enhancement of the implementation rules for internal
control applicable to new business units, organised
the review of implementation rules for internal control
in respect of new business units, thoroughly organised
and reviewed the risk areas in respect of emerging
businesses, conducted annual assessment of the
internal control of newly-established companies, and
supervised the timely rectifications of problems that had
been identified, thereby effectively guarding ourselves
against operational 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, established and refined the
centralised risk directories and case studies database
of the Company, continued to strengthen the level
of risk management informatisation, and solidified a
standardised risk management procedure so that risk
management terminology is unified across all levels of
the Company and the effectiveness of risk management
was improved. Following the efforts made over the past
years, China Telecom has established a comprehensive
risk management system and has gradually perfected
its comprehensive risk monitoring and prevention
mechanism.
In 2013, pursuant to the requirement of provision C2 of
the Corporate Governance Code promulgated by 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 two types of major
potential risks, including the external environment risk
and operational risk, and has achieved satisfactory
results. In 2013, the Company was not confronted with
any major risk event.
After rigorous risk identification, assessment and
analysis, the Company has conducted a preliminary
assessment of potential major risks to the Company
in 2014, such as the external environmental risk and
operational risk, and has put forward detailed response
plans. Through 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.
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Corporate Governance Report
The Company has adopted the COSO Internal Control
Framework (1992) 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 evaluate the nature of internal
control deficiencies and reach a conclusion as to the
effectiveness of the internal control system, the Company
adopts the following 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. 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 2013, the Company’s internal audit department
initiated and coordinated the assessment of internal
control at the 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 Company 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 2013, the Company, on the basis of a
comprehensive self-evaluation, launched a special self-
assessment work organised and led by the operational
department and conducted specific self-assessment
based on two selected hot issues in relation to risk
management which have certain impact on the operation
of the Company. Meanwhile, we further enhanced the
function of the internal control seminars and emphasised
on solving the difficult issues on the cross-departmental
and cross-processing internal control. The above
measures effectively promoted the participation by
various departments and units and ensured the self-
assessment work covering 100% of the Company, while
timely detected and rectified internal control deficiencies
so as to effectively control and eliminate potential risks.
The Company also worked towards perfecting the
systems and deepening its governance measures, while
continuously improving the quality and effectiveness of
its internal control self-assessment.
Under the risk-guided independent assessment of
the Company’s internal control, we consolidated
audit resources, worked around key areas and major
business processes and conducted assessments.
At the same time, we focused on new services and
new units including mobile Internet to select two units
upon which we embarked upon our internal control
construction. Thorough assessment was conducted
to help guard us against risks associated with the
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Corporate Governance Report
new business areas. In 2013, in accordance with the
Company’s assessment principles and arrangements,
all units launched a proactive independent assessment,
timely identified potential risks and oversaw the process
to rectify the problems. This achieved positive results.
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. 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
2013, 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 relating to the
Company’s accounting and financial reporting functions,
the sufficiency of the qualifications and experience of
staff, together with the adequacy of the staff’s training
programmes and the relevant budget.
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Corporate Governance Report
Investor Relations and Transparent
Information Disclosure Mechanism
The Company establishes an Investor Relations
Department which is responsible for providing
shareholders and investors with the necessary
information, data and services in a timely manner. It also
maintains proactive communications with shareholders,
investors and other capital market participants 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
and responds to key questions which are of prime
concerns to the investors. This has helped 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 maintaining
daily communication with shareholders, investors and
analysts. In 2013, 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.
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In 2013, the Company attended the following investors conferences held by major international investment banks:
Date
Name of Conference
January 2013
January 2013
March 2013
May 2013
May 2013
May 2013
May 2013
May 2013
May 2013
June 2013
June 2013
June 2013
June 2013
June 2013
July 2013
Deutsche Bank Access China Conference 2013
UBS Greater China Conference 2013
Credit Suisse Asian Investment Conference 2013
Macquarie Greater China Conference 2013
CLSA China Forum 2013
Morgan Stanley Hong Kong Investor Summit 2013
BNP Paribas Asia Pacific TMT Conference 2013
Deutsche Bank Access Asia Conference 2013
Goldman Sachs Telecom & Internet Corporate Day 2013
J.P. Morgan China Summit 2013
Societe Generale/Ji Asia London Conference 2013
Bank of America Merrill Lynch Global Telecom & Media Conference 2013
CIMB 11th Annual Asia Pacific Leaders’ Conference
Nomura Asia Equity Forum 2013
Macquarie Non-Deal Roadshow (Australia) 2013
September 2013
CICC 1st London Conference
September 2013
CLSA Hong Kong Investors’ Forum 2013
September 2013
UOB Kay Hian Non-Deal Roadshow (Taiwan) 2013
October 2013
Macquarie China Corporate Day 2013 & Non-Deal Roadshow (Europe)
November 2013
Credit Suisse China Investment Conference 2013
November 2013
Goldman Sachs Greater China Summit 2013
November 2013
Bank of America Merrill Lynch China Conference 2013
November 2013
Citi Greater China Investor Conference 2013
November 2013
Morgan Stanley Asia Pacific Summit 2013
November 2013
HSBC Asia Investor Forum 2013 & Non-Deal Roadshow (US)
November 2013
J.P. Morgan Global TMT Conference 2013
November 2013
Daiwa Investment Conference Hong Kong 2013
December 2013
CICC Investment Forum 2013
December 2013
Barclays Asia TMT Conference 2013
December 2013
Societe Generale/Ji Asia Pan Asian Conference 2013
December 2013
BOCI Mobile Internet Outlook 2014 Corporate Day
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Corporate Governance Report
The Company’s investor relations website
(www.chinatelecom-h.com) not only serves as an
important channel for the Company to disseminate
press releases and corporate information to investors
and the capital market, but also plays a significant role
in the Company’s valuation and our compliance with
regulatory requirements for information disclosure. The
Company’s website is equipped with a number of useful
functions including interactive stock quote, interactive
KPI, interactive FAQs, auto email alerts to investors,
downloading to excel, RSS Feeds, self-selected items in
investors briefcase, html version annual report, financial
highlights, investor toolbar, website information which
other users are also interested in, etc. In 2013, the
Company has revamped the website using a leading
technology, HTML 5 and a number of new functions
and contents were added to further enhance the
functions of the website and the level of transparency
of the Company’s information disclosure, so as to meet
the international best practices. In addition, a mobile
version of the Company’s website was also offered,
which allows the investors, shareholders, media and
the general public to easily and promptly browse
the updated information on the Company’s website
through mobile devices at any time and any place. The
Company’s website was accredited a number of awards
in IR Global Rankings, W3, iNova, Euromoney, indicating
that the Company’s website is highly recognised
by professionals. The Company also actively seeks
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 inside
information. In general, the authorised speaker only
makes clarification and explanation on the data available
on the market, and avoid providing or divulging any
unpublished inside 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 is accurate.
In addition, discussions on the Company’s key financial
data or other financial indicators are avoided during the
black-out period.
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Shareholder Rights
According to the Articles of Association, shareholders
who request for the convening of an extraordinary
general meeting or a class meeting shall comply with the
following procedures:
Two or more shareholders holding in aggregate 10%
or more of the shares carrying the right to vote at the
meeting sought to be held shall sign one or more written
requisitions in the same format and with the same
content, stating the proposed matters to be discussed
at the meeting, and requiring the Board to convene a
shareholders’ extraordinary general meeting or a class
meeting thereof. If the board of directors fails to issue a
notice of such a meeting within 30 days from the date of
receipt of the requisitions, the shareholders who make
the requisitions may themselves convene such a meeting
(in a manner as similar as possible to the manner in
which shareholders’ meetings are convened by the
board of directors) within four months from the date of
receipt of the requisitions by the board of directors.
When the Company convenes an annual general
meeting, shareholders holding 5% or more of the total
voting shares of the Company shall have the right to
propose new motions in writing, and the Company shall
place such proposed motions on the agenda for such
Annual General Meeting if they are matters falling within
the functions and powers of shareholders in general
meetings.
Process of forwarding shareholders’ enquiries to the
Board:
Shareholders may at any time send their enquiries and
concerns to the Board in writing through the Company
Secretary and the Investor Relations Department. The
contact details of the Company Secretary are as follows:
The Company Secretary
China Telecom Corporation Limited
38th Floor, Dah Sing Financial Center
108 Gloucester Road, Wanchai
Hong Kong
Email: ir@chinatelecom-h.com
Tel No.: (852) 2877 9777
Fax No.: (852) 2877 0988
A dedicated “Investor” section is available on the
Company’s website (www.chinatelecom-h.com). There
is a FAQ function in the “Investor” section designated to
enable timely, effective and interactive communication
between the Company, shareholders and investors.
Company Secretary and the Investor Relations
Department of the Company handle both telephone and
written enquiries from shareholders of the Company
from time to time. Shareholders’ enquiries and concerns
will be forwarded to the Board and/or the relevant Board
Committees of the Company, where appropriate, to
answer the shareholders’ questions. Information on the
Company’s website is updated regularly.
China Telecom Corporation Limited Annual Report 2013
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Corporate Governance Report
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 non-executive directors. The Board
of the Company currently comprises 13 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 Corporate Governance Code
of the Listing Rules. These Independent Directors also
satisfy the requirements on “independence” under the
Listing Rules. However, the related standard set out in
the Listing Rules is different from the requirements in
Section 303A.02 of the NYSE Listed Company Manual.
Pursuant to the requirements of the NYSE Listed
Company Manual, companies shall formulate separate
corporate governance rules. Under the currently
applicable PRC and Hong Kong laws and regulations,
the Company is not required to formulate any rules for
corporate governance; therefore, the Company has not
formulated any separate corporate governance rules.
However, the Company has implemented the code
provisions under the Corporate Governance Code as set
out in Appendix 14 of the Listing Rules for the financial
year ended 31 December 2013.
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China Telecom Corporation Limited Annual Report 2013
Corporate Governance Report
Continuous Evolution of Corporate
Governance
The Company continuously analyses the corporate
governance development of international advanced
enterprises and the investors’ desires, constantly
examines and strengthens the corporate governance
measures and practice, and improves the current
practices at the appropriate time; we strongly believe that
by adhering to good corporate governance principles,
and improving the transparency, 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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Market - Orientation
& Differentiation
STRATEGIC
INITIATIVES
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Human Resources Development Report
Human Resources Development Report
Market Oriented
Mechanism
to Enhance Vitality
Differentiation
to Strengthen
Competitiveness
Human Resources Development Report
In 2013, in accordance with the overall strategy of “De-
telecom”, “Market-orientation and Differentiation” and
“Three New Roles”, we firmly adhered to the principle of
“supporting development and serving our employees”,
and grasped the overall idea of laying down a strong
foundation of team building and constructing a
mechanism for promoting further development.
Leveraging on the human resources planning, the
Company further enhanced its building of teams of
management, professional technicians and innovative
talents and increased its efforts in mechanism
innovation for human resources management, which
have pragmatically protected the rights of its employees
and effectively supported its business development.
Firstly, the Company built a value-based human
resource planning system. Modelled on the supply
value chain concept, a value model of China Telecom
human resources was built to include key performance
indicators for enhancing the value of its human
resources management, and to establish strategic,
operating and supporting systems for human resources
management. As such, the Company has formulated
the key performance indicators, major tasks and key
measures in relation to human resources management
from 2013 to 2016, which have effectively improved
the vision and rationality of the human resources
management of the Company.
Secondly, the Company improved the management
of our executives and strengthened our senior
management team building. The Company initiated a
consolidated performance assessment for management
in a move to enhance the appraisal system. The
enhanced appraisal system further strengthened the use
of the evaluation results in the selection, appointment
and training of management personnel. We also sped
up outstanding young leaders’ promotion and improved
the selection and appointment process by promoting
a total of 33 employees to leadership positions in a
higher rank through the elections and open recruitment
organised by the Company during the year, which
further optimised the age mix of our management
team. In addition, the Company proactively promoted
a job exchange program among executives to enhance
their leadership skills and all-round capabilities through
a multi-job training. In 2013, 20 executives participated
in the program.
Thirdly, the Company strengthened its efforts in
building a team with innovative talents. To foster the
building of a team with innovative talents, the Company
created an incubation centre and introduced a creative
management and operating system with a market-
oriented approach, so as to create an incubation
environment for new business development teams
and an incubation system that would clear the way
for their corporatisation. Over the last two years,
Three New Roles
Leader of Intelligent Pipeline
Provider of Integrated Platforms
Participant of Content & Application Development
China Telecom Corporation Limited Annual Report 2013
89
Human Resources Development Report
the Company has separately selected 68 innovative
projects in four batches for further development at
the incubation centre. Under the promotion of this
“professional incubation + entrepreneurial guidance +
angel investment” incubation model, the Company has
currently realised the corporatisation of 18 innovative
projects, with the number of employees in the new
business development teams reaching 276.
Fourthly, the Company promoted innovative human
resources management to support our services
development. We increased our efforts in developing
pilot schemes for the transformation of our human
resources management. Through the pilot schemes,
the Company enhanced the efficiency of its human
resources management through optimising the
employee structure, controlling the total number of
employees and creating a differentiated remuneration
distribution mechanism. For the development of its
emerging services, the Company has set up a program
for gathering and nurturing talents for its emerging
services while actively exploring the human resources
management practices for the mobile Internet services.
The management
expressed greetings to
employees
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Lastly, the Company actively implemented the new
Labour Contract Law of the People’s Republic of China
which regulated the use of labour force by enterprises.
The Company carried out a comprehensive research on
the new Labour Contract Law of the People’s Republic
of China, set up guidelines for its service operation
model, proposed structural adjustment to its personnel,
put forward the principle of “equality of remuneration
and work” and the standardisation of outsourcing
arrangements. Based on the new Labour Contract
Law of the People’s Republic of China, the Company
proactively implemented the principle of “equality of
remuneration and work” with self-regulation, which
effectively limited the risks of the use of labour force by
the Company.
Information of Employees
As at the end of 2013, the Group had 306,545 employees. The numbers of employees working under each
classification and their respective proportions were as follows:
Management, Finance and Administration
Sales and Marketing
Operations and Maintenance
Research and Development
Total
Number of
employees
Percentage
49,113
157,915
97,264
2,253
306,545
16.0%
51.5%
31.7%
0.8%
100%
China Telecom Corporation Limited Annual Report 2013
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Human Resources Development Report
Corporate-Employee Relationship
Communication between Management and
Employees
The Company established a feedback system to
systematically understand and know the employees’
views as well as promoted a close-end management
system to handle the requests and concerns of the
employees. In 2013, the Company’s management and
labour union leaders made over 60 visits to over 200
employees, including those who were in difficulty as
well as the outstanding employees. To understand the
views of the employees, the Company also introduced
a third party survey involving over 7,000 employees
in eight provincial branches to investigate their stress
conditions as well as the sources and impacts of their
work stress and the channels for relieving such stress.
We have also timely understood and grasped the issues
expressed by the employees, and actively reflected the
demands of the employees by making proposals and
recommendations to the Company.
Roles and Duties of Labour Unions
Our labour unions persisted in the principle of “serving
both corporate development and the employees’
growth”.
We established an honours system for the
employees. Based on the unified standard that
adopted different layers and classifications and
frontline-orientated incentive development principles,
the Company researched and developed the “China
Telecom Employees’ Honours System” which
established a multi-level, comprehensive, guidance-
oriented and sustainable honours system and brought
about deepened incentives for the employees. The
honours system, together with the position and
remuneration system, formed a differentiated incentive
mechanism.
We created a platform for the on-the-job
innovation activities of employees. Based on a low
entry barrier, wide coverage, easy to replicate and long-
term incentive approach, the Company actively created
a platform for the enhancement of the employees’ job
innovation and capability, which further promoted the
on-the-job innovation activities of the employees.
We created an ambience of innovation. The
Company introduced an exemplary promotion
convention in 2013 to award excellent quality and
spirits. In 2013, two employees were awarded the
“National May 1st Labour Award” while five received
the “National May 1st Labour Medal”; 12 units were
awarded the “National Pioneer Workers”; 14 units were
awarded the “State-owned Pioneer Groups”, with 25
workers being awarded the “Outstanding Workers”; 50
units were awarded the “Enterprise Pioneer Groups”,
with 97 workers being awarded as “Outstanding
Workers”; nine employees were named as “Technical
Master of China’s State-owned Enterprises” while 24
were named as “Technical Master of Enterprise”. To
promote exemplary pioneer workers on a regular basis,
the Company increased the intensity in the promotion
of more than 80 frontline outstanding employees
and over 10 teams. The Company actively created
an ambience of advocating, learning, competing and
caring for these pioneers in order to incentivise its
employees to continue to pursue excellence.
The Company also offered guidance to the labour
dispatch entities and labour outsourcing entities for
them to establish labour unions and their employees to
join the unions, in order to motivate employees’ passion
to participate in and support corporate development.
As such, the union enrollment rate of the employees
has reached 97%. The Company actively developed
activities to build home for the employees and 14
provincial labour unions were named as the “Home for
National Outstanding Workers”.
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Coordination and Communication between
the Company and the Labour Unions
Caring for Employees
Over 700,000 counts of employees participated in
three new business development competitions, which
included network enhancement labour competition to
improve network quality, a four-stage technical skills
competition and the network security competition
organised by the Ministry of Industry and Information
Technology. The Company has also organised an
on-the-job innovation training program for frontline
employees, setting up a learning and exchange
mechanism and promoting multi-level innovative
workshops. To date, there were over 60 innovative
workshops that aimed to speed up knowledge sharing
and to transfer excellent experience and techniques. A
win-win situation was attained for both the Company
and the employees by enhancing the employees’
technical skills, business skills, practical experience and
their passion for innovation.
We deepened the implementation of the “Four-
Smalls” initiative. The Company included the
operating cost of the “Four-Smalls” initiative into
its budget management to enhance its operating
efficiency. The area of coverage of the “Four-Smalls”
initiative was extended to different frontline operating
units such as sales outlets, “10000” call service, and
the installation and maintenance teams such that
80% of the frontline units implemented “Four-Smalls”
initiative and employees of these units managed to
benefit from such initiative. In addition, more were
added to the “Four-Smalls” initiative to target different
employees in different zones and different situations so
that their actual difficulties and problems can be tackled
immediately. The Company also adopted several
measures to alleviate the stress of its employees.
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Human Resources Development Report
We established a regular mechanism for
employee visits. During the New Year and Lunar
New Year holidays, the Company’s entire management
team visited frontline units in 17 provinces (districts
and prefecture-level cities) to show their care for
the employees. The management of the Company,
labour union leaders and staff often found time to
visit employees who were in difficulty as well as the
outstanding employees when they were in their regions.
We cared for our employees in the affected
regions and regions with severe conditions. The
Company raised over RMB22 million for employees
who were affected by the Ya’an Earthquake. In
addition, a special relief fund of RMB1 million was
allocated to the labour union in Sichuan province to
assist the employees in the affected regions. RMB1.7
million was allocated to the affected employees in
Gansu province as allowances for their families. The
Company also allocated RMB12.1 million to frontline
employees at 16 provincial branches as the “Cool
Summer” subsidy. The Company also organised six
sessions of study and field trip activities that promoted
“Hand and hearts filling the love of China Telecom” for
the employees that provided continued services during
Ya’an Earthquake and an exchange program among
the excellent employees working in areas with severe
conditions. 186 outstanding employees participated in
the activities.
We conducted activities to boost morale and team
work. China Telecom organised a balloon volleyball
tournament for its employees. China Telecom also
took the trophy of the balloon volleyball competition
organised by the China Telecommunications Sports
Association. An internal photo competition organised
by the Company attracted over 3,000 submissions
which enriched the Company’s mobile photos archive.
A national photography exhibition co-organised by the
Company, the Popular Photography Magazine and the
terminal company attracted over 60,000 entries, which
successfully raised the branding of our “e-Surfing”
service. Provincial labour unions organised over 50
arts and sports activities that not just enriched the
employees’ cultural life, but also raised their morale and
team spirits.
Strengthening Human Capital
Focusing on our strategic development priorities, the
Company continued to strengthen the development
of talent teams, and actively promoted the capabilities
improvement of our operation managers, professionals
and technical personnel.
Developing Leadership Skills
In 2013, we organised and launched four phases
of leadership training sessions for the management
from the headquarter and provincial branches, two
phases of leadership training sessions for prefecture-
level management and a training session for the newly
appointed management executives, with a total of 502
counts of managers attending the training sessions. The
Company also actively sent management personnel to
attend various trainings for high-level talents. In 2013,
a total of five general managers from the provincial
branches attended the leadership training organised by
the China Executive Leadership Academy, Yan’an, and
China Business Executives Academy, Dalian, while 10
deputy executives from the headquarter attended the
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Human Resources Development Report
elective sessions for senior management. To fully utilise
the functions of China Telecom College, the Company
provided training for the new executives with emphasis
on leadership training. To leverage on the strength
of the online university, the Company set up special
learning zones for managers to learn about the new
technologies and new businesses. The Company also
actively explored the training model for the reserved
management, initiating a pilot scheme known as
“entrepreneurial training camp” which was used as a
basis to stimulate new thoughts among the reserved
management team.
Cultivating Professional Talents
To fully utilise the professional talents based on the
Company’s corporate focus, the Company has
developed an annual work plan for each group of
professionals in order to nurture their talents. In 2013,
the Company organised 11 training sessions for Rank
B talents under seven categories, including sales and
marketing, IP, IT, wireless and mobility, core network,
optical transmission and access as well as platform,
with a total of 699 counts of senior professionals
attending the training and a coverage ratio of over
95%. During the period, the Company examined 385
Rank A and Rank B talents specialised in IP, IT/ICT and
sales and marketing, of which 110 were awarded with
distinction.
Enhancing Employees’ Skills
The Company actively commenced frontline employees’
skills training and skills certification. In 2013, in order
to support the overall strategy of “De-telecom”,
“Market-orientation and Differentiation” and “Three
New Roles” the Company focused on the key business
development areas and held 187 training sessions
covering various areas, including marketing, products,
sales services, corporate informatisation, maintenance
and service support, network development and
construction and integrated management, with 13,000
attendees in total, up 6.2% from 2012. The Company
also organised and conducted skills certification for
nine types of skills such as channel management,
corporate informatisation, and customer service. A
total of 82,000 counts of employees participated in
the certification examinations. In line with the Group’s
efforts to sub-divide performance evaluation units, the
Company emphasised on the training provided for
channel managers, secretaries of rural bureaus and
self-managed TOP shop managers. In relation to our
key businesses, the Company initiated trainings with an
emphasis on relationship marketing of informatisation
application in the industry and trainings to enhance
supporting capabilities of key informatisation
application. In addition, the Company also focused
on the frontline employees and organised frontline
training, as well as training on the mobile operating
system and other professional training activities
focusing on particular models. These training sessions
fully enhanced the business techniques of frontline
employees.
Looking forward, the Company is keen to build a team
of talents and further enlarge the talent reserves for
emerging services. In 2013, the Company recruited
approximately 6,400 fresh graduates, 71.6% of
which were majored in communications, computer
engineering, sales and marketing and information
operations management, up 11 percentage points
from 2012. The Company continued to recruit top
graduates for the available positions, with over 1,000
top graduates being selected in 2013, and a total of
approximately 3,400 top graduates being trained in the
past three years.
China Telecom Corporation Limited Annual Report 2013
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Human Resources Development Report
Remuneration and Performance
Management
The remuneration of the Company’s employees
comprises base salary and performance based salary,
and takes into account both short and medium-to-long
term incentives. In 2013, the Company implemented
the “Position and Remuneration System of Full Services
Operation”, instructing each business unit to gradually
implement the system based on trial-run results.
Furthermore, the Company persisted in determining the
distribution of employees’ remuneration based on their
value and contribution while tilting towards the core
frontline employees. At the same time, to facilitate the
introduction of sub-dividing the performance evaluation
units, the Company introduced innovative distribution
mechanisms to motivate and incentivise its employees.
Through measures such as market mechanism, shop
owner responsibility system and tender underwriting,
the Company managed to delegate responsibilities,
allocate key resources and run independently
with consistent rights and responsibilities. These
measures unified the interests of promoting corporate
development and the individual interests of employees.
By directly linking up the employees’ salary level with
their performance evaluation results, the Company
encouraged its employees to be more productive so
that they could fully realise their individual value and
achieve a higher remuneration level while working for
the company.
To continuously improve the model for classification
and allocation of labour costs, the Company adopted
a flexible budget control policy for provincial branches
which proportionately matches income with labour cost
such that more allocations were made to units with a
higher level of revenues and vice versa. The Company
continued to enhance the correlation between revenue
and labour costs in terms of labour cost allocation and
raise the allocation ratio in accordance with profit-linked
efficiency. Furthermore, the Company continued to
apply reduction rules to the labour costs incurred by the
provincial branches that failed to meet the profit budget
amounts, which ensured that the labour cost allocation
Continuously enhancing
the technical skills of
employees through
organising a series of
competition
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Human Resources Development Report
mechanism fitted well into business development
of the Company. The Company also applied value
deposition and development cycle to manage its
direct subsidiaries and professional companies and
implemented a differentiated model for classification
and allocation of labour costs.
has further optimised and improved the performance
evaluation system to appraise the performance of
business units, deputies, middle-level management
and employees at different levels, enhancing the
specific focus and relevance of the entire performance
evaluation process.
At present, China Telecom has established a relatively
comprehensive employees’ performance evaluation
system. Branches of all levels have established
employees’ performance evaluation teams which are
led by the respective general manager of the relevant
branch. The teams have formulated evaluation methods
for deputies, functional departments, subordinated
units and general employees. In 2013, the Company
managed to further improve its employee evaluation
and incentive mechanism and related supervision
system to secure the fairness and reliability of the
performance evaluation results. At the same time, it
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, and there were
no gender discrimination policies or regulation, and
there had been no circumstance whereby child labour
or forced labour was employed.
China Telecom Corporation Limited Annual Report 2013
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Corporate Social Responsibility Report
By adhering to the core philosophy of “comprehensive innovation, pursuing truth and pragmatism, respecting people
and creating value all together”, China Telecom persevered in the fulfillment of its responsibilities to stakeholders,
further promoted enterprise transformation and continued to enhance its comprehensive corporate value. In 2013,
China Telecom was ranked 14th in “Fortune China CSR Ranking 2013” by Fortune China magazine, which jumped
from its previous ranking of the 39th. China Telecom was also first accredited as one of the “Top 25 Most Responsible
Companies”.
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The Road of Responsibilities
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China Telecom Corporation Limited Annual Report 2013
Corporate Social Responsibility Report
I. Operating with integrity and in
compliance with the laws
Implementing the e-Surfing 3G network
coverage in rural areas
Extensive areas of the rural territory in China have
been covered by the 3G network of China Telecom. In
2013, the Company continued to improve the mobile
networks in rural areas as well as the road network. As
at the end of 2013, the 3G network covered 35,400
rural towns, enabling more residents in rural areas to use
information services via the 3G network.
Promoting the “Broadband China • Fibre
Cities” project
As a key player for constructing China’s broadband
network, during the three consecutive years since 2011,
China Telecom further accelerated the construction
of broadband infrastructure by promoting the FTTH
construction in urban areas and applying customised
techniques in broadband network construction in rural
areas to speed up the installation of broadband lines in
administrative villages.
The Company persists in operation complying with
the laws and integrity, through complying with relevant
laws and regulations, industry regulations and business
ethics. We have established an all-rounded and
seamless compliance system featuring legal education,
strengthening internal control, audit supervision, anti-
corruption and comprehensive risk management.
We have created a lasting, effective and standard
communication mechanism in order to regulate the
disclosure of corporate information. We have taken
the initiative in receiving government regulation and
social supervision. In 2013, we continued to strengthen
system construction, supervision and inspection,
and made timely rectification when problems were
discovered.
II. Fulfilling our essential responsibilities
as a telecom operator
China Telecom regards the construction of complete
and comprehensive basic networks, developing
universal telecommunications services, guaranteeing
emergency communications, maintaining information
health, promoting indigenous innovation and facilitating
industrial development as our inherent responsibilities.
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Corporate Social Responsibility Report
As at the end of 2013, the coverage of China Telecom
FTTH reached approximately 84 million households.
The number of FTTH subscribers was close to 27
million. The number of wireline broadband subscribers
was over 100 million. Over 290,000 administrative
villages in 21 provinces in Southern China installed
broadband lines. 80% of China Telecom wireline
broadband subscribers used bandwidth products with
4Mbps or above.
Progressing the “Village-to-Village” projects
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 and bridge the digital divide between cities and
the countryside. In 2013, the installation of broadband
lines in over 6,800 administrative villages and over 1,600
natural villages was completed.
Securing emergency communications
China Telecom is dedicated to securing smooth
national communications. In 2013, there were
a number of natural disasters in China, such as
the Ya’an earthquake, typhoons and floods. The
Company quickly responded and took initiatives to
restore communication services in the affected areas.
Throughout the year, a total of 118,600 counts of relief
workers, 27,500 counts of rescue vehicles and 1,300
counts of emergency communications equipment were
deployed for this purpose. A total of 4.2 billion free
SMS messages were sent. The Company successfully
accomplished the communications support tasks of
important events such as the Chinese National Games,
Asian Youth Games, China-Eurasia Expo and China’s
Antarctic expedition.
Mr. Wang Xiaochu,
Chairman of the
Company, led the
disaster relief works
against the earthquake
The relief team of
China Telecom carried
equipment and tools for
emergency relief works
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III. Fulfilling our responsibilities towards
our customers
Adhering to our operation philosophy of “pursuing
the mutual growth of corporate value and customer
value”, and the service philosophy of “Customer First,
Service Foremost”, China Telecom strives to protect
the interests of customers according to the law. The
Company also strives to understand our customer
needs and provide suitable, easy-to-use and value-
for-money products for all our customers, including
individuals, households, corporations, government or
social undertakings. With customer perception as a
starting point, the Company continues to perfect our
service and enhance its service quality, so as to enable
our customers to fully enjoy a new informatisation
lifestyle.
Implementing the campaign to tackle
common service issues
In 2013, in association with the mass line education and
implementation campaign, along with the correction of
unwholesome tendencies in the industry required by
the Ministry of Industry and Information Technology,
China Telecom rectified a number of common service
issues, enhancing service management and improving
the long-term mechanism against these issues.
In response to customer complaints about the business
practice of some of the subsidiaries of the Company
such as involuntary service suspensions, compulsory
bundled services and forced subscription, China
Telecom carried out a series of measures to enhance
its control and management. By increasing our efforts
in centralising and marketing packages, the Company
tackled the issues from the source. We also overhauled
the provisions in our promotion package plans or other
additional plans, the security settings of the related
marketing systems and the access control systems,
and rectified issues immediately after they were
discovered. The Company regulated the marketing of
value-added services, prohibited forced subscription,
strictly applied the re-confirmation for services, and
imposed strict and severe punishment on violators. In
addition, the Company required the sales outlets to
ensure the sales of single product, and banned the
practice of product bundling.
In response to customer complaints about the
major problems in the installation and maintenance
of broadband lines, China Telecom implemented a
series of measures to regulate the provision of these
services. The Company enhanced the management of
installation and maintenance services to ensure timely
delivery of such services. With a better allocation of
resources, the Company managed to improve the
booking system, and bring in more efficient service
providers to better support and improve the work
flow. The standardisation of the installation and
maintenance service providers was implemented to
improve the quality of their services. Metrics related to
customer perception of the quality of the installation
and maintenance services were improved to better
evaluate service quality and to align the performance of
the installation and maintenance service providers with
customer perception.
In the 2013 customer satisfaction assessment
organised by the Ministry of Industry and Information
Technology, the broadband and 3G Internet services
provided by China Telecom were recognised as having
maintained a leading position in the industry. Our
internet service was awarded the “Best New Media
Service” for the year by China Business News. Our
Weibo customer service was shortlisted for the “Top
Ten Weibo Operations” by the State-owned Assets
Supervision and Administration Commission of the
State Council. China Telecom was named among
the “Top Ten Units of Customer Service” in the Sixth
Congress for the Assessment of After-sales Services in
the country organised by the China General Chamber
of Commerce and the China Foundation of Consumer
Protection.
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Corporate Social Responsibility Report
Promoting informatisation in primary and
secondary schools
IV. Fulfilling our responsibility towards
our employees
In 2013, our operations at all levels took the initiative to
contact primary and secondary schools in respective
regions and provided a range of solutions for schools
in various areas, including the construction of
informatisation infrastructure at primary and secondary
schools, informatisation of education management,
provision of digital education resources services,
construction of and training for the professional team
for the informatisation of education, launch of pilot
testing programmes for the informatisation of education
and the research and development of information
technology and the promotion of the use of IT solutions
and applications.
During the year, the Company installed a total of 27,000
new broadband lines and upgraded 36,000 existing
ones at primary and secondary schools to further
promote the “school-to-school” broadband connection.
To fulfill the schools’ needs to share quality education
resources among different classes, the Company
introduced the use of the “class-to-class” application.
In addition, the Company worked together with the
education departments to promote the “people-to-
people” internet learning space and implement the
construction and operation of the cloud computing
platform for digital education resources. The Company
also worked together with the education departments
to launch an informatisation training programme for
teachers and professional teams to improve the IT skills
of people working in elementary education units. One of
the major campaigns “10,000 roadshows for campus
informatisation” served more than 100,000 teachers in
the region. The Company also supported the education
departments in their pilot testing programmes for
informatisation of education and helped to complete the
construction of more than 4,300 “smart campuses”.
We consider our employees to be our most valuable
resource. The Company adheres to the principle of
respecting people and cherishing every employee. We
value various types of professional and technical staff
and seek to align the development of the Company
with the staff. 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 rights to be the master of their own affairs.
In 2013, we continued to carry out production
safety publicity and provide education and training
to implement our production safety accountability
system and safety management system. We continued
to improve the working and living conditions of our
frontline employees by expanding the coverage of the
“Four Smalls” initiative, namely, small canteens, small
bathrooms, small washrooms and small activity rooms
at the workplace, which will be extended to other
frontline units such as the sales outlets, “10000” call
service and the installation and maintenance service
providers. The Company persisted in determining
employees’ remuneration based on their value and
contribution and continued to tilt in favour of frontline
employees, which resulted in the steady increase of
their income.
In 2013, we increased our efforts in staff training to
fulfil the strong development needs arising from our
business expansion, with the number of attendees for
professional training increased by 6.2% from 2012.
The Company provided more support for the training
of frontline employees and launched the campaign
102
China Telecom Corporation Limited Annual Report 2013
Corporate Social Responsibility Report
to deliver training to frontline employees, with a focus
on training the frontline employees in marketing units,
especially managers in our county offices, in order to
enhance their management skills. The Company trained
and accredited employees responsible for frontline
marketing and services, installation and maintenance
as a total of 82,000 counts of employees went through
the accreditation process. The Company organised
a number of skills competitions and set up multi-
level innovative workshops to establish an on-the-job
innovation platform to encourage our employees to
improve their innovative and technical skills. Employees
were also encouraged to share their knowledge,
experience and skills, and help each other to improve
their technical skills and practical experience. Caring for
the spiritual well-being of our employees, the Company
established the “China Telecom Employees’ Honours
System”, a system that contained different classes of
honours with extensive coverage. Being both guidance-
driven and sustainable, the system aimed to increase
the employees’ own values and encourage them to
continue to pursue excellence.
China Telecom continued to provide the best support
for our employees who were in difficulty. The Company
set up a permanent mechanism to offer comfort to
its employees, with a support mechanism to help all
employees who might be from different regions and in
different situations to solve their practical difficulties and
problems. In 2013, the Company launched a campaign
to raise over RMB22 million for employees in Ya’an,
Sichuan, who were affected by the earthquake.
V. 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 Integrated Information
Service Provider” by further promoting energy saving
and emission reduction in the areas of procurement,
construction and operations.
In 2013, we accelerated the promotion of an
energy consumption monitoring system. With the
sub-division of performance evaluation units, the
Company examined energy usage in greater detail and
applied norm management to improve the precision
management of energy saving and emission reduction.
We steadily promoted operations under an increased
temperature in our facilities, raising 55% of our mobile
network base stations to 28 or 30 degrees Celsius and
thereby saving more than 100 million units of electricity
for the year. We continued to upgrade the technology
to reduce energy consumption in our infrastructure.
During the year, we built around 4,000 intelligent
ventilation units, and completed the construction of
approximately 6,000 sets of e-green power switches
and approximately 1,500 intelligent heat transfer
devices. Energy saving technology was used in 41%
of our facilities, 9 percentage points higher than 2012
with around 150 million units of electricity being saved
for the year. The Company comprehensively promoted
a more energy-saving and reliable 240V DC power
supply system, with more than 400 units put in use in
2013. Energy consumption in our telecommunications
networks was effectively controlled during the year.
China Telecom Corporation Limited Annual Report 2013
103
Corporate Social Responsibility Report
In addition to the promotion of environmentally friendly
operations, the Company continued to develop and
promote the environmentally friendly information
products to help our customers’ energy saving and
emission reduction, as well as our environmentally
friendly development.
Furthermore, to avoid redundant construction
and improve the efficiency of telecommunications
infrastructure, the Company cooperated with its parent
company and various telecommunications operators to
jointly construct and share the Internet infrastructure.
It also helped to protect the natural environment and
landscape, and reduced the use of land, energy and
raw materials.
Implementing Energy Performance
Contracting
Energy Performance Contracting, or EPC, is a new
market mechanism for energy saving operations,
whereby the fees saved by lower usage of energy are
used to pay all the costs of the energy saving project.
In 2013, the Company achieved a new breakthrough
in upgrading the technology to save energy by utilising
EPC, while effectively supporting the upgrade of its
infrastructure and network equipment. As at the end
of 2013, 19 provincial branches of China Telecom
deployed external funds of approximately RMB170
million for 382 EPC projects, saving approximately 77
million units of electricity for the year.
VI. 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, sports and
health 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 2013, we continued
to assist our parent company with promoting poverty
alleviation and assistance in Tibet. We participated in
a variety of assistance programmes in Bianba County,
Tibet, and in Yanyuan County and Muli County,
Liangshan Yi Autonomous Prefecture, Sichuan.
104
China Telecom Corporation Limited Annual Report 2013
Corporate Social Responsibility Report
The Company assisted with projects in relation to
infrastructure construction, informatisation, education
and training, agriculture, health and science and
technology. Together with the Ministry of Education,
the Company jointly launched a campaign known as
“e-Surfing School Care for the Unattended Children”
together with mainstream media to raise public
awareness of unattended children, covering two million
unattended children scattered in 4,000 schools in eight
mid-western provinces.
In 2014, China Telecom will proactively take the
initiative to develop a coordinated approach to fulfil its
responsibility towards its stakeholders. As an integrated
information service provider, we will help to improve the
livelihood of the people, implementing industrialisation,
informatisation, urbanisation and agricultural
modernisation. We will assist with restructuring and
developing the national economy, while using our best
efforts to create value in our business for stakeholders.
We will also strive to make new contributions to the
sustainable development of our economy and society.
China Telecom successfully commenced the e-Surfing 3G services in the Antarctic
China Telecom Corporation Limited Annual Report 2013
105
An innovative,
responsible
and
vibrant
enterprise
PROMISING
PROSPECT
FINANCIAL
STATEMENTS
Independent Auditor’s Report
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 (collectively referred to as the “Group”) set out on pages 110 to 185, which comprise the consolidated
and company statements of financial position as at 31 December 2013, and the consolidated statement of
comprehensive income, consolidated statement of changes in equity and 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 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 and to report
our opinion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose.
We do not assume responsibility towards or accept liability to any other person for the contents of this 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
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 2013 and of the Group’s profit and cash flows for the year then ended in accordance
with International Financial Reporting Standards and have been properly prepared in accordance with the disclosure
requirements of the Hong Kong Companies Ordinance.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
19 March 2014
China Telecom Corporation Limited Annual Report 2013
109
Consolidated Statement of Financial Position
at 31 December 2013 (Amounts in millions)
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
31 December
2013
RMB
Note
31 December
2012
RMB
(restated)
4
5
6
7
9
10
11
19
12
13
14
15
374,341
44,157
25,007
29,917
8,045
1,106
1,026
2,927
3,930
490,456
6,523
312
20,022
7,569
2,287
16,070
52,783
373,781
32,500
25,759
29,918
9,214
1,016
616
2,922
4,190
479,916
5,928
1,505
18,782
6,331
2,730
30,099
65,375
543,239
545,291
The notes on pages 118 to 185 form part of these financial statements.
110
China Telecom Corporation Limited Annual Report 2013
Consolidated Statement of Financial Position
at 31 December 2013 (Amounts in millions)
31 December
2013
RMB
Note
31 December
2012
RMB
(restated)
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 and payable
Finance lease obligations
Deferred revenues
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Equity
Share capital
Reserves
16
16
17
18
19
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 19 March 2014.
27,687
20,072
81,132
69,633
371
1
1,202
200,098
6,523
10,212
68,948
105,781
492
–
1,654
193,610
(147,315)
(128,235)
343,141
351,681
62,617
–
1,229
631
64,477
83,070
3
1,791
717
85,581
264,575
279,191
80,932
196,809
277,741
923
278,664
543,239
80,932
184,207
265,139
961
266,100
545,291
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
The notes on pages 118 to 185 form part of these financial statements.
China Telecom Corporation Limited Annual Report 2013
111
Statement of Financial Position
at 31 December 2013 (Amounts in millions)
ASSETS
Non-current assets
Property, plant and equipment, net
Construction in progress
Lease prepayments
Goodwill
Intangible assets
Investments in subsidiaries
Interests in associates
Investments
Deferred tax assets
Other assets
Total non-current assets
Current assets
Inventories
Income tax recoverable
Accounts receivable, net
Prepayments and other current assets
Time deposits with original maturity over three months
Cash and cash equivalents
Total current assets
Total assets
31 December
2013
RMB
31 December
2012
RMB
Note
4
5
6
7
8
9
10
11
19
12
13
14
15
372,222
43,806
24,990
29,877
7,662
6,015
564
1,025
2,647
3,800
492,608
3,203
306
19,326
5,951
30
8,211
37,027
371,738
32,080
25,742
29,877
8,962
6,078
564
612
2,716
4,078
482,447
3,183
1,494
17,789
5,135
580
20,862
49,043
529,635
531,490
The notes on pages 118 to 185 form part of these financial statements.
112
China Telecom Corporation Limited Annual Report 2013
Statement of Financial Position
at 31 December 2013 (Amounts in millions)
31 December
2013
RMB
31 December
2012
RMB
Note
16
16
17
18
19
16
19
11
20
21
27,578
20,072
78,199
65,473
201
1
1,201
6,476
10,212
64,043
102,657
291
–
1,651
192,725
(155,698)
185,330
(136,287)
336,910
346,160
62,617
–
1,229
505
64,351
82,690
3
1,791
627
85,111
257,076
270,441
80,932
191,627
272,559
529,635
80,932
180,117
261,049
531,490
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 and payable
Finance lease obligations
Deferred revenues
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Equity
Share capital
Reserves
Total equity
Total liabilities and equity
Approved and authorised for issue by the Board of Directors on 19 March 2014.
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
The notes on pages 118 to 185 form part of these financial statements.
China Telecom Corporation Limited Annual Report 2013
113
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2013 (Amounts in millions, except per share data)
Note
2013
RMB
2012
RMB
(restated)
22
321,584
283,176
23
24
25
26
27
28
33
33
(69,083)
(53,102)
(70,448)
(46,723)
(54,760)
(49,666)
(65,979)
(63,099)
(42,857)
(40,367)
(294,116)
(261,968)
27,468
(5,153)
670
103
23,088
(5,422)
17,666
414
(104)
(79)
5
236
17,902
17,545
121
17,666
17,781
121
17,902
0.22
80,932
21,208
(1,562)
93
78
19,817
(4,753)
15,064
(228)
57
(2)
–
(173)
14,891
14,949
115
15,064
14,776
115
14,891
0.18
80,932
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
Other comprehensive income for the year:
Items that may be reclassified subsequently to profit or loss:
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 of 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
Number of shares (in millions)
The notes on pages 118 to 185 form part of these financial statements.
114
China Telecom Corporation Limited Annual Report 2013
Consolidated Statement of Changes In Equity
for the year ended 31 December 2013 (Amounts in millions)
Attributable to equity holders of the Company
Share
Capital
Share
Statutory
Other
Exchange
Retained
controlling
Total
capital
reserve
premium
reserves
reserves
reserve
earnings
Note
RMB
RMB
RMB
RMB
RMB
RMB
RMB
Total
RMB
interests
RMB
equity
RMB
Non-
Balance as at 1 January 2012,
as previously reported
80,932
16,767
10,746
64,316
Adjusted for the Seventh Acquisition
1
–
233
–
–
Balance as at 1 January 2012, as restated
80,932
17,000
10,746
64,316
Profit for the year, as restated
Other comprehensive income, as restated
Total comprehensive income, as restated
Contribution from non-controlling interests
Distribution to non-controlling interests
Acquisition of the Sixth Acquired Business
Dividends
Appropriations
Others
Balance as at 31 December 2012,
as restated
Profit for the year
Other comprehensive income
Total comprehensive income
Contribution from non-controlling interests
Distribution to non-controlling interests
Acquisition of the Seventh Acquired Company
Dividends
Appropriations
Disposal of a subsidiary
1
32
21
1
32
21
1
–
–
–
–
–
–
–
–
–
–
–
–
249
–
(48)
–
–
(380)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,413
–
80,932
16,821
10,746
65,729
–
–
–
–
–
–
–
–
–
–
–
–
141
–
(278)
–
–
380
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,663
–
283
–
283
–
(171)
(171)
–
–
–
–
–
–
112
–
315
315
–
–
–
–
–
–
83,896
256,122
788
256,910
(818)
(45)
(863)
–
(2)
(2)
–
–
–
–
–
–
(143)
45
83,753
14,949
256,167
14,949
–
(173)
14,949
14,776
–
–
–
(5,625)
(1,413)
–
249
–
(48)
(5,625)
–
(380)
(865)
91,664
265,139
–
(79)
(79)
17,545
17,545
–
236
17,545
17,781
–
–
–
–
–
–
–
–
–
(5,433)
(1,663)
11
141
–
(278)
(5,433)
–
391
–
788
115
–
115
131
(73)
–
–
–
–
961
121
–
121
59
(74)
–
–
–
(144)
45
256,955
15,064
(173)
14,891
380
(73)
(48)
(5,625)
–
(380)
266,100
17,666
236
17,902
200
(74)
(278)
(5,433)
–
247
Balance as at 31 December 2013
80,932
17,064
10,746
67,392
427
(944)
102,124
277,741
923
278,664
The notes on pages 118 to 185 form part of these financial statements.
China Telecom Corporation Limited Annual Report 2013
115
Consolidated Statement of Cash Flows
for the year ended 31 December 2013 (Amounts in millions)
Net cash from operating activities
(a)
88,351
70,722
Note
2013
RMB
2012
RMB
(restated)
Cash flows used in investing activities
Capital expenditure
Lease prepayments
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of lease prepayments
Net cash inflow/(outflow) from disposal of a subsidiary
Purchase of time deposits with maturity over three months
Maturity of time deposits with maturity over three months
Payment for the payable to China Telecommunications Corporation
related to the Mobile Network Acquisition (as defined in Note 16)
Payment for the first installment of the Mobile Network Acquisition
Net cash used in investing activities
Cash flows from/(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
Payment for the acquisition price of the Fifth Acquisition
Payment for the acquisition price of the Sixth Acquisition
Net cash contributions from non-controlling interests
Net cash from/(used in) financing activities
Net (decrease)/increase 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
1
1
1
(70,921)
(111)
1,538
360
512
(2,750)
3,193
(14,269)
(25,500)
(50,071)
(133)
2,696
255
(116)
(2,730)
1,804
–
–
(107,948)
(48,295)
(2)
54,983
(44,053)
(5,433)
–
–
142
5,637
(13,960)
30,099
(69)
16,070
–
9,702
(24,133)
(5,625)
(29)
(48)
331
(19,802)
2,625
27,475
(1)
30,099
The notes on pages 118 to 185 form part of these financial statements.
116
China Telecom Corporation Limited Annual Report 2013
Consolidated Statement of Cash Flows
for the year ended 31 December 2013 (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 for doubtful debts
Write down of inventories
Investment income
Share of profits of associates
Interest income
Interest expense
Unrealised foreign exchange loss/(gain)
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
2013
RMB
2012
RMB
(restated)
23,088
19,817
69,083
1,744
360
(670)
(103)
(361)
5,511
3
(1,021)
97,634
(3,156)
(955)
(1,077)
294
3,210
3,148
(1,014)
98,084
358
(5,573)
21
(4,539)
88,351
49,666
1,612
235
(93)
(78)
(591)
2,154
(1)
(2,429)
70,292
(2,124)
(1,185)
(1,045)
484
5,016
6,245
(1,360)
76,323
587
(2,200)
23
(4,011)
70,722
The notes on pages 118 to 185 form part of these financial statements.
China Telecom Corporation Limited Annual Report 2013
117
Notes to the Financial Statements
for the year ended 31 December 2013
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, telecommunication network resource services and lease of network
equipment, 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 international telecommunications services, including lease of network equipment,
International Internet access and transit, and Internet data centre service in certain countries of the Asia Pacific,
Europe, 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, lease of network equipment,
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.
118
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
1. Principal Activities, Organisation and Basis of Presentation (continued)
Organisation (continued)
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 Global Limited (“CT Global”) 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”).
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”).
On 30 April 2012, the Company acquired the digital trunking business (the “Sixth Acquired Business”) from
Besttone Holding Co., Ltd., a subsidiary of China Telecommunications Corporation, at a purchase price of
RMB48 million (hereinafter, referred to as the “Sixth Acquisition”).
China Telecom Corporation Limited Annual Report 2013
119
Notes to the Financial Statements
for the year ended 31 December 2013
1. Principal Activities, Organisation and Basis of Presentation (continued)
Organisation (continued)
Pursuant to an agreement entered into by the Company and China Telecommunications Corporation on
26 April 2013, the Company disposed of an 80% equity interest in E-surfing Media Co., Ltd. (“E-surfing
Media”), a subsidiary of the Company primarily engaged in the provision of video media services, to China
Telecommunications Corporation. The initial consideration for the disposal of the equity interest in E-surfing
Media was RMB1,195 million, which was concluded based on the valuation of the equity interests in E-surfing
Media as at 31 December 2012 as filed for the state-owned assets appraisals. In addition, an adjustment was
made to the initial consideration to arrive at the final consideration based on 80% of the change in the book
value of the net assets of E-surfing Media during the period from 31 December 2012 to the completion date of
the disposal. The risks and rewards of the ownership of the equity interest in E-surfing Media were transferred
to China Telecommunications Corporation on 30 June 2013. The final consideration was arrived at RMB1,248
million and received by 31 December 2013.
Analysis of assets and liabilities of the disposed subsidiary:
Current assets
Cash and cash equivalents
Accounts receivable, net
Other current assets
Non-current assets
Property, plant and equipment, net
Other non-current assets
Current liabilities
Accounts payable
Other current liabilities
Non-current liabilities
Net assets disposed of
30 June 2013
RMB millions
736
150
1
111
18
222
64
8
722
120
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
1. Principal Activities, Organisation and Basis of Presentation (continued)
Organisation (continued)
Gain on disposal of a subsidiary:
Consideration received
Net assets disposed of
Non-controlling interests
Gain on disposal
2013
RMB millions
1,248
(722)
144
670
The gain on disposal of E-surfing Media has been included in investment income of the consolidated statement
of comprehensive income.
Net cash inflow from disposal of a subsidiary:
Consideration received in cash and cash equivalents
Less: cash and cash equivalents disposed of
Net cash inflow from disposal of a subsidiary
2013
RMB millions
1,248
(736)
512
Pursuant to an acquisition agreement entered into by CT Global and China Telecommunications Corporation
on 16 December 2013, CT Global acquired 100% interest in China Telecom (Europe) Limited (“CT Europe”
or the “Seventh Acquired Company”), a wholly owned subsidiary of China Telecommunications Corporation,
from China Telecommunications Corporation (hereinafter, referred to as the “Seventh Acquisition”). The initial
consideration for the Seventh Acquisition was RMB261 million. The initial consideration shall be adjusted for
the difference between the net asset value on the completion date of the acquisition and the net asset value
on the appraisal benchmark date of the acquisition, which was 30 June 2013 in order to arrive at the final
consideration. The Seventh Acquisition was completed on 31 December 2013. The final consideration was
RMB278 million. The initial consideration has been paid within 15 Business Days upon the completion of the
acquisition.
Hereinafter, the First Acquired Group, the Second Acquired Group, the Third Acquired Group, the Fourth
Acquired Company, the Fifth Acquired Group, the Sixth Acquired Business and the Seventh Acquired
Company are collectively referred to as the “Acquired Groups”.
China Telecom Corporation Limited Annual Report 2013
121
Notes to the Financial Statements
for the year ended 31 December 2013
1. Principal Activities, Organisation and Basis of Presentation (continued)
Basis of presentation
Since the Group and the Acquired Groups are 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 the Acquired Groups are accounted for as an equity
transaction in the consolidated statement of changes in equity.
The consolidated results of operations for the year ended 31 December 2012 and the consolidated financial
position as at 31 December 2012 as previously reported by the Group and the combined amounts presented in
the consolidated financial statements of the Group to reflect the acquisition of the Seventh Acquired Company
are set out below:
Consolidated statement of comprehensive income
for the year ended 31 December 2012:
Operating revenues
Profit for the year
Consolidated statement of financial position as at
31 December 2012:
Total assets
Total liabilities
Total equity
The Group
(as previously
reported)
RMB
millions
The Seventh
Acquired
Company
RMB
millions
The Group
(as restated)
RMB
millions
283,073
15,040
545,072
279,042
266,030
103
24
219
149
70
283,176
15,064
545,291
279,191
266,100
For the periods presented, all significant transactions and balances between the Group and the Seventh
Acquired Company have been eliminated on combination.
122
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
1. Principal Activities, Organisation and Basis of Presentation (continued)
Set up of subsidiaries
On 9 June 2013, the Group set up a subsidiary, iMUSIC Culture & Technology Co., Ltd., which engages in the
provision of music production and related information services.
On 19 August 2013, the Group set up a subsidiary, Zhejiang Yixin Technology Co., Ltd., which engages in the
provision of instant messenger service.
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.
China Telecom Corporation Limited Annual Report 2013
123
Notes to the Financial Statements
for the year ended 31 December 2013
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”).
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 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.
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 40.
(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. When fulfilling the following conditions, the
Company has control over an entity: (a) has power over an investee, (b) has exposure, or rights, to
variable returns from its involvement with the investee, and (c) has the ability to use its power over the
investee to affect the amount of the investor’s returns.
When assessing whether the Company has power, only substantive rights (held by the Company and
other parties) are considered.
124
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
2. Significant Accounting Policies (continued)
(b) Basis of consolidation (continued)
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 a joint venture.
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 or joint 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 and any impairment loss relating to the investment. 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.
China Telecom Corporation Limited Annual Report 2013
125
Notes to the Financial Statements
for the year ended 31 December 2013
2. Significant Accounting Policies (continued)
(c)
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 the
Group’s foreign operations is the currency of the primary economic environment in which the foreign
operations operate. 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 the
Group’s foreign operations are translated into RMB at average rate prevailing during the year. Assets
and liabilities of the Group’s foreign operations 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) Accounts and other receivables
Accounts 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 less allowance for doubtful
debts.
126
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
2. Significant Accounting Policies (continued)
(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 initially recorded at cost, less subsequent accumulated depreciation
and impairment losses (Note 2(o)). The cost of an asset comprises its purchase price, any directly
attributable costs of bringing the asset to working condition and location for its intended use and the
cost of borrowed funds used during the periods of construction. Expenditure incurred after the asset
has been put into operation, including cost of replacing part of such an item, is capitalised only when it
increases the future economic 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.
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
2013, the carrying amount of assets held under finance leases was RMB28 million (2012: RMB3 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.
China Telecom Corporation Limited Annual Report 2013
127
Notes to the Financial Statements
for the year ended 31 December 2013
2. Significant Accounting Policies (continued)
(g) Property, plant and equipment (continued)
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
(h)
(i)
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.
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.
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.
(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.
128
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
2. Significant Accounting Policies (continued)
(k)
Intangible assets
The Group’s intangible assets comprise computer software and customer relationships acquired in the
CDMA business acquisition (Note 7).
Computer software that is not an integral part of any tangible assets, is recorded at cost less
subsequent accumulated amortisation and impairment losses (Note 2(o)). Amortisation of computer
software is calculated on a straight-line basis over the estimated useful lives, which mainly range from
three to 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. By the end of the expected customer relationship period, fully amortised customer relationships
were written off.
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)).
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. For investments
in available-for-sale equity securities, a significant or prolonged decline in the fair value of that investment
below its cost is considered to be objective evidence of impairment. When these investments are
derecognised or impaired, the cumulative gain or loss previously recognised in other comprehensive
income is recognised in 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)).
(l)
(m)
(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.
China Telecom Corporation Limited Annual Report 2013
129
Notes to the Financial Statements
for the year ended 31 December 2013
2. Significant Accounting Policies (continued)
(o)
Impairment
(i)
Impairment of accounts and other receivables and investments in equity securities
carried at cost
Accounts and other receivables and investments in equity securities carried at cost 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;
and
significant changes in the technological, market, economic or legal environment that have
an adverse effect on the debtor.
The impairment loss for accounts and other receivables is measured as the difference between
the asset’s carrying amount and the estimated future cash flows, discounted at the financial
asset’s original effective interest rate where the effect of discounting is material, and is recognised
as an expense in profit or loss.
The impairment loss for investments in equity securities carried at cost 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 accounts 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 carried at cost are not reversed.
130
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
2. Significant Accounting Policies (continued)
(o)
Impairment (continued)
(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 fair value
less costs of disposal and value in use. 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.
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. An impairment loss in respect of
goodwill is not reversed. For the years presented, no reversal of impairment loss was recognised
in profit or loss.
China Telecom Corporation Limited Annual Report 2013
131
Notes to the Financial Statements
for the year ended 31 December 2013
2. Significant Accounting Policies (continued)
(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.
Fees received for wireline installation charges for periods prior to 1 January 2012 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 amortised
over the same expected customer relationship period. In 2012, since the amounts of fees
received and the associated direct costs incurred are insignificant, the fees and associated direct
costs are not deferred, and are recognized in profit or loss when received or incurred.
(iii)
Monthly service fees are recognised in the month during which the services are provided to
customers.
(iv)
Revenue from sale of prepaid calling cards are recognised as the cards are used by customers.
(v)
Revenue derived from value-added services are recognised when the services are provided to
customers.
Revenue from value-added services in which no third party service providers are involved, such as
caller display and Internet data center services, are presented on a gross basis. Revenues from
all other value-added services are presented on either gross or net basis based on the assessment
of each individual arrangement with third parties. The following factors indicate that the Group is
acting as principal in the arrangements with third parties:
i)
ii)
iii)
The Group is responsible for providing the applications or services desired by customers,
and takes responsibility for fulfillment of ordered applications or services, including the
acceptability of the applications or services ordered or purchased by customers;
The Group takes title of the inventory of the applications before they are ordered by
customers;
The Group has risks and rewards of ownership, such as risks of loss for collection from
customers after applications or services are provided to customers;
iv)
The Group establishes selling prices with customers;
v)
The Group can modify the applications or perform part of the services;
vi)
The Group has discretion in selecting suppliers used to fulfill an order; and
vii)
The Group determines the nature, type, characteristics, or specifications of the
applications or services.
132
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
2. Significant Accounting Policies (continued)
(p) Revenue recognition (continued)
If majority of the indicators of risks and responsibilities exist in the arrangements with third parties, the
Group is acting as a principal and have exposure to the significant risks and rewards associated with
the rendering of services or the sale of applications, and revenues for these services are recognised on
gross basis. If majority of the indicators of risks and responsibilities do not exist in the arrangements with
third parties, the Group is acting as an agent, and revenues for these services are recognised on a net
basis.
(vi)
(vii)
Revenue from the provision of Internet and telecommunications network resource services is
recognised when the services are provided to customers.
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 is 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.
The Group offers promotional packages, which involve the bundled sales of terminal equipment
(mobile handsets) and telecommunications services, to customers. The total contract consideration of
a promotional package is allocated to revenues generated from the provision of telecommunications
services and the sales of terminal equipment using the residual method. Under the residual method,
the total contract consideration of the arrangement is allocated as follows: The undelivered component,
which is the provision of telecommunications services, is measured at fair value, and the remainder
of the contract consideration is allocated to the delivered component, which is the sales of terminal
equipment. The Group recognises revenues generated from the delivery and sales of the terminal
equipment when the title of the terminal equipment is passed to the customers whereas revenues
generated from the provision of telecommunications services are recognised based upon the actual
usage of such services. During each of the years in the two-year period ended 31 December 2013, a
substantial portion of the total contract consideration is allocated to the provision of telecommunications
services since the terminal equipment is typically provided free of charge or at a nominal amount to
promote the Group’s core business of the provision of telecommunications services, and the fair value
of the telecommunication services approximates the total contract consideration. The Group believes
that the residual method of accounting for promotional packages provides the most relevant and reliable
presentation method of the delivery and sales of the terminal equipment and telecommunication services
since it reflects the economic substance of the arrangement.
China Telecom Corporation Limited Annual Report 2013
133
Notes to the Financial Statements
for the year ended 31 December 2013
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 RMB36,490 million for the year ended 31 December 2013 (2012: RMB34,905 million),
among which, the costs of terminal equipment offered as part of a promotional package to our
customers for free or at a nominal amount to promote the Group’s telecommunication service amounted
to RMB22,795 million for the year ended 31 December 2013 (2012: RMB21,754 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
2013, research and development expense was RMB630 million (2012: RMB608 million).
(t)
Employee benefits
The Group’s contributions to defined contribution retirement plans administered by the PRC government
and defined contribution retirement plans administered by independent external parties are recognised
in profit or loss as incurred. Further information is set out in Note 38.
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 39.
(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) Accounts and other payables
Accounts 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.
134
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
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, or directly in equity, in which case the relevant amounts of tax are recognised
in other comprehensive income or directly in equity respectively. 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.
Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax
liabilities are recognised for taxable temporary differences associated with investments in subsidiaries
and associates, except where the Group is able to control the reversal of the temporary difference and it
is probable that the temporary difference will not reverse in the foreseeable future.
(y) Dividends
Dividends are recognised as a liability in the period in which they are declared.
China Telecom Corporation Limited Annual Report 2013
135
Notes to the Financial Statements
for the year ended 31 December 2013
2. Significant Accounting Policies (continued)
(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.
(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 the integrated
telecommunications business. The Group’s assets located outside mainland China and operating
revenues derived from activities outside mainland China are less than 10% 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.
136
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
3. Application of New and Revised International Financial Reporting Standards
The IASB has issued a number of new and revised IFRSs that are effective for accounting period beginning on
or after 1 January 2013. The Group applied the following new or revised IFRSs that are effective for the current
year:
•
•
•
•
•
•
Amendments to IAS 1, “Presentation of Financial Statements – Presentation of Items of Other
Comprehensive Income”
IFRS 10, “Consolidated Financial Statements”
IFRS 12, “Disclosure of Interests in Other Entities”
IFRS 13, “Fair Value Measurement”
Amendments to IFRS 7,” Financial Instruments: Disclosures – Offsetting Financial Assets and Financial
Liabilities”
Revised IAS 19, “Employee Benefits”
The Group has not yet applied any new and revised standard or interpretation that is not yet effective for the
current accounting period (Note 41).
Amendments to IAS 1, “Presentation of Financial Statements – Presentation of Items of
Other Comprehensive Income”
The amendments introduced new terminology for the statement of comprehensive income and income
statement. Under the amendments to IAS 1, “statement of comprehensive income” is renamed as “statement
of profit or loss and other comprehensive income” and “income statement” is renamed as “statement of profit
or loss”. However, the amendments to IAS 1 allow an entity to use titles for these statements other than those
used in the amendments to IAS 1. The Group has not made any changes to the titles for these statements.
In addition, the amendments to IAS 1 require items of other comprehensive income to be grouped into two
categories to disclose: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that
may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of
other comprehensive income is required to be allocated on the same basis – the amendments do not change
the option to present items of other comprehensive income either before tax or net of tax.
The application of the amendments has no significant impact on the presentation of items of other
comprehensive income of the Group.
IFRS 10, “Consolidated Financial Statements”
IFRS 10 replaces the parts of IAS 27, “Consolidated and Separate Financial Statements” that deal with
consolidated financial statements and SIC 12, “Consolidation – Special Purpose Entities”. Under IFRS 10, there
is only one basis for consolidation, that is, control. In addition, IFRS 10 includes a new definition of control that
contains three elements: (a) has power over an investee, (b) has exposure, or rights, to variable returns from its
involvement with the investee, and (c) has the ability to use its power over the investee to affect the amount of
the investor’s returns. Extensive guidance has been added in IFRS 10 to deal with complex scenarios.
The application of IFRS 10 has no significant impact on the Group’s financial statements.
China Telecom Corporation Limited Annual Report 2013
137
Notes to the Financial Statements
for the year ended 31 December 2013
3. Application of New and Revised International Financial Reporting Standards
(continued)
IFRS 12, “Disclosure of Interests in Other Entities”
IFRS 12 is a disclosure standard and brings together into a single standard all disclosure requirements
applicable to entities’ interests in subsidiaries, joint arrangements, associates and unconsolidated structured
entities. In general, the disclosure requirements in IFRS 12 are more extensive than those previously required
by the respective standards.
The application of IFRS 12 has no significant impact on the Group’s financial statements.
IFRS 13, “Fair Value Measurement”
IFRS 13 establishes a single source of guidance for fair value measurements. The standard defines fair value,
establishes a framework for measuring fair value, and requires disclosures about fair value measurements.
The scope of IFRS 13 is broad, and applies to both financial instrument items and non-financial instrument
items for which other IFRSs require or permit fair value measurements and disclosures about fair value
measurements, subject to a few exceptions.
The application of IFRS 13 has no significant impact on the Group’s financial statements.
Amendments to IFRS 7, “Financial Instruments: Disclosures – Offsetting Financial Assets
and Financial Liabilities”
The amendments require entities to disclose information about rights of offset and related arrangements for
financial instruments under an enforceable master netting agreement or similar arrangement.
The application of the amendments has no significant impact on the Group’s financial statements.
Revised IAS 19, “Employee Benefits”
Revised IAS 19, “Employee Benefits” mainly changes the accounting for defined benefit plans. This standard
eliminates the “corridor approach” permitted under the previous version of IAS 19 and no longer permits the
recognition of actuarial gains and losses to be deferred and recognised in profit or loss. All actuarial gains and
losses should be recognised immediately through other comprehensive income.
The application of Revised IAS 19. “Employee Benefits” has no significant impact on the Group’s financial
statements.
138
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
4. Property, Plant and Equipment, Net
The Group
Cost/Deemed cost:
Balance at 1 January 2012, as previously reported
Adjusted for the Seventh Acquisition (Note 1)
Balance at 1 January 2012, as restated
Additions
Mobile Network Acquisition (Note 16)
Transferred from construction in progress
Disposals
Reclassification
Balance at 31 December 2012, as restated
Additions
Transferred from construction in progress
Disposals
Reclassification
Balance at 31 December 2013
Accumulated depreciation and impairment:
Balance at 1 January 2012, as previously reported
Adjusted for the Seventh Acquisition (Note 1)
Balance at 1 January 2012, as restated
Depreciation charge for the year
Written back on disposal
Reclassification
Balance at 31 December 2012, as restated
Depreciation charge for the year
Written back on disposal
Reclassification
Balance at 31 December 2013
Net book value at 31 December 2013
Net book value at 31 December 2012, as restated
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
86,309
–
86,309
582
3,697
2,348
(414)
(1)
92,521
560
2,926
(657)
61
95,411
(32,696)
–
(32,696)
(3,810)
258
–
(36,248)
(4,776)
540
(21)
(40,505)
54,906
56,273
654,201
37
654,238
868
98,476
42,022
(4,617)
172
791,159
1,367
58,424
(14,915)
(175)
835,860
(446,683)
(21)
(446,704)
(39,324)
4,162
(66)
(481,932)
(56,794)
13,819
44
(524,863)
310,997
309,227
24,715
9
24,724
775
700
1,329
(448)
(171)
26,909
955
1,494
(1,126)
114
28,346
(16,942)
(4)
(16,946)
(2,162)
414
66
(18,628)
(2,294)
1,037
(23)
(19,908)
8,438
8,281
765,225
46
765,271
2,225
102,873
45,699
(5,479)
–
910,589
2,882
62,844
(16,698)
–
959,617
(496,321)
(25)
(496,346)
(45,296)
4,834
–
(536,808)
(63,864)
15,396
–
(585,276)
374,341
373,781
China Telecom Corporation Limited Annual Report 2013
139
Notes to the Financial Statements
for the year ended 31 December 2013
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
85,750
567
3,697
2,285
(392)
(1)
91,906
544
2,874
(630)
60
94,754
(32,523)
(3,729)
237
–
(36,015)
(4,692)
519
(21)
(40,209)
54,545
55,891
651,808
795
98,476
41,808
(4,629)
225
788,483
1,335
57,962
(14,855)
(176)
832,749
(445,397)
(39,097)
4,182
(119)
(480,431)
(56,556)
13,801
40
(523,146)
309,603
308,052
23,444
918
700
1,303
(367)
(224)
25,774
906
1,463
(958)
116
27,301
(16,234)
(2,212)
348
119
(17,979)
(2,141)
912
(19)
761,002
2,280
102,873
45,396
(5,388)
–
906,163
2,785
62,299
(16,443)
–
954,804
(494,154)
(45,038)
4,767
–
(534,425)
(63,389)
15,232
–
(19,227)
(582,582)
8,074
7,795
372,222
371,738
Cost/Deemed cost:
Balance at 1 January 2012
Additions
Mobile Network Acquisition (Note 16)
Transferred from construction in progress
Disposals
Reclassification
Balance at 31 December 2012
Additions
Transferred from construction in progress
Disposals
Reclassification
Balance at 31 December 2013
Accumulated depreciation and impairment:
Balance at 1 January 2012
Depreciation charge for the year
Written back on disposal
Reclassification
Balance at 31 December 2012
Depreciation charge for the year
Written back on disposal
Reclassification
Balance at 31 December 2013
Net book value at 31 December 2013
Net book value at 31 December 2012
140
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
5. Construction in Progress
Balance at 1 January 2012, as previously reported
Adjusted for the Seventh Acquisition (Note 1)
Balance at 1 January 2012, as restated
Additions
Mobile Network Acquisition (Note 16)
Transferred to property, plant and equipment
Transferred to intangible assets
Balance at 31 December 2012, as restated
Additions
Transferred to property, plant and equipment
Transferred to intangible assets
Balance at 31 December 2013
6. Goodwill
The Group The Company
RMB millions RMB millions
18,448
27
18,475
51,862
9,177
(45,699)
(1,315)
32,500
77,364
(62,844)
(2,863)
44,157
18,174
–
18,174
51,395
9,177
(45,396)
(1,270)
32,080
76,814
(62,299)
(2,789)
43,806
The Group
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
Cost:
Goodwill arising from acquisition of CDMA
business
29,917
29,918
29,877
29,877
On 1 October 2008, the Group acquired the CDMA mobile communication business and related assets
and liabilities, which also included the entire equity interests of China Unicom (Macau) Company Limited
(currently known as China Telecom (Macau) Company Limited) and 99.5% equity interests of Unicom
Huasheng Telecommunications Technology Company Limited (currently known as Tianyi Telecom Terminals
Company Limited) (collectively the “CDMA business”) from China Unicom. 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.
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.
China Telecom Corporation Limited Annual Report 2013
141
Notes to the Financial Statements
for the year ended 31 December 2013
6. Goodwill (continued)
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 10.6% (2012: 10.2%). Cash flows beyond the five-year period are projected to perpetuity at
annual growth rate of 1.5%. 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.
7.
Intangible Assets
The Group
Cost:
Balance at 1 January 2012
Additions
Mobile Network Acquisition (Note 16)
Transferred from construction in progress
Disposals
Balance at 31 December 2012
Additions
Transferred from construction in progress
Disposals
Balance at 31 December 2013
Accumulated amortisation and impairment:
Balance at 1 January 2012
Amortisation charge for the year
Written back on disposal
Balance at 31 December 2012
Amortisation charge for the year
Written back on disposal
Balance at 31 December 2013
Net book value at 31 December 2013
Net book value at 31 December 2012
142
China Telecom Corporation Limited Annual Report 2013
Computer
software
Customer
Total
relationships
RMB millions RMB millions RMB millions
9,893
269
3,578
1,315
(67)
14,988
461
2,863
(221)
18,091
(6,110)
(1,403)
55
(7,458)
(2,787)
199
(10,046)
8,045
7,530
11,238
–
–
–
–
11,238
–
–
(11,238)
–
(7,306)
(2,248)
–
(9,554)
(1,684)
11,238
–
–
1,684
21,131
269
3,578
1,315
(67)
26,226
461
2,863
(11,459)
18,091
(13,416)
(3,651)
55
(17,012)
(4,471)
11,437
(10,046)
8,045
9,214
Notes to the Financial Statements
for the year ended 31 December 2013
Computer
software
Customer
Total
relationships
RMB millions RMB millions RMB millions
9,561
179
3,578
1,270
(56)
14,532
327
2,789
(192)
17,456
(5,959)
(1,345)
50
(7,254)
(2,729)
189
(9,794)
7,662
7,278
11,238
–
–
–
–
11,238
–
–
(11,238)
–
(7,306)
(2,248)
–
(9,554)
(1,684)
11,238
–
–
1,684
20,799
179
3,578
1,270
(56)
25,770
327
2,789
(11,430)
17,456
(13,265)
(3,593)
50
(16,808)
(4,413)
11,427
(9,794)
7,662
8,962
7.
Intangible Assets (continued)
The Company
Cost:
Balance at 1 January 2012
Additions
Mobile Network Acquisition (Note 16)
Transferred from construction in progress
Disposals
Balance at 31 December 2012
Additions
Transferred from construction in progress
Disposals
Balance at 31 December 2013
Accumulated amortisation and impairment:
Balance at 1 January 2012
Amortisation charge for the year
Written back on disposal
Balance at 31 December 2012
Amortisation charge for the year
Written back on disposal
Balance at 31 December 2013
Net book value at 31 December 2013
Net book value at 31 December 2012
China Telecom Corporation Limited Annual Report 2013
143
Notes to the Financial Statements
for the year ended 31 December 2013
8.
Investments in Subsidiaries
Unquoted investments, at cost
The Company
2013
RMB millions
2012
RMB millions
6,015
6,078
Details of the Company’s subsidiaries which principally affected the results, assets and liabilities of the Group at
31 December 2013 are as follows:
Name of Company
Type of legal entity
Date of
incorporation
Place of
incorporation
and operation
China Telecom System
Limited Company
13 September 2001
PRC
Integration Co., Limited
Registered/
Issued capital
(in RMB millions
unless otherwise
stated)
392
Principal activity
Provision of system
integration and
consulting services
China Telecom Global
Limited Company
25 February 2000
Limited
Hong Kong Special
Administrative
Region of the PRC
HK$58 million
Provision of international
value-added network
services
China Telecom (Americas)
Limited Company
22 November 2001
The United States of
US$43 million
Provision of
Corporation
America
telecommunications
services
350
Provision of Best Tone
information services
Limited Company
15 August 2007
PRC
China Telecom Best Tone
Information Service Co.,
Limited
China Telecom (Macau)
Company Limited
Limited Company
15 October 2004
Macau Special
MOP60 million
Provision of
Administrative
Region of the PRC
telecommunications
services
Tianyi Telecom Terminals
Limited Company
1 July 2005
PRC
500
Sales of
Company Limited
China Telecom (Singapore)
Limited Company
5 October 2006
Singapore
S$1
Pte. Limited
telecommunications
terminals
Provision of international
value-added network
services
144
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
8.
Investments in Subsidiaries (continued)
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 activity
E-surfing Pay Co., Ltd
Limited Company
3 March 2011
PRC
300
Provision of
e-commerce services
Shenzhen Shekou
Limited Company
5 May 1984
PRC
91
Provision of
Telecommunications
Company Limited
China Telecom (Australia)
Limited Company
10 January 2011
Australia
AUD1 million
Pty Ltd
China Telecom Korea
Limited Company
16 May 2012
South Korea
KRW500 million
Co.,Ltd
China Telecom (Malaysia)
Limited Company
26 June 2012
Malaysia
RM500,000
SDN BHD
China Telecom Information
Technology (Vietnam)
Co., Ltd
Limited Company
9 July 2012
Vietnam
VND6,300 million
iMUSIC Culture &
Limited Company
9 June 2013
PRC
250
Technology Co., Ltd.
China Telecom (Europe)
Limited Company
2 March 2006
Limited
GBP16.15 million
The United Kingdom
of Great Britain
and Northern
Ireland
telecommunications
services
Provision of international
value-added network
services
Provision of international
value-added network
services
Provision of international
value-added network
services
Provision of international
value-added network
services
Provision of music
production and
related information
services
Provision of international
value-added network
services
Zhejiang Yixin Technology
Limited Company
19 August 2013
PRC
Co., Ltd.
10
Provision of instant
messenger service
China Telecom Corporation Limited Annual Report 2013
145
Notes to the Financial Statements
for the year ended 31 December 2013
8.
Investments in Subsidiaries (continued)
Except for Shenzhen Shekou Telecommunications Company Limited which is 51% owned by the Company
and Zhejiang Yixin Technology Co., Ltd. which is 73% owned by the Company, all of the above subsidiaries are
directly or indirectly wholly-owned by the Company. No subsidiaries of the Group have material non-controlling
interest.
9.
Interests in Associates
Unlisted equity investments, at cost
Share of post-acquisition changes
in net assets
The Group
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
229
877
1,106
232
784
1,016
564
–
564
564
–
564
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 position or
results of operations for all periods presented. Details of the Group’s principal associate are as follows:
Name of company
Attributable
equity interest
Principal activities
Shanghai Information Investment Incorporation
24%
Provision of information technology
consultancy services
The above associate is established in the PRC and is not traded on any stock exchange.
146
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
9.
Interests in Associates (continued)
Summarised financial information of the Group’s principal associate and reconciled to the carrying amounts in
the Group’s consolidated financial statements are disclosed below:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Operating revenues
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Dividend received from the associate
Reconciled to the Group’s interests in the associate
Net assets of the associate
Non-controlling interests of the associate
Group’s effective interest in the associate
Group’s share of net assets of the associate
Carrying amount of the associate in the consolidated financial statements of
the Group
10.
Investments
Shanghai Information
Investment Incorporation
2013
RMB millions
2012
RMB millions
5,721
7,683
4,795
3,265
3,772
267
(1)
266
8
5,344
(1,733)
24%
867
5,495
7,031
4,865
2,929
3,424
244
3
247
7
4,732
(1,378)
24%
805
867
805
Available-for-sale equity securities
Other unlisted equity investments
The Group
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
999
27
1,026
585
31
616
998
27
1,025
585
27
612
Other unlisted equity investments mainly represent the Group’s and the Company’s various interests in PRC
private enterprises which are mainly engaged in the provision of information technology services and Internet
contents.
China Telecom Corporation Limited Annual Report 2013
147
Notes to the Financial Statements
for the year ended 31 December 2013
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
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
Provisions and impairment losses,
primarily for doubtful debts
Property, plant and equipment
Deferred revenues and
installation costs
Available-for-sale equity securities
Deferred tax assets/(liabilities)
1,071
1,431
425
–
2,927
1,028
1,279
615
–
2,922
–
(184)
(270)
(177)
(631)
–
(266)
(378)
(73)
(717)
1,071
1,247
155
(177)
2,296
1,028
1,013
237
(73)
2,205
Balance at
1 January
2012
RMB millions
Recognised in
statement of
comprehensive
income
RMB millions
Disposal of
a subsidiary
RMB millions
Balance at
31 December
2012
RMB millions
1,011
720
352
(130)
1,953
19
293
(115)
57
254
(2)
–
–
–
(2)
1,028
1,013
237
(73)
2,205
Balance at
1 January
2013
RMB millions
Recognised in
statement of
comprehensive
income
RMB millions
Disposal of
a subsidiary
RMB millions
Balance at
31 December
2013
RMB millions
1,028
1,013
237
(73)
2,205
43
238
(82)
(104)
95
–
(4)
–
–
(4)
1,071
1,247
155
(177)
2,296
Provisions and impairment losses,
primarily for doubtful debts
Property, plant and equipment
Deferred revenues and installation costs
Available-for-sale equity securities
Net deferred tax assets
Provisions and impairment losses,
primarily for doubtful debts
Property, plant and equipment
Deferred revenues and installation costs
Available-for-sale equity securities
Net deferred tax assets
148
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
11. Deferred Tax Assets and Liabilities (continued)
The Company
Assets
Liabilities
Net Balance
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
Provisions and impairment losses,
primarily for doubtful debts
Property, plant and equipment
Deferred revenues and
installation costs
Available-for-sale equity securities
Deferred tax assets/(liabilities)
990
1,232
425
–
2,647
982
1,101
615
18
2,716
–
(149)
(271)
(85)
(505)
–
(249)
(378)
–
(627)
990
1,083
154
(85)
2,142
982
852
237
18
2,089
Balance at
1 January
2012
RMB millions
Addition in
the Sixth
Acquisition
RMB millions
Recognised in
statement of
comprehensive
income
RMB millions
Balance at
31 December
2012
RMB millions
965
665
352
(39)
1,943
2
–
–
–
2
15
187
(115)
57
144
982
852
237
18
2,089
Provisions and impairment losses,
primarily for doubtful debts
Property, plant and equipment
Deferred revenues and installation costs
Available-for-sale equity securities
Net deferred tax assets
Provisions and impairment losses, primarily for doubtful debts
Property, plant and equipment
Deferred revenues and installation costs
Available-for-sale equity securities
Net deferred tax assets
Balance at
1 January
2013
RMB millions
Recognised in
statement of
comprehensive
income
RMB millions
Balance at
31 December
2013
RMB millions
982
852
237
18
2,089
8
231
(83)
(103)
53
990
1,083
154
(85)
2,142
China Telecom Corporation Limited Annual Report 2013
149
Notes to the Financial Statements
for the year ended 31 December 2013
12.
Inventories
Inventories represent:
Materials and supplies
Goods for resale
The Group
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
905
5,618
6,523
985
4,943
5,928
893
2,310
3,203
968
2,215
3,183
13. Accounts Receivable, Net
Accounts receivable, net, are analysed as follows:
The Group
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
Note
Accounts receivable
Third parties
China Telecom Group
Other telecommunications
operators in the PRC
Subsidiaries
Less: Allowance for doubtful
debts
(i)
21,293
391
536
–
(restated)
19,650
627
529
–
22,220
20,806
(2,198)
20,022
(2,024)
18,782
19,454
181
527
1,306
21,468
(2,142)
19,326
18,130
289
526
805
19,750
(1,961)
17,789
Note:
(i)
China Telecommunications Corporation together with its subsidiaries other than the Group are referred to as “China
Telecom Group”.
150
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
13. Accounts Receivable, Net (continued)
The following table summarises the changes in allowance for doubtful debts:
The Group
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
At beginning of year
Impairment losses for doubtful debts
Accounts receivable written off
At end of year
2,024
1,740
(1,566)
2,198
1,942
1,624
(1,542)
2,024
1,961
1,721
(1,540)
2,142
1,873
1,605
(1,517)
1,961
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
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
11,887
2,438
1,784
488
16,597
(2,122)
14,475
11,402
2,319
1,613
387
15,721
(1,932)
13,789
11,725
2,390
1,769
487
16,371
(2,105)
14,266
11,279
2,288
1,598
386
15,551
(1,917)
13,634
Ageing analysis of accounts receivable from other telecommunications operators and enterprise customers is as
follows:
Current, within 1 month
1 to 3 months
4 to 12 months
More than 12 months
Less: Allowance for doubtful debts
The Group
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
2,436
1,169
1,302
716
5,623
(76)
5,547
(restated)
1,953
1,575
984
573
5,085
(92)
4,993
2,448
1,010
1,054
585
5,097
(37)
5,060
1,817
1,186
780
416
4,199
(44)
4,155
China Telecom Corporation Limited Annual Report 2013
151
Notes to the Financial Statements
for the year ended 31 December 2013
13. Accounts Receivable, Net (continued)
Ageing analysis of accounts receivable that are not impaired is as follows:
The Group
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
(restated)
Not past due
17,839
16,854
17,190
15,893
Less than 1 month past due
1 to 3 months past due
Amounts past due
1,206
977
2,183
1,261
667
1,928
1,184
952
2,136
1,245
651
1,896
20,022
18,782
19,326
17,789
Amounts due from the provision of telecommunications services to customers are generally due within 30 days
from the date of billing.
14. Prepayments and Other Current Assets
Prepayments and other current assets represent:
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
The Group
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
1,037
–
472
1,213
2,418
2,429
7,569
(restated)
779
–
407
1,086
2,149
1,910
6,331
828
746
472
476
2,009
1,420
5,951
764
480
407
568
1,802
1,114
5,135
152
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
15. Cash and Cash Equivalents
Cash at bank and in hand
Time deposits with original maturity
within three months
The Group
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
(restated)
14,639
22,492
8,105
17,614
1,431
16,070
7,607
30,099
106
8,211
3,248
20,862
16. Short-term and Long-term Debt and Payable
Short-term debt comprises:
Loans from banks – unsecured
Other loans – unsecured
Loans from China Telecom Group
– unsecured
Total short-term debt
The Group
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
5,443
182
22,062
27,687
5,521
182
820
6,523
5,416
182
21,980
27,578
5,474
182
820
6,476
The weighted average interest rate of the Group’s and the Company’s total short-term debt as at 31 December
2013 was 4.7% (2012: 5.5%) and 4.7% (2012: 5.5%) respectively. As at 31 December 2013, the loans from
banks and other loans bear interest at rates ranging from 4.5% to 6.0% (2012: 4.5% to 6.7%) per annum and
are repayable within one year; the loans from China Telecom Group bear interest at rate of 4.5% (2012: 4.5%
to 4.7%) per annum and are repayable within one year.
China Telecom Corporation Limited Annual Report 2013
153
Notes to the Financial Statements
for the year ended 31 December 2013
16. Short-term and Long-term Debt and Payable (continued)
Long-term debt and payable comprises:
Interest rates and final maturity
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
The Group
The Company
Bank loans – unsecured
Renminbi denominated
Interest rates ranging from 3.60%
10
160
10
160
to 7.04% per annum with
maturities through 2020
US Dollars denominated
Interest rates ranging from 1.00%
534
598
534
598
to 8.30% per annum with
maturities through 2060
Euro denominated
Interest rate of 2.30% per annum
with maturities through 2032
Other currencies denominated
Other loans – unsecured
Renminbi denominated
Medium-term notes – unsecured
(Note (i))
Amount due to China
Telecommunications
Corporation – unsecured
Deferred consideration of Mobile
Network Acquisition – Renminbi
denominated (Note (ii))
Others
Total long-term debt and payable
Less: Current portion
Non-current portion
428
20
992
1
456
26
1,240
1
428
20
992
1
456
26
1,240
1
19,986
29,951
19,986
29,951
61,710
61,710
61,710
61,710
–
82,689
(20,072)
62,617
380
93,282
(10,212)
83,070
–
–
82,689
92,902
(20,072)
62,617
(10,212)
82,690
154
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
16. Short-term and Long-term Debt and Payable (continued)
Note:
(i)
(ii)
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. This medium-term note was repaid by the Company on 24 October 2013.
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.
Represents the remaining balance of the deferred consideration payable to China Telecommunications Corporation
in respect of the acquisition of certain CDMA network assets and associated liabilities, which were held by China
Telecommunications Corporation through network branches located in 30 provinces, municipalities and autonomous
regions in the PRC (hereinafter, referred to as the “Mobile Network Acquisition”). The Company may, from time to time,
pay all or part of the deferred payment at any time after the completion date without penalty until the fifth anniversary of
the completion date of the Mobile Network Acquisition. The Company pays interest on the deferred payment to China
Telecommunications Corporation at half-yearly intervals and the interest accrues from the day following the completion of
the Mobile Network Acquisition. The interest rate is set at a 5 basis points premium to the yield of the 5-year super AAA
rated Medium Term Notes most recently published by the National Association of Financial Market Institutional Investors
before the completion date of the Mobile Network Acquisition and will be adjusted once a year in accordance with the
last yield of the 5-year super AAA rated Medium Term Notes most recently published by the National Association of
Financial Market Institutional Investors at the end of each year. The interest rates for 2013 and 2014 are 4.83% and 6.25%,
respectively.
If the amount is not paid when due, the Company is required to pay the liquidated damages on such amount at a daily rate
of 0.03% of the amount in arrears from the day following the applicable due date to the date that such amount has actually
been paid in full.
The aggregate maturities of the Group’s and the Company’s long-term debt and payable subsequent to 31
December 2013 are as follows:
Within 1 year
Between 1 to 2 years
Between 2 to 3 years
Between 3 to 4 years
Between 4 to 5 years
Thereafter
The Group
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
20,072
85
86
61,796
74
576
82,689
10,212
20,059
86
86
62,177
662
93,282
20,072
85
86
61,796
74
576
82,689
10,212
20,059
86
86
61,797
662
92,902
The Group’s short-term and long-term debt and payable do not contain any financial covenants. As at
31 December 2013, the Group and the Company have unutilised committed credit facilities amounting to
RMB157,694 million (2012: RMB163,130 million) and RMB157,694 million (2012: RMB163,127 million)
respectively.
China Telecom Corporation Limited Annual Report 2013
155
Notes to the Financial Statements
for the year ended 31 December 2013
17. Accounts Payable
Accounts payable are analysed as follows:
Third parties
China Telecom Group
Other telecommunications operators
in the PRC
Subsidiaries
The Group
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
66,115
13,905
1,112
–
81,132
(restated)
56,353
11,557
1,038
–
68,948
60,213
13,276
1,110
3,600
78,199
49,065
10,968
1,038
2,972
64,043
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
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
19,349
16,178
15,396
30,209
81,132
(restated)
18,467
17,793
15,885
16,803
68,948
15,370
15,968
15,161
31,700
78,199
13,588
17,770
15,931
16,754
64,043
156
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
18. Accrued Expenses and Other Payables
Accrued expenses and other payables represent:
The Group
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
Note
(restated)
Amounts due to China Telecom
Group
(i)
Amounts due to subsidiaries
Amounts due to other
telecommunications
operators in the PRC
Accrued expenses
Customer deposits and
receipts in advance
Dividend payable
1,690
–
40,745
–
849
459
40,420
468
59
14,774
53,063
47
69,633
59
14,431
50,515
31
105,781
59
13,291
50,815
–
65,473
57
13,154
48,558
–
102,657
Note:
(i)
The amount as at 31 December 2013 includes the final consideration of the Seventh Acquisition amounting to RMB278
million, among which the initial consideration amounting to RMB261 million was paid in January 2014.
The amount as at 31 December 2012 includes the first installment of the final consideration of the Mobile Network
Acquisition amounting to RMB25,500 million and the liabilities assumed by the Group from the network branches of China
Telecommunications Corporation payable to China Telecom Group amounting to RMB14,269 million in connection with the
Mobile Network Acquisition. These amounts were paid in January 2013.
China Telecom Corporation Limited Annual Report 2013
157
Notes to the Financial Statements
for the year ended 31 December 2013
19. Deferred Revenues
Deferred revenues represent the unearned portion of installation fees for wireline services received from
customers and the unused portion of calling cards.
Balance at beginning of year
Additions for the year
– calling cards
Reductions for the year
– amortisation of installation fees
– usage of calling cards
Balance at end of year
Representing:
– current portion
– non-current portion
The Group
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
3,445
4,805
3,442
4,803
484
484
(860)
(638)
2,431
1,202
1,229
2,431
773
773
(1,233)
(900)
3,445
1,654
1,791
3,445
484
484
(860)
(636)
2,430
1,201
1,229
2,430
769
769
(1,233)
(897)
3,442
1,651
1,791
3,442
Included in other assets are primarily capitalised direct costs associated with the installation of wireline services.
As at 31 December 2013, the unamortised portion of these costs was RMB1,172 million (2012: RMB1,687
million).
20. Share Capital
Registered, issued and fully paid
67,054,958,321 ordinary domestic shares of RMB1.00 each
13,877,410,000 overseas listed H shares of RMB1.00 each
The Group and the Company
2013
RMB millions
2012
RMB millions
67,055
13,877
80,932
67,055
13,877
80,932
All ordinary domestic shares and H shares rank pari passu in all material respects.
158
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
21. Reserves
The Group
Capital
reserve
RMB
millions
(Note (i))
Share
premium
RMB
millions
Statutory
reserves
RMB
millions
(Note (iii))
Other
reserves
RMB
millions
(Note (ii))
Exchange
reserve
RMB
millions
Retained
earnings
RMB
millions
Balance as at 1 January 2012, as previously reported
Adjusted for the Seventh Acquisition (Note 1)
Balance as at 1 January 2012, as restated
Acquisition of the Sixth Acquired Business (Note 1)
Contribution from non-controlling interests
Others
Dividends (Note 32)
Appropriations (Note (iii))
Total comprehensive income for the year, as restated
Balance as at 31 December 2012, as restated
Acquisition of the Seventh Acquired Company (Note 1)
Disposal of a subsidiary
Contribution from non-controlling interests
Dividends (Note 32)
Appropriations (Note (iii))
Total comprehensive income for the year
Balance as at 31 December 2013
16,767
233
17,000
(48)
249
(380)
–
–
–
16,821
(278)
380
141
–
–
–
17,064
10,746
–
10,746
–
–
–
–
–
–
10,746
–
–
–
–
–
–
10,746
64,316
–
64,316
–
–
–
–
1,413
–
65,729
–
–
–
–
1,663
–
67,392
283
–
283
–
–
–
–
–
(171)
112
–
–
–
–
–
315
427
(818)
(45)
(863)
–
–
–
–
–
(2)
(865)
–
–
–
–
–
(79)
(944)
83,896
(143)
83,753
–
–
–
(5,625)
(1,413)
14,949
91,664
–
11
–
(5,433)
(1,663)
17,545
102,124
196,809
Total
RMB
millions
175,190
45
175,235
(48)
249
(380)
(5,625)
–
14,776
184,207
(278)
391
141
(5,433)
–
17,781
China Telecom Corporation Limited Annual Report 2013
159
Notes to the Financial Statements
for the year ended 31 December 2013
21. Reserves (continued)
The Company
Capital
reserve
Share
premium
Statutory
reserves
Retained
earnings
Total
RMB millions RMB millions RMB millions RMB millions RMB millions
Balance as at 1 January 2012
Total comprehensive income for the year
Acquisition of the Sixth Acquired Business (Note 1)
Appropriations (Note (iii))
Dividends (Note 32)
Balance as at 31 December 2012
Total comprehensive income for the year
Appropriations (Note (iii))
Dividends (Note 32)
Balance as at 31 December 2013
(Note (i))
(Note (iii))
29,168
–
(20)
–
–
29,148
–
–
–
29,148
10,746
–
–
–
–
10,746
–
–
–
10,746
64,316
–
–
1,413
–
65,729
–
1,663
–
67,392
67,623
13,909
–
(1,413)
(5,625)
74,494
16,943
(1,663)
(5,433)
84,341
171,853
13,909
(20)
–
(5,625)
180,117
16,943
–
(5,433)
191,627
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 Group 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 Group 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 2013, the Company transferred RMB1,663 million, being 10% of the year’s net profit determined
in accordance with IFRS, to this reserve. For the year ended 31 December 2012, the Company transferred RMB1,413
million, being 10% of the year’s net profit determined in accordance with the IFRS.
The Company did not transfer any discretionary surplus reserve for the years ended 31 December 2013 and 2012.
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.
160
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
21. Reserves (continued)
Note: (continued)
(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 of the Company determined in accordance with the PRC
Accounting Standards for Business Enterprises and the amount determined in accordance with IFRS. As at 31 December
2013, the amount of retained earnings available for distribution was RMB84,341 million (2012: RMB74,494 million), being
the amount determined in accordance with IFRS. Final dividend of approximately RMB6,098 million in respect of the
financial year 2013 proposed after the end of the reporting period has not been recognised as a liability at the end of the
reporting period (Note 32).
22. Operating Revenues
Operating revenues represent revenues from the provision of telecommunications services. The components of
the Group’s operating revenues are as follows:
The Group
2013
RMB millions
Note
2012
RMB millions
(restated)
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
38,633
58,217
99,394
36,230
25,233
17,586
46,291
43,369
49,166
87,662
31,137
23,181
15,737
32,924
321,584
283,176
Wireline voice
Mobile voice
Internet
Value-added services
Integrated information application services
Telecommunications network resource services
and lease of network equipment
Others
Note:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
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 installation fees charged to customers for the
provision of wireline telephony services.
Represent the aggregate amount of monthly fees, local usage fees, domestic long distance usage fees, international, Hong
Kong, Macau and Taiwan long distance usage fees and interconnections fees charged to customers for the provision of
mobile telephony services.
Represent amounts charged to customers for the provision of Internet access services.
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 and etc.
Represent primarily the aggregate amount of fees charged to customers for Best Tone information services and IT services
and applications.
Represent primarily the aggregate amount of fees charged to customers for the provision of telecommunications network
resource 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, and repair and maintenance of equipment.
China Telecom Corporation Limited Annual Report 2013
161
Notes to the Financial Statements
for the year ended 31 December 2013
23. Network Operations and Support Expenses
Included in the Group’s network operations and support expenses are as follows:
Operating and maintenance
Utility
Property rental and management fee
CDMA network capacity lease fee
Others
24. Personnel Expenses
Personnel expenses are attributable to the following functions:
Network operations and support
Selling, general and administrative
25. Other Operating Expenses
Other operating expenses consist of:
Interconnection charges
Cost of goods sold
Donations
Others
162
China Telecom Corporation Limited Annual Report 2013
The Group
2013
RMB millions
2012
RMB millions
(restated)
29,963
11,404
7,284
–
4,451
53,102
24,840
7,823
5,141
25,546
2,629
65,979
The Group
2013
RMB millions
30,551
16,172
46,723
2012
RMB millions
(restated)
28,392
14,465
42,857
The Group
2013
RMB millions
Note
2012
RMB millions
(restated)
(i)
(ii)
15,916
38,764
11
69
54,760
14,129
26,162
12
64
40,367
Notes to the Financial Statements
for the year ended 31 December 2013
25. Other Operating Expenses (continued)
Note:
(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.
26. Total Operating Expenses
Total operating expenses for the year ended 31 December 2013 were RMB294,116 million (2012:
RMB261,968 million) which include auditor’s remuneration in relation to audit and non-audit services are
RMB60 million and RMB1 million respectively (2012: RMB90 million and RMB6 million).
27. 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
2013
RMB millions
2012
RMB millions
(restated)
5,840
(329)
5,511
(361)
61
(58)
5,153
2,479
(325)
2,154
(591)
47
(48)
1,562
*Interest expense was capitalised in construction in progress at the following
rates per annum
4.5%–5.8%
1.3%–6.2%
28.
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
The Group
2013
RMB millions
2012
RMB millions
(restated)
5,590
31
(199)
5,422
4,900
50
(197)
4,753
China Telecom Corporation Limited Annual Report 2013
163
Notes to the Financial Statements
for the year ended 31 December 2013
28.
Income Tax (continued)
A reconciliation of the expected tax expenses with the actual tax expense is as follows:
Profit before taxation
The Group
2013
RMB millions
Note
2012
RMB millions
(restated)
23,088
19,817
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
Effect of change in tax rate
Others
(i)
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Actual income tax expense
5,772
(216)
(31)
428
(120)
4
(415)
5,422
4,954
(269)
(23)
539
(162)
155
(441)
4,753
Note:
(i)
(ii)
Except for certain subsidiaries and branches which are taxed at preferential rate of 15%, 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.
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 represent miscellaneous income which are not subject to income tax.
(v)
Certain branches with operations in the western region of the PRC gradually obtained approvals from tax authorities to
adopt the preferential income tax rate of 15%. Accordingly, deferred tax assets that were recovered and deferred tax
liabilities were settled after obtaining the approvals from tax authorities were adjusted to reflect the change in tax rate. The
overall effect of change in tax rate was charged to the consolidated statement of comprehensive income.
(vi)
Amounts primarily represent tax deduction on prior year research and development expenses and losses on disposal of
property, plant and equipment approved by tax authorities during the year.
164
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
29. Directors’ and Supervisors’ Remuneration
The following table sets out the remuneration paid or payable to the Company’s Directors and Supervisors:
2013
Executive directors
Wang Xiaochu
Yang Jie
Wu Andi
Zhang Jiping
Yang Xiaowei
Sun Kangmin
Ke Ruiwen
Non-executive director
Chen Liangxian2
Xie Liang2
Independent non-executive
directors
Wu Jichuan
Qin Xiao
Tse Hau Yin
Cha May Lung
Xu Erming
Supervisors
Shao Chunbao
Tang Qi3
Mao Shejun3
Zhang Jianbin
Hu Jing
Du Zuguo
Independent supervisor
Zhu Lihao
Directors’/
supervisors’ fees
RMB thousands
Salaries,
allowances and
benefits in kind
RMB Thousands
Discretionary1
bonuses
RMB thousands
Retirement
scheme
contributions
RMB thousands
Share-based
payments
RMB thousands
Total
RMB Thousands
–
–
–
–
–
–
–
–
–
167
200
399
200
200
–
–
–
–
–
–
100
1,266
350
343
298
305
298
306
298
–
–
–
–
–
–
–
297
66
133
157
96
–
–
2,947
1,148
1,105
1,031
1,031
1,020
1,019
550
–
–
–
–
–
–
–
393
75
380
397
308
–
–
8,457
67
66
64
64
63
64
68
–
–
–
–
–
–
–
63
21
42
59
52
–
–
693
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,565
1,514
1,393
1,400
1,381
1,389
916
–
–
167
200
399
200
200
753
162
555
613
456
–
100
13,363
1
2
3
4
Including deferred performance bonus for the term of office from 2010 to 2012.
Mr. Chen Liangxian resigned as a Non-executive Director of the Company on 20 March 2013. Mr. Xie Liang was appointed as
a Non-executive Director of the Company on 29 May 2013.
Mr. Mao Shejun retired as a Supervisor of the Company on 19 August 2013. Mr. Tang Qi was appointed as a Supervisor of
the Company on 19 August 2013.
The remuneration of all Directors and Supervisors were calculated based on their respective actual terms of office within this
year.
China Telecom Corporation Limited Annual Report 2013
165
Notes to the Financial Statements
for the year ended 31 December 2013
29. Directors’ and Supervisors’ Remuneration (continued)
2012
Executive directors
Wang Xiaochu
Yang Jie
Wu Andi
Zhang Jiping
Zhang Chenshuang1
Yang Xiaowei
Sun Kangmin
Ke Ruiwen2
Non-executive director
Li Jinming3
Chen Liangxian4
Independent non-executive
directors
Wu Jichuan
Qin Xiao
Tse Hau Yin
Cha May Lung
Xu Erming
Supervisors
Shao Chunbao6
Miao Jianhua5
Mao Shejun
Zhang Jianbin6
Xu Cailiao5
Han Fang5
Hu Jing6
Du Zuguo
Independent supervisor
Zhu Lihao
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
–
–
–
–
–
–
–
–
–
–
200
203
405
203
200
–
–
–
–
–
–
–
–
100
1,311
337
337
293
293
122
293
293
171
–
–
–
–
–
–
–
49
245
173
45
83
225
10
–
–
2,969
377
386
344
344
337
340
340
171
–
–
–
–
–
–
–
49
289
450
62
303
316
22
–
–
4,130
62
59
59
59
24
59
59
36
–
–
–
–
–
–
–
10
48
59
19
42
42
8
–
–
645
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
776
782
696
696
483
692
692
378
–
–
200
203
405
203
200
108
582
682
126
428
583
40
–
100
9,055
¹
²
³
4
5
6
7
Mr. Zhang Chenshuang retired as an Executive Director of the Company on 20 March 2012.
Mr. Ke Ruiwen was appointed as an Executive Director of the Company on 30 May 2012.
Mr. Li Jinming retired as a Non-executive Director of the Company on 22 August 2012.
Mr. Chen Liangxian was appointed as a Non-executive Director of the Company on 16 October 2012, and resigned as a
Non-executive Director of the Company on 20 March 2013.
Mr. Miao Jianhua retired as a Supervisor of the Company on 22 August 2012. Mr. Xu Cailiao and Madam Han Fang
resigned as Supervisors of the Company on 22 August 2012.
Mr. Shao Chunbao, Mr. Zhang Jianbin and Mr. Hu Jing were appointed as Supervisors of the Company on 16 October
2012.
The remuneration of all Directors and Supervisors were calculated based on their respective actual terms of office within this
year.
166
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
30.
Individuals With Highest Emoluments and Senior Management Remuneration
(a)
Five highest paid individuals
Of the five highest paid individuals of the Group for the year ended 31 December 2013, one of them was
director of the Company and whose remuneration was disclosed in Note 29. None of the five highest
paid individuals of the Group for the year ended 31 December 2012 were directors of the Company.
The aggregate of the emoluments in respect of the four (2012: five) individuals (non-directors) are as
follows:
Salaries, allowances and benefits in kind
Discretionary bonuses
Retirement scheme contributions
2013
RMB
thousands
2012
RMB
thousands
4,176
3,639
113
7,928
5,713
2,588
118
8,419
The emoluments of the four (2012: five) individuals (non-directors) with the highest emoluments are
within the following bands:
RMB0–RMB1,000,000
RMB1,000,001–RMB1,500,000
RMB1,500,001–RMB2,000,000
RMB2,000,001–RMB2,500,000
2013
Number of
individuals
2012
Number of
individuals
0
0
2
2
0
2
2
1
None of these employees received any inducements or compensation for loss of office, or waived any
emoluments during the periods presented.
China Telecom Corporation Limited Annual Report 2013
167
Notes to the Financial Statements
for the year ended 31 December 2013
30.
Individuals With Highest Emoluments and Senior Management Remuneration
(continued)
(b) Senior management remuneration
The emoluments of the Group’s senior management are within the following bands:
RMB0–RMB1,000,000
RMB1,000,001–RMB1,500,000
RMB1,500,001–RMB2,000,000
RMB2,000,001–RMB2,500,000
2013
Number of
individuals
2012
Number of
individuals
17
5
2
1
26
0
0
1
31. Profit Attributable to Equity Holders of the Company
For the year ended 31 December 2013, the consolidated profit attributable to equity holders of the Company
includes a profit of RMB16,633 million which has been dealt with in the stand-alone financial statements of the
Company.
For the year ended 31 December 2012, the consolidated profit attributable to equity holders of the Company
includes a profit of RMB14,134 million which has been dealt with in the stand-alone financial statements of the
Company.
32. Dividends
Pursuant to a resolution passed at the Directors’ meeting on 19 March 2014, a final dividend of equivalent
to HK$0.095 per share totaling approximately RMB6,098 million for the year ended 31 December 2013 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 2013.
Pursuant to the shareholders’ approval at the Annual General Meeting held on 29 May 2013, a final dividend of
RMB0.067135 (equivalent to HK$0.085) per share totaling RMB5,433 million in respect of the year ended 31
December 2012 was declared and paid on 19 July 2013.
Pursuant to the shareholders’ approval at the Annual General Meeting held on 30 May 2012, a final dividend of
RMB0.069506 (equivalent to HK$0.085) per share totaling RMB5,625 million in respect of the year ended 31
December 2011 was declared of which RMB5,235 million was paid on 20 July 2012. The remaining amounts
were paid by December 2012.
168
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
33. Basic Earnings Per Share
The calculation of basic earnings per share for the years ended 31 December 2013 and 2012 is based on the
profit attributable to equity holders of the Company of RMB17,545 million and RMB14,949 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.
34. Commitments and Contingencies
Operating lease commitments
The Group leases business premises and equipment through non-cancellable operating leases. 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 2013 and 2012, the Group’s and the Company’s future minimum lease payments under
non-cancellable operating leases are as follows:
The Group
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
2,236
1,516
1,087
779
611
1,344
7,573
(restated)
2,133
1,202
881
688
553
1,489
6,946
1,964
1,319
988
718
581
1,294
6,864
1,995
1,118
819
636
505
1,372
6,445
Within 1 year
Between 1 to 2 years
Between 2 to 3 years
Between 3 to 4 years
Between 4 to 5 years
Thereafter
Total minimum lease payments
Total rental expense in respect of operating leases charged to profit or loss for the year ended 31 December
2013 was RMB6,057 million (2012: RMB29,434 million).
China Telecom Corporation Limited Annual Report 2013
169
Notes to the Financial Statements
for the year ended 31 December 2013
34. Commitments and Contingencies (continued)
Capital commitments
As at 31 December 2013 and 2012, 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
The Group
The Company
2013
RMB millions
2012
2013
RMB millions RMB millions
2012
RMB millions
931
6,807
7,738
778
6,460
7,238
462
6,641
7,103
764
8,401
9,165
915
6,747
7,662
778
6,444
7,222
462
6,606
7,068
764
8,377
9,141
Contingent liabilities
(a)
The Company and the Group were advised by their PRC lawyers that, no material contingent liabilities
were assumed by the Company or the Group.
(b)
As at 31 December 2013 and 2012, 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 2013 and 2012, 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.
170
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
35. Financial Instruments
Financial assets of the Group and the Company include cash and cash equivalents, time deposits, investments,
accounts receivable, advances and other receivables. Financial liabilities of the Group and the Company include
short-term and long-term debts and payable, accounts payable, accrued expenses and other payables. The
Group and the Company do not hold nor issue financial instruments for trading purposes.
(a)
Fair Value Measurements
Based on IFRS 13, Fair Value Measurement, 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: 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: fair values measured using valuation techniques in which any significant input is not
based on observable market data
The fair values of the Group and the Company’s financial instruments (other than long-term debt and
payable and available-for-sale equity investment securities) approximate their carrying amounts due to
the short-term maturity of these instruments.
The Group and the Company’s available-for-sale equity investment securities are categorised as level
1 financial instruments. As at 31 December 2013, the fair value of the Group and the Company’s
available-for-sale equity investment securities are RMB999 million (2012: RMB585 million) and RMB998
million (2012: RMB585 million), respectively, based on quoted market price on a PRC stock exchange.
The Group and the Company’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.
China Telecom Corporation Limited Annual Report 2013
171
Notes to the Financial Statements
for the year ended 31 December 2013
35. Financial Instruments (continued)
(a)
Fair Value Measurements (continued)
The fair values of long-term indebtedness are estimated by discounting future cash flows using current
market interest rates offered to the Group and the Company for debt with substantially the same
characteristics and maturities. The fair value measurement of long-term indebtedness is categorized as
level 2. The interest rates used by the Group and the Company in estimating the fair values of long-term
debt and payable, having considered the foreign currency denomination of the debt, ranged from 1.0%
to 6.8% (2012: 1.0% to 6.8%). As at 31 December 2013 and 2012, the carrying amounts and fair values
of the Group and the Company’s long-term debt and payable were as follows:
The Group
2013
2012
Carrying
amount
Fair value
RMB millions RMB millions
Carrying
amount
RMB millions
Fair value
RMB millions
Long-term debt and payable
82,689
82,002
93,282
92,931
The Company
2013
2012
Carrying
amount
Fair value
RMB millions RMB millions
Carrying
amount
RMB millions
Fair value
RMB millions
Long-term debt and payable
82,689
82,002
92,902
92,551
During the year, there were no transfers among instruments in level 1, level 2 or level 3.
172
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
35. Financial Instruments (continued)
(b) Risks
The Group and the Company’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 and the Company’s overall risk management programme focuses on
the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group
and the Company’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:
(i)
(ii)
Credit risk
Credit risk refers to the risk that a counterparty will be unable to pay amounts in full when
due. For the Group and the Company, 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 and the Company primarily place
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 and the Company 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 and the Company’s credit policy and quantitative disclosures in respect of the Group
and the Company’s exposure on credit risk for accounts receivable are set out in Note 13.
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 and the
Company 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.
China Telecom Corporation Limited Annual Report 2013
173
Notes to the Financial Statements
for the year ended 31 December 2013
35. 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 and the Company’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 and the
Company would be required to repay:
The Group
2013
Total
contractual
undiscounted
cash flow
Within
1 year or
on demand
More than
1 year but
less than
2 years
More than
2 years but
less than
5 years
Carrying
amount
More than
5 years
RMB millions RMB millions RMB millions RMB millions RMB millions RMB millions
Short-term debt
Long-term debt and payable
Accounts payable
Accrued expenses and
other payables
Finance lease obligations
27,687
82,689
81,132
69,633
1
28,279
99,135
81,132
69,633
1
28,279
24,874
81,132
69,633
1
–
3,951
–
–
–
–
69,690
–
–
–
261,142
278,180
203,919
3,951
69,690
–
620
–
–
–
620
2012
Total
contractual
undiscounted
cash flow
RMB millions
Within
1 year or
on demand
RMB millions
More than
1 year but
less than
2 years
RMB millions
More than
2 years but
less than
5 years
RMB millions
Carrying
amount
RMB millions
More than
5 years
RMB millions
6,523
93,282
68,948
105,781
3
274,537
6,652
110,705
68,948
105,781
3
292,089
6,652
14,571
68,948
105,781
–
195,952
–
23,997
–
–
2
–
71,441
–
–
1
23,999
71,442
–
696
–
–
–
696
Short-term debt
Long-term debt and payable
Accounts payable, as restated
Accrued expenses and
other payables, as restated
Finance lease obligations
174
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
35. Financial Instruments (continued)
(b) Risks (continued)
(ii)
Liquidity risk (continued)
The Company
2013
Total
contractual
undiscounted
cash flow
Within
1 year or
on demand
More than
1 year but
less than
2 years
More than
2 years but
less than
5 years
Carrying
amount
More than
5 years
RMB millions RMB millions RMB millions RMB millions RMB millions RMB millions
Short-term debt
Long-term debt and payable
Accounts payable
Accrued expenses and
other payables
Finance lease obligations
27,578
82,689
78,199
65,473
1
28,168
99,135
78,199
65,473
1
28,168
24,874
78,199
65,473
1
–
3,951
–
–
–
–
69,690
–
–
–
253,940
270,976
196,715
3,951
69,690
–
620
–
–
–
620
2012
Total
contractual
undiscounted
cash flow
RMB millions
Within
1 year or
on demand
RMB millions
More than
1 year but
less than
2 years
RMB millions
More than
2 years but
less than
5 years
RMB millions
Carrying
amount
RMB millions
More than
5 years
RMB millions
6,476
92,902
64,043
102,657
3
266,081
6,604
110,196
64,043
102,657
3
283,503
6,604
14,571
64,043
102,657
–
187,875
–
23,997
–
–
2
–
70,932
–
–
1
23,999
70,933
–
696
–
–
–
696
Short-term debt
Long-term debt and payable
Accounts payable
Accrued expenses and other
payables
Finance lease obligations
Management believes that the Group and the Company’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 and the Company’s working capital requirements and repay its borrowings and
obligations when they become due.
China Telecom Corporation Limited Annual Report 2013
175
Notes to the Financial Statements
for the year ended 31 December 2013
35. Financial Instruments (continued)
(b) Risks (continued)
(iii)
Interest rate risk
The Group and the Company’s interest rate risk exposure arises primarily from its short-term
debts and long-term debts and payable. Debts carrying interest at variable rates and at fixed
rates expose the Group and the Company to cash flow interest rate risk and fair value interest
rate risk, respectively. The Group and the Company manages its exposure to interest rate risk by
closely monitoring the change in the market interest rate.
The following table sets out the interest rate profile of the Group and the Company’s debt at the
end of the reporting period:
The Group
Fixed rate debt:
Short-term debt
Long-term debt and payable
Variable rate debt:
Short-term debt
Long-term debt and payable
Total debt
Fixed rate debt as
a percentage of total debt
2013
Effective
interest rate
% RMB millions
2012
Effective
interest rate
%
RMB millions
4.7
4.5
5.5
6.3
26,807
20,979
47,786
880
61,710
62,590
110,376
43.3%
5.4
4.4
5.5
4.8
5,877
31,572
37,449
646
61,710
62,356
99,805
37.5%
176
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
35. Financial Instruments (continued)
(b) Risks (continued)
(iii)
Interest rate risk (continued)
The Company
2013
Effective
interest rate
% RMB millions
2012
Effective
interest rate
%
RMB millions
4.7
4.5
5.5
6.3
26,698
20,979
47,677
880
61,710
62,590
110,267
43.2%
5.5
4.4
5.5
4.8
5,850
31,192
37,042
626
61,710
62,336
99,378
37.3%
Fixed rate debt:
Short-term debt
Long-term debt and payable
Variable rate debt:
Short-term debt
Long-term debt and payable
Total debt
Fixed rate debt as
a percentage of total debt
As at 31 December 2013, it is estimated that an increase of 100 basis points in interest rate, with
all other variables held constant, would decrease the Group and the Company’s net profit for the
year and retained earnings by approximately RMB469 million (2012: RMB468 million).
The above sensitivity analysis has been prepared on the assumptions that the change of interest
rate was applied to the Group and the Company’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 2012.
(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 and the
Company’s foreign currency risk exposure relates to bank deposits and borrowings denominated
primarily in US dollars, Euros and Hong Kong dollars.
China Telecom Corporation Limited Annual Report 2013
177
Notes to the Financial Statements
for the year ended 31 December 2013
35. Financial Instruments (continued)
(b) Risks (continued)
(iv)
Foreign currency exchange rate risk (continued)
Management does not expect the appreciation or depreciation of the Renminbi against
foreign currencies will materially affect the Group and the Company’s financial position and
result of operations because 94.3% (2012: 97.2%) of the Group and 99.2% (2012: 99.2%) of
the Company’s cash and cash equivalents and 99.1% (2012: 98.9%) and of the Group and
the Company’s short-term and long-term debt and payable as at 31 December 2013 are
denominated in Renminbi. Details of bank loans denominated in other currencies are set out in
Note 16.
36. 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, long-term debt and payable, and finance lease
obligations. As at 31 December 2013, the Group’s total debt-to-total assets ratio was 20.3% (2012: 18.3%),
which is within the range of management’s expectation.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
37. 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.
178
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
37. Related Party Transactions (continued)
(a)
Transactions with China Telecom Group (continued)
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 (the “Listing Rules”) and have complied with the disclosure
requirements under Chapter 14A of the Listing Rules. Further details of these continuing connected
transactions are disclosed under the paragraph “Connected Transactions” in the report of directors.
2013
RMB millions
Note
2012
RMB millions
(restated)
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 amounts due to and loans from
China Telecom Group*
Lease of CDMA network facilities*
Lease of land use rights*
CDMA network capacity lease fee
Reimbursement of capacity maintenance related costs of
CDMA network
Mobile Network Acquisition
(i)
(i)
(ii)
(iii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
3,563
3,885
14,543
192
1,136
2,826
11,208
652
616
44
394
3,912
157
16
–
–
–
3,029
2,685
10,203
370
764
2,652
9,541
366
570
48
414
24
–
–
25,546
2,519
87,210
Note:
(i)
(ii)
(iii)
(iv)
*
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.
Represent construction and engineering as well as design and supervisory services provided by China Telecom
Group.
Represent IT services provided to and received from China Telecom Group.
Represent amounts paid and payable to China Telecom Group in respect of cultural, educational, health care and
other community services.
These transactions also constitute connected transactions under Chapter 14A of the Listing Rules. They are
conducted on normal commercial terms and are fully exempted from compliance with the reporting, announcement,
independent shareholders’ approval and/or annual review requirements either under Rules 14A.31, 14A.33 or
14A.65 of the Listing Rules.
China Telecom Corporation Limited Annual Report 2013
179
Notes to the Financial Statements
for the year ended 31 December 2013
37. Related Party Transactions (continued)
(a)
Transactions with China Telecom Group (continued)
Note: (continued)
(v)
(vi)
(vii)
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.
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.
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.
(ix)
(x)
(xi)
Represent interest paid and payable to China Telecom Group with respect to the amounts due to China
Telecommunications Corporation and loans from China Telecom Group (Note 16).
Represent amounts paid and payable to China Telecom Group primarily for lease of certain CDMA mobile
telecommunications network (“CDMA network”) facilities located in Xizang Autonomous Region.
Represent amounts received and receivable from/paid and payable to China Telecom Group for leases of land use
rights.
(xii)
Represent amounts paid and payable to China Telecom Group for lease of CDMA network capacity.
(xiii)
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.
(xiv)
Represent the final consideration of the Mobile Network Acquisition (Note 16).
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
Long-term debt and payable
Total amounts due to China Telecom Group
180
China Telecom Corporation Limited Annual Report 2013
2013
RMB millions
2012
RMB millions
(restated)
391
1,037
1,428
13,905
1,690
22,062
61,710
99,367
627
779
1,406
11,557
40,745
820
61,710
114,832
Notes to the Financial Statements
for the year ended 31 December 2013
37. 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 and
payable, 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 and payable due to China Telecom Group are set out in Note 16.
As at 31 December 2013 and 2012, no material allowance for doubtful debts was recognised in respect
of amounts due from China Telecom Group.
(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
2013
RMB
thousands
2012
RMB
thousands
14,329
794
15,123
9,041
704
9,745
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 38.
(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”).
China Telecom Corporation Limited Annual Report 2013
181
Notes to the Financial Statements
for the year ended 31 December 2013
37. Related Party Transactions (continued)
(d) Transactions with other government-related entities in the PRC (continued)
Apart from transactions with parent company and its fellow subsidiaries (Note 37(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
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.
The directors believe the above information provides appropriate disclosure of related party transactions.
38. 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. Other than the above, the Group also
participates in supplementary defined contribution retirement plans managed by independent external parties
whereby the Group is required to make contributions to the retirement plans at fixed rates of the employees’
salaries, bonuses and certain allowances. 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 above plans for the year ended 31 December 2013 were RMB5,682 million
(2012: RMB5,049 million).
The amount payable for contributions to the above defined contribution retirement plans as at 31 December
2013 was RMB707 million (2012: RMB617 million).
182
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
39. 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 2012, the Company approved the granting of 916.7 million stock appreciation right units to eligible
employees. Under the terms of this grant, all stock appreciation rights had a contractual life of five years from
date of grant and an exercise price of HK$4.76 per unit. A recipient of stock appreciation rights may exercise
the rights in stages commencing November 2013. As at each of the third, fourth and fifth anniversary of the
date of grant, the total number of stock appreciation rights exercisable may not in aggregate exceed 33.3%,
66.7% and 100%, respectively, of the total stock appreciation rights granted to such person.
During the year ended 31 December 2013 and 2012, no stock appreciation right units were exercised. For
the year ended 31 December 2013, compensation expense of RMB39 million was reversed by the Group in
respect of stock appreciation rights as a result of decline in share price of the Company. For the year ended 31
December 2012, compensation expense of RMB163 million was recognised by the Group in respect of stock
appreciation rights.
As at 31 December 2013, the carrying amount of the liability arising from stock appreciation rights was
RMB124 million (2012: RMB163 million). As at 31 December 2013, 305 million stock appreciation right units
vested but were not exercised. The carrying amount of the corresponding liability was RMB41 million. As at 31
December 2012, no stock appreciation right units were vested.
40. 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.
China Telecom Corporation Limited Annual Report 2013
183
Notes to the Financial Statements
for the year ended 31 December 2013
40. Accounting Estimates and Judgements (continued)
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.
For the year ended 31 December 2013, no provision for impairment losses were made against the carrying
value of property, plant and equipment (2012 Nil). 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.
184
China Telecom Corporation Limited Annual Report 2013
Notes to the Financial Statements
for the year ended 31 December 2013
41. Possible Impact of Amendments, New Standards and Interpretation Issued But
Not Yet Effective for the Annual Accounting Period Ended 31 December 2013
Up to the date of issue of these financial statements, the IASB has issued the following amendments, new
standards and interpretation which are not yet effective for the annual accounting period ended 31 December
2013:
Effective for
accounting period
beginning on or after
Amendments to IFRS 10, IFRS 12 and IAS 27, “Investment Entities”
Amendments to IAS 32, “Offsetting Financial Assets and Financial Liabilities”
Amendments to IAS 36, “Recoverable Amount Disclosures for
1 January 2014
1 January 2014
1 January 2014
Non-Financial Assets”
Amendments to IAS 39, “Novation of Derivatives and Continuation of
1 January 2014
Hedge Accounting”
IFRIC 21, “Levies”
Amendments to IAS 19, “Defined Benefit Plans: Employee Contributions”
Amendments to IFRSs, “Annual Improvements to IFRSs 2010-2012 Cycle”
Amendments to IFRSs, “Annual Improvements to IFRSs 2011-2013 Cycle”
IFRS 14, “Regulatory Deferral Accounts”
IFRS 9, “Financial Instruments”, and Amendments to IFRS 9 and IFRS 7,
“Mandatory Effective Date of IFRS 9 and Transition Disclosures”
1 January 2014
1 July 2014
1 July 2014 (with limited
exceptions)
1 July 2014
1 January 2016
Mandatory effective date
will be determined when
the outstanding phases
of IFRS 9 are finalised
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 2013. 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.
42. Comparative Figures
As a result of the Seventh Acquisition, certain comparative figures have been adjusted or restated to account
for the acquisition as if it had occurred before the start of the earliest period presented. Further details of this
acquisition are disclosed in Note 1.
43. Parent and Ultimate Holding Company
The parent and ultimate holding company of the Group as at 31 December 2013 is China Telecommunications
Corporation, a state-owned enterprise established in the PRC.
China Telecom Corporation Limited Annual Report 2013
185
Financial Summary
(Amounts in millions, except per share data)
Results of operation
Wireline voice
Mobile voice
Internet
Telecommunications network resource services and
lease of network equipment
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 before taxation
Income tax
Profit for the year
Other comprehensive income for the year:
Items that may be reclassified subsequently to profit or loss:
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 of 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
2013
RMB
38,633
58,217
99,394
17,586
107,754
–
321,584
69,083
53,102
70,448
46,723
54,760
294,116
27,468
(5,153)
670
103
23,088
(5,422)
17,666
414
(104)
(79)
5
236
17,902
17,545
121
17,666
17,781
121
17,902
0.22
Year ended 31 December
2012
RMB
(restated)
2011
RMB
(restated)
2010
RMB
(restated)
2009
RMB
(restated)
43,369
49,166
87,662
15,737
87,242
–
283,176
49,666
65,979
63,099
42,857
40,367
261,968
21,208
(1,562)
93
78
19,817
(4,753)
15,064
(228)
57
(2)
–
(173)
14,891
14,949
115
15,064
14,776
115
14,891
0.18
49,770
38,628
74,994
14,321
67,338
98
245,149
51,241
52,940
48,765
39,204
28,878
221,028
24,121
(2,254)
40
99
22,006
(5,416)
16,590
(205)
51
(105)
–
(259)
62,499
28,906
63,991
12,442
51,634
497
219,969
52,231
47,493
42,153
35,564
19,113
196,554
23,415
(3,601)
328
131
20,273
(4,846)
15,427
132
(48)
(52)
(25)
7
16,331
15,434
16,494
96
16,590
16,235
96
16,331
0.20
15,309
118
15,427
15,316
118
15,434
0.19
78,432
20,027
51,569
11,520
46,733
1,151
209,432
52,812
43,749
40,526
32,888
17,452
187,427
22,005
(4,377)
791
101
18,520
(4,382)
14,138
538
(120)
6
–
424
14,562
13,934
204
14,138
14,283
279
14,562
0.17
186
China Telecom Corporation Limited Annual Report 2013
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
As at 31 December of the year
2013
RMB
2012
RMB
(restated)
2011
RMB
(restated)
2010
RMB
(restated)
2009
RMB
(restated)
374,341
44,157
71,958
18,357
34,426
373,781
32,500
73,635
32,829
32,546
268,925
18,475
72,218
29,279
30,434
272,532
14,449
78,367
27,890
27,470
283,605
11,582
83,909
35,310
25,714
543,239
545,291
419,331
420,708
440,120
200,098
64,477
193,610
85,581
127,397
34,979
127,012
47,482
143,536
59,323
264,575
279,191
162,376
174,494
202,859
Total equity attributable to equity holders of the
Company
Non-controlling interests
Total equity
277,741
923
265,139
961
256,167
788
245,718
496
236,413
848
278,664
266,100
256,955
246,214
237,261
Total liabilities and equity
543,239
545,291
419,331
420,708
440,120
China Telecom Corporation Limited Annual Report 2013
187
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
2013 share price
HK$ per H share
US$ per ADS
High
4.46
Low
3.48
Close
3.92
High
58.06
Low
44.94
Close
50.57
Number of issued shares: (as at 31 December 2013)
80,932,368,321
Market capitalization: (as at 31 December 2013)
HK$317.3 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 2013.
600
500
400
300
200
100
0
2
0
0
1/2
1
China Telecom (+170%)
HSI (+136%)
MSCI (+67%)
3
0
0
1/2
1
4
0
0
1/2
1
5
0
0
1/2
1
6
0
0
1/2
1
7
0
0
1/2
1
China Telecom
8
0
0
1/2
1
HSI
9
0
0
1/2
1
0
1
0
1/2
1
1
1
0
1/2
1
2
1
0
1/2
1
3
1
0
2/2
1
MSCI
188
China Telecom Corporation Limited Annual Report 2013
Shareholder Information
Distribution of shares and shareholdings
The share capital of the Company as at 31 December 2013 was RMB80,932,368,321, divided into 80,932,368,321
shares of RMB1.00 each. As at 31 December 2013, 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 2013:
Name of shareholder
Commonwealth Bank of Australia
JPMorgan Chase & Co.
BlackRock, Inc.
Number of shares
2,080,867,924
1,536,081,879
1,301,821,443
Percentage of the
total number of
H shares in issue
14.99
11.07
9.38
China Telecom Corporation Limited Annual Report 2013
189
Shareholder Information
Dividend History
Financial Year
Ex-Dividend Date
Shareholder
Approval Date
Payment Date
2002 Final
2003 Final
2004 Final
2005 Final
2006 Final
2007 Final
2008 Final
2009 Final
2010 Final
2011 Final
2012 Final
2013 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
4 June 2013
4 June 2014
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
29 May 2013
29 May 2014
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
19 July 2013
18 July 2014
Dividend
per Share
(HK$)
0.00837*
0.065
0.065
0.075
0.085
0.085
0.085
0.085
0.085
0.085
0.085
0.095**
*
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 29 May 2014.
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 2013 with the
United States Securities and Exchange Commission by 30 April 2014.
2013 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 2012”. 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, WWF. 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 2013”, 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.
190
China Telecom Corporation Limited Annual Report 2013
Shareholder Information
Annual General Meeting
To be held at 11 a.m. on 29 May 2014 in Grand Hyatt Hong Kong
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
Computershare Hong Kong Investor Services Limited
Address:
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
Tel:
Fax:
Email:
China Telecom Corporation Limited Annual Report 2013
191
Shareholder Information
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)
shrrelations@bnymellon.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.
192
China Telecom Corporation Limited Annual Report 2013
About
CHINA
TELECOM
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 2013, the Company
has wireline access lines in service of about 156 million, wireline broadband
subscribers of about 100 million and mobile subscribers of about 186 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.
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 scientifi cally
Care the staff and tap their potential to the full
Reward the society and be a responsible corporate citizen
Corporate Slogan
Connecting the World
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#1 INTERNA T I O N A L BESTSELLER
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China Telecom Corporation Limited
31 Jinrong Street, Xicheng District, Beijing, PRC, 100033
www.chinatelecom-h.com
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Design and Production by: iOne Financial Press Limited
Website: www.ione.com.hk
China Telecom Corporation Limited
HKEx Stock Code: 728
NYSE Stock Code: CHA