China Telecom Corporation Limited
HKEx Stock Code: 728
NYSE Stock Code: CHA
Annual Report 2014
STAY Hungry
STAYRICH
China Telecom Corporation Limited
31 Jinrong Street, Xicheng District, Beijing, PRC, 100033
www.chinatelecom-h.com
Design and Production by: iOne Financial Press Limited
Website: www.ione.com.hk
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Hungry for
REFORM &
INNOVATION
Hungry for
GROWTH &
RETURN
World’s Largest
CDMA Mobile Operator
>180 million
MOBILE SUBSCRIBERS
World’s Largest
Wireline Broadband Operator
>100 million
WIRELINE
BROADBAND
SUBSCRIBERS
World’s Largest
Fixed-line Operator
>140 million
ACCESS LINES IN
SERVICE
Hungry for
DELIGHTING
CUSTOMERS
STAY
RICH
RICH Career to
OUR TALENTS
RICH
Services Offering to OUR
CUSTOMERS
Advancement to
RICH
OUR
SOCIETY
RICH
Return to OUR
SHAREHOLDERS
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 2014, the Company has wireline access lines in service of about 144
million, wireline broadband subscribers of about 107 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.
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CONTENTS
9
10
11
12
14
15
26
36
46
55
73
76
78
Contents
Corporate Culture
Corporate Information
Financial Highlights
2014 Milestones
Chairman’s Statement
Directors, Supervisors and Senior
Management
Management’s Discussion and Analysis
Business Review
Financial Review
Report of the Directors
Report of the Supervisory Committee
Recognition & Awards
Corporate Governance Report
99
Human Resources Development
Report
109 Corporate Social Responsibility Report
119
Independent Auditor’s Report
120 Consolidated Statement of
Financial Position
122 Statement of Financial Position
124 Consolidated Statement of
Comprehensive Income
125 Consolidated Statement of
Changes in Equity
126 Consolidated Statement of
Cash Flows
128 Notes to the Financial Statements
194
Financial Summary
196 Shareholder Information
Forward-Looking Statements
Certain statements contained in this report 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.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
9
CORPORATE CULTURE
Corporate Mission
Let the customers fully enjoy a new information life
Strategic Goal
Be a world-class integrated information service provider
Core Value
Comprehensive innovation, pursuing truth and
pragmatism, respecting people and creating value all
together
Operation Philosophy
Pursue mutual growth of corporate value and customer
value
Service Philosophy
Customer First Service Foremost
Code of Corporate Practice
Keep promise and provide excellent service for
customers
Cooperate honestly and seek win-win result in joint
innovation
Operate prudently and enhance corporate value
continuously
Manage precisely and allocate resources scientifically
Care the staff and tap their potential to the full
Reward the society and be a responsible corporate
citizen
Corporate Slogan
Connecting the World
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CORPORATE INFORMATION
Board of Directors
Executive Directors
Wang Xiaochu (Chairman)
Yang Jie
Zhang Jiping
Yang Xiaowei
Sun Kangmin
Ke Ruiwen
Non-Executive Director
Zhu Wei
Independent Non-Executive Directors
Tse Hau Yin, Aloysius
Cha May Lung, Laura
Xu Erming
Wang Hsuehming
Company Secretary &
Qualified Accountant
Yung Shun Loy, Jacky
Audit Committee
Tse Hau Yin, Aloysius (Chairman)
Xu Erming
Wang Hsuehming
Remuneration Committee
Xu Erming (Chairman)
Tse Hau Yin, Aloysius
Wang Hsuehming
Nomination Committee
Cha May Lung, Laura (Chairlady)
Tse Hau Yin, Aloysius
Xu Erming
Supervisory Committee
Tang Qi (Employee Representative)
Zhang Jianbin (Employee Representative)
Hu Jing
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 2014
11
FINANCIAL HIGHLIGHTS
Operating revenues (RMB millions)
283,176
321,584
324,394
2012
2013
2014
EBITDA1 (RMB millions)
EBITDA margin2
Net profit3 (RMB millions)
Capital expenditure (RMB millions)
Total debt/Equity4
Earnings per share (RMB)
Dividend per share (HK$)
Net asset value per share4 (RMB)
70,874
28.0%
14,949
53,748
37.6%
0.1847
0.085
3.276
96,551
34.6%
17,545
79,992
39.7%
0.2168
0.095
3.432
94,853
33.0%
17,680
76,889
36.8%
0.2185
0.095
3.573
1 EBITDA was calculated based on operating revenues minus operating expenses plus depreciation and amortisation.
2 EBITDA margin was calculated based on EBITDA divided by service revenues.
3 Net profit represented profit attributable to equity holders of the Company.
4 Equity and net asset value represented equity attributable to equity holders of the Company.
For further information,
please browse our website at
www.chinatelecom-h.com
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
FINANCIAL HIGHLIGHTS
Operating Revenues
(RMB millions)
EBITDA1
(RMB millions)
EBITDA Margin2
(%)
321,584
324,394
96,551
94,853
28.0
33.0
34.6
283,176
70,874
2012
2013
2014
2012
2013
2014
2012
2013
2014
Net Profit3
(RMB millions)
Dividend Per Share
(HK$)
NAV Per Share4
(RMB)
14,949
17,545
17,680
0.085
0.095
3.276
0.095
3.432
3.573
2012
2013
2014
2012
2013
2014
2012
2013
2014
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
13
2014 MILESTONES
January
• China Telecom commenced
mobile telecommunications
services in Antarctica,
becoming the first operator in
the country providing mobile
telecommunications services
in Antarctica
June
• With the implementation
of the pilot programme
of replacing business
tax with VAT in the
telecommunications industry,
China Telecom tackled in full
strengths to ensure a smooth
transition of the tax reform
July
• China Telecom commenced
the efficiently-centralised
operation of 4G business in
hybrid network trial
cities and launched
brand new package
plans. The number
of trial cities for the
hybrid network reached 56 by
the end of the year
• China Telecom launched the
brand new “Smart Families”
product “Joy me”, providing
family informatisation services
comprising terminals, network
and applications all together
g
December
• China Telecom ranked first
in the industry in terms
of growth rate of service
revenues
• China Telecom proactively
launched the resale of mobile
services (MVNO)
and partnered
with 26 resellers
in the year,
effectively promoting business
innovation and strengthening
market expansion capabilities
• Establishing the Tower
Company with China
Mobile and China Unicom
to promote the joint
construction and sharing
of telecommunications
infrastructure facilities
August
• As the exclusive
telecommunications partner
of the Nanjing
Youth Olympics,
China Telecom
leveraged the 4G
hybrid network
edges of in-
depth coverage
and synergistic development,
providing all-round
telecommunications
assurance services
• China Telecom fully
devoted to restore
telecommunications services
and accomplished the rescue
mission successfully in the
areas affected by the 6.5
magnitude earthquake in
Ludian, Yunnan
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CHAIRMAN'S
STATEMENT
CHAIRMAN’S STATEMENT
CHAIRMAN’S STATEMENT
，，
We always believe everyone has a dream of having
We always believe everyone has a dream of having
their own stage to perform on and shine. In the past
their own stage to perform on and shine. In the past
two years, we vigorously sub-divided our performance
two years, we vigorously sub-divided our performance
evaluation units of operation, coupled with ancillary
evaluation units of operation, coupled with ancillary
individual performance contracts and service support
individual performance contracts and service support
system. I am so pleased to see the standing out of tens
system. I am so pleased to see the standing out of tens
of thousands of “unit CEOs”. Their passion and full
of thousands of “unit CEOs”. Their passion and full
dedication on chasing their dreams have fuelled China
dedication on chasing their dreams have fuelled China
Telecom of 100 years’ legacy with vibrancy and vigor.
Telecom of 100 years’ legacy with vibrancy and vigor.
I strongly believe that our “unit CEOs” will build a
I strongly believe that our “unit CEOs” will build a
more promising future for our Company as they strive to
more promising future for our Company as they strive to
realize their potential and personal value!
realize their potential and personal value!，，
16
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
17
17
177
CHAIRMAN’S STATEMENT
In 2014, in the face of a number of prominent changes
in the external environment, the Company rose to the
challenges. While persisting in our established strategic
direction, we proactively and flexibly adjusted our
operation plans. We accelerated the transformation of
our development model, achieving a stable growth in
our operating results. By seizing the 4G development
opportunities, the Company advanced the sound
development of its 4G service in 56 trial cities with
the strength of its hybrid network. The Company
pragmatically promoted its comprehensive deepening
reform to further liberate its productivity and continually
generate development vitality. The Company proactively
promoted an Internet-oriented transformation and
accelerated the upgrade of its fundamental services
and the “market-driven” development of its emerging
businesses. The Company persisted in reform and
innovation and strengthened open cooperation,
enhancing its quality and efficiency. Moreover, we
participated in the investment and establishment of
the Tower Company and recently we were granted the
4G (LTE FDD) licence, which brought us brand new
opportunities for our development.
Operating Results
In 2014, the Company accelerated its reform and
transformation. Despite the impact of the value-added
tax (VAT) reform and the geographical limitations on
the trial of its 4G hybrid network, the Company still
managed to achieve a stable growth in its revenue and
profit. Operating revenues amounted to RMB324.4
billion, representing an increase of 0.9% over last year.
Service revenues1 amounted to RMB287.4 billion,
representing an increase of 3% over last year, ranking
first in the industry for the first time in respect of the
growth rate of the revenues since the restructuring of
the telecommunications industry in 2008. Emerging
businesses accounted for 29% of service revenues,
representing an increase of 5 percentage points over
last year. Our business structure continued to be
fast optimised. EBITDA2 was RMB94.9 billion, while
EBITDA margin3 was 33%. Profit attributable to the
equity holders of the Company was RMB17.7 billion,
representing an increase of 0.8% over last year. Basic
earnings per share were RMB0.22. Capital expenditure
was RMB76.9 billion while free cash flow4 was
RMB12.5 billion.
1
2
3
4
Service revenues were calculated based on operating
revenues minus sales of mobile terminals, sales of wireline
equipment and other non-service revenues.
EBITDA was calculated based on operating revenues
minus operating expenses plus depreciation and
amortisation.
EBITDA margin was calculated based on EBITDA divided
by service revenues.
Free cash flow was calculated from EBITDA minus capital
expenditure and income tax.
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CHAIRMAN’S STATEMENT
forthcoming shareholders’ general meeting that a
dividend equivalent to HK$0.095 per share be declared
for the year 2014, maintaining the same level of
dividends as last year. Going forward, the Company will
strive to enhance its profit while paving the way for an
increase in future dividends.
Rising to the challenges and persisting in
innovation to achieve stable growth
Accelerating transformation and upgrade of
fundamental services
In 2014, the Company efficiently leveraged the synergy
of the networks and target markets between 4G
and 3G, with the splendid launch of 4G driving the
sustainable development of its mobile services. With
a focus on cities with high data traffic, the Company
accelerated the establishment of 4G network and
continued to strengthen the advantage of its network
quality. The Company actively nurtured the 4G terminal
value chain and introduced fashionable brands,
resulting in a continual increase in the varieties of
terminals. With the introduction of innovative products
such as customised service plans and dual-number
sim cards, and the enhanced package design of
low-entry barrier, heavy data, sharable and do-it-
yourself plans, customer experience was continuously
enhanced. Our efficiently-centralised 4G operations
further accelerated the pace of market responses and
became an important milestone in the transformation of
the operating model of mobile services. Mobile service
revenues reached RMB120.3 billion for the year,
representing an increase of 6% over last year, ranking
first in the industry. Amid intensified market competition
driven by the launch of 4G services and strengthened
marketing promotions by the peers, the Company
GROWTH RATE OF
SERVICE REVENUES
in the industry
The pilot programme of VAT reform commenced
in the telecommunications industry in June 2014.
Although it has an adverse impact on the Company
in the short term, we expect that it will be beneficial
for the sustainable development of the Company in
the long term. The Company strived to optimise its
development and sales models, implemented enhanced
management over cost, procurement and vendors’ tax
qualifications. The relevant adverse impact has been
moderated. In the future, with the continual expansion
of the VAT reform to other industries, it is expected that
the Company will be entitled to more input VAT credits.
Together with the continuously optimising revenue
structure of the Company, it will be beneficial for the
enhancement of its profitability in the long term.
Taking into account the return to shareholders, the
Company’s profitability, free cash flow and capital
requirements for its future development, the Board
of Directors has decided to recommend at the
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
19
CHAIRMAN’S STATEMENT
recorded a stable subscriber base of 186 million, with
a net addition of 40,000 subscribers. Among these
subscribers, the net increase of 3G/4G subscribers
was approximately 15.52 million, achieving a subscriber
base of 119 million and representing 64% of its total
mobile subscribers. The subscriber structure was
further optimised.
In 2014, along with the increasingly intensified
competition in the wireline broadband market, the
Company accelerated its innovation and transformed its
business development model to continuously explore
new business growth drivers. By continually leveraging
the strength of its fibre network, the Company
promoted comprehensive bandwidth upgrades for
subscribers, with 50Mbps and 100Mbps bandwidth
as its mainstream products and will also accelerate the
promotion of end-to-end bandwidth speed upgrade,
creating a comparative advantage throughout the
entire network. The Company leveraged the integrated
product, “Joy me”, to create “Smart Family” portals,
embodying smart terminals and applications to achieve
an evolutionary upgrade from a single-function service
to an all-in-one integrated product. The Company also
launched standardised fast selling products such as
“Speedy Connect” cards and prepaid cards to achieve
the open channel sales of broadband services. Wireline
broadband revenues amounted to RMB73.5 billion
for the year, representing an increase of 4% over last
year. The number of wireline broadband subscribers
reached 107 million, representing a net increase of 6.85
million. Among these subscribers, Fibre-to-the-Home
(FTTH) subscribers reached 42.61 million, accounting
for approximately 40% of the total wireline broadband
subscribers, representing an increase of 13 percentage
points over last year.
Achieving significant breakthroughs in emerging
businesses
The innovative business model of data traffic operations
continued to enhance the value of data traffic. The
Company continually expanded its scale of data traffic
by optimising the sales and marketing model with an
emphasis on management of data traffic value and
the sharing of resources with mainstream Internet
companies. Leveraging its integrated platform, the
Company launched innovative data traffic backward
monetisation products such as “Data Traffic 800” and
“Liuliangbao”, which established a data traffic resource
exchange platform to further enrich the product mode
and transaction method of data traffic products.
To satisfy the personalised demands of users, the
Company launched 4G dedicated-data traffic products
focusing on videos, music and games, by deepening
the optimisation of its intelligent pipelines and enhancing
the core capabilities of its data traffic operations such
as specific data identification. Mobile handset Internet
access revenues amounted to RMB34.1 billion for the
year, representing an increase of nearly 50% over last
year. Aggregate 3G/4G handset Internet data traffic
increased by 56% over last year, and the monthly
average data traffic per 3G/4G handset subscriber
reached 227MB, representing an increase of 19% over
last year. The 3G/4G handset internet access ARPU
accounted for 40% of the 3G/4G handset ARPU.
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CHAIRMAN’S STATEMENT
The Company focused on informatisation applications
to further enhance its competitive strength in the
Information and Communications Technology
(ICT) services. Led by the “Smart Cities” project,
the Company fully leveraged the advantage of its
longstanding cooperation with the government
and enterprises and continued to strengthen the
informatisation development in areas such as urban
safety, transportation and government administrative
services. The Company also accelerated the promotion
of scale replication of benchmarking industry
applications, and achieved significant breakthroughs
in targeted markets such as campuses, business
customers and the rural market. The Company
promoted the efficiently-centralised management and
operation of the Internet Data Centre (IDC) business
and the cloud computing services to reduce costs and
enhance efficiency. The Company also accelerated the
data aggregation and resource integration of Big Data
across the whole network. It also rapidly promoted the
transformation of its own data capabilities into products
and established the China Big Data Union together with
44 enterprises. In 2014, the Company’s revenues from
ICT services amounted to RMB23.9 billion, representing
an increase of 18% over last year.
The Company continually enhanced the Internet
application development model which comprised of
portals, content and capabilities. Fully leveraging the
data-attracting feature of portal-type applications to
accelerate scale expansion, YiChat has become an
important portal of mobile Internet services for the
Company, creating a new independently operating
model for the Company’s Internet businesses. The
rapidly growing “Best Pay” business became the most
extensively covered daily-life payment platform in the
country. The Company also leveraged products such
as “Tianyibao” and “e-Surfing Credit” to promote
the exploration of the Internet finance market and
continually expanded its business scope. In 2014, the
number of “Best Pay” users exceeded 100 million,
ranking in the top five in the industry with a gross
merchandise value exceeding RMB350 billion for
the year, representing an increase of 1.6 times over
last year. Relying on the integrated platform for the
convergence of various quality application developers
and Internet companies, the Company served as a
linking bridge among developers, enterprises and
subscribers by providing a vertically integrated service
of network, capabilities and applications to build a new
ecosystem for the mobile Internet business.
EMERGING
BUSINESS
revenues
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
21
CHAIRMAN’S STATEMENT
Fully deepening strategic transformation to
develop differentiated edges
Fully commencing the Internet-oriented
transformation
Solid progress in comprehensive deepening
reform
In the area of fundamental services, the Company fully
promoted the sub-division of performance evaluation
units and commenced authorities delegation operations
with performance contracts. Through delegating
operation authorities and delineating clearly on
responsibilities, authorities and interests, the Company
continually enhanced the autonomy of frontline staff in
operations to stimulate their vitality. By trial-running the
“top down” service support system and implementing
the cross-profession collaborative operations, the
Company enhanced the speed of market responses
and improved the efficiency of resource allocation,
creating a flatter and highly efficient operating system.
In the area of emerging services, the Company
respected the mobile Internet development pattern
and established segregated zones for innovations. In
accordance with the principle of relatively segregating
from fundamental services, the Company continued
to improve its market-driven talent management
mechanism, Internet-oriented resource allocation and
financial management mechanism. To facilitate the
rapid growth of emerging businesses, the Company
strengthened its efficiently-centralised operations and
established as well as enhanced its internal competition
mechanism.
Leveraging its existing advantages, the Company further
enhanced its market competitiveness through Internet-
oriented operations. The Company coordinated its
leading resources in an extensive efficiently-centralised
manner and promptly launched differentiated products
such as “cloud dam” (Distributed Denial of Service
(DDoS) protection product) and security handsets. Fully
leveraging Yichat, Wechat and other new mobile social
media, the Company adopted new marketing initiatives
such as event marketing and experience marketing
to accelerate the transformation towards Internet-
oriented marketing. By strengthening the efficiently-
centralised e-channels and vigorously promoting
the cooperation between online stores and social
e-commerce merchants, the Company achieved a
unified national operation of online stores in 2014, with
online sales in 4G services amounting to 11%. With a
view to promoting the Internet-oriented transformation
of customer services, the Company made extensive use
of new media for customer services such as Weibo and
Wechat to promote online services, resulting in cost
reduction and efficiency enhancement.
cooperate
with
ENTERPRISES
to form
CHINA BIG DATA
UNION
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CHAIRMAN’S STATEMENT
Open cooperation to strengthen competitive
advantages of the ecosystem
Quality and efficiency enhancement to strengthen
highly efficient operations
Persisting in strengthening open cooperation,
the Company created competitive advantages of
the ecosystem. Through extensive collaboration
with upstream and downstream partners along
the value chain, including chipsets, terminals and
Internet applications, the Company aggregated the
strength of each party in all aspects to enhance its
competitiveness. By vigorously promoting cooperation
with open channels to accelerate the penetration of
channels, the Company continually enhanced its market
presence in rural areas and campuses and increased its
market share of terminal sales through open channels.
To foster the development of its wireline broadband
services, the Company tried to introduce private capital
and a more flexible mechanism in the construction of
its local access network. The Company proactively
launched the resale of mobile services (MVNO) and
partnered with 26 resellers throughout the year. By
taking the advantage of the resellers’ competitive edges
in areas such as business, services, channels and
innovation, the Company further enhanced its network
resource utilisation rate and investment return. Through
the investment in establishing the Tower Company, the
Company promoted the joint construction and sharing
of telecommunications infrastructure facilities, with a
view to further increasing its operating efficiency and
corporate value.
The Company continued to deepen its precision
management, strengthen the overall coordination
and optimal allocation of existing resources to further
enhance the Company’s operating efficiency and
return. By optimising its sales and marketing model and
enhancing its efficient use of marketing resources, in
2014, the Company reduced its sales and marketing
expenses by more than RMB7 billion when compared
to the previous year. By fully implementing the O2O
collaborative operations, the Company conducted
efficiently-centralised promotions of its online platform
to strengthen the aggregation of customer flow, while,
on the other hand, consolidating physical stores
to enhance overall effectiveness. The Company
continued to optimise its network deployment and
resource allocation, and carried out cross-regional
resource re-allocation to activate existing network
assets, and thereby further promoting investment
return and network resource utilisation. The Company
also accelerated its reform in IT support, continued
optimising the procurement process, and set up a
VAT system to achieve a smooth transition upon the
implementation of the VAT reform.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
23
CHAIRMAN’S STATEMENT
Corporate Governance and Social
Responsibility
Outlook
At present, China’s economy has entered into the
“new normal” of medium-high-level growth, and
innovation will be the key driver for future development.
The booming development of the “Consumption
Internet” market along with the emerging “Industrial
Internet” market in China will provide us with vast
market potential. The issuance of the 4G licence will
bring new opportunities for the industry development,
and our corporate transformation development will
generate new opportunities. At the same time, the
domestic telecommunications industry is increasingly
saturated, and market competition will gradually lead
to an era of competition for existing customers. Under
the new industry ecology, cross-industry competition
and cooperation become a main trend, which brings
severe challenges to the current operating model.
Although the VAT reform is expected to be beneficial
for the Company’s development in the long term, it
will still impose a significant impact on its profitability
in the short term. Tackling various challenges will also
become a new norm for the Company for some time in
the future.
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 transparency and corporate value 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 in 2014, including being
voted the “No. 1 Most Honoured Company in Asia” by
Institutional Investor for two consecutive years, “No. 1
Best Managed Company in Asia” by FinanceAsia for
four consecutive years and also “Overall Best Managed
Company in Asia” by Euromoney for five years in a row.
We persisted in operating with integrity and proactively
fulfilled our corporate social responsibility, while
maintaining a fair and orderly environment for market
competition and facilitating the healthy development
of the entire value chain. We actively promoted green
operations, further strengthened energy conservation
and emission reduction, and improved utilisation
efficiency of resources. We received high recognition
and appreciation from the society by accomplishing
telecommunications assurance services for significant
events such as the APEC Summit and Youth Olympics,
and contributing in the rescue and relief mission in
earthquakes and other natural disasters.
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CHAIRMAN’S STATEMENT
Looking ahead, we have full confidence. We will
seize the crucial opportunities from the issuance
of 4G licence and the sharing of tower resources.
We will increase our investment and promote the
rapid development of our mobile services in full
strengths, especially the profitable scale development
of our 4G services. We will proactively promote our
comprehensive deepening reform, accelerate the
transformation of our operation and management
models to further stimulate the corporate vitality. We will
speed up our Internet-oriented transformation and fully
leverage our existing strengths in telecommunications.
We will engage in open cooperation and strengthen our
competitive advantages of the ecosystem to enhance
our differentiated operational capabilities. We will rapidly
establish a new China Telecom so as to create 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. I would also like to express my
sincere thanks to all our employees for their hard work
and contribution as well as to Madam Wu Andi, Mr.
Shao Chunbao and Mr. Du Zuguo for their valuable
contribution during their tenure of offices as executive
director, Chairman of the Supervisory Committee and
supervisor of the Company, respectively.
Wang Xiaochu
Chairman and Chief Executive Officer
Beijing, China
18 March 2015
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
25
DIRECTORS, SUPERVISORS
AND SENIOR MANAGEMENT
Mr. Wang Xiaochu
Age 56, 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 extensive
experience in management and telecommunications industry.
Mr. Yang Jie
Age 52, 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
extensive experience in management and telecommunications industry.
26
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
DIRECTORS, SUPERVISORS
AND SENIOR MANAGEMENT
Mr. Zhang Jiping
Age 59, 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. Mr. Zhang 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 and the Chairman of
Supervisory Committee of China Tower Corporation Limited. Mr. Zhang has
extensive experience in management and telecommunications industry.
Mr. Yang Xiaowei
Age 51, is an Executive Director and Executive Vice President of the
Company. Mr. Yang is a senior engineer. He received a bachelor degree
from the Computer Application Department of Chongqing University
in 1998 and a master 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 2014
27
DIRECTORS, SUPERVISORS
AND SENIOR MANAGEMENT
Mr. Sun Kangmin
Age 57, 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 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, Chairman of the board of directors and an Executive Director
of China Communications Services Corporation Limited and a Director of
China Tower Corporation Limited. Mr. Sun has extensive experience in
management and telecommunications industry.
Mr. Ke Ruiwen
Age 51, 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 extensive experience in
management and telecommunications industry.
28
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
DIRECTORS, SUPERVISORS
AND SENIOR MANAGEMENT
Mr. Zhu Wei
Age 46, is a Non-executive Director of the Company. Mr. Zhu received his post-
graduate diploma in political economy from Jinan University. Mr. Zhu is currently
the Chairman of Guangdong Rising Assets Management Co., Ltd (one of the
domestic shareholders of the Company). Mr. Zhu previously served as the
Deputy Manager of the Issuing Department, director of the General Office, and
Deputy Manager of the Research and Development Department of Guangzhou
Securities Company of the People’s Bank of China, Guangzhou Branch,
Deputy General Manager of Guangzhou Securities Financial Consultancy
Company, General Manager of Shenzhen Yuntong Xinda Communications
Limited, assistant to the General Manager of Guangdong Technology Ventures
Investment Company, General Manager of the Asset Management Department
and Director of Guangdong Technology Venture Capital Group Company
Limited, General Manager of Guangdong Kerui Investment Management
Company, the Chairman of Guangdong Hongtu Technology (Holdings)
Company Limited, Deputy Chairman and General Manager of Guangdong
Southern Media Holdings Limited, and Deputy Director of Banking Supervision
Department IV of the China Banking Regulatory Commission. Mr. Zhu has
extensive experience in finance, securities and corporate management.
Mr. Tse Hau Yin, Aloysius
Age 67, is an Independent Non-Executive Director of the Company. Mr. Tse is
currently an Independent Non-executive Director of CNOOC Limited, Linmark
Group Limited, Sinofert Holdings Limited and SJM Holdings Limited, which are
listed on the Main Board of The Stock Exchange of Hong Kong Limited (“HKSE
Main Board”). Mr. Tse is also an independent non-executive director of OCBC
Wing Hang Bank Limited (formerly known as “Wing Hang Bank Limited”), which
was listed on the HKSE Main Board until October 2014. 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.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
29
DIRECTORS, SUPERVISORS
AND SENIOR MANAGEMENT
Madam Cha May Lung, Laura
Age 65, 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 of Hong Kong. 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 a Non-Executive Director of Unilever, PLC and
Unilever, N.V, Vice Chairman of the International Advisory Council of the
China Securities Regulatory Commission (“CSRC”), and 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.
Professor Xu Erming
Age 65, 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 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.
30
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
DIRECTORS, SUPERVISORS
AND SENIOR MANAGEMENT
Madam Wang Hsuehming
Age 65, is an Independent Non-executive Director of the Company. Madam
Wang graduated from the University of Massachusetts and attended
Columbia University. She is currently a Senior Advisor and former Chairman
of BlackRock China. She was also formerly Chairman of China at Goldman
Sachs Asset Management, having joined Goldman Sachs in 1994, became
a partner in 2000 and an Advisory Director from 2010 to 2011. Ms. Wang
served as a Director of The Paulson Institute. With nearly 30 years of
experience in financial services, she participated in pioneering efforts in
China’s economic reform and restructuring, including serving as an advisor
to the CAAC and its subsequent regional airlines on privatization and capital
equipment financing.
Mr. Gao Tongqing
Age 51, 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.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
31
DIRECTORS, SUPERVISORS
AND SENIOR MANAGEMENT
Mr. Chen Zhongyue
Age 43, is an Executive Vice President of the Company. Mr. Chen received
a bachelor degree in English studies from Shanghai International Studies
University and a master degree in international trade economy from Zhejiang
University. Mr. Chen served as Deputy General Manager of China Telecom
Zhejiang branch, Managing Director of the Public Customers Department
of the Company and China Telecommunications Corporation, General
Manager of China Telecom Shanxi branch. He is also a Vice President of
China Telecommunications Corporation. Mr. Chen has extensive experience
in management and the telecommunications industry.
Mr. Yung Shun Loy, Jacky
Age 52, is the Deputy 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 extensive
experience in auditing, company secretary and senior financial management
of listed companies.
32
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
DIRECTORS, SUPERVISORS
AND SENIOR MANAGEMENT
Supervisors
Mr. Tang Qi
Age 56, 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 the
Company. Mr. Tang received a doctorate degree in business administration
(DBA) from the Hong Kong Polytechnic University. Mr. Tang served as the
Director of the marketing department of the Posts and Telecommunications
Administration of Shandong province, Manager of the marketing department
of China Telecommunications Corporation, General Manager of China
Telecom Shandong branch, General Manager of China Telecom Chongqing
branch. Mr. Tang is a senior engineer and has extensive experience in
operation and management in the telecommunications industry.
Mr. Zhang Jianbin
Age 49, 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) and
the Deputy General Counsel of China Telecommunications Corporation.
Mr. Zhang graduated from the Law School of Peking University in 1989
and received LLM degree. He also had EMBA degree from the Guanghua
School of Management at Peking University in 2006. He previously
worked at the Department of Policy and Regulation of the Ministry of
Posts and Telecommunications (“MPT”) and the Directorate General of
Telecommunications (“DGT”) of the MPT. He served as Deputy Director
of the General Office and Deputy Director of the Legal Affairs Division
of the DGT of the MPT, Director of the Corporate Strategy Department
(Legal Department) of the Company. Mr. Zhang is a senior economist with
extensive experience in telecommunications legislation and regulation,
corporate governance, corporate legal affairs and risk management.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
33
DIRECTORS, SUPERVISORS
AND SENIOR MANAGEMENT
Mr. Hu Jing
Age 39, is a Supervisor of the Company. Mr. Hu is currently the Director in
the audit department of the Company. Mr. Hu received a bachelor degree in
accounting from the Xi’an University of Finance and Economics in 1997 and
a master degree in business administration from the Northwest University in
2003. Mr. Hu served at various financial and auditing positions at Shaanxi
Telecom Company and China Telecommunications Corporation. He is a
member of the Chinese Institute of Certified Public Accountants and senior
accountant with extensive experience in finance and auditing.
34
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS
BUSINESS REVIEW
The following table sets out the key operating data for 2012, 2013 and 2014:
Mobile subscribers
Of which: 3G/4G subscribers
Wireline broadband subscribers
Access lines in service
Mobile voice usage
Mobile SMS usage
Handset data traffic
Unit
2012
2013
2014
Million
Million
Million
Million
160.62
69.05
90.12
163.00
185.58
103.11
100.10
155.80
185.62
118.63
106.95
143.56
Million minutes
509,229
603,616
655,939
Million messages
55,789
64,235
64,583
KTB
72.3
175.1
273.2
Wireline local voice usage
Million pulses
172,175
148,690
130,439
BestPay gross merchandise value
RMB Billion
40.8
133.1
352.0
Rate of change
over 2013
0.0%
15.1%
6.8%
–7.9%
8.7%
0.5%
56.0%
–12.3%
164.5%
most
Conducted video calls with the southern--most
Conducted video calls with the southern
city in China through the 4G network
city in China through the 4G network
36
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
BUSINESS REVIEW
(2) Steadily growing mobile services
with remarkable results in data traffic
operations
In 2014, the Company strengthened its content
application-driven strategies, promoted the
transformation of sales and marketing models,
persisted in the terminal-led approach and
deepened cooperation with open channels,
achieving a collaborative development of 3G and
4G services and managing to maintain a stable
scale of mobile subscribers with an optimised
subscriber structure and steady growth in the
revenues of mobile services. The number of mobile
subscribers reached 185.62 million, with a net
addition of around 40,000 subscribers, and mobile
service revenues increased by 5.7% over last year
to RMB120,268 million.
The Company continued to improve the data
traffic product offerings, and launched 4G
packages focusing on data traffic and multi-
terminal data sharing. We upgraded “DIY” data
packages to fully customised packages and
regulated the data traffic promotion strategies,
maintaining a steady value of data traffic. The
Company actively strengthened the development
of data backward monetisation and launched
data backward monetising products such as
“Liuliangbao” and Data Traffic 800, expanded
high-valued data traffic customers in scale and at
the same time cooperated with Internet companies
to promote heavy data usage applications, such
as video streaming. In 2014, total handset data
traffic reached 273KTB, with an increase of 56%
compared to last year, and the monthly average
mobile data traffic per handset subscriber reached
227MB.
In 2014, in the face of various changes in policies and
the environment both within and out of the industry
such as the licensing of 4G services and Value-Added
Tax Reform (VAT Reform), the Company proactively
adapted to and took initiatives to manage the
challenges, continued to promote the transformation of
sales and marketing models and developed extensive
cooperation in various fields. The Company achieved
steady growth in subscribers’ scale and industry-
leading growth in service revenues with a continual
increase in the proportion of revenues attributable
to its emerging businesses and a further enhanced
competitive position in the market.
Handset Data
Traffic
KTB
Key operating performance
(1) Industry-leading growth in revenue with
a continually optimising structure
In 2014, the Company’s operating revenues
increased by 0.9% to RMB324,394 million. Service
revenues increased by 3.1% to RMB287,379
million. The Company’s revenue structure was
further optimised, with mobile revenues accounting
for 46.7% of operating revenues, and revenues
of emerging businesses accounting for 29.1% of
service revenues, up 4.8 percentage points.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
37
BUSINESS REVIEW
FTTH
subscribers
of the total
wireline broadband subscribers
(3) Wireline broadband services continued
to develop steadily, maintaining a leading
position in the market
In 2014, the Company continued to promote the
implementation of wireline and mobile integration,
enhancing customer value while stabilising the
wireline revenue base. Wireline revenues increased
by 1.4% to RMB172,783 million, maintaining
positive growth in revenues.
In response to regulatory policy changes and
in order to reinforce its competitive edges in
the wireline broadband market, the Company
continued to rapidly promote fibre network
construction and bandwidth upgrade, and further
optimised the subscriber structure, thereby
achieving steady growth in subscriber scale and
revenues. In 2014, wireline broadband revenues
grew by 3.8% to RMB73,485 million. Total number
of wireline broadband subscribers reached
106.95 million with a net addition of 6.85 million
subscribers.
In 2014, revenues from wireline value-added
services (VAS) and integrated information services
were RMB38,047 million, representing an increase
of 11.0% over the last year, with iTV, IT Services
and Applications and IDC business being the
three key drivers for promoting the growth in
the revenues of VAS and integrated information
services. The Company reinforced its efforts in
promoting the integration of iTV and high-speed
broadband services and enhancing customers’
usage experience. With the support from industry
application bases, the Company focused on
key industry applications to accelerate the
development of its ICT business. The Company
also enhanced the deployment of its cloud data
centres, improving the cloud products platforms
and service capabilities.
In 2014, the Company’s operating revenues
attributable to the wireline voice services
further declined, which effectively alleviated the
Company’s operational risks. Revenues from
wireline voice services were RMB33,587 million,
or 10.4% of the operating revenues, down 1.6
percentage points compared to last year. The
upgrade of the Personal Access System (PAS)
subscribers was basically completed.
BestPay
GMV > RMB 350bil
Business operating strategies
In 2014, the Company closely grasped the work
principles of “reform and innovation, open cooperation,
and quality and efficiency enhancement”, proactively
adapting to various changes in policies and the external
environment. The Company continuously enhanced
its capabilities in areas such as operation, sales and
services by transforming its development models and
optimising customer acquisition methods. Seven key
operational measures were implemented:
38
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
BUSINESS REVIEW
First, efficiently centralising operations in 4G
business and strengthening the collaborative
development of 3G and 4G
In 2014, the Company was permitted to commence
the LTE hybrid network trial, with a launch of 4G
handset services in 56 cities. The Company conducted
efficiently-centralised operations of the 4G business
and carried out standardised brand and sales
promotion campaigns across the entire network by
making available one-stop services, standardised
tariff and efficiently centralised sales service. We
also strengthened the collaboration of 3G and 4G
businesses and unified the policies for 3G and 4G
services in respect of areas such as package design,
resources allocation, sales models and marketing
plans. The number of 3G/4G subscribers reached
118.63 million, or about 64% of mobile subscribers.
Handset Internet access ARPU and average data traffic
per subscriber also increased significantly.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
39
BUSINESS REVIEW
Second, creating differentiated broadband
products for enhanced core competitive
advantage in broadband services
In 2014, the Company continued the promotion
of the fibre upgrade for its broadband networks,
continually transformed network capabilities into market
capabilities through an exploration of capabilities,
driving customers to adopt high bandwidth services.
With deepened integrated development, the Company
launched products such as “Speedy Connect”
Card and “Speed Upgrade” Card and expanded
open sales channels and implemented collaborative
sales operations for online and offline channels. The
Company also created a smart family business portal
by introducing the “Joy me” product, thereby enriching
high bandwidth applications. FTTH subscribers reached
42.61 million and subscribers of services with 8Mbps
access bandwidth or above accounted for a proportion
of 45.7%, increased by 18.8 percentage points over
2013.
Third, persisting in a terminal-led approach,
maintaining a prosperous industry value
chain
Through supporting the research and development
of chipset manufacturers, the cost of mobile terminal
chipsets was lowered. 305 new mobile terminal models
were launched within the year, of which more than 100
were 4G terminals while smart devices accounted for
over 80% of the terminal sales. The Company provided
40
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
BUSINESS REVIEW
integrating “channel manager + distributor + physical
store” which focuses on small and medium-sized
customers. We accomplished efficiently-centralised
operations for electronic channels in the entire network,
developed personalised products and innovated the
development model of electronic channels through
extensive cooperation with e-commerce companies in
the society, with a focus on young users.
Mobile Subscribers
(million)
185.58
+0.02%
185.62
2013
2014
terminal direct subsidy to terminals below RMB700,
encouraging the industry value chain to drive the sales
of mid-to-low end smart devices. We were the first in
the industry to launch the “multi-mode” smartphones,
and made every effort to gain a share of the handset
replacement market of existing customers. The
Company also actively attracted the market of popular
terminals, such as OPPO, VIVO and Meizu for open
channels and Xiaomi, Honor and Dazen for Internet
channels. All such popular brands launched customised
handsets for China Telecom.
Fourth, acceleration of the Internet-
oriented transformation of channels and
implementation of the O2O cooperative
model
The Company accelerated the promotion of the
efficient expansion of channels and their professional
operations, as well as carried out O2O operations
that strengthened traffic flow via online channels and
strengthened user experience via offline channels.
For physical channels, we focused on increasing the
coverage of open channels in urban core business
districts, implementing tiered management in store
and distributor levels in specialty channels and at the
same time establishing sales outlets for “multi-mode”
handsets in rural areas. For direct sales channels,
the Company established exclusive service centres
focusing on enterprise customers in key industries;
it also adopted a collaborative marketing approach
Wireline Broadband Subscribers
(million)
Access Lines in Service
(million)
+6.84%
106.95
100.10
-7.9%
143.6
155.8
5.4
12.6
40.2
97.6
PAS
Public Telephone
Government
& Enterprise
Household
0.4
11.4
40.9
90.9
2013
2014
2013
2014
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
41
BUSINESS REVIEW
Fifth, enhancing application promotion to
enhance customer value
In 2014, the Company continued to innovate application
products and reinforced its efforts in promoting the
various applications. In respect of Internet applications,
the Company continued to strengthen its Internet
application development system which comprises of
portals, content and capabilities, leading to a significant
improvement in user scale and the capability of
application platforms, such as YiChat, BestPay and the
integrated platforms. In respect of industry applications,
the Company primarily promoted products such as
Popular Shop Assistant, Out-of-Office Assistant, video
streaming services, general office assistance services
and e-Surfing RFID, targeting at various individual
customer groups. The Company also focused on
promoting products such as “e-Surfing School” and
“Nongjibao” in schools and rural markets. In respect of
daily life applications, the Company reinforced its efforts
to promote public transportation applications, banking
services applications and BestPay application based on
NFC function.
Sixth, promoting sub-dividing performance
evaluation units with performance contracts,
unlocking internal momentum and vitality of
the Company
In 2014, the Company deepened the reform in
establishing market-driven resource allocation and
operation mechanisms, fully promoting the “sub-dividing
performance evaluation units with performance
contracts” project among frontline production and
operation units, and creating autonomous operation
entities that are highly unified in terms of accountability,
authorities and interests. Through key procedures
including flattening organisation structure, authority
delegation, “top-down” service system, process
reengineering, efficiently-centralised support and
reversed evaluation, the Company also promoted the
construction of “top-down” management and support
system to allow frontline employees who were closest
to the customers to decide on internal resources
42
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
BUSINESS REVIEW
PT / EXPO COMM
CHINA 2014
ITU Telecom World 2014
World Internet
Conference
allocation of the Company, motivating the enthusiasm,
proactiveness and creativity of the individuals with
delegated authorities. In 2014, over 80% of the frontline
operating units implemented “sub-dividing performance
evaluation units with performance contracts”, and
70% of the individuals with delegated authorities were
selected by a market-oriented approach, leading to a
widely acclaimed market-oriented mechanism.
Seventh, focusing on customers’
perceptions to promote the Internet-oriented
transformation of services
Focusing on its key services including 3G/4G and
broadband, the Company established and implemented
service standards, promoted convenient and
transparent services, implemented regular customer
experience programmes in multi-levels and various
ways, comprehensively promoted the construction of
a credit management system and carried out service
promotion campaigns, sustaining a continual leading
position in customer satisfaction and maintaining
the No. 1 position in the industry in the customer
satisfaction assessment on both wireless and wireline
internet access services conducted by the Ministry
of Industry and Information Technology in 2014.
The Company proactively adapted to the industry
development trends, and accelerated the Internet-
oriented transformation of services while promoting
self-service and sharing-based online services. A
significant improvement in the service capabilities of the
new channels was achieved, as the users of new media
customer service channels (YiChat, Weibo and WeChat
customer services) reached over 127 million and the
average monthly service volume exceeded over 74
million times.
Network and operation support
In 2014, the Company further optimised resources
allocation to secure major networks constructions for
mobile, broadband and emerging businesses, etc.
First, leveraging the prime opportunities of the 4G
hybrid network trial, the Company accelerated the
deployment of 4G networks in 56 trial cities and
promoted 4G auxiliary facilities construction in over 100
key cities across the country, assuring network support
for the development of the 4G service of the Company.
In respect of the existing 2G/3G network, the Company
mainly focused on network optimisation and its effective
collaboration with 4G service, steadily implementing
precise construction and capacity expansion in key
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
43
BUSINESS REVIEW
Launched “Smart Families” new product “Joy me”
Launched “Smart Families” new product “Joy me”
areas, maintaining high network quality and excellent
customer perception and steadily increasing network
utilisation rate, efficiency and return. During the year,
the mobile network utilisation rate increased by 3
percentage points.
carrying capability. The Company continued to promote
the capacity expansion of the metropolitan area
networks and the transformation of the next-generation
Internet, improving the overall carrying capability of
emerging businesses.
Second, taking deepening reform and sub-division of
investment units as focus, the Company continued to
promote the precision and timeliness of its broadband
investment and construction and focused on expediting
fibre network transformation and bandwidth upgrade
in urban core districts. 90% of the southern city areas
were covered by networks with 20 Mbps or above. The
FTTH access port utilisation rate reached 46%, up 6
percentage points.
Third, the Company accelerated the application of new
technologies, effectively supporting the development of
emerging businesses. Deploying efficiently-centralised
cloud resource pools, the Company was able to
launch new products within a short period of time. The
Company also continued to promote the integration
of cloud technology in its business platforms and
improved the operating efficiency of its centralised
operations. The 400G platform routers were brought
into the carrying network to improve the capacity and
Development measures and highlights
for 2015
A series of policy changes in 2014 had brought a long-
term impact on the business. In 2015, apart from facing
the changes in severe challenges from the changes in
the traditional operating model, the Company also sees
the enormous market opportunities from the flourishing
development in the consumer Internet market and the
emerging industrial Internet market. With differentiation
as its main line, the Company further changes its
subscriber acquisition model and promotes the dual
enhancement in corporate scale and efficiency. In
respect of mobile services, the Company will fully
commence its 4G business operations, leveraging
the differentiated advantages of its FDD network
and continuously optimising customer experience. In
addition, the Company will introduce non-cash cost
marketing model, carrying out differentiated marketing
and targeting refined markets by strengthening content
44
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
BUSINESS REVIEW
applications and offering differentiated products.
Following the terminal-led approach, the Company
implements “the Excellence 100” programme and
launches special handsets such as security handsets
and video handsets. In respect of its broadband
business, led by the 100Mbps broadband service
development, the Company continues to promote the
construction of fibre networks, fully realise the end-to-
end bandwidth upgrade in terms of access capability,
achieving significant improvement in the average access
bandwidth and creating the core competitiveness of
its broadband services. To promote the integration of
marketing and maintenance, the Company optimises
its service process, introducing instant installation upon
the completion of sales. To enrich the applications for
high bandwidth adoption, the Company promotes “Joy
me” and cloud products and expands and develops
smart home applications such as video surveillance. In
respect of its emerging businesses, first, the Company
refines data traffic operations based on big data
and multi-dimensional analysis of customer behavior
characteristics, optimising the data traffic products
and implementing targeted and precise marketing.
The Company increases promotion of data backward
monetisation, opening up external cooperation
capabilities of “Liuliangbao” and unifying the product
form of “Data Traffic 800”. Second, expanding
information services and seizing opportunities from the
traditional industry upgrade, and advancing the change
of ICT to IIT (Information Internet-ware Technology),
the Company expands the scale of informatisation
products. The Company efficiently centralises the
development of cloud products, strengthening research
and sales of products such as cloud hosting, private
cloud and object-based storage systems and speeding
up the construction of the IDC unified operating
system. Third, the Company diversifies the mobile
Internet applications, promoting payment, YiChat,
security products and others to satisfy the lifestyle and
entertainment demands of customers, and promoting
applications focusing on community, education,
healthcare to meet the daily life needs of customers.
We will also continue to optimise network resources,
improve operating and maintenance efficiency, perfect
service capabilities of full services and enhance
customers’ satisfaction to attain continuous growth in
customer value and corporate value.
e-Surfing terminal industry
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value chain annual conference
value chain annual conference
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
45
MANAGEMENT’S DISCUSSION AND ANALYSIS
FINANCIAL REVIEW
Operating Revenues
In 2014, the Group managed to maintain a stable
development condition, and the operating revenues
achieved steady growth despite the impact of the
value-added tax (VAT) reform and the geographical
limitation on the trial of the LTE hybrid network.
Operating revenues in 2014 were RMB324,394 million,
an increase of 0.9% from 2013. Of this, the total mobile
revenues were RMB151,611 million, an increase of
0.3% from 2013. The total wireline revenues were
RMB172,783 million, an increase of 1.4% from 2013.
Service Revenues
RMB
MILLION
Short-term pain, long-term beneficial to
VAT Reform
SUSTAINABLE
GROWTH
Summary
In 2014, in the face of a number of prominent changes
in external environment, the Group firmly grasped
the main theme of “reform and innovation, open
cooperation, quality and efficiency enhancement”,
innovated in system and mechanism, refined customer
acquisition strategies, accelerated the promotion of
the comprehensive deepening reform and enhanced
corporate value. The Group’s operating revenues in
2014 were RMB324,394 million, an increase of 0.9%
from 2013; service revenues1 were RMB287,379
million, an increase of 3.1% from 2013; operating
expenses were RMB295,886 million, an increase of
0.6% from 2013; profit attributable to equity holders
of the Company was RMB17,680 million, an increase
of 0.8% from 2013; basic earnings per share were
RMB0.22; EBITDA2 was RMB94,853 million, a
decrease of 1.8% from 2013 and the EBITDA margin3
was 33.0%.
1
2
3
Service revenues were calculated based on operating revenues minus sales of mobile terminals (2014: RMB31,343 million; 2013:
RMB37,435 million), sales of wireline equipment (2014: RMB3,956 million; 2013: RMB3,564 million) and other non-service revenues
(2014: RMB1,716 million; 2013: RMB1,734 million).
EBITDA was calculated based on operating revenues minus operating expenses plus depreciation and amortisation. As the
telecommunications business is a capital intensive industry, capital expenditure, the level of gearing and finance costs may have
a significant impact on the net profit of companies with similar operating results. Therefore, we believe EBITDA may be helpful in
analysing the operating results of a telecommunications service provider such as the Company. Although EBITDA has been widely
applied in the global telecommunications industry as a benchmark to reflect operating performance, debt raising ability and liquidity,
it is not regarded as a measure of operating performance and liquidity under generally accepted accounting principles. It also does
not represent net cash from operating activities. In addition, our EBITDA may not be comparable to similar indicators provided by
other companies.
EBITDA margin was calculated based on EBITDA divided by service revenues.
46
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
FINANCIAL REVIEW
The following table sets forth a breakdown of the operating revenues of the Group for 2013 and 2014, together with
their respective rates of change:
For the year ended 31 December
(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
Total operating revenues
2014
33,587
54,673
112,431
38,419
26,939
17,332
41,013
324,394
2013
38,633
58,217
99,394
36,230
25,233
17,586
46,291
321,584
Rates of
change
(13.1%)
(6.1%)
13.1%
6.0%
6.8%
(1.4%)
(11.4%)
0.9%
Wireline Voice
Mobile Voice
In 2014, revenue from wireline voice services was
RMB33,587 million, a decrease of 13.1% from
RMB38,633 million in 2013, accounting for 10.4% of
our operating revenues. Declining revenue contribution
from wireline voice services effectively mitigated
operating risks.
In 2014, being affected by the launch of 4G services by
the peers, the VAT reform, change in our sales model
and the substitution effect of mobile Internet services,
revenue from mobile voice services was RMB54,673
million, a decrease of 6.1% from RMB58,217 million in
2013, accounting for 16.9% of our operating revenues.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
47
FINANCIAL REVIEW
Internet
In 2014, revenue from Internet access services was
RMB112,431 million, an increase of 13.1% from
RMB99,394 million in 2013, accounting for 34.7% of
our operating revenues. On the basis of the customer
access bandwidth upgrade, the Group enriched various
informatisation applications, leveraged the integrated
product, “Joy me”, to create “Smart Family” portals
and promoted high-bandwidth applications. At the end
of 2014, the number of wireline broadband subscribers
of the Group reached 107 million, and the wireline
broadband revenue of the Group was RMB73,485
million, an increase of 3.8% from 2013. At the same
time, the Group achieved rapid growth in the volume
of and revenue from mobile data traffic, effectively
driven by developing differentiated edges in products,
persisting in terminal-led and application-driven
approaches, innovating on the business model of data
traffic operations and launching various products, such
as “Liuliangbao”, “Data Traffic 800” and dedicated-data
traffic packages. Revenue from mobile Internet access
services was RMB37,809 million, an increase of 35.2%
from 2013. Of this, revenue from handset data traffic
was RMB34,086 million, an increase of 48.8% from
2013.
Mobile Internet
access services
revenue
Wireline
value-added
services revenue
Value-Added Services
In 2014, revenue from value-added services was
RMB38,419 million, an increase of 6.0% from
RMB36,230 million in 2013, accounting for 11.8%
of our operating revenues. Of this, the revenue from
wireline value-added services was RMB18,428 million,
an increase of 11.8% from 2013, mainly driven by the
rapid growth of the IDC and iTV services. Revenue from
mobile value-added services was RMB19,991 million,
an increase of 1.2% from 2013.
Integrated Information Application Services
In 2014, revenue from integrated information application
services was RMB26,939 million, an increase of 6.8%
from RMB25,233 million in 2013, accounting for
8.3% of our operating revenues. Of this, revenue from
wireline integrated information application services was
RMB19,619 million, an increase of 10.3% from 2013.
The increase in revenue was mainly due to the fact
that the Group focused on informatisation applications,
enhanced open cooperation, accelerated the
promotion of scale replication of benchmarking industry
applications, which led to the rapid development of
IT Services and Applications. Revenue from mobile
integrated information application services was
RMB7,320 million, a decrease of 1.6% from 2013.
48
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
FINANCIAL REVIEW
Telecommunications Network Resource
Services and Lease of Network Equipment
Others
In 2014, revenue from telecommunications network
resource services and lease of network equipment
was RMB17,332 million, a decrease of 1.4% from
RMB17,586 million in 2013, accounting for 5.3% of our
operating revenues. The decline was mainly due to the
fact that revenue from telecommunications network
resource services and lease of network equipment
was subject to higher VAT rate. Revenue from lease of
mobile network equipment was RMB463 million.
In 2014, revenue from other services was RMB41,013
million, a decrease of 11.4% from RMB46,291 million in
2013, accounting for 12.6% of our operating revenues.
The decline was mainly resulted from the reduction
of the centralised procurement and sales of mobile
terminal equipment. Revenue from sales of mobile
terminal equipment was RMB31,343 million, a decrease
of 16.3% from 2013.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
49
FINANCIAL REVIEW
Operating Expenses
While continuously enhancing our coordination and management of resources, reinforcing network maintenance
and optimisation and improving the capabilities of network support and service, the Group reinforced the efforts in
management and control of selling expenses, enhanced the utilisation efficiency of marketing resources and promoted
profitable development of the Group. In 2014, operating expenses of the Group were RMB295,886 million, an increase
of 0.6% compared with 2013, and the rate of growth of operating expenses was lower than the revenue growth rate.
Operating expenses accounted for 91.2% of our operating revenues, a decrease of 0.3 percentage points from 2013.
The following table sets forth a breakdown of the operating expenses of the Group in 2013 and 2014 and their
respective rates of change:
(RMB millions, except percentage data)
Depreciation and amortisation
Network operations and support expenses
Selling, general and administrative expenses
Personnel expenses
Other operating expenses
For the year ended 31 December
2014
66,345
68,651
62,719
50,653
47,518
2013
69,083
53,102
70,448
46,723
54,760
Total operating expenses
295,886
294,116
Rates of
change
(4.0%)
29.3%
(11.0%)
8.4%
(13.2%)
0.6%
Depreciation and Amortisation
Network Operations and Support Expenses
In 2014, depreciation and amortisation was RMB66,345
million, a decrease of 4.0% from RMB69,083 million in
2013, accounting for 20.5% of our operating revenues.
The decrease in depreciation and amortisation was
mainly due to the saving in the amortisation of customer
relationships in this year.
In 2014, network operations and support expenses
were RMB68,651 million, an increase of 29.3% from
RMB53,102 million in 2013, accounting for 21.2% of
our operating revenues. The growth was mainly due
to the fact that the Company reasonably enhanced
network maintenance quality to build competitive edges
for concerted development of 3G and 4G, wireline and
wireless broadband, and the increase in property rental
and management fee. In addition, with the replacement
of the PAS service by a more advanced mobile
network, the Group disposed almost all of the PAS
assets.
50
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
SG&A
FINANCIAL REVIEW
Personnel Expenses
In 2014, personnel expenses were RMB50,653 million,
an increase of 8.4% from RMB46,723 million in 2013,
accounting for 15.6% of our operating revenues.
The growth was mainly due to that the Group raised
the remuneration for frontline staff. For details of the
number of employees, remuneration policies and
training schemes, please refer to the Human Resources
Development Report in this annual report.
Selling, General and Administrative Expenses
Other Operating Expenses
In 2014, selling, general and administrative expenses
amounted to RMB62,719 million, a decrease of
11.0% from RMB70,448 million in 2013, accounting
for 19.3% of our operating revenues. The decline
was mainly attributable to the fact that the Group
accelerated the optimisation and innovation of its sales
model, strengthened the management and control
on selling expenses, especially on terminal subsidies,
and improved the utilisation efficiency of marketing
resources. Commission and service expenses for third
parties amounted to RMB28,367 million, an increase of
11.2% from 2013. Advertising and promotion expenses
amounted to RMB26,122 million, a decrease of 28.4%
from 2013, of which the terminal subsidies amounted to
RMB15,340 million, a decrease of 32.7% from 2013. At
the same time, the Group continued to strengthen the
precision management of general and administrative
expenses. Compared to last year, general and
administrative expenses decreased by 2.5%.
In 2014, other operating expenses were RMB47,518
million, a decrease of 13.2% from RMB54,760 million
in 2013, accounting for 14.6% of our operating
revenues. The decline was mainly attributable to the
reduction of the centralised procurement and sales of
mobile terminal equipment and the saving of mobile
interconnection charges. The cost of mobile terminal
equipment sold amounted to RMB29,982 million, a
decrease of 14.9% from 2013.
Net Finance Costs
In 2014, the Group’s net finance costs were RMB5,291
million, an increase of 2.7% from RMB5,153 million in
2013. The growth was mainly due to the fact that the
interest rate of the deferred consideration of Mobile
Network Acquisition increased from 4.83% per annum
in 2013 to 6.25% per annum in 2014 (adjusted in
accordance with a 5 basis points premium to the yield
of the 5-year super AAA rated Medium Term Notes
once a year pursuant to the agreement). Net exchange
gains were RMB55 million in 2014.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
51
FINANCIAL REVIEW
Profitability Level
VAT Reform
The pilot programme of VAT reform commenced
in the telecommunications industry in June 2014.
Although it has an adverse impact in the short term,
the Group expects that it will be beneficial for its
sustainable development in the long term. The Group
strived to optimise its development and sales models,
implemented enhanced management over cost,
procurement and vendors’ tax qualifications. The
relevant adverse impact has been moderated. In the
future, with the continual expansion of the VAT reform
to other industries, it is expected that the Group will
be entitled to more input VAT credits. Together with
the continuously optimising revenue structure, it will be
beneficial for the enhancement of the profitability in the
long term.
Investment in establishing China Tower
Corporation Limited
In order to promote the joint construction and
sharing of telecommunications infrastructure facilities
and further increase the operating efficiency and
corporate value, the Company, China United Network
Communications Corporation Limited and China
Mobile Communication Company Limited entered into
a Promoters’ Agreement for China Communications
Facilities Services Corporation Limited in July 2014 to
establish China Communications Facilities Services
Corporation Limited (currently renamed as “China
Tower Corporation Limited”). The registered share
capital of China Tower Corporation Limited is RMB10
billion, of which RMB2,990 million was contributed by
the Group, representing a shareholding percentage of
29.9%. The related subscription had been fully paid by
the end of 2014.
Income Tax
Capital Expenditure and Cash Flows
The Group’s statutory income tax rate is 25%. In 2014,
the Group’s income tax expenses were RMB5,498
million with the effective income tax rate of 23.6%.
The difference between the effective income tax rate
and the statutory income tax rate was mainly due to
the preferential income tax rate, which was lower than
the statutory income tax rate, enjoyed by some of our
branches with operations in the western region of China
and some of our subsidiaries.
Profit Attributable To Equity Holders of the
Company
In 2014, profit attributable to equity holders of the
Company was RMB17,680 million, an increase of 0.8%
from RMB17,545 million in 2013.
Capital Expenditure
In 2014, the Group reasonably controlled 4G
investment pace with regard to LTE hybrid network trial
approval progress and adjusted the structure of capital
expenditure. On the basis of the launch of the LTE
hybrid network trial, the Group proactively invested in
4G auxiliary facilities and further upgraded the access
bandwidth capability of the fibre network in cities
to ensure the return on investment. In 2014, capital
expenditure of the Group was RMB76,889 million, a
decrease of 3.9% from RMB79,992 million in 2013.
Profit attributable to
equity holders of
the Company
RMB
MILLION
52
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
FINANCIAL REVIEW
Cash Flows
In 2014, net increase in cash and cash equivalents for the Group was RMB4,370 million, while the net decrease in
cash and cash equivalents was RMB13,960 million in 2013.
The following table sets forth the cash flow position of the Group in 2013 and 2014:
(RMB millions)
Net cash flow from operating activities
Net cash used in investing activities
Net cash (used in)/from financing activities
Net increase/(decrease) in cash and cash equivalents
For the year ended 31 December
2014
96,405
(81,708)
(10,327)
4,370
2013
88,351
(107,948)
5,637
(13,960)
In 2014, the net cash inflow from operating activities
was RMB96,405 million, an increase of RMB8,054
million from RMB88,351 million in 2013. The increase
was mainly due to the increase in operating revenues
and the decrease in payment of expenses related to
operating activities.
In 2014, the net cash outflow used in investing activities
was RMB81,708 million, a decrease of RMB26,240
million from RMB107,948 million in 2013. The
decrease was mainly due to the payment of part of the
consideration of Mobile Network Acquisition in 2013.
In 2014, the net cash outflow used in financing activities
was RMB10,327 million. In 2013, the net cash inflow
from financing activities was RMB5,637 million. The
reason of the fluctuation was mainly due to the fact that
the Group repaid part of short-term loans.
Working Capital
The Group consistently upheld prudent financial
principles and strict fund management policies. At
the end of 2014, the Group’s working capital (total
current assets minus total current liabilities) deficit
was RMB146,782 million, a decrease in deficit of
RMB533 million from RMB147,315 million in 2013.
As at 31 December 2014, the Group’s unutilised
credit facilities were RMB130,488 million (2013:
RMB157,694 million). Given the stable net cash inflow
from operating activities and our sound credit record,
the Group has sufficient working capital to satisfy the
operation requirement. At the end of 2014, the Group’s
cash and cash equivalents amounted to RMB20,436
million, amongst which cash and cash equivalents
denominated in Renminbi accounted for 93.1% (2013:
94.3%).
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
53
FINANCIAL REVIEW
Assets and Liabilities
In 2014, the Group continued to maintain a solid financial position. At the end of 2014, the total assets of the Group
increased to RMB561,274 million from RMB543,239 million at the end of 2013, while total indebtedness decreased to
RMB106,552 million from RMB110,377 million at the end of 2013. The ratio of the Group’s total indebtedness to total
assets decreased to 19.0% at the end of 2014 from 20.3% at the end of 2013.
Indebtedness
The indebtedness analysis of the Group as of the end of 2013 and 2014 is as follows:
(RMB millions)
Short-term debt
Long-term debt maturing within one year
Long-term debt and deferred consideration due to
China Telecommunications Corporation
Finance lease obligations (including current portion)
Total debt
By the end of 2014, the total indebtedness of the Group
was RMB106,552 million, a decrease of RMB3,825
million from the end of 2013. This is mainly due to the
repayment of medium-term notes amounting to RMB20
billion and part of short-term loans, and the issuance
of super short-term commercial papers amounting to
RMB19 billion in total. Of the total indebtedness of the
Group, loans denominated in Renminbi, US Dollars and
Euro accounted for 99.2% (2013: 99.1%), 0.5% (2013:
0.5%), and 0.3% (2013: 0.4%), respectively. 41.3%
(2013: 43.3%) of this indebtedness are loans with
Contractual Obligations
For the year ended 31 December
2014
43,976
82
62,494
–
106,552
2013
27,687
20,072
62,617
1
110,377
fixed interest rates, while the remainders are loans with
floating interest rates.
As at 31 December 2014, the Group did not pledge
any assets as collateral for debt (2013: Nil).
Most of the Group’s revenue receipts from and
payments made for its business were denominated in
Renminbi, therefore the Group did not have significant
risk exposure to foreign exchange fluctuations.
(RMB millions)
Short-term debt
Long-term debt and payable
Operating lease commitments
Capital commitments
Total
44,133
72,517
9,139
7,165
Total contractual obligations
132,954
1 January
2015 –
31 December
2015
1 January
2016 –
31 December
2016
1 January
2017 –
31 December
2017
1 January
2018 –
31 December
2018
1 January
2019 –
31 December
2019
44,133
3,243
2,635
7,165
57,176
–
3,243
1,921
–
5,164
–
64,953
1,389
–
66,342
–
77
1,021
–
1,098
–
77
678
–
755
Thereafter
–
924
1,495
–
2,419
Note: Amounts of short-term debt, and long-term debt and payable include recognised and unrecognised interest payable, and are not
discounted.
54
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
REPORT OF THE
DIRECTORS
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 the International
Financial Reporting Standards for the year ended 31
December 2014.
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
2014 and the financial position of the Company and the
Group as at that date are set out in the audited financial
statements on pages 120 to 193 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 RMB6,085 million for the year ended
31 December 2014. The dividend proposal will be
submitted for consideration at the Annual General
Meeting to be held on 27 May 2015. Dividends will
be denominated and declared in Renminbi. Dividends
for holders of domestic shares and the holders of the
Company’s H shares through the Southbound Trading
Link (the “Southbound Shareholders”) will be paid in
Renminbi, whereas dividends for H share shareholders
other than the Southbound Shareholders 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 17 July 2015 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 2014 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 8 June 2015.
According to regulations by the State Administration
of Taxation (Guo Shui Han [2011] No.348) and
relevant laws and regulations, if the individual H share
shareholders who are Hong Kong or Macau residents
and those whose country of domicile is a country which
has entered into a tax treaty with the PRC stipulating
a dividend tax rate of 10%, the Company will finally
withhold and pay individual income tax at the rate of
10% on behalf of the individual H share shareholders.
If the individual H share shareholder whose country
of domicile is a country which has entered into a tax
treaty with the PRC stipulating a dividend tax rate of
less than 10%, the Company will finally withhold and
pay individual income tax at the rate of 10% on behalf
56
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
of the individual H share shareholder. 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 8 June 2015 (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 Tuesday, 2 June 2015. 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.
REPORT OF THE DIRECTORS
For investors of the Shanghai Stock Exchange (including
enterprises and individuals) investing in the H shares of
the Company listed on Hong Kong Stock Exchange (the
“Southbound Trading Link”), the Shanghai branch of
China Securities Depository and Clearing Corporation
Limited, as the nominee of the holders of H shares
under the Southbound Trading Link, will receive
all dividends distributed by the Company and will
distribute the dividends to the relevant investors of H
shares under the Southbound Trading Link through its
depositary and clearing system.
According to the relevant provisions under the “Notice
on Tax Policies for Shanghai-Hong Kong Stock
Connect Pilot Programme (Cai Shui [2014] No. 81)”,
the Company shall withhold individual income tax at
the rate of 20% with respect to dividends received by
the Mainland individual investors for investing in the
H shares of the Company listed on the Hong Kong
Stock Exchange through the Southbound Trading
Link. In respect of the dividends for the investment by
Mainland securities investment funds in the H shares
of the Company listed on Hong Kong Stock Exchange
through the Southbound Trading Link, the tax levied
on dividends derived from such investment shall be
ascertained by reference to the rules applicable to
the treatment of individual investors. The Company
is not required to withhold income tax on dividends
derived by the Mainland enterprise investors under
the Southbound Trading Link, and such enterprises
shall report the income and make tax payment by
themselves. The record date for entitlement to the
shareholders’ rights and the relevant arrangements of
dividend distribution for the Southbound Shareholders
are the same as those for the Company’s H share
shareholders.
The Company assumes no responsibility and disclaims
all liabilities whatsoever in relation to the tax status or
tax treatment of the individual H share shareholders and
for any claims arising from any delay in or inaccurate
determination of the tax status or tax treatment of the
individual H share shareholders or any disputes over
the withholding mechanism or arrangements.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
57
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
Zhang Jiping
Yang Xiaowei
Sun Kangmin
Ke Ruiwen
Zhu Wei
Tse Hau Yin, Aloysius
Cha May Lung, Laura
Xu Erming
Wang Hsuehming
Gao Tongqing
Chen Zhongyue
Yung Shun Loy, Jacky
56
52
59
51
57
51
46
67
65
65
65
51
43
52
Chairman and Chief Executive Officer
20 December 2004
Executive Director, President and
20 October 2004
Chief Operating 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
Non-executive Director
29 May 2014
Independent Non-executive Director
9 September 2005
Independent Non-executive Director
9 September 2008
Independent Non-executive Director
9 September 2005
Independent Non-executive Director
Executive Vice President
Executive Vice President
Deputy Chief Financial Officer,
Qualified Accountant and Company Secretary
29 May 2014
21 June 2013
12 December 2014
1 February 2005
On 29 May 2014, the fourth session of the Board
expired. The members of the fourth session of the
Board, namely, Mr. Wu Jichuan, Mr. Qin Xiao and Mr.
Xie Liang retired as the Directors of the Company.
The remaining Directors from the fourth session of
the Board, namely, Mr. Wang Xiaochu, Mr. Yang Jie,
Madam Wu Andi, Mr. Zhang Jiping, Mr. Yang Xiaowei,
Mr. Sun Kangmin, Mr. Ke Ruiwen, Mr. Tse Hau Yin,
Aloysius, Madam Cha May Lung, Laura and Mr. Xu
Erming all continued to serve their duties as Directors
for the fifth session of the Board after election at the
Annual General Meeting held on 29 May 2014. On the
same day, Mr. Zhu Wei and Madam Wang Hsuehming
were elected as Directors of the fifth session of the
Board as from 29 May 2014 at that Annual General
Meeting. On 12 December 2014, the Board appointed
Mr. Chen Zhongyue as the Executive Vice President of
the Company. On 10 February 2015, Madam Wu Andi
retired from her positions as an Executive Director,
Executive Vice President and Chief Financial Officer of
the Company due to her age. On 17 February 2015,
the Board appointed Mr. Yung Shun Loy, Jacky as the
Deputy Chief Financial Officer of the Company.
58
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
REPORT OF THE DIRECTORS
Supervisors of the Company
The following table sets out certain information of the Supervisors of the Company as at the date of this Report:
Name
Tang Qi
Zhang Jianbin
Hu Jing
Age
Position in the Company
Date of Appointment
56
49
39
Supervisor (Employee Representative)
19 August 2013
Supervisor (Employee Representative)
Supervisor
16 October 2012
16 October 2012
On 29 May 2014, the fourth session of the Supervisory
Committee expired. Madam Zhu Lihao, a member of
the fourth session of the Supervisory Committee, retired
as a Supervisor of the Company. Supervisors of the
fourth session of the Supervisory Committee, namely,
Mr. Shao Chunbao, Mr. Hu Jing and Mr. Du Zuguo,
continued to serve as Supervisors of the fifth session of
the Supervisory Committee after election at the Annual
General Meeting held on 29 May 2014. On the same
day, Mr. Tang Qi and Mr. Zhang Jianbin continued
to be elected by the employees of the Company
democratically as an Employee Representative
Supervisor. On 18 February 2015, due to adjustment
Share Capital
of work division, Mr. Shao Chunbao resigned from
his position as a Supervisor and the Chairman of the
Supervisory Committee of the Company. On 12 March
2015, Mr. Du Zuguo resigned from his position as
a Supervisor of the Company due to adjustment of
work division. Mr. Sui Yixun and Mr. Ye Zhong have
been nominated as Supervisors of the Company. The
resolutions in relation to the proposed appointment of
Mr. Sui Yixun and Mr. Ye Zhong as the Supervisors of
the Company are subject to the shareholders’ approval
at the Annual General Meeting for the year 2014 to be
held on 27 May 2015.
The share capital of the Company as at 31 December 2014 was RMB80,932,368,321, divided into 80,932,368,321
shares of RMB1.00 each. As at 31 December 2014, 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 2014
Percentage of the
total number of shares
in issue as at
31 December 2014
(%)
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
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
59
REPORT OF THE DIRECTORS
Material Interests and Short Positions
in Shares and Underlying Shares of the
Company
As at 31 December 2014, 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.
JPMorgan Chase & Co.
57,377,053,317
(Long Position)
5,614,082,653
(Long Position)
1,792,139,463
(Long Position)
Domestic shares
85.57%
70.89% Beneficial owner
Domestic shares
8.37%
6.94% Beneficial owner
H shares
12.91%
2.21% 214,254,302 shares as beneficial
owner; 449,228,000 shares
as investment manager;
32,000 shares as trustee
(other than bare trustee)
and 1,128,625,161 shares
as custodian corporation/
approved lending agent
0.18%
0.03% Beneficial owner
8.13%
1.39% Custodian corporation/
approved lending agent
9.95%
1.71% Interest of controlled corporation
8.14%
1.40% Interest of controlled corporation
0.03%
0.01% Interest of controlled corporation
7.00%
1.20% Interest of controlled corporation
5.00%
0.86% Investment manager
25,638,482
(Short Position)
1,128,625,161
(Shares available
for lending)
1,380,231,874
(Long Position)
1,129,819,307
(Long Position)
4,344,000
(Short Position)
971,875,000
(Long Position)
694,547,094
(Long Position)
H shares
H shares
H shares
H shares
H shares
H shares
H shares
Commonwealth
Bank of Australia
BlackRock, Inc.
The Capital Group
Companies Inc.
Templeton Investment
Counsel, LLC
60
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
REPORT OF THE DIRECTORS
Save as stated above, as at 31 December 2014, in the
register required to be maintained under Section 336 of
the SFO, no other persons were recorded to hold any
interests or short positions in the shares or underlying
shares of the equity derivatives of the Company.
Directors’ and Supervisors’ Interests
and Short Positions in Shares,
Underlying Shares and Debentures
As at 31 December 2014, 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.
Directors’ and Supervisors’ Interests in
Contracts
For the year ended 31 December 2014, 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).
Emoluments of the Directors and
Supervisors
Please refer to note 29 of the audited financial
statements for details of the emoluments of all Directors
and Supervisors of the Company in 2014.
As at 31 December 2014, 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.
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.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
61
REPORT OF THE DIRECTORS
Public Float
Reserves
As at the date of this Report, based on the information
that is publicly available to the Company and within
the knowledge of the Directors, the Company has
maintained the prescribed public float under the Listing
Rules and as agreed with The Stock Exchange of Hong
Kong Limited.
Summary of Financial Information
Please refer to pages 194 to 195 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 2014.
Bank Loans and Other Borrowings
Please refer to note 16 of the audited financial
statements for details of bank loans and other
borrowings of the Group.
Capitalised Interest
Please refer to note 27 of the audited financial
statements for details of the Group’s capitalised interest
for the year ended 31 December 2014.
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 2014.
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 2014, calculated on the above basis
and before deducting the proposed final dividends for
2014, amounted to RMB93,224 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 2014.
Donations
For the year ended 31 December 2014, the Group
made charitable and other donations with a total
amount of RMB23 million.
62
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
REPORT OF THE DIRECTORS
Subsidiaries and Associated
Companies
Please refer to note 8 and note 9 of the audited financial
statements for details of the Company’s subsidiaries
and the Group’s interests in associated companies as
at 31 December 2014.
Changes in Equity
Please refer to the consolidated statement of
changes in equity as contained in the audited financial
statements of this year (page 125 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
Major Customers and Suppliers
For the year ended 31 December 2014, sales to the
five largest customers of the Group accounted for an
amount no more than 30% of the operating revenues of
the Group.
For the year ended 31 December 2014, purchases
from the five largest suppliers of the Group accounted
for approximately 35.0% of the total annual purchases
of the Group.
For the year ended 31 December 2014, purchases
from the Group’s largest supplier accounted for
approximately 10.5% 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.
Please refer to note 39 of the audited financial
statements for details of the stock appreciation rights
offered by the Company.
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.
Pre-Emptive Rights
Material Development of the Company
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.
Please refer to the respective sections in the Chairman’s
Statement, Business Review and Financial Review for
the details relating to the material development of the
Company in 2014.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
63
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 2014:
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
Provision of Internet applications channel services by the Group
Annual
monetary cap
for continuing
connected
transactions
(RMB millions)
Transaction
Amounts
(RMB millions)
246
346
734
1,171
167
3,729
3,089
15,478
2,885
11,549
366
900
1,000
1,100
1,400
600
5,000
5,000
16,000
3,800
15,000
800
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.
64
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
REPORT OF THE DIRECTORS
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.
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
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
65
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.
66
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
REPORT OF THE DIRECTORS
IT Services Framework Agreement
Community 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.
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).
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
67
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.
68
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
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.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
69
REPORT OF THE DIRECTORS
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
(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.
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
REPORT OF THE DIRECTORS
The Company’s auditor was engaged to report on the
Group’s continuing connected transactions for the
year ended 31 December 2014 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.
The Independent Non-executive Directors of the
Company have confirmed that all continuing connected
transactions for the year ended 31 December 2014 to
which the Group was a party:
The Independent Non-executive Directors have further
confirmed that:
The values of continuing connected transactions for the
year ended 31 December 2014 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 2014 and have confirmed to the Board
that the transactions:
1. have received the approval of the Board;
1. had been entered into, and the agreements
2. have been entered into in accordance with the
governing those transactions were entered into,
by the Group in the ordinary and usual course of
business;
2. had been entered into either:
(i) on normal commercial terms or better; or
(ii) if there are not sufficient comparable
transactions to judge whether they are on normal
commercial terms, on terms no less favourable
to the Company than those available to or (if
applicable) from independent third parties; and
3. had been entered into in accordance with the
relevant terms that are fair and reasonable and
in the overall interests of the shareholders of the
Company as a whole.
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 78 to 98 of this 2014 annual report
of the Company for details of our compliance with the
Corporate Governance Code.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
71
REPORT OF THE DIRECTORS
Material Legal Proceedings
As at 31 December 2014, 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 2014. 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 2015
will be proposed to the Annual General Meeting of the
Company to be held on 27 May 2015.
By Order of the Board
Wang Xiaochu
Chairman and Chief Executive Officer
Beijing, PRC
18 March 2015
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
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.
I. The work status of the Supervisory
Committee of the Company
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.
During the reporting period, the Supervisory Committee
held two meetings. At the seventh meeting of the
Fourth Session of the Supervisory Committee held
in March 2014, the Supervisory Committee reviewed
and approved six agenda items, including the financial
statements for the year 2013, the independent auditor’s
report, the profit distribution and dividend proposal,
the Supervisory Committee’s report for the year 2013,
the working plan of the Supervisory Committee for the
year 2014, the change of session of the Supervisory
Committee of the Company and passed the relevant
resolutions. Regarding major adjusted items, changes
in assets, the rectification of problems discovered
during the audit and the internal control assessment,
changes in related party transactions and the relevant
management and control, the Supervisory Committee
has communicated with the Finance Department,
Internal Audit Department and external auditors and
raised certain recommendations. On 29 May 2014, the
supervisors duly signed to approve the appointment of
Mr. Shao Chunbao as the Chairman of the fifth session
of the Supervisory Committee. At the first meeting of
the Fifth Session of the Supervisory Committee held
in August 2014, the Supervisory Committee reviewed
and approved the interim financial statements and
the independent auditor’s review report for the six
months ended 30 June 2014. Regarding changes in
major figures in the reports, review of interim financial
statements, the effect of replacing business tax with
value-added tax and the relevant remedial measures
and the growth of ICT business, the Supervisory
II. 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, in the face of a number
of prominent changes in the external environment, the
Company rose to the challenges and firmly upheld
the main theme of “reform and innovation, open
cooperation, enhancement in quality and efficiency”.
Through promoting a transformation in development
models and an Internet-oriented transformation,
the promotion of rapid development of 4G services,
the acceleration of the transformation and upgrade
of its fundamental services and the market-driven
development of its emerging businesses, the increase
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
73
REPORT OF THE SUPERVISORY COMMITTEE
in the magnitude of the reform and innovation and open
cooperation, the Company strived to achieve stable
growth in its operating results. In 2014, the operating
revenues of the Company reached RMB324.4 billion,
an increase of 0.9% from last year. The service
revenues reached RMB287.4 billion, an increase
of 3% over last year, ranking first in the industry in
respect of revenue growth rate. The proportion of
service revenues attributable to emerging businesses
reached 29%, an increase of 5 percent points over last
year and our business structure was continually and
rapidly optimised. EBITDA was RMB94.9 billion with
EBITDA margin of 33%. Profit attributable to the equity
holders of the Company reached RMB17.7 billion,
representing an increase of 0.8% from last year. Free
cash flows amounted to RMB12.5 billion. In summary,
the Company accurately grasped the trends in mobile
Internet development and the integrated development
of the industry. The operational efficiency was steadily
improved. The core competitiveness was continually
strengthened and the corporate development is full
of vitality. Meanwhile, while conscientiously fulfilling its
responsibility to shareholders, the Company voluntarily
committed itself to the sustainable economic, social and
environmental development and persisted in as well as
excelled in fulfilling its social responsibilities, such as its
own corporate responsibilities, responsibilities towards
customers, responsibilities towards employees,
environmental responsibilities and public welfare
responsibilities.
III. The independent opinion on the
relevant matters during the reporting
period
1. The opinion raised by the Supervisory
Committee on the compliance of the
operation of the Company with laws and
regulations
Pursuant to the relevant laws and regulations of the
PRC, the Supervisory Committee monitored the
convening procedures and resolutions of the meetings
of the Board, the implementation by the Board of the
resolutions approved by the Shareholders’ 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, especially
those of the minority shareholders, actively promoted
the regulated operations of the Company, enhanced
the level of governance of the Company, followed lawful
procedures in their decision-making, 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.
2. 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 2014 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 condition, operating results and
cash flows.
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
REPORT OF THE SUPERVISORY COMMITTEE
In 2015, 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. The
Supervisory Committee will focus on the Company’s
implementation of important measures in the process
of promoting comprehensive deepening reform and
the acceleration of the Internet-oriented transformation,
and will further broaden the planning of the work of the
Supervisory Committee and strengthen its efforts in
monitoring so as to protect the interests of all investors.
By Order of the Supervisory Committee
Tang Qi
Zhang Jianbin
Hu Jing
Supervisors of the Supervisory Committee
Beijing, PRC
18 March 2015
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
75
RECOGNITION & AWARDS
For further information,
please browse our website at
www.chinatelecom-h.com/en/
company/awards.php
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
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77
777
CORPORATE GOVERNANCE REPORT
Shareholders' Meeting
Board of
Directors
Supervisory
Committee
Audit
Committee
Remuneration
Committee
Nomination
Committee
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 2014, 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
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
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, corporate internal
control requirements and other regulatory requirements.
For the financial year ended 31 December 2014,
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.
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014CORPORATE GOVERNANCE REPORT CORPORATE GOVERNANCE REPORT
BEST
Company in ASIA
Managed
In 2014, 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
four consecutive years in the Asia’s Best Companies
Poll 2014 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 telecommunications sector” in 2014 All-
Asia-Executive-Team ranking organised by Institutional
Investor for two consecutive years. 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”, respectively for two consecutive years. In
2014, 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 for two consecutive years
in The Global Top 50 and was the only Asian company
among the top 5 companies for two consecutive years.
The Company was accredited the “Platinum Award for
All-Round Excellence” in the poll of Corporate Awards
2014 by the Asset. 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 2014” by Corporate Governance Asia for five
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.
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CORPORATE GOVERNANCE REPORT
Shareholders’ General Meeting
Board of Directors
As at 31 December 2014, the Board comprises 12
Directors with seven Executive Directors, one Non-
executive Director and four 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 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 fifth session of
the Board lasts for three years, starting from May 2014
until the day of the Company’s Annual General Meeting
in 2017, upon which the sixth session of the Board will
be elected.
In 2014, the Company convened one Shareholders’
General Meeting, the Annual General Meeting (“AGM”)
for the year 2013. The AGM held on 29 May 2014
reviewed and approved numerous resolutions such as
the financial statements for the year 2013, Report of the
Independent International Auditor, proposal for profit
and dividends distribution, authorisation to the Board
for the formulation of budget for 2014, appointment
and remuneration of auditors, authorisation to the
Board to issue debentures and change of session of
the Board of Directors and the Supervisory Committee.
The amendments to the Articles of Association of the
Company were approved at the AGM to reflect the
change in the composition of the Board of Directors
and the Supervisory Committee.
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.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
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CORPORATE GOVERNANCE REPORT
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, banking, 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 below sets out the analysis of the composition of the Board as at 31 December 2014:
12
10
8
6
4
2
0
Female
Male
Independent
Non-Executive
Directors
Non-Executive
Director
Executive
Directors
64-69
11-15
54-63
6-10
44-53
1-5
Gender Designation Age Group Duration of service (years)
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CORPORATE GOVERNANCE REPORT
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 financial condition, the operating results
and cash flows of the Company for such period. In
preparing the financial statements for the year ended
31 December 2014, 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 regulate
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.
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 2014,
the Board played a pivotal role in the Company’s
operation, budgeting, decision-making, supervision,
internal control, organisational restructuring and
corporate governance. The Company convened four
Board meetings, four Audit Committee meetings, one
Remuneration Committee meeting, one Nomination
Committee meeting and four board and two audit
committee written resolutions were passed in this year.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
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CORPORATE GOVERNANCE REPORT
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, risk management,
internal control implementation and assessment
report, annual proposal for profit distribution, annual
report, interim report and quarterly reports, continuing
connected transactions and the annual caps applicable
thereto, appointment and remuneration of auditors,
change of session of the Board of Directors, formation
of the Tower Company and the replacement of
business tax with value-added tax (“VAT reform”). 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 visits to our provincial branches from
time to time 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 2014
CORPORATE GOVERNANCE REPORT
In 2014, the Directors as at 31 December 2014 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
Zhu Wei
Independent Non-executive Directors
Tse Hau Yin, Aloysius
Cha May Lung, Laura
Xu Erming
Wang Hsuehming
Types of training
A, B
A, B
A, B
A, B
A, B
A, 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, 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
At 31 December 2014, the Audit Committee comprised
three Independent Non-executive Directors, Mr. Tse
Hau Yin, Aloysius as the chairman and Mr. Xu Erming
and Madam Wang Hsuehming 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
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
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CORPORATE GOVERNANCE REPORT
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 2014, 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 2014, the Audit Committee convened four meetings
and passed two written resolutions, in which it reviewed
important matters related to the Company’s annual,
interim and quarterly financial statements, assessment
of the qualifications, independence, performance,
appointments and remuneration of the external
auditors, risk management, effectiveness of internal
control, internal audit, connected transactions and the
replacement of business tax with value-added tax. The
Audit Committee reviewed the annual audited reports,
interim review reports and quarterly agreed-upon
procedures reports prepared by the external auditors,
communicated with the management and the external
auditors in regards to the regular financial reports and
proposed them for the Board’s approval after review
and approval. 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
At 31 December 2014, the Remuneration Committee
comprised three Independent Non-executive Directors.
Mr. Xu Erming as the chairman, Mr. Tse Hau Yin,
Aloysius and Madam Wang Hsuehming 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 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
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CORPORATE GOVERNANCE REPORT
Committee is responsible to and regularly reports its
work to the Board. The Remuneration Committee held
one meeting in 2014 and reviewed and discussed the
remuneration policy for the Directors of the fifth session
of the Board.
Nomination Committee
At 31 December 2014, the Company’s Nomination
Committee comprised three Independent Non-
executive Directors, Madam Cha May Lung, Laura as
the chairman and Mr. Tse Hau Yin, Aloysius 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
2014, and it performed a review of the structure and
operations of the Board and discussed the change of
session of the Board of Directors.
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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CORPORATE GOVERNANCE REPORT
The number of attendance/meetings of the members of the Board and committees
in year 2014
Executive Directors
Wang Xiaochu (Chairman)
Yang Jie
Wu Andi
Zhang Jiping
Yang Xiaowei
Sun Kangmin
Ke Ruiwen
Non-Executive Directors
Zhu Wei*
Xie Liang*
Independent Non-Executive Directors
Wu Jichuan*
Qin Xiao*
Tse Hau Yin, Aloysius
Cha May Lung, Laura
Xu Erming
Wang Hsuehming*
Audit
Committee
Nomination
Committee
Remuneration
Committee
Board
Annual
General
Meeting
4/4
4/4
4/4
4/4
3/4
3/4
4/4
1/3
1/1
1/1
1/1
4/4
3/4
3/4
3/3
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1/1
1/1
4/4
N/A
4/4
3/3
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
N/A
N/A
N/A
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
1/1
1/1
1/1
0/1
1/1
N/A
N/A
N/A
N/A
1/1
1/1
1/1
N/A
Note: Certain Directors (including Independent Non-executive Directors) did not attend the Annual General Meeting and some of the
meetings of the Board due to other business commitments or being overseas.
* Mr. Wu Jichuan, Mr. Qin Xiao and Mr. Xie Liang retired as Directors of the Company on 29 May 2014 upon the expiry of the term of
service of the fourth session of the Board. Meanwhile, Mr. Zhu Wei and Madam Wang Hsuehming were appointed as the Directors
of the fifth session of the Board on 29 May 2014.
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Supervisory Committee
At 31 December 2014, the Company’s Supervisory
Committee comprised five Supervisors, including
two Employee Representative Supervisors. 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 twice a year.
The number of attendance/meetings of members of the Supervisory Committee in
year 2014
Supervisors
Shao Chunbao (Chairman of the Supervisory Committee)
Zhu Lihao*
Tang Qi (Employee Representative Supervisor)
Zhang Jianbin (Employee Representative Supervisor)
Hu Jing
Du Zuguo
Number of
Attendance/Meetings
2/2
1/1
1/2
2/2
2/2
2/2
Note: Certain Supervisors could not attend some of the meetings of the Supervisory Committee due to other work commitments.
* On 29 May 2014, Madam Zhu Lihao retired as the Supervisor upon the expiry of the fourth session of the Supervisory Committee.
External Auditors
auditors did not contravene the requirements of the US
Sarbanes-Oxley Act of 2002.
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
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 2014 is as follows:
Service item
Audit services
Non-audit services (mainly include internal control advisory and other advisory services)
Total
Fee
(including
value-added tax)
(RMB millions)
66.0
6.0
72.0
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The Directors of the Company are responsible for the
preparation of consolidated financial statements that
give a true and fair view in accordance with the
International Financial Reporting Standards as issued
by the International Accounting Standards Board
and the disclosure requirements of the Hong Kong
Companies Ordinance, and for such internal control
as the Directors determine is necessary to enable the
preparation of consolidated financial statements that
are free from material misstatement, whether due to
fraud or error.
The statements by the external auditors of the
Company, Deloitte Touche Tohmatsu, regarding their
reporting responsibilities on the financial statements of
the Company is set out in the Independent Auditors’
Report on page 119.
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
years 2013 and 2014 has been approved at the Annual
General Meeting for years 2012 and 2013, respectively.
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 2015, subject to the approval at the 2014 Annual
General Meeting.
Comprehensive Risk Management and
Internal Control System
The Board attaches great importance to the
construction and perfection of the risk management
and internal control system. The Board is responsible
for evaluating and determining the nature and extent of
the risks it is willing to take in achieving the Company’s
strategic objectives, and ensuring that the Company
establishes and maintains appropriate and effective
risk management and internal control systems, and
the Board acknowledges that it is responsible for the
risk management and internal control systems and
for reviewing their effectiveness. Such systems are
designed to manage rather than eliminate the risk
of failure to achieve business objectives, and can
only provide reasonable and not absolute assurance
against material misstatement or loss. The Board
oversees management in the design, implementation
and monitoring of the risk management and internal
control systems. The Board takes effective approaches
to supervise the implementation of related control
measures, whilst enhancing operation efficiency and
effectiveness, and enhancing corporate governance,
risk assessment, risk management and internal
control so that the Company can achieve long-term
development goals. The internal control system of
the Company is built on clear organisational structure
and management duties, an effective delegation and
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 attaches great importance to the prevention
of fraud and has formulated its internal reporting
system, which encourages anonymous reporting of
situations where employees, especially Directors and
senior management personnel, breach the rules.
The Company views comprehensive risk management
as an important task within the 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
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CORPORATE GOVERNANCE REPORT
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 2014, 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 2014, 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 2015, 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.
Since the year 2003, based on the requirements of the
U.S. securities regulatory authorities and the COSO
Internal Control Framework, and with the assistance
of KPMG Advisory (China) Limited (Beijing office) and
Deloitte Touche Tohmatsu Certified Public Accountants
LLP 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 2014, the Company comprehensively considered
deepening the reform of various initiatives, the
adjustment in organisation structure and department
duties, the changes in business development and the
impact of the replacement of business tax with value-
added tax in accordance with the new requirements
under the COSO Internal Control Framework (2013).
With a focus on supporting the development of
emerging businesses, pursuing ways to promptly
address market needs and solving new problems
arising in the course of business innovation, operations
innovation and cooperation innovation, the Company
made revisions to the internal control manuals during
the year in order to enhance the construction of
internal control systems, made additional effort in
its implementation, and strengthened risk control
in key areas. The Company introduced the relevant
management requirements on business outsourcing,
information technology, sub-dividing performance
evaluation units with performance contracts, mobile
resale, fraud prevention, etc., so as to strengthen
internal control for key businesses and key areas of risks
and further refining critical control points and optimising
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
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CORPORATE GOVERNANCE REPORT
internal control processes to improve the operational
efficiency of the Company. The Company optimised
the business process of outside investment, frontline
marketing outsourcing, procurement management,
invoice management, etc and comprehensively dealt
with the risk areas for new businesses. In view of the
characteristics of emerging businesses, the Company
established a sub-division of internal control manuals
for new emerging businesses and guided the new
emerging business units to construct and optimise the
internal control implementation rules. The Company
conducted assessments of the internal control systems
for the year, and supervised the timely rectification of
problems that had been identified, avoiding operational
risks.
The Internal Audit Department plays a vital role in
supporting the Board, the management and the
risk management and internal control systems.
The functions of the Internal Audit Department are
independent of the Company’s business operations
and are complementary to the duties of the external
auditors, and play an important role in the monitoring
of the Company’s internal governance. The Internal
Audit Department is responsible for organising the
risk management and internal controls assessment of
the Company, and provides an objective assurance
to the Audit Committee and the Board that the
risk management and internal control systems are
maintained and operated by the management in
compliance with agreed processes and standards. The
Internal Audit Department regularly reports the internal
audit findings to the Audit Committee on a quarterly
basis, and reports the internal audit results to the Board
through the Audit Committee.
Annual Risk Management and Internal
Control Evaluation
The Company has been continuously improving its risk
management and internal control systems. 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
assessment of internal control.
The Company has adopted the COSO Internal
Control Framework as the standard for the internal
control assessment. With the management’s internal
control testing guidelines and the Audit Standard No.
5 that were issued by PCAOB as its directives, the
Company’s internal control assessment is composed
of the self-assessment conducted by the persons
responsible for internal control together with the
independent assessment conducted by the internal
audit department. In order to 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.
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In 2014, 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 corresponding to environment
control and 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 2014, 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. We further
refined the function of the internal control seminars
and emphasised on solving the difficult issues on the
cross-departmental and cross-processing internal
control, establishing an assessment mechanism post-
internal control self-assessment and strengthening the
integration between self-assessment work and audit
work as well as promoting the effectiveness of self-
assessment. 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, continuing to build
upon our internal control construction and selecting
key businesses and units for assessment to help guard
us against risks associated with the new business
areas. In 2014, 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 established a
collaborative risk prevention mechanism to promote the
vertical supervision and improvement of the rectification
system in different technical areas by various
departments of the headquarters 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 internal and external
assessments in a positive manner.
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Through self-assessments and independent
assessments conducted at different levels, the
Company carried out multi-layered and full-dimensional
reviews of its internal control system, and put its
utmost efforts into rectifying the problems which were
identified. Through this method, the Company was
able to ensure the effectiveness of its internal control
and successfully passed the year-end attestation
undertaken by the external auditors.
The Board oversees the Company’s risk management
and internal control systems on an ongoing basis and
the Board, through the Audit Committee, conducted
an annual review of the internal control system of the
Company and its subsidiaries for the financial year
ended 31 December 2014, which covered all material
controls including financial, operational and compliance
controls, as well as its risk management functions. After
receiving the reports from the Internal Audit Department
and the confirmation from the management to the
Board on the effectiveness of these systems, the Board
is of the view that the Company’s internal control
system is solid, well-established, effective and sufficient.
The annual review also confirms 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.
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 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 and wireline
broadband subscribers. The Company attaches
great importance to maintaining daily communication
with shareholders, investors and analysts. In 2014,
the Company 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 2014, the Company attended the following investors conferences held by major international investment banks:
Date
Name of Conference
January 2014
January 2014
January 2014
January 2014
March 2014
March 2014
April 2014
May 2014
May 2014
May 2014
May 2014
May 2014
May 2014
May 2014
June 2014
June 2014
June 2014
June 2014
July 2014
DBS Vickers Pulse of Asia Conference 2014
CIMB 4G Corporate Day 2014
Deutsche Bank Access China Conference 2014
UBS Greater China Conference 2014
Morgan Stanley Asia TMT & Internet Conference 2014
Credit Suisse Asian Investment Conference 2014
Mizuho Non-Deal Roadshow 2014 (Singapore)
Macquarie Greater China Conference 2014
CLSA China Forum 2014
DBS Vickers Hong Kong Pulse of Asia Conference 2014
UBS Pan-Asian Telco Conference 2014
Deutsche Bank Access Asia Conference 2014
BNP Paribas 5th Asia Pacific TMT Conference 2014
Goldman Sachs Asia Telecom & Internet Corporate Day 2014
Bank of America Merrill Lynch Global Telecom & Media Conference 2014 & Non-Deal
Roadshow (Europe)
HSBC Annual Asia Investor Forum 2014
CIMB 4th Annual Asia Pacific Conference
J.P. Morgan China Summit 2014
Macquarie China Corporate Day 2014 & Non-Deal Roadshow (US)
September 2014
UBS Mutual Market Access Conference 2014
September 2014
21st CLSA Investors’ Forum 2014
September 2014
CIMB China TMT Corporate Day
October 2014
Jefferies 4th Annual Asia Summit
November 2014
Daiwa Investment Conference 2014
November 2014
HSBC 6th Annual Asia Investor Forum & Non-Deal Roadshow (US)
November 2014
J.P. Morgan Global TMT Conference 2014
November 2014
Goldman Sachs Greater China CEO Summit 2014
November 2014
Morgan Stanley Thirteenth Annual Asia Pacific Summit
November 2014
Citi China Investor Conference 2014
December 2014
Barclays Asia TMT Conference 2014
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
95
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 2014,
the Company updated the contents of its website on
ongoing basis 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, the Company revamped
its mobile website, which allows the investors,
shareholders, media and the general public to more
easily and promptly browse the updated information
96
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 the professional
rankings of LACP, W3 and iNova, indicating that
the Company’s website is highly recognised by the
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.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014CORPORATE GOVERNANCE REPORT CORPORATE GOVERNANCE REPORT
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.
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 2014
97
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 11 Directors, of which
4 are Independent Directors, making the number of
Independent Directors exceeds one-third of the total
number of Directors on the Board, in compliance with
the requirements of the Corporate Governance Code
of the Listing Rules. These Independent Directors also
satisfy the requirements on “independence” under the
Listing Rules. However, the related standard set out in
the Listing Rules is different from the requirements in
Section 303A.02 of the NYSE Listed Company Manual.
Pursuant to the requirements of the NYSE Listed
Company Manual, companies shall formulate separate
corporate governance rules. Under the currently
applicable PRC and Hong Kong laws and regulations,
the Company is not required to formulate any rules for
corporate governance; therefore, the Company has not
formulated any separate corporate governance rules.
However, the Company has implemented the code
provisions under the Corporate Governance Code and
Corporate Governance Report as set out in Appendix
14 of the Listing Rules for the financial year ended 31
December 2014.
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.
For further information, please browse our
website at www.chinatelecom-h.com
98
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
HR
HUMAN RESOURCES DEVELOPMENT REPORT
In 2014, in accordance with the main theme of “reform
and innovation, open cooperation, quality and efficiency
enhancement”, we further liberalised our thoughts,
raised our awareness and innovated mechanisms
to motivate personnel vitality and enhance human
resources efficiency. Our aim was to control staff size,
refine corporate structure, improve corporate vitality
and enhance staff ability as we further promoted the
transformation of human resources and implemented
the reform measures to pragmatically protect the
rights of our employees, and effectively supported
our sustainable corporate development with strong
guarantees in our organisation and talents.
I. Improve the management of executives and
strengthen senior management team building.
With the “Proposal on Improving the Selection and Exit
Mechanism of Executives”, we perfected our existing
mechanism of areas such as leadership selection,
eligibility criteria, performance review criteria, training for
reserved cadres and assessment results application.
In respect of talent selection, we intensified our efforts
in selecting and promoting reserved cadres to further
raise our satisfaction level of selection and employment
of talents. With a focus on our need for transformation
in the wake of competition, we also intensified our
reserved cadre training efforts. We organised a
recommendation process for deputy reserved cadres
of our headquarters and provincial branches and set up
a team of 255 reserved cadres.
II. Innovate sub-contracting employment
mechanism, regulate labour management. In
accordance with the implementation of the autonomy
of the operating units with delegated authority and
an effective incentive mechanism, we integrated the
accountability, authorities and interests of the operating
units with delegated authority and unit CEOs. Actively
and steadily implementing the “Labour Contract Law”,
we kept an overall stable workforce. We also brought
in a benchmarking study in human resources efficiency
and structure, guided each unit in a targeted manner
in human resources efficiency enhancement and
promoted human resources structural adjustment.
Chairman visited and expressed greetings to
Chairman visited and expressed greetings to
frontline staff
frontline staff
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
HUMAN RESOURCES DEVELOPMENT REPORT
III. Centralised human resources management
information system to enhance management
capabilities. All employees were included into the
centralised management system for six major functions
– organisation management, staffing allocation,
salary and social security, contractors management,
reporting systems, and staff self-service functions.
The system was capable of not just accessing real-
time corporate human resources information to
regulate and avoid employment risks and enhance
the efficiently-centralised management capabilities of
human resources, but also unifying the management
and control of human resources volumes and statistical
analysis to provide information support for human
resources strategy.
Information of Employees
IV. Actively promote the establishment of a self-
developed R&D and operation team for Internet-
oriented products. We strengthened our self-
developed research and development and operational
support capabilities, completing studies of major
positions and technological capabilities requirements
for the research and development of Internet-oriented
products and exploring how China Telecom could
develop its own research and development and
operation team. We focused on the acceleration of
building a research and development and operation
team for new products such as network security,
CDN, cloud computing, big data, WIFI and intelligent
pipelines.
As at the end of 2014, the Group had 300,960 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
Others
Total
Number of
employees
Percentage
49,180
154,456
95,348
1,976
300,960
16.3%
51.3%
31.7%
0.7%
100.0%
Corporate–Employee Relationship
Communication between Management and
Employees
The labour union, through a multi-manner, multi-
channel, and multi-perspective approach, can
understand the mentality and working and living
conditions of our staff which provided more
comprehensive, intuitive and valuable reference
information for administrative decision-making and
maintained a stable and harmonious workforce. We
managed to handle and resolve employees’ demands,
conflicts and hidden problems in a timely manner.
By launching the “Face to heart” activity, we also
managed to meet over 5,000 frontline staff from over
20 provinces, over 60 municipalities, over 100 counties
and over 200 bureaus. For two consecutive years, we
carried out a special survey on staff thinking with the
theme of humane caring in eight provinces.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
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HUMAN RESOURCES DEVELOPMENT REPORT
Roles and Duties of Labour Unions
Staff Management Measures” to establish a long-term
mechanism to incentivise talented employees.
Adhere to honouring frontline employees and
actively helping them to achieve honour. The
forum for the 2014 National May 1st Labour Award
winners and other award winners was convened and
32 awarded frontline employees joined the forum.
The 100 “Elite Female” shop managers and excellent
channel managers selection activities launched by
the labour union joint channel department honoured
100 outstanding female shop managers and channel
managers. The Company improved the provincial staff
honour system and the opportunity for frontline staff
to receive an award has increased when compared
to last year. Two units of the Company were awarded
the “National May 1st Labour Award” while seven
individuals received the “National May 1st Labour
Medal”. One unit was awarded the “National March 8th
Red Flag” award while one individual was named the
“National March 8th Red Flag” bearer. 13 groups were
awarded the “National Pioneer Workers”. 6 individuals
were awarded the “National Technical Master” award.
40 employees were named “Technical Master of
China’s State-owned Key Enterprises” while 54 were
named as “Technical Master” of the Company.
Vigorously promote the advanced model
workers, create a studious, competitive and
helpful environment. To promote the advanced
model workers on a routine, we made use of the
headquarter’s TV and billboards to display over 50
outstanding frontline employees and more than 10
teams. On the eve of May 1st, we called an award
ceremony in each province to honour more than 100
model workers. On the eve of March 8th, we honoured
the “Elite Female Contribution” in each province for
a total of more than 1,100 groups, individuals, and
women’s organisations. We organised the fourth
phase of exchange programmes for outstanding
staff. All levels within the Company and the respective
unions sent their regards to nearly 1,000 outstanding
employees. We studied and drafted the “Outstanding
Service reform to support sub-division of units
and encourage job innovation. More than 2,000
job innovations appeared and more than 500 items
including achievements, case study and practices
were publicised and promoted in the Company. All
levels of enterprises created model workers innovation
workshops, and named over 40 workshops. Our
team scooped nearly half of the prizes in the state-
owned key enterprise staff skills contest (network
security administrator and phone operator), ranking
No. 1 in number of gold medals and total number of
medals. Through the combination of online and offline
approaches, the Company developed job innovations
and various types of competition. We had over 400,000
counts of staff participating in the above activities,
achieving full staff participation.
Coordination and Communication
between the Company and the Labour
Unions
Based on the Internet model, we established a
“Double Hundred” platform for launching “Hundred
Events for Employees Caring” and “Hundred Cases
of Job Innovations” selection exercise, fully exploring,
discovering and displaying examples of good people,
good deeds and innovation within the Company to
further promote the development of our business and
employees. At present, over 400,000 counts of staff
have participated, with more than 130,000 posts that
received over 3.63 million “like”, 480,000 “comment”
and 400,000 “favourite”. Through the “double hundred”
platform, staff present themselves and recommend
colleagues around them and communicate, interact
with and learn from one another in a light-hearted
way. Through their participation, they could also get
assistance on work-related issues and resolve specific
difficulties and release their work pressure.
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
HUMAN RESOURCES DEVELOPMENT REPORT
Caring for Employees
Benefit more staff through welfare extension
and expansion. Each rural bureau, urban bureau,
sales outlet, installation and maintenance team,
county branches and other frontline units, through the
construction of the “Four-Smalls” facilities and provision
of refrigerators, microwaves and other facilities and
renovation and expansion of existing “Four-Smalls”
facilities, managed to solve employees’ practical
difficulties. Specifically, we built nearly 2,000 new
“Four-Smalls” sets, and adopted a variety of ways to
solve their basic needs of dining, drinking water supply,
vegetables supply, activity and resting for a total of
over 2,500 frontline units. We committed a total of over
RMB100 million that benefitted over 130,000 frontline
employees.
The management expressed
The management expressed
greetings to employees
greetings to employees
at sales outlets
at sales outlets
The management shook hands with the winners
The management shook hands with the winners
of“National May 1st Labour Medal”
of“National May 1st Labour Medal”
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
103
HUMAN RESOURCES DEVELOPMENT REPORT
More practical in solving practical difficulties
of employees. By amending the “Regulations on
Management of Staff Personal Labour Protective
Equipment”, we resolved heating problems for more
than 20,000 employees at sales outlets in winter. We
also facilitated more than 7,000 counts of frontline staff
in 13 provinces to go to urban areas for their medical
problems. We launched our EAP activities to reduce
work pressure for our staff through online and offline
services that benefitted more than 100,000 counts of
staff. We launched activities for families with children
taking public examinations, showed care to employees’
children on June 1st and supported women’s day
activities on March 8th. Other staff-friendly measures
include building sunlight greenhouses on plateaus,
increasing subsidies for staff canteens in counties,
delivering meals to frontline staff, showing special
care for pregnant and breast feeding female workers,
equipping maintenance staff with “five small tools”,
assisting staff with the purchase of their train tickets
over the Spring Festival holiday and providing sleeping
bags to frontline staff. We also solved the practical
difficulties of our staff. These measures were universally
welcomed by our staff and brought them real benefits.
Visit affected areas with timely relief. We tried
our utmost to offer assistance and sympathy to the
staff affected by natural disasters. During periods of
earthquakes, typhoons, storms, landslides and other
natural disasters, the labour union went to the frontline
to understand our staff’s situation. We also allocated
RMB6 million as a sympathy fund for Hainan, Yunnan,
Sichuan, Xinjiang and other provinces experiencing
natural disasters. To promote our care work as a
routine, we transferred RMB1 million each year in
advance to provincial companies for the Spring Festival
and New Year’s Day and as regular care. Labour
unions from all levels will express regards when they
have a chance to meet frontline staff. Total spending on
care work was over RMB67 million that benefitted over
140,000 frontline staff. We also allocated over RMB29
million relief fund for over 16,000 staff in need.
Activities for morale and team building,
consolidating strengths for development. We
organised innovative business experience activities
to promote new business development and data
traffic operation. We also organised a staff photo
competition which attracted over 46,000 submissions
and enriched our mobile handset photo gallery. We
also co-organised a national photography competition
with Popular Photography Magazine which not only
attracted more than 580,000 submissions, but also
enhanced the reputation of the e-Surfing brand. The
China Telecom team won the men’s championship
in the balloon volleyball competition organised by
China Telecommunications Sports Association.
The China Telecom team also represented the
telecommunications industry in the 3rd national balloon
volleyball competition and came 4th in the competition.
Overall the provincial labour unions organised more
than 140 recreational and sports activities last year.
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 2014, we organised 623 leaders from all provincial
levels and managers from city branches to participate
in eight training sessions which allowed these leaders
to have a better and deeper understanding of the
spirit of the comprehensive deepening reform of the
Company. A total of 5,460 counts of staff participated
in the 146 training sessions on specific topics organised
by different levels within the Company. Our online
university courses also facilitated 3,460 managers in
their online training. We organised and implemented
training classes for “deepening reform”. A total of over
1,100 management personnel have participated in
the training to ensure timely and accurate delivery of
corporate strategy.
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
HUMAN RESOURCES DEVELOPMENT REPORT
Cultivating Professional Talents
With the improvement of the management mechanism
of senior professionals, we divided our technicians
into two groups – technology managerial and network
operational – and adopted a differentiated selection,
use and assessment mechanism. By carrying out a
professional talent renewal and selection process in
sales and marketing, wireless, mobile, IP, network
security and other areas, we have picked 416 Rank
B professional talents in four areas to date. To further
strengthen their development, we organised various
courses for Rank B professional personnel, training
675 staff in 11 sessions to improve the overall quality
of their professional expertise. To strengthen the daily
management and assessment of talents, we organised
professional assessment tests for the 2013 Rank A and
B professional personnel in early 2014. Among the 623
Rank A and B professional personnel who participated
in the assessment for the year, 180 staff earned
“Excellent Rating”. We maintained a stable senior level
professional management team as illustrated by the
mere 0.6% turnover rate among the 2014 Rank A and
B professionals.
We launched senior qualification assessment
programmes in engineering, economics and accounting
and received applications from over 700 staff from
our headquarters, Beijing office and 12 provincial
companies applying for assessment. After qualification
assessment, thesis and oral examination and other
assessments, we accredited 506 staff, including 395
senior engineers, 84 senior economists and 27 senior
accountants.
Staff capacity building
We focused on sub-dividing performance evaluation
units with performance contracts and enhanced the
ability of frontline staff. We implemented a unit CEO
capability enhancement programme, and organised
managerial training classes for over 8,000 counts
of managers from county companies, over 27,000
counts of shop managers and over 21,000 counts of
rural bureau secretaries. We also carried out special
training camps for outstanding rural bureau secretaries
and TOP shop managers, training up nearly 800
outstanding managers in the county companies.
Nurturing and introducing outstanding young
talents
The Group employed 1,109 summer interns, of which
502, or 45.3%, were from 17 key colleges that we were
in co-operation with. We also carried out a training
programme for outstanding college graduates, and 695
outstanding college graduates were selected by 13
units.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
105
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 2014, 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 support sub-dividing the performance evaluation
units, the Company introduced innovative distribution
mechanisms to motivate and incentivise the vitality
of its employees. Through measures such as market
mechanism, shop manager responsibility system and
bidding for the contract, the Company managed to
delegate responsibilities, allocate key resources and
promote independent management of operation with
consistent accountability, authorities and interests.
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 improve the management of our labour cost
budget, we adhered to the principle of categorised
management and prioritising efficiency to ensure good
labour cost budgeting guidelines and budget review
and approval. We motivated our provincial companies
to focus on the enhancement of market share, revenue
scale and corporate profitability through allocating
labour cost and resources.
We innovated labour cost allocation for emerging
business fields. Based on the revenue growth target
of emerging business areas, we coordinated and
determined the total of labour cost of emerging
business units managed by the Company. By
delegating the internal allocation mechanism to
emerging business units, we adopted market principles
and reallocated labour costs of emerging business
units based on the development of the businesses and
market benchmarking.
At present, China Telecom has established a relatively
comprehensive performance evaluation system for all
its employees. 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 of the Company. The Company
managed to 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 has further
optimised and improved the performance evaluation
system to appraise the performance by categories of
business units, deputies, middle-level management and
employees, enhancing the specific focus and relevance
of the entire performance evaluation process.
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 adheres to offering equality of
remuneration and work for male and female employees,
implements special regulations to protect female
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
HUMAN RESOURCES DEVELOPMENT REPORT
employees’ rights and interests, and there were
no discriminatory policies or regulations, and
there had been no circumstance whereby child
labour or forced labour was employed.
We adhered to frontline-orientated income distribution,
allocated disaster relief fund to the staff affected by
natural disasters and solved their practical difficulties.
With a healthy system in provincial and municipal
workers’ congress system, over 95% of the employees
benefit and welfare policy systems were submitted
to the workers’ congress for consideration. A joint
conference was convened with the chairman of union
to approve the “Plan on Implementation of Innovation
of Labour Employment Mechanism in Authorities
Delegation Operation Units” to safeguard the
employees’ interests.
HUMAN RESOURCES DEVELOPMENT REPORT
Zhao Zhixian
Zhao Zhixian
the true life-
the true life-
saving hero
saving hero
Tuerhung Abudoukeremu
Tuerhung Abudoukeremu
intimate customer service personnel
intimate customer service personnel
with fragrance staying in his hand
with fragrance staying in his hand
after giving the rose
after giving the rose
the Besttone “Magnolia”
PEOPLE
Hu Guoqiang
Hu Guoqiang
the frontline leader who is
the frontline leader who is
a close partner with the staff
a close partner with the staff
Xu Jun
Xu Jun
the pioneer of Fiber Network world
the pioneer of Fiber Network world
Sichuan Emergency
Sichuan Emergency
Communication Office
Communication Office
our iron army of communication
our iron army of communication
ttttttt
eeeeeeeee
Tan Minghe
Tan Minghe
the “Backpack Secretary”
the “Backpack Secretary”
For further information,
please browse our website at
www.chinatelecom-h.com/en/
company/hrdev.php
Zeng Yu
Zeng Yu
the “magical Anchor”
the “magical Anchor”
of IT support frontline
of IT support frontline
Dan Zeng
Dan Zeng
the Tibet civilized
the Tibet civilized
“broadcaster”
“broadcaster”
108
108
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CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CSR
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.
110
CORPORATE SOCIAL RESPONSIBILITY REPORTCHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014 CORPORATE SOCIAL RESPONSIBILITY REPORT
I. Operating with integrity and in
compliance with the laws
Conducting the 4G hybrid network trial in an
orderly manner
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 accordance with changes
in areas such as laws, regulations, policies and
business operations, we continued to strengthen the
construction of the Company’s regulatory systems. In
2014, we developed a manual and other regulations on
integrity, revised and improved regulations on internal
control, equity investment and contract management.
We also launched the supervision and inspection of the
implementation of such regulations, 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.
China Telecom implemented the national overall plan
by conducting technology research and validation tests
on the interoperating of the 4G hybrid network. The
Company carried out 4G hybrid network construction
in more than 100 major cities across the country,
launched 4G services in 56 pilot cities, established
19 industrial and 78 corporate standards, and made
breakthroughs in hybrid network technology.
Promoting the “Broadband China • Fibre
Cities” project
As a key player for constructing China’s broadband
network, during the four 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.
As at the end of 2014, the coverage of China Telecom
FTTH reached over 120 million households. Over
300,000 administrative villages in 21 provinces
in southern China installed broadband lines. The
Company achieved its “Broadband China • Fibre
Cities” goal set in 2011 a year earlier, with the number
of wireline broadband subscribers reaching 107 million,
of which 42.61 million were FTTH subscribers. The
percentage of broadband subscribers with 8Mbps or
above reached 45.7%.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
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CORPORATE SOCIAL RESPONSIBILITY REPORT
Continually promoting the “Village-to-Village”
projects
China Telecom continued to promote the construction
of communications networks in rural areas and remote
rural villages. In 2014, the Company completed
the installation of broadband lines in over 4,700
administrative villages and telephone lines in over 980
natural villages. Service outlets in rural areas were also
constructed in coordination with the installation. The
Company strived to raise the standard of informatisation
for rural areas, agricultural enterprises and individual
farmers and bridge the digital divide between cities and
the countryside.
Securing emergency communications
China Telecom is dedicated to securing smooth
national communications. In 2014, the Company
quickly responded to the rescue activities of a number
of natural disasters such as the Ludian earthquake,
taking initiatives to restore communication services
in the affected areas within the shortest possible
period of time. Throughout the year, a total of 24,000
counts of relief workers, over 5,000 counts of rescue
vehicles and over 6,000 counts of emergency
communications equipment were deployed for this
purpose. The Company successfully accomplished the
communication support tasks of important events such
as the APEC Summit and the Youth Olympic Games.
III. Fulfilling our responsibilities towards
our customers
Adhering to our operation philosophy of “pursuing
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 and easy-to-use products
for all our customers, including individuals, households,
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CORPORATE SOCIAL RESPONSIBILITY REPORT
service including data usage, voice and message;
second, upon the commencement of the service,
customers could change service combinations in their
customised plans based on their habits or scenarios,
not only by exchanging the data usage, voice and
message allowances in a certain proportion within
the monthly plan, but also by transferring service
allowances to other customers using the customised
service plans as well.
The customised service plan has been widely
acclaimed by our customers. The Company extended
the same offer from online Internet channels to offline
physical channels so that more customers could enjoy
the customisation services and the fun brought by it.
corporations, government and social undertakings.
With customer perception as a starting point, the
Company incorporates customers’ demand for
innovative services and continually enhances its service
quality through resolving key service issues in a timely
manner based on customers’ feedback to enable our
customers to fully enjoy a new informatisation lifestyle.
According to statistics from the Ministry of Industry
and Information Technology, China Telecom continued
to lead in the customer satisfaction ratings of wireline
broadband services and 3G Internet services in 2014.
Launching customised 4G service plan
In July 2014, China Telecom became the first in the
industry to launch customised 4G service plans, which
allowed customers to enjoy “customising the plan,
changing and converting the combination of services
and transferring the plan to others”. Customers were
able to tailor-make customised plans based on their
consumption patterns and needs at a tiered pricing
standard based on usage level of services including
data, voice, message, and other services.
The customised plan brought new convenience to
customers, including: first, there was no limit on each
Ethnic minorities enjoy the
Ethnic minorities enjoy the
new informatisation lifestyle
new informatisation lifestyle
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
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CORPORATE SOCIAL RESPONSIBILITY REPORT
Improving people’s livelihood through “Best
Pay”
Leveraging its communications advantages, China
Telecom launched a series of safe and convenient
online financial services including “communications
plus payment” and “payment plus financial planning”
under the brand name of “Best Pay”, to improve
people’s livelihood through technology and to promote
a smarter lifestyle. In 2014, the number of “Best Pay”
users exceeded 100 million. Best Pay grew into the
most extensively covered daily-life payment platform in
the country, reaching a cumulative gross merchandise
value of over RMB350 billion. Online financial products
such as “Tianyibao” and “e-Surfing Credit” were also
popular among the customers, with the number of
“Tianyibao” customers reaching 3 million.
Developing new media services for clients
China Telecom actively adapted itself to the changes in
mobile Internet development and customers’ demand
for services. Following the idea of “services are in place
wherever customers are”, we developed online sales
outlets and mobile sales outlets, as well as new third-
party social media customer services including YiChat,
Weibo and WeChat. Customers can top up phone
credits, settle payment, inquire into hot information
and check plan information such as account balance,
bill and reward points conveniently on their computers
or mobile devices. They can also communicate real-
time with customer service staff instantly for help if they
encounter any difficulty.
In 2014, China Telecom further stepped up its efforts
and managed its online sales outlets and mobile sales
outlets operations in an efficiently-centralised manner.
We realised a centralised management of the public
accounts on Wechat and YiChat. At the end of 2014,
the Company had acquired over 120 million users on
new media customers service channels and achieved
over 70 million monthly self-service volume. At the
same time, the Company received “The 2014 Best
China Enterprise New Media Micro Customer Service
Award” from the State-owned Assets Supervision
and Administration Commission of the State Council
(SASAC).
After the earthquakes in Ludian County and Jinggu
County, Yunnan Province and Kangding County,
Sichuan Province in 2014, China Telecom took
advantage of the new media and proactively
participated in disseminating rescue information and
implemented 24/7 content delivery mechanisms on its
Weibo customer service account in a timely manner. It
also linked up with the Weibo of other operators and
provided timely updates to the society on the progress
of the relief work of the telecommunications field. In
addition, China Telecom also provided comprehensive
communication support information, rapidly collecting
and disseminating information on help seeking,
search notices and safety report as well as spreading
earthquake-related knowledge to the public, which
reached over 20 million counts of people.
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Throughout the year, the Company devoted major
efforts to implementing a capability enhancement
programme for frontline “unit CEOs”. Over 8,000
counts of county (district)-level company managers,
27,000 counts of shop managers and 21,000 counts
of rural bureau secretaries received training under the
project. The Company organised a number of labour
competitions and skills competitions to encourage our
employees to share their knowledge, experience and
skills, and help each other to improve their professional
skills and practical experience.
All levels of the Group listened to the requests of
employees and cared for the psychological well-being
of our employees. The Company leveraged the “China
Telecom Employees’ Honours System” to motivate
employees to continue to pursue excellence. China
Telecom continued to provide support for its employees
who were in difficulty, regularly offering comfort to its
employees and helping all employees to solve their
practical difficulties and problems.
IV. Fulfilling our responsibility towards
our employees
We consider our employees to be our most valuable
resource. The Company adheres to the principle of
respecting people and cherishing every employee. In
accordance with relevant state laws and regulations,
we safeguard the interests of our employees and focus
on the establishment of stable and harmonious labour
relations. We value the leverage of various types of
professionals and technical staff and seek to align the
development of the Company with that of the staff. We
support labour unions in carrying out their functions
and encourage our employees to participate in the
democratic management of the Company and protect
their right to be the master of their own affairs.
In 2014, 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 implementing the construction
of the “Four Smalls” initiative, namely, small canteens,
small bathrooms, small washrooms and small activity
rooms at the workplace with a total investment amount
exceeding RMB100 million, benefiting 130,000
employees. The Company promoted sub-dividing
performance evaluation units with performance
contracts reform, helping frontline employees to
increase their income through development.
Provision of fibre network services in residential
Provision of fibre network services in residential
communities
communities
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
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CORPORATE SOCIAL RESPONSIBILITY REPORT
V. Fulfilling our responsibility towards
the environment
Establishing the concept of “Low-Carbon
Telecommunications and Environmentally Friendly
Development”, China Telecom 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 as well as enhancing
environmental protections. In 2014, we intensified
the application of an energy consumption monitoring
system, advancing the promotion of sub-dividing
energy consumption performance evaluation units,
comprehensively promoting Energy Performance
Contracting, steadily promoting a raise of temperature
in our equipment rooms, accelerating the upgrading
and service withdrawal of obsolete equipment with high
energy consumption, and saving approximately 800
million kilowatt-hours of electricity in the year.
During the year, China Telecom cooperated with
its parent company to jointly construct and share
telecommunications infrastructure with various
telecommunications operators to avoid duplicate
construction, protect the natural environment and
landscape, reduce the amount of land use, and
reduce the consumption of energy and raw materials.
The Company devoted more effort to promoting the
joint construction and sharing of telecommunications
infrastructure in areas such as transportation, scenic
parks, and large buildings. It also focused on increasing
the proportion of joint construction and sharing of
tower resources, base station equipment rooms,
main supplies introduction, communication poles and
pipelines. We successfully completed the assessment
indicators on joint construction and sharing of
telecommunications infrastructure and facilities set by
the Ministry of Industry and Information Technology and
the SASAC with no violation of prohibitive provisions.
The Company continued to develop and promote
environmentally friendly information products to help
our customers’ energy saving and emission reduction,
as well as environmentally friendly development.
Promoting the service withdrawal of obsolete
equipment
China Telecom proactively implemented the
notice of “Catalogue for Elimination of Obsolete
Telecommunications Equipment with High Energy
Consumption (First Batch)” issued by the Ministry of
Industry and Information Technology in 2014. The
Company comprehensively organised its existing
network resources, developing practical elimination
plans for obsolete equipment, and implementing unified
deployment plans. Within the year, the Company
completed the service withdrawal of over 100 toll
stations, nearly 1,000 end stations and over 42 million
cable ports, saving 390 million kilowatt-hours of
electricity. It also devoted effort to promoting network
switching of core Data Communication Network
(DCN), closing down or storing inefficient business
platforms on the cloud, promoting service withdrawal of
obsolete equipment for Digital Data Network (DDN) and
simplifying network, making remarkable achievements.
VI. Contributing to community well-
being
China Telecom was consciously involved in social
welfare undertakings. We supported the development
of science and technology, education, culture, sports
and health undertakings, caring for vulnerable groups in
society and helping 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 2014, we continued
to assist our parent company with promoting poverty
alleviation and assistance in Tibet. We participated in
116
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CORPORATE SOCIAL RESPONSIBILITY REPORT
a variety of assistance programmes in Bianba County,
Tibet Autonomous Region, Yanyuan County and Muli
County, Sichuan Province and Shufu County, Xinjiang
Uygur Autonomous Region. The Company assisted
with projects in relation to infrastructure construction,
informatisation, education and training, agriculture,
health and science and technology.
In 2015, China Telecom will further deepen its
reform and promote its Internet operations. We will
play an active role in implementing industrialisation,
informatisation, urbanisation and agricultural
modernisation in the process of their development.
We will assist with the transformation and upgrade of
various sectors and industries, while creating value in
our business for stakeholders. We will also strive to
make new contributions to build a well-off society.
Fully devoted to restore telecommunications services
Fully devoted to restore telecommunications services
in affected areas to support rescue and relief work
in affected areas to support rescue and relief work
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
117
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 120 to 193, which comprise the consolidated
and company statements of financial position as at 31 December 2014, 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 2014 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
18 March 2015
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
119
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 December 2014 (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
Short-term bank deposits
Cash and cash equivalents
Total current assets
Total assets
31 December
2014
RMB
31 December
2013
RMB
Note
4
5
6
7
9
10
11
19
12
13
14
15
372,876
53,181
24,410
29,917
8,984
4,106
972
3,232
4,053
501,731
4,225
1,360
21,562
10,581
1,379
20,436
59,543
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
561,274
543,239
The notes on pages 128 to 193 form part of these financial statements.
120
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 December 2014 (Amounts in millions)
31 December
2014
RMB
31 December
2013
RMB
Note
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
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 18 March 2015.
43,976
82
88,458
72,442
307
–
1,060
27,687
20,072
81,132
69,633
371
1
1,202
206,325
200,098
(146,782)
(147,315)
354,949
343,141
62,918
798
1,125
64,841
62,617
1,229
631
64,477
271,166
264,575
80,932
208,251
289,183
925
290,108
561,274
80,932
196,809
277,741
923
278,664
543,239
Wang Xiaochu
Chairman and
Chief Executive Officer
Yang Jie
Executive Director,
President and
Chief Operating Officer
Ke Ruiwen
Executive Director and
Executive Vice President
The notes on pages 128 to 193 form part of these financial statements.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
121
STATEMENT OF FINANCIAL POSITION
at 31 December 2014 (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
Short-term bank deposits
Cash and cash equivalents
Total current assets
Total assets
31 December
2014
RMB
31 December
2013
RMB
Note
4
5
6
7
8
9
10
11
19
12
13
14
15
370,796
52,502
24,393
29,877
8,456
6,060
3,554
971
2,943
3,881
503,433
2,022
1,339
20,309
7,936
52
9,616
41,274
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
544,707
529,635
The notes on pages 128 to 193 form part of these financial statements.
122
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
STATEMENT OF FINANCIAL POSITION
at 31 December 2014 (Amounts in millions)
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
Deferred revenues
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Equity
Share capital
Reserves
Total equity
Total liabilities and equity
31 December
2014
RMB
31 December
2013
RMB
Note
16
16
17
18
19
16
19
11
20
21
43,835
82
85,291
66,423
190
–
1,055
27,578
20,072
78,199
65,473
201
1
1,201
196,876
(155,602)
192,725
(155,698)
347,831
336,910
62,915
798
996
64,709
62,617
1,229
505
64,351
261,585
257,076
80,932
202,190
283,122
544,707
80,932
191,627
272,559
529,635
Approved and authorised for issue by the Board of Directors on 18 March 2015.
Wang Xiaochu
Chairman and
Chief Executive Officer
Yang Jie
Executive Director,
President and
Chief Operating Officer
Ke Ruiwen
Executive Director and
Executive Vice President
The notes on pages 128 to 193 form part of these financial statements.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
123
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2014 (Amounts in millions, except per share data)
Operating revenues
Operating expenses
Depreciation and amortisation
Network operations and support
Selling, general and administrative
Personnel expenses
Other operating expenses
Total operating expenses
Operating profit
Net finance costs
Investment income
Share of profits of associates
Profit before taxation
Income tax
Profit for the year
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
Note
22
2014
RMB
2013
RMB
324,394
321,584
23
24
25
26
27
28
(66,345)
(68,651)
(62,719)
(50,653)
(47,518)
(69,083)
(53,102)
(70,448)
(46,723)
(54,760)
(295,886)
(294,116)
28,508
(5,291)
6
34
23,257
(5,498)
17,759
(54)
14
3
(3)
(40)
27,468
(5,153)
670
103
23,088
(5,422)
17,666
414
(104)
(79)
5
236
Total comprehensive income for the year
17,719
17,902
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)
17,680
79
17,759
17,640
79
17,719
0.22
80,932
17,545
121
17,666
17,781
121
17,902
0.22
80,932
33
33
The notes on pages 128 to 193 form part of these financial statements.
124
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2014 (Amounts in millions)
Attributable to equity holders of the Company
Share
premium
RMB
Statutory
reserves
RMB
Other
reserves
RMB
Exchange
reserve
RMB
Retained
earnings
RMB
Share
capital
RMB
80,932
–
–
Capital
reserve
RMB
16,821
–
–
–
–
–
–
–
–
–
–
141
–
(278)
–
–
380
Note
1
32
21
Balance as at 1 January 2013
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
10,746
–
–
65,729
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,663
–
Balance as at 31 December 2013
80,932
17,064
10,746
67,392
Profit for the year
Other comprehensive income
Total comprehensive income
Distribution to non-controlling interests
Dividends
Appropriations
32
21
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,680
Total
RMB
265,139
17,545
236
(865)
–
(79)
91,664
17,545
–
(79)
17,545
17,781
–
–
–
–
–
–
–
–
–
(5,433)
(1,663)
11
141
–
(278)
(5,433)
–
391
Non-
controlling
interests
RMB
961
121
–
121
59
(74)
–
–
–
(144)
Total
equity
RMB
266,100
17,666
236
17,902
200
(74)
(278)
(5,433)
–
247
(944)
102,124
277,741
923
278,664
–
3
3
–
–
–
17,680
–
17,680
(40)
17,680
17,640
–
(6,198)
(1,680)
–
(6,198)
–
79
–
79
(77)
–
–
17,759
(40)
17,719
(77)
(6,198)
–
112
–
315
315
–
–
–
–
–
–
427
–
(43)
(43)
–
–
–
Balance as at 31 December 2014
80,932
17,064
10,746
69,072
384
(941)
111,926
289,183
925
290,108
The notes on pages 128 to 193 form part of these financial statements.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
125
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2014 (Amounts in millions)
Net cash from operating activities
Cash flows used in investing activities
Capital expenditure
Lease prepayments
Purchase of investments
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of lease prepayments
Net cash inflow from disposal of a subsidiary
Purchase of short-term bank deposits
Maturity of short-term bank deposits
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
Note
(a)
2014
RMB
2013
RMB
96,405
88,351
(80,273)
(184)
(2,990)
710
121
–
(2,566)
3,474
–
–
(70,921)
(111)
–
1,538
360
512
(2,750)
3,193
(14,269)
(25,500)
Net cash used in investing activities
(81,708)
(107,948)
Cash flows (used in)/from financing activities
Principal element of finance lease payments
Proceeds from bank and other loans
Repayment of bank and other loans
Payment of dividends
Payment of the acquisition price of the Seventh Acquisition
Net cash (distributions to)/contributions from non-controlling interests
(b)
Net cash (used in)/from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Effect of changes in foreign exchange rate
Cash and cash equivalents at 31 December
(1)
53,022
(56,819)
(6,198)
(278)
(53)
(10,327)
4,370
16,070
(4)
20,436
(2)
54,983
(44,053)
(5,433)
–
142
5,637
(13,960)
30,099
(69)
16,070
The notes on pages 128 to 193 form part of these financial statements.
126
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2014 (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 (gain)/loss
Loss/(gain) on retirement and disposal of property, plant and equipment
Operating profit before changes in working capital
Increase in accounts receivable
Decrease/(increase) in inventories
Increase in prepayments and other current assets
(Increase)/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
2014
RMB
2013
RMB
23,257
23,088
66,345
2,084
151
(6)
(34)
(304)
5,650
(55)
2,287
99,375
(3,594)
2,280
(2,359)
(2)
6,473
6,571
(573)
108,171
305
(5,693)
29
(6,407)
96,405
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
(b)
The Seventh Acquisition represents the acquisition of the 100% equity interest in China Telecom (Europe)
Limited, a wholly owned subsidiary of China Telecommunications Corporation, by China Telecom Global
Limited (“CT Global”, a subsidiary of the Company) from China Telecommunications Corporation on 31
December 2013.
The notes on pages 128 to 193 form part of these financial statements.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
127
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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, Africa, 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.
Organisation
As part of the reorganisation (the “Restructuring”) of China Telecommunications Corporation, the Company
was incorporated in the PRC on 10 September 2002. In connection with the Restructuring, China
Telecommunications Corporation transferred to the Company the wireline telecommunications business and
related operations in Shanghai Municipality, Guangdong Province, Jiangsu Province and Zhejiang Province
together with the related assets and liabilities (the “Predecessor Operations”) in consideration for 68,317 million
ordinary domestic shares of the Company. The shares issued to China Telecommunications Corporation have
a par value of RMB1.00 each and represented the entire registered and issued share capital of the Company at
that date.
On 31 December 2003, the Company acquired the entire equity interests in Anhui Telecom Company
Limited, Fujian Telecom Company Limited, Jiangxi Telecom Company Limited, Guangxi Telecom Company
Limited, Chongqing Telecom Company Limited and Sichuan Telecom Company Limited (collectively the “First
Acquired Group”) and certain network management and research and development facilities from China
Telecommunications Corporation for a total purchase price of RMB46,000 million (hereinafter, referred to as the
“First Acquisition”).
On 30 June 2004, the Company acquired the entire equity interests in Hubei Telecom Company Limited,
Hunan Telecom Company Limited, Hainan Telecom Company Limited, Guizhou Telecom Company Limited,
Yunnan Telecom Company Limited, Shaanxi Telecom Company Limited, Gansu Telecom Company Limited,
Qinghai Telecom Company Limited, Ningxia Telecom Company Limited and Xinjiang Telecom Company
Limited (collectively the “Second Acquired Group”) from China Telecommunications Corporation for a total
purchase price of RMB27,800 million (hereinafter, referred to as the “Second Acquisition”).
128
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
1. Principal Activities, Organisation and Basis of Presentation (continued)
Organisation (continued)
On 30 June 2007, the Company acquired the entire equity interests in China Telecom System Integration Co.,
Ltd. (“CTSI”), 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”).
On 30 June 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 final consideration for the disposal of the equity interest in E-surfing was
arrived at RMB1,248 million.
On 31 December 2013, CT Global acquired 100% equity 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 for a total purchase price of RMB278 million
(hereinafter, referred to as the “Seventh Acquisition”), and was paid by 30 June 2014.
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”.
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.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
129
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
1. Principal Activities, Organisation and Basis of Presentation (continued)
Set up of a subsidiary
On 17 June 2014, the Group set up a subsidiary, Chengdu E-store Technology Co., Ltd, which engages in
software technology development.
Merger with subsidiaries
Pursuant to the resolution passed by the Company’s shareholders at an Extraordinary General Meeting held
on 25 February 2008, the Company entered into merger agreements with each of the following subsidiaries:
Shanghai Telecom Company Limited, Guangdong Telecom Company Limited, Jiangsu Telecom Company
Limited, Zhejiang Telecom Company Limited, Anhui Telecom Company Limited, Fujian Telecom Company
Limited, Jiangxi Telecom Company Limited, Guangxi Telecom Company Limited, Chongqing Telecom
Company Limited, Sichuan Telecom Company Limited, Hubei Telecom Company Limited, Hunan Telecom
Company Limited, Hainan Telecom Company Limited, Guizhou Telecom Company Limited, Yunnan Telecom
Company Limited, Shaanxi Telecom Company Limited, Gansu Telecom Company Limited, Qinghai Telecom
Company Limited, Ningxia Telecom Company Limited and Xinjiang Telecom Company Limited. In addition,
the Company entered into merger agreements with Beijing Telecom on 1 July 2008. Pursuant to these merger
agreements, the Company merged with these subsidiaries and the assets, liabilities and business operations of
these subsidiaries were transferred to the Company’s branches in the respective regions.
2. Significant Accounting Policies
(a) Basis of preparation
The accompanying financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
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 at fair value (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.
130
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
2. Significant Accounting Policies (continued)
(a) Basis of preparation (continued)
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that
period or in the period of the revision and future periods if the revision affects both current and future
periods.
Judgements made by management in the application of IFRS that have significant effect on the financial
statements and major sources of estimation uncertainty are discussed in Note 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.
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 the proportionate share, of the acquisition date, of 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.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
131
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
2. Significant Accounting Policies (continued)
(b) Basis of consolidation (continued)
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.
(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.
132
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
2. Significant Accounting Policies (continued)
(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.
(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
2014, the carrying amount of assets held under finance leases was RMB18 million (2013: RMB28
million).
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
133
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
2. Significant Accounting Policies (continued)
(g) Property, plant and equipment (continued)
Gains or losses arising from retirement or disposal of property, plant and equipment are determined
as the difference between the net disposal proceeds and the carrying amount of the asset and are
recognised as income or expense in the profit or loss on the date of disposal.
Depreciation is provided to write off the cost of each asset over its estimated useful life on a straight-line
basis, after taking into account its estimated residual value, as follows:
Buildings and improvements
Telecommunications network plant and equipment
Furniture, fixture, motor vehicles and other equipment
Depreciable lives
primarily range from
8 to 30 years
6 to 10 years
5 to 10 years
(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.
134
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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 2014
135
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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/issuer.
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.
136
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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 with finite useful lives 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 2014
137
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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. From 2012 onwards, 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 is 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;
138
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
2. Significant Accounting Policies (continued)
(p) Revenue recognition (continued)
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.
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 a
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 are
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 are recognised when the
services are provided to customers.
Sale of equipment is recognised on delivery of the equipment to customers and when the
significant risks and rewards of ownership and title have been transferred to the customers.
Revenue from repair and maintenance of equipment is recognised when the service is provided
to customers.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
139
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
2. Significant Accounting Policies (continued)
(p) Revenue recognition (continued)
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 2014, 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.
(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 RMB26,122 million for the year ended 31 December 2014 (2013: RMB36,490 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 RMB15,340 million for the year ended 31 December 2014 (2013: RMB22,795 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.
140
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
2. Significant Accounting Policies (continued)
(s) Research and development expense
Research and development expenditure is expensed as incurred. For the year ended 31 December
2014, research and development expense was RMB607 million (2013: RMB630 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.
(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.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
141
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
2. Significant Accounting Policies (continued)
(x)
Income tax
Income tax for the year comprises current tax and movement in deferred tax assets and liabilities.
Income tax is recognised in 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.
(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.
142
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
2. Significant Accounting Policies (continued)
(z) Related parties (continued)
(b)
An entity is related to the Group if any of the following conditions applies:
(i)
(ii)
The entity and the Group are members of the same group (which means that each parent,
subsidiary and fellow subsidiary is related to the others);
The entity is an associate or joint venture of the Group (or an associate or joint venture of a
member of a group of which the Group is a member); or the Group is an associate or joint
venture of the entity (or an associate or joint venture of a member of a group of which the
entity is a member);
(iii)
The entity and the Group are joint ventures of the same third party;
(iv)
The entity is a joint venture of a third entity and the Group is an associate of the third
entity; or the Group is a joint venture of a third entity and the entity is an associate of the
third entity;
(v)
The entity is controlled or jointly controlled by a person identified in (a);
(vi)
A person identified in (a)(i) has significant influence over the entity or is a member of the
key management personnel of the entity (or of a parent of the entity).
Close members of the family of a person are those family members who may be expected to influence,
or be influenced by, that person in their dealings with the entity.
(aa) Segmental reporting
An operating segment is a component of an entity that engages in business activities from which
revenues are earned and expenses are incurred, and is identified on the basis of the internal
financial reports that are regularly reviewed by the chief operating decision maker in order to allocate
resource and assess performance of the segment. For the periods presented, management has
determined that the Group has one operating segment as the Group is only engaged in 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.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
143
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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 2014. The Group has applied the following new interpretation and amendments to IFRSs that
are effective for the current year:
•
•
•
Amendments to IAS 32, “Offsetting Financial Assets and Financial Liabilities”
Amendments to IAS 36, “Recoverable Amount Disclosures for Non-Financial Assets”
IFRIC 21, “Levies”
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 32, “Offsetting Financial Assets and Financial Liabilities”
The amendments to IAS 32 clarify the requirements relating to the offset of financial assets and financial
liabilities. Specifically, the amendments clarify the criterion that an entity “currently has a legally enforceable
right to set off the recognised amounts” and “intends either to settle on a net basis, or to realise the assets and
settle the liability simultaneously”. The application of the amendments has no significant impact on the Group’s
consolidated financial statements.
Amendments to IAS 36, “Recoverable Amount Disclosures for Non-Financial Assets”
The amendments to IAS 36 remove the requirement to disclose the recoverable amount of a cash generating
unit (CGU) to which goodwill or other intangible assets with indefinite useful lives had been allocated when
there has been no impairment or reversal of impairment of the related CGU. Furthermore, the amendments
introduce additional disclosure requirements applicable to when the recoverable amount of an asset or a CGU
is measured at fair value less costs of disposal. These new disclosures include the fair value hierarchy, key
assumptions and valuation techniques used which are in line with the disclosure required by IFRS 13 Fair Value
Measurements. The application of the amendments has no significant impact on the Group’s consolidated
financial statements.
IFRIC 21, “Levies”
The interpretation defines a levy as a payment to a government for which an entity receives no specific goods
or services. A liability is recognised when the obligating event occurs. The obligating event is the activity that
triggers payment of the levy. This is typically specified in the legislation that imposes the levy. The application of
the interpretation has no significant impact on the Group’s consolidated financial statements.
144
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
4. Property, Plant and Equipment, Net
The Group
Telecomm-
unications
network plant
and equipment
RMB millions
Furniture,
fixture,
motor vehicles
and other
equipment
RMB millions
Buildings and
improvements
RMB millions
Total
RMB millions
Cost/Deemed cost:
Balance at 1 January 2013
Additions
Transferred from construction in progress
Disposals
Reclassification
Balance at 31 December 2013
Additions
Transferred from construction in progress
Disposals
Reclassification
92,521
560
2,926
(657)
61
95,411
726
2,661
(642)
(2)
791,159
1,367
58,424
(14,915)
(175)
835,860
1,254
57,880
(74,688)
67
Balance at 31 December 2014
98,154
820,373
Accumulated depreciation and impairment:
Balance at 1 January 2013
Depreciation charge for the year
Written back on disposal
Reclassification
Balance at 31 December 2013
Depreciation charge for the year
Written back on disposal
Reclassification
(36,248)
(4,776)
540
(21)
(40,505)
(4,735)
592
2
(481,932)
(56,794)
13,819
44
(524,863)
(55,687)
71,351
(7)
26,909
955
1,494
(1,126)
114
28,346
703
1,497
(1,670)
(65)
28,811
(18,628)
(2,294)
1,037
(23)
(19,908)
(2,266)
1,559
5
910,589
2,882
62,844
(16,698)
–
959,617
2,683
62,038
(77,000)
–
947,338
(536,808)
(63,864)
15,396
–
(585,276)
(62,688)
73,502
–
Balance at 31 December 2014
(44,646)
(509,206)
(20,610)
(574,462)
Net book value at 31 December 2014
Net book value at 31 December 2013
53,508
54,906
311,167
310,997
8,201
8,438
372,876
374,341
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
145
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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
Cost/Deemed cost:
Balance at 1 January 2013
Additions
Transferred from construction in progress
Disposals
Reclassification
Balance at 31 December 2013
Additions
Transferred from construction in progress
Disposals
Reclassification
91,906
544
2,874
(630)
60
94,754
690
2,606
(610)
(2)
788,483
1,335
57,962
(14,855)
(176)
832,749
1,192
57,618
(74,546)
71
Balance at 31 December 2014
97,438
817,084
Accumulated depreciation and impairment:
Balance at 1 January 2013
Depreciation charge for the year
Written back on disposal
Reclassification
Balance at 31 December 2013
Depreciation charge for the year
Written back on disposal
Reclassification
(36,015)
(4,692)
519
(21)
(40,209)
(4,644)
561
2
(480,431)
(56,556)
13,801
40
(523,146)
(55,413)
71,206
(7)
25,774
906
1,463
(958)
116
27,301
658
1,455
(1,475)
(69)
27,870
(17,979)
(2,141)
912
(19)
(19,227)
(2,145)
1,421
5
906,163
2,785
62,299
(16,443)
–
954,804
2,540
61,679
(76,631)
–
942,392
(534,425)
(63,389)
15,232
–
(582,582)
(62,202)
73,188
–
Balance at 31 December 2014
(44,290)
(507,360)
(19,946)
(571,596)
Net book value at 31 December 2014
Net book value at 31 December 2013
53,148
54,545
309,724
309,603
7,924
8,074
370,796
372,222
146
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
5. Construction in Progress
Balance at 1 January 2013
Additions
Transferred to property, plant and equipment
Transferred to intangible assets
Balance at 31 December 2013
Additions
Transferred to property, plant and equipment
Transferred to intangible assets
Balance at 31 December 2014
6. Goodwill
The Group The Company
RMB millions RMB millions
32,500
77,364
(62,844)
(2,863)
44,157
74,585
(62,038)
(3,523)
53,181
32,080
76,814
(62,299)
(2,789)
43,806
73,801
(61,679)
(3,426)
52,502
The Group
The Company
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
Cost:
Goodwill arising from acquisition
of CDMA business
29,917
29,917
29,877
29,877
On 1 October 2008, the Group acquired the CDMA mobile communication business and related assets and
liabilities, which also included the entire equity interests of China Unicom (Macau) Company Limited (currently
known as China Telecom (Macau) Company Limited) and 99.5% equity interests of Unicom Huasheng
Telecommunications Technology Company Limited (currently known as Tianyi Telecom Terminals Company
Limited) (collectively the “CDMA business”) from China Unicom Limited and China Unicom Corporation Limited
(collectively “China Unicom”). The purchase price of the business combination was RMB43,800 million, which
was fully settled as at 31 December 2010. In addition, pursuant to the acquisition agreement, the Group
acquired the customer-related assets and assumed the customer-related liabilities of CDMA business for a net
settlement amount of RMB3,471 million due from China Unicom. This amount was subsequently settled by
China Unicom in 2009. The business combination was accounted for using the purchase method.
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 2014
147
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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 10.3% (2013: 10.6%). 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 2013
Additions
Transferred from construction in progress
Disposals/written-off
Balance at 31 December 2013
Additions
Transferred from construction in progress
Disposals
Balance at 31 December 2014
Accumulated amortisation and impairment:
Balance at 1 January 2013
Amortisation charge for the year
Written back on disposal/written-off
Balance at 31 December 2013
Amortisation charge for the year
Written back on disposal
Balance at 31 December 2014
Net book value at 31 December 2014
Net book value at 31 December 2013
Computer
software
Customer
Total
relationships
RMB millions RMB millions RMB millions
14,988
461
2,863
(221)
18,091
378
3,523
(239)
21,753
(7,458)
(2,787)
199
(10,046)
(2,923)
200
(12,769)
8,984
8,045
11,238
–
–
(11,238)
–
–
–
–
–
(9,554)
(1,684)
11,238
–
–
–
–
–
–
26,226
461
2,863
(11,459)
18,091
378
3,523
(239)
21,753
(17,012)
(4,471)
11,437
(10,046)
(2,923)
200
(12,769)
8,984
8,045
148
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
7.
Intangible Assets (continued)
The Company
Cost:
Balance at 1 January 2013
Additions
Transferred from construction in progress
Disposals/written-off
Balance at 31 December 2013
Additions
Transferred from construction in progress
Disposals
Balance at 31 December 2014
Accumulated amortisation and impairment:
Balance at 1 January 2013.
Amortisation charge for the year
Written back on disposal/written-off
Balance at 31 December 2013
Amortisation charge for the year
Written back on disposal
Balance at 31 December 2014
Net book value at 31 December 2014
Net book value at 31 December 2013
8.
Investments in Subsidiaries
Unquoted investments, at cost
Computer
software
Customer
Total
relationships
RMB millions RMB millions RMB millions
14,532
327
2,789
(192)
17,456
245
3,426
(233)
20,894
(7,254)
(2,729)
189
(9,794)
(2,841)
197
(12,438)
8,456
7,662
11,238
–
–
(11,238)
–
–
–
–
–
(9,554)
(1,684)
11,238
–
–
–
–
–
–
25,770
327
2,789
(11,430)
17,456
245
3,426
(233)
20,894
(16,808)
(4,413)
11,427
(9,794)
(2,841)
197
(12,438)
8,456
7,662
The Company
2014
RMB millions
2013
RMB millions
6,060
6,015
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
149
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
8.
Investments in Subsidiaries (continued)
Details of the Company’s subsidiaries which principally affected the results, assets and liabilities of the Group at
31 December 2014 are as follows:
Name of Company
Type of legal
entity
Date of
incorporation
Place of
incorporation
and operation
China Telecom System
Limited Company
13 September 2001
PRC
Integration Co.,
Limited
Registered/
Issued capital
(in RMB millions
unless otherwise
stated) Principal activity
392 Provision of system
integration and
consulting services
China Telecom Global
Limited Company
25 February 2000
Limited
Hong Kong Special
Administrative
Region of the PRC
HK$168 million Provision of international
value-added network
services
China Telecom (Americas)
Limited Company
22 November 2001
Corporation
The United States
of America
US$43 million Provision of
telecommunications
services
China Telecom Best Tone
Information Service Co.,
Limited
China Telecom (Macau)
Company Limited
Limited Company
15 August 2007
PRC
350 Provision of Best Tone
information services
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
Pte. Limited
E-surfing Pay Co., Ltd
Limited Company
3 March 2011
PRC
Shenzhen Shekou
Limited Company
5 May 1984
PRC
Telecommunications
Company Limited
telecommunications
terminals
S$1 Provision of international
value-added network
services
300 Provision of e-commerce
services
91 Provision of
telecommunications
services
150
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
8.
Investments in Subsidiaries (continued)
Name of Company
Type of legal
entity
Date of
incorporation
Place of
incorporation
and operation
China Telecom (Australia)
Limited Company
10 January 2011
Australia
Pty Ltd
China Telecom Korea
Limited Company
16 May 2012
South Korea
Co.,Ltd
China Telecom (Malaysia)
Limited Company
26 June 2012
Malaysia
SDN BHD
China Telecom Information
Technology (Vietnam)
Co., Ltd
Limited Company
9 July 2012
Vietnam
Registered/
Issued capital
(in RMB millions
unless otherwise
stated) Principal activity
AUD1 million Provision of international
value-added network
services
KRW500 million Provision of international
value-added network
services
RM500,000 Provision of international
value-added network
services
VND6,300 million Provision of international
value-added network
services
iMUSIC Culture &
Limited Company
9 June 2013
PRC
250 Provision of music
Technology Co., Ltd.
production and related
information services
China Telecom (Europe)
Limited Company
2 March 2006
Limited
The United Kingdom
of Great Britain and
Northern Ireland
GBP16.15 million Provision of international
value-added network
services
Zhejiang Yixin Technology
Limited Company
19 August 2013
PRC
Co., Ltd.
Chengdu E-store
Limited Company
17 June 2014
PRC
Technology Co., Ltd
10 Provision of instant
messenger service
45 Provision of software
technology
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.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
151
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
9.
Interests in Associates
Unlisted equity investments, at cost
Share of post-acquisition changes
in net assets
The Group
The Company
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
3,219
887
4,106
229
877
1,106
3,554
–
3,554
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 associates are as follows:
Name of company
Attributable
equity interest
Principal activities
China Tower Corporation Limited
29.9%
Construction, maintenance and
Shanghai Information Investment Incorporation
24.0%
operation of telecommunications
towers as well as ancillary facilities
Provision of information technology
consultancy services
The above associates are established in the PRC and are not traded on any stock exchange.
152
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
9.
Interests in Associates (continued)
Summarised financial information of the Group’s principal associates 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
Loss 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
China Tower
Corporation
Limited
2014
RMB millions
9,676
454
244
–
–
(114)
–
(114)
–
9,886
–
29.9%
2,956
2,956
China Tower Corporation Limited was set up in July 2014, so no comparative figures are presented.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
153
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
9.
Interests in Associates (continued)
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
2014
RMB millions
2013
RMB millions
6,309
7,773
4,887
3,680
3,740
236
–
236
10
5,515
(1,738)
24.0%
906
5,721
7,683
4,795
3,265
3,772
267
(1)
266
8
5,344
(1,733)
24.0%
867
906
867
Available-for-sale equity securities
Other unlisted equity investments
The Group
The Company
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
945
27
972
999
27
1,026
944
27
971
998
27
1,025
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.
154
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
2014
RMB millions RMB millions
2013
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)
1,156
1,788
288
–
3,232
1,071
1,431
425
–
2,927
–
(773)
(189)
(163)
(1,125)
–
(184)
(270)
(177)
(631)
1,156
1,015
99
(163)
2,107
1,071
1,247
155
(177)
2,296
Recognised in
consolidated
statement of
comprehensive
income
RMB millions
Balance at
1 January
2013
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
Recognised in
consolidated
statement of
comprehensive
income
RMB millions
Balance at
1 January
2014
RMB millions
Balance at
31 December
2014
RMB millions
1,071
1,247
155
(177)
2,296
85
(232)
(56)
14
(189)
1,156
1,015
99
(163)
2,107
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
155
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
11. Deferred Tax Assets and Liabilities (Continued)
The Company
Assets
Liabilities
Net Balance
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
2014
RMB millions RMB millions
2013
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)
1,097
1,558
288
–
2,943
990
1,232
425
–
2,647
–
(736)
(189)
(71)
(996)
–
(149)
(271)
(85)
(505)
1,097
822
99
(71)
1,947
990
1,083
154
(85)
2,142
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
Balance at
1 January
2014
RMB millions
Recognised in
statement of
comprehensive
income
RMB millions
Balance at
31 December
2014
RMB millions
990
1,083
154
(85)
2,142
107
(261)
(55)
14
(195)
1,097
822
99
(71)
1,947
156
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
12.
Inventories
Inventories represent:
Materials and supplies
Goods for resale
The Group
The Company
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
789
3,436
4,225
905
5,618
6,523
779
1,243
2,022
893
2,310
3,203
13. Accounts Receivable, Net
Accounts receivable, net, are analysed as follows:
The Group
The Company
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
Note
(i)
Accounts receivable
Third parties
China Telecom Group
Other telecommunications
operators in the PRC
Subsidiaries
Less: Allowance for doubtful
debts
22,853
329
858
–
21,293
391
536
–
24,040
22,220
(2,478)
21,562
(2,198)
20,022
20,456
135
848
1,273
22,712
(2,403)
20,309
19,454
181
527
1,306
21,468
(2,142)
19,326
Note:
(i)
China Telecommunications Corporation together with its subsidiaries other than the Group are referred to as “China
Telecom Group”.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
157
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
13. Accounts Receivable, Net (continued)
The following table summarises the changes in allowance for doubtful debts:
The Group
The Company
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
At beginning of year
Impairment losses for doubtful debts
Accounts receivable written off
At end of year
2,198
2,075
(1,795)
2,478
2,024
1,740
(1,566)
2,198
2,142
2,039
(1,778)
2,403
1,961
1,721
(1,540)
2,142
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
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
11,273
2,600
1,865
660
16,398
(2,355)
14,043
11,887
2,438
1,784
488
16,597
(2,122)
14,475
11,172
2,541
1,851
656
16,220
(2,336)
13,884
11,725
2,390
1,769
487
16,371
(2,105)
14,266
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
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
3,012
1,679
1,924
1,027
7,642
(123)
7,519
2,436
1,169
1,302
716
5,623
(76)
5,547
2,809
1,449
1,446
788
6,492
(67)
6,425
2,448
1,010
1,054
585
5,097
(37)
5,060
158
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
13. Accounts Receivable, Net (continued)
Ageing analysis of accounts receivable that are not impaired is as follows:
The Group
The Company
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
Not past due
19,408
17,839
18,214
17,190
Less than 1 month past due
1 to 3 months past due
Amounts past due
1,356
798
2,154
1,206
977
2,183
1,330
765
2,095
1,184
952
2,136
21,562
20,022
20,309
19,326
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
Value-added tax recoverable
Other receivables
The Group
The Company
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
818
–
414
1,895
3,398
1,072
2,984
10,581
1,037
–
472
1,213
2,418
359
2,070
7,569
753
378
411
943
2,978
906
1,567
7,936
828
746
472
476
2,009
80
1,340
5,951
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
159
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
15. Cash and Cash Equivalents
Cash at bank and in hand
Time deposits with original maturity within
three months
The Group
The Company
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
18,660
14,639
1,776
20,436
1,431
16,070
9,509
107
9,616
8,105
106
8,211
16. Short-term and Long-term Debt and Payable
Short-term debt comprises:
Loans from banks – unsecured
Super short-term commercial papers
– unsecured
Other loans – unsecured
Loans from China Telecom Group
– unsecured
Total short-term debt
The Group
The Company
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
5,399
5,443
5,376
5,416
18,997
182
19,398
43,976
–
182
22,062
27,687
18,997
182
19,280
43,835
–
182
21,980
27,578
The weighted average interest rate of the Group’s and the Company’s total short-term debt as at 31 December
2014 was 5.1% (2013: 4.7%) per annum and 5.1% (2013: 4.7%) per annum respectively. As at 31 December
2014, the Group’s and the Company’s loans from banks and other loans bear interest at rates ranging from
4.5% to 11.0% (2013: 4.5% to 6.0%) per annum and rates ranging from 4.5% to 6.0% (2013: 4.5% to 6.0%)
per annum respectively, and are repayable within one year; super short-term commercial papers amounting
to RMB7 billion bear interest at a fixed rate of 5.30% per annum and are repayable in March 2015 while two
batches of RMB6 billion super short-term commercial papers bear interest at a fixed rate of 5.55% per annum
and were repaid in January 2015; the loans from China Telecom Group bear interest at rate of 4.5% (2013: 4.5%)
per annum and are repayable within one year.
160
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
16. Short-term and Long-term Debt and Payable (continued)
Long-term debt and payable comprises:
Interest rates and final maturity
2014
RMB millions
2013
RMB millions
2014
RMB millions
2013
RMB millions
The Group
The Company
Bank loans – unsecured
Renminbi denominated
US Dollars denominated
Euro denominated
Other currencies denominated
Interest rates ranging from 3.60%
to 7.04% per annum with
maturities through 2020
Interest rates ranging from 1.00%
to 8.30% per annum with
maturities through 2060
Interest rate of 2.30% per annum
with maturities through 2032
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
10
10
10
10
491
534
491
534
349
15
865
1
–
428
20
992
1
19,986
349
15
865
1
–
428
20
992
1
19,986
61,710
61,710
61,710
61,710
424
63,000
(82)
62,918
–
82,689
(20,072)
62,617
421
62,997
(82)
62,915
–
82,689
(20,072)
62,617
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
161
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
16. Short-term and Long-term Debt and Payable (continued)
Note:
(i)
(ii)
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. These medium-term notes were repaid by the Company on 29 December
2014.
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 2014 and 2015 are 6.25% and 5.11%,
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 2014 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
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
82
82
61,792
71
71
902
63,000
20,072
85
86
61,796
74
576
82,689
82
82
61,792
71
71
899
62,997
20,072
85
86
61,796
74
576
82,689
The Group’s short-term and long-term debt and payable do not contain any financial covenants. As at
31 December 2014, the Group and the Company have unutilised committed credit facilities amounting to
RMB130,488 million (2013: RMB157,694 million) and RMB130,488 million (2013: RMB157,694 million)
respectively.
162
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
71,934
15,667
857
–
88,458
66,115
13,905
1,112
–
81,132
65,991
14,979
856
3,465
85,291
60,213
13,276
1,110
3,600
78,199
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
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
17,783
11,678
14,825
44,172
88,458
19,349
16,178
15,396
30,209
81,132
14,089
11,481
14,600
45,121
85,291
15,370
15,968
15,161
31,700
78,199
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
163
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
18. Accrued Expenses and Other Payables
Accrued expenses and other payables represent:
The Group
The Company
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
1,043
–
72
17,242
54,014
71
72,442
1,690
–
59
14,774
53,063
47
69,633
847
282
72
13,850
51,372
–
66,423
849
459
59
13,291
50,815
–
65,473
Amounts due to China Telecom Group
Amounts due to subsidiaries
Amounts due to other telecommunications
operators in the PRC
Accrued expenses
Customer deposits and receipts in
advance
Dividend payable
19. Deferred Revenues
Deferred revenues represent the unearned portion of 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
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
2,431
3,445
2,430
3,442
547
547
(586)
(534)
1,858
1,060
798
1,858
484
484
(860)
(638)
2,431
1,202
1,229
2,431
540
540
(586)
(531)
1,853
1,055
798
1,853
484
484
(860)
(636)
2,430
1,201
1,229
2,430
Included in other assets are primarily capitalised direct costs associated with the installation of wireline services.
As at 31 December 2014, the unamortised portion of these costs was RMB818 million (2013: RMB1,172
million).
164
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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
2014
RMB millions
2013
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.
21. Reserves
The Group
Capital
reserve
Share
premium
Statutory
reserves
Other
reserves
Exchange
reserve
Retained
earnings
Total
RMB millions RMB millions RMB millions RMB millions RMB millions RMB millions RMB millions
(Note (i))
(Note (iii))
(Note (ii))
16,821
10,746
65,729
112
(865)
91,664
184,207
Balance as at 1 January 2013
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
Dividends (Note 32)
Appropriations (Note (iii))
Total comprehensive income
(278)
380
141
–
–
–
17,064
–
–
–
–
–
–
–
–
10,746
–
–
–
–
–
–
1,663
–
67,392
–
1,680
for the year
–
–
–
Balance as at 31 December 2014
17,064
10,746
69,072
–
–
–
–
–
315
427
–
–
(43)
384
–
–
–
–
–
(79)
(944)
–
–
–
11
–
(5,433)
(1,663)
17,545
102,124
(6,198)
(1,680)
3
17,680
(941)
111,926
(278)
391
141
(5,433)
–
17,781
196,809
(6,198)
–
17,640
208,251
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
165
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
21. Reserves (continued)
The Company
Balance as at 1 January 2013
Total comprehensive income
for the year
Appropriations (Note (iii))
Dividends (Note 32)
Balance as at 31 December 2013
Total comprehensive income
for the year
Appropriations (Note (iii))
Dividends (Note 32)
Capital
reserve
Share
premium
Statutory
reserves
Retained
earnings
Total
RMB millions RMB millions RMB millions RMB millions RMB millions
(Note (i))
(Note (iii))
29,148
10,746
65,729
74,494
180,117
–
–
–
–
–
–
–
1,663
–
29,148
10,746
67,392
–
–
–
–
–
–
–
1,680
–
16,943
(1,663)
(5,433)
84,341
16,761
(1,680)
(6,198)
93,224
16,943
–
(5,433)
191,627
16,761
–
(6,198)
202,190
Balance as at 31 December 2014
29,148
10,746
69,072
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.
166
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
21. Reserves (continued)
The Company (continued)
Note: (continued)
(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 2014, the Company transferred RMB1,680 million, being 10% of the year’s net profit determined
in accordance with IFRS, to this reserve. 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 the IFRS.
The Company did not transfer any discretionary surplus reserve for the years ended 31 December 2014 and 2013.
The statutory and discretionary surplus reserves are non-distributable other than in liquidation and can be used to make
good of previous years’ losses, if any, and may be utilised for business expansion or converted into share capital by
issuing new shares to existing shareholders in proportion to their shareholdings or by increasing the par value of the shares
currently held by them, provided that the remaining reserve balance after such issue is not less than 25% of the registered
capital.
(iv)
According to the Company’s Articles of Association, the amount of retained earnings available for distribution to
shareholders of the Company is the lower of the amount 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
2014, the amount of retained earnings available for distribution was RMB93,224 million (2013: RMB84,341 million), being
the amount determined in accordance with IFRS. Final dividend of approximately RMB6,085 million in respect of the
financial year 2014 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:
Wireline voice
Mobile voice
Internet
Value-added services
Integrated information application services
Telecommunications network resource services and
lease of network equipment
Others
The Group
2014
RMB millions
2013
RMB millions
Note
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
33,587
54,673
112,431
38,419
26,939
17,332
41,013
38,633
58,217
99,394
36,230
25,233
17,586
46,291
324,394
321,584
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
167
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
22. Operating Revenues (continued)
Note:
Before 1 June 2014, most of the Group’s operating revenues were subject to business tax levied at rates of 3%, and relevant business
tax was set off against operating revenues. Pursuant to the Notice on Covering Telecommunications Industries under the VAT Reform
(Caishui [2014] No.43) jointly issued by the Ministry of Finance and the State Administration of Taxation, from 1 June 2014, the
pilot programme of replacing business tax with VAT is extended to cover the telecommunications industry. The VAT rate for basic
telecommunications services (including voice communication, lease or sale of network resources) is 11% while the VAT rate for value-
added telecommunications services (including Internet access services, short and multimedia messaging services, transmission and
application service of electronic data and information) is 6%, and VAT is excluded from operating revenues. With effect from 1 June
2014, the Group is no longer required to pay business tax of 3% on telecommunications services.
(i)
(ii)
Represent the aggregate amount of monthly fees, local usage fees, domestic long distance usage fees, international, Hong
Kong, Macau and Taiwan long distance usage fees, interconnections 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.
(iii)
Represent amounts charged to customers for the provision of Internet access services.
(iv)
(v)
(vi)
Represent the aggregate amount of fees charged to customers for the provision of value-added services, which comprise
primarily caller ID services, short messaging services, 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 as well as the resale of mobile services
(MVNO).
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
Others
168
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
The Group
2014
RMB millions
2013
RMB millions
38,159
11,644
9,224
9,624
68,651
29,963
11,404
7,284
4,451
53,102
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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
The Group
2014
RMB millions
2013
RMB millions
32,855
17,798
50,653
30,551
16,172
46,723
The Group
2014
RMB millions
2013
RMB millions
Note
(i)
(ii)
(iii)
12,483
33,836
23
1,176
47,518
15,916
38,764
11
69
54,760
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.
(iii)
Others mainly include other surcharges related to VAT.
26. Total Operating Expenses
Total operating expenses for the year ended 31 December 2014 were RMB295,886 million (2013: RMB294,116
million) which include auditor’s remuneration in relation to audit and non-audit services (excluding value-added
tax) of RMB62 million and RMB6 million respectively (2013: RMB60 million and RMB1 million).
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
169
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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
2014
RMB millions
2013
RMB millions
5,958
(308)
5,650
(304)
21
(76)
5,291
5,840
(329)
5,511
(361)
61
(58)
5,153
* Interest expense was capitalised in construction in progress at
the following rates per annum
4.5%–6.0%
4.5%–5.8%
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
2014
RMB millions
2013
RMB millions
5,237
58
203
5,498
5,590
31
(199)
5,422
170
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
28.
Income Tax (continued)
A reconciliation of the expected tax expenses with the actual tax expense is as follows:
Profit before taxation
The Group
2014
RMB millions
2013
RMB millions
Note
23,257
23,088
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
5,814
(248)
(31)
347
(243)
–
(141)
5,498
5,772
(216)
(31)
428
(120)
4
(415)
5,422
Note:
(i)
(ii)
Except for certain subsidiaries and branches which are mainly 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.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
171
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
29. Directors’ and Supervisors’ Remuneration
The following table sets out the remuneration paid or payable to the Company’s Directors and Supervisors:
2014
Executive directors
Wang Xiaochu
Yang Jie
Wu Andi4
Zhang Jiping
Yang Xiaowei
Sun Kangmin
Ke Ruiwen
Non-executive directors
Zhu Wei1
Xie Liang1
Independent non-executive
directors
Tse Hau Yin
Cha May Lung
Xu Erming
Wang Hsuehming2
Qin Xiao2
Wu Jichuan2
Supervisors
Shao Chunbao5
Tang Qi
Zhang Jianbin
Hu Jing
Du Zuguo6
Independent supervisor
Zhu Lihao3
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
–
–
–
–
–
–
–
–
–
394
197
200
114
82
–
–
–
–
–
–
42
1,029
340
340
296
296
296
296
296
–
–
–
–
–
–
–
–
296
199
157
97
–
–
2,909
479
479
431
423
423
431
423
–
–
–
–
–
–
–
–
416
466
406
327
–
–
4,704
93
92
87
89
88
88
77
–
–
–
–
–
–
–
–
70
68
65
58
–
–
875
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
912
911
814
808
807
815
796
–
–
394
197
200
114
82
–
782
733
628
482
–
42
9,517
1
2
3
4
5
6
7
Mr. Xie Liang retired as a Non-executive Director of the Company on 29 May 2014. Mr. Zhu Wei was appointed as a Non-
executive Director of the Company on 29 May 2014.
Mr. Qin Xiao and Mr. Wu Jichuan retired as Independent Non-executive Directors of the Company on 29 May 2014. Madam
Wang Hsuehming was appointed as an Independent Non-executive Director of the Company on 29 May 2014.
Madam Zhu Lihao retired as an independent supervisor of the Company on 29 May 2014.
Madam Wu Andi retired as an executive director of the Company on 10 February 2015.
Mr. Shao Chunbao resigned as a supervisor of the Company on 18 February 2015.
Mr. Du Zuguo resigned as a supervisor of the Company on 12 March 2015.
The remuneration of all Directors and Supervisors were calculated based on their respective actual terms of office within this
year.
172
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
29. Directors’ and Supervisors’ Remuneration (continued)
2013
Executive directors
Wang Xiaochu
Yang Jie
Wu Andi
Zhang Jiping
Yang Xiaowei
Sun Kangmin
Ke Ruiwen
Non-executive directors
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
Discretionary
bonuses1
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 2014
173
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
30.
Individuals with Highest Emoluments and Senior Management Remuneration
(a)
Five highest paid individuals
None of the five highest paid individuals of the Group for the year ended 31 December 2014 were
directors of the Company. 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.
The aggregate of the emoluments in respect of the five (2013: four) individuals (non-directors) are as
follows:
Salaries, allowances and benefits in kind
Discretionary bonuses
Retirement scheme contributions
2014
RMB
thousands
2013
RMB
thousands
7,869
2,532
244
10,645
4,176
3,639
113
7,928
The emoluments of the five (2013: four) 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
2014
Number of
individuals
2013
Number of
individuals
–
–
2
3
–
–
2
2
None of these employees received any inducements or compensation for loss of office, or waived any
emoluments during the periods presented.
174
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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
2014
Number of
individuals
2013
Number of
individuals
23
–
–
1
17
5
2
1
31. Profit Attributable to Equity Holders of the Company
For the year ended 31 December 2014, the consolidated profit attributable to equity holders of the Company
includes a profit of RMB16,801 million which has been dealt with in the stand-alone financial statements 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.
32. Dividends
Pursuant to a resolution passed at the Board of Directors’ meeting on 18 March 2015, a final dividend of
equivalent to HK$0.095 per share totaling approximately RMB6,085 million for the year ended 31 December
2014 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 2014.
Pursuant to the shareholders’ approval at the Annual General Meeting held on 29 May 2014, a final dividend of
RMB0.076583 (equivalent to HK$0.095) per share totaling RMB6,198 million in respect of the year ended 31
December 2013 was declared and paid on 18 July 2014.
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.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
175
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
33. Basic Earnings Per Share
The calculation of basic earnings per share for the years ended 31 December 2014 and 2013 is based on the
profit attributable to equity holders of the Company of RMB17,680 million and RMB17,545 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 2014 and 2013, the Group’s and the Company’s future minimum lease payments under
non-cancellable operating leases 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
Total minimum lease payments
The Group
The Company
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
2,635
1,921
1,389
1,021
678
1,495
9,139
2,236
1,516
1,087
779
611
1,344
7,573
2,457
1,764
1,271
960
647
1,475
8,574
1,964
1,319
988
718
581
1,294
6,864
Total rental expense in respect of operating leases charged to profit or loss for the year ended 31 December
2014 was RMB7,779 million (2013: RMB6,057 million).
176
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
34. Commitments and Contingencies (continued)
Capital commitments
As at 31 December 2014 and 2013, the Group and the Company had capital commitments as follows:
Contracted for but not provided
– property
– telecommunications network plant
and equipment
Authorised but not contracted for
– property
– telecommunications network plant
and equipment
The Group
The Company
2014
RMB millions
2013
2014
RMB millions RMB millions
2013
RMB millions
422
6,743
7,165
466
6,361
6,827
931
6,807
7,738
778
6,460
7,238
422
6,737
7,159
466
6,335
6,801
915
6,747
7,662
778
6,444
7,222
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 2014 and 2013, 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 2014 and 2013, 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.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
177
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
35. Financial Instruments
Financial assets of the Group and the Company include cash and cash equivalents, bank 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 2014, the fair value of the Group and the Company’s available-
for-sale equity investment securities are RMB945 million (2013: RMB999 million) and RMB944 million
(2013: RMB998 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 because
their fair values cannot be measured reliably, so their fair values were not disclosed.
178
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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 categorised 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 6.6% (2013: 1.0% to 6.8%). As at 31 December 2014 and 2013, the carrying amounts and fair values
of the Group and the Company’s long-term debt and payable were as follows:
The Group
2014
2013
Carrying
amount
Fair value
RMB millions RMB millions
Carrying
amount
RMB millions
Fair value
RMB millions
Long-term debt and payable
63,000
63,043
82,689
82,002
The Company
2014
2013
Carrying
amount
Fair value
RMB millions RMB millions
Carrying
amount
RMB millions
Fair value
RMB millions
Long-term debt and payable
62,997
63,040
82,689
82,002
During the year, there were no transfers among instruments in level 1, level 2 or level 3.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
179
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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.
180
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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
2014
Total
contractual
undiscounted
cash flow
RMB millions
Carrying
amount
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
More than
5 years
RMB millions
Short-term debt
Long-term debt and payable
Accounts payable
Accrued expenses and other
payables
43,976
63,000
88,458
72,442
267,876
44,133
72,517
88,458
72,442
277,550
–
3,243
–
–
3,243
–
65,107
–
–
65,107
–
924
–
–
924
44,133
3,243
88,458
72,442
208,276
2013
Total
contractual
undiscounted
cash flow
RMB millions
28,279
99,135
81,132
69,633
1
Within 1 year
or on demand
RMB millions
28,279
24,874
81,132
69,633
1
Carrying
amount
RMB millions
27,687
82,689
81,132
69,633
1
Short-term debt
Long-term debt and payable
Accounts payable
Accrued expenses and other
payables
Finance lease obligations
More than
1 year but
less than
2 years
RMB millions
More than
2 years but
less than
5 years
RMB millions
More than
5 years
RMB millions
–
3,951
–
–
–
–
69,690
–
–
–
–
620
–
–
–
620
261,142
278,180
203,919
3,951
69,690
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
181
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
35. Financial Instruments (continued)
(b) Risks (continued)
(ii)
Liquidity risk (continued)
The Company
2014
Total
contractual
undiscounted
cash flow
RMB millions
Carrying
amount
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
More than
5 years
RMB millions
Short-term debt
Long-term debt and payable
Accounts payable
Accrued expenses and other
payables
43,835
62,997
85,291
66,423
258,546
43,989
72,514
85,291
66,423
268,217
–
3,243
–
–
3,243
–
65,107
–
–
65,107
–
921
–
–
921
43,989
3,243
85,291
66,423
198,946
2013
Total
contractual
undiscounted
cash flow
RMB millions
28,168
99,135
78,199
65,473
1
Within 1 year
or on demand
RMB millions
28,168
24,874
78,199
65,473
1
Carrying
amount
RMB millions
27,578
82,689
78,199
65,473
1
Short-term debt
Long-term debt and payable
Accounts payable
Accrued expenses and other
payables
Finance lease obligations
More than
1 year but
less than
2 years
RMB millions
More than
2 years but
less than
5 years
RMB millions
More than
5 years
RMB millions
–
3,951
–
–
–
–
69,690
–
–
–
–
620
–
–
–
620
253,940
270,976
196,715
3,951
69,690
182
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
35. Financial Instruments (continued)
(b) Risks (continued)
(ii)
(iii)
Liquidity risk (continued)
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.
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
Variable rate debt:
Short-term debt
Deferred consideration
due to China
Telecommunications
Corporation (as defined in
Note 16)
Total debt
Fixed rate debt as a
percentage of total debt
2014
2013
Effective
interest rate
% RMB millions
5.0
2.4
43,156
866
44,022
Effective
interest rate
%
4.7
4.5
RMB millions
26,807
20,979
47,786
5.6
820
5.5
880
5.1
61,710
62,530
106,552
41.3%
6.3
61,710
62,590
110,376
43.3%
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
183
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
35. Financial Instruments (continued)
(b) Risks (continued)
(iii)
Interest rate risk (continued)
The Company
2014
2013
Effective
interest rate
% RMB millions
5.0
2.4
43,015
866
43,881
Effective
interest rate
%
4.7
4.5
RMB millions
26,698
20,979
47,677
5.6
820
5.5
880
5.1
61,710
62,530
106,411
41.2%
6.3
61,710
62,590
110,267
43.2%
Fixed rate debt:
Short-term debt
Long-term debt
Variable rate debt:
Short-term debt
Deferred consideration
due to China
Telecommunications
Corporation
Total debt
Fixed rate debt as a
percentage of total debt
As at 31 December 2014, 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 (2013: RMB469 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 2013.
184
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
35. Financial Instruments (continued)
(b) Risks (continued)
(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.
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 93.1% (2013: 94.3%) of the Group and 99.2% (2013: 99.2%) of
the Company’s cash and cash equivalents and 99.2% (2013: 99.1%) and of the Group and
the Company’s short-term and long-term debt and payable as at 31 December 2014 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 deferred consideration due
to China Telecommunications Corporation, and finance lease obligations. As at 31 December 2014, the
Group’s total debt-to-total assets ratio was 19.0% (2013: 20.3%), which is within the range of management’s
expectation.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
185
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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.
The principal transactions with China Telecom Group are as follows. These transactions constitute
continuing connected transactions under the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing Rules”) and the Company has complied with the relevant
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.
2014
RMB millions
2013
RMB millions
Note
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
Property lease income
Property lease expenses
Net transaction amount of centralised services
Interconnection revenues
Interconnection charges
Internet applications channel services
Interest on amounts due to and loans from
China Telecom Group*
Lease of CDMA network facilities*
Lease of inter-provincial transmission optic fibres*
Lease of land use rights*
(i)
(i)
(ii)
(iii)
(iii)
(iv)
(v)
(vi)
(vi)
(vii)
(viii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
3,729
3,089
15,478
167
1,171
2,885
11,549
39
695
246
45
391
366
4,431
193
22
15
3,563
3,885
14,543
192
1,136
2,826
11,208
46
673
616
44
394
–
3,912
157
25
16
*
These transactions 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.
186
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
37. Related Party Transactions (continued)
(a)
Transactions with China Telecom Group (continued)
Note:
(i)
(ii)
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.
(iii)
Represent IT services provided to and received from China Telecom Group.
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
Represent amounts paid and payable to China Telecom Group in respect of cultural, educational, health care and
other community services.
Represent amounts paid and payable to China Telecom Group in respect of ancillary services such as repairs and
maintenance of telecommunications equipment and facilities and certain customer services.
Represent amounts received and receivable from/paid and payable to China Telecom Group for mutual leasing of
properties.
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.
Represent amounts received and receivable from/paid and payable to China Telecom Group for interconnection of
local and domestic long distance calls.
Represent amounts received and receivable from China Telecom Group in respect of Internet applications channel
services, including the provision of telecommunications channel and applications support platform and billing and
deduction services, etc.
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 paid and payable to China Telecom Group for lease of certain inter-provincial transmission
optic fibres within its service regions.
(xiii)
Represent amounts paid and payable to China Telecom Group for leases of land use rights.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
187
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
37. Related Party Transactions (continued)
(a)
Transactions with China Telecom Group (continued)
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
2014
RMB millions
2013
RMB millions
329
818
1,147
15,667
1,043
19,398
61,710
97,818
391
1,037
1,428
13,905
1,690
22,062
61,710
99,367
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 2014 and 2013, 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:
2014
RMB
thousands
11,598
1,069
12,667
2013
RMB
thousands
14,329
794
15,123
Short-term employee benefits
Post-employment benefits
The above remuneration is included in personnel expenses.
188
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
37. Related Party Transactions (continued)
(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”).
Apart from transactions with parent company and its fellow subsidiaries (Note 37(a)), the Group has
transactions that are collectively but not individually significant 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.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
189
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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 14% to 22% 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 2014 were RMB6,229 million
(2013: RMB5,682 million).
The amount payable for contributions to the above defined contribution retirement plans as at 31 December
2014 was RMB669 million (2013: RMB707 million)
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.
190
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
39. Stock Appreciation Rights (continued)
During the year ended 31 December 2014 and 2013, no stock appreciation right units were exercised. For the
year ended 31 December 2014, compensation expense of RMB130 million was recognized by the Group in
respect of stock appreciation rights. 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.
As at 31 December 2014, the carrying amount of the liability arising from stock appreciation rights was
RMB254 million (2013: RMB124 million). As at 31 December 2014, 609 million stock appreciation right units
vested but were not exercised. The carrying amount of the corresponding liability was RMB183 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.
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.
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.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
191
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
40. Accounting Estimates and Judgements (continued)
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 with finite useful lives 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 fair value less costs of disposal. 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 fair value 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 2014, no provision for impairment losses were made against the carrying
value of property, plant and equipment (2013 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 and intangible assets are 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 and amortisation 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 and amortisation expense for future periods is adjusted if there are
significant changes from previous estimates.
192
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
41. Possible Impact of Amendments, New Standards Issued But Not Yet Effective
for the Annual Accounting Period Ended 31 December 2014
Up to the date of issue of these financial statements, the IASB has issued the following amendments, new
standards which are not yet effective for the annual accounting period ended 31 December 2014:
Effective for
accounting period
beginning on or after
Amendments to IAS 19, “Defined Benefit Plans: Employee Contributions”
Amendments to IFRSs, “Annual Improvements to IFRSs 2010-2012 Cycle”
1 July 2014
1 July 2014 (with limited
Amendments to IFRSs, “Annual Improvements to IFRSs 2011-2013 Cycle”
Amendments to IFRSs, “Annual Improvements to IFRSs 2012-2014 Cycle”
IFRS 14, “Regulatory Deferral Accounts”
Amendments to IAS 1, “Disclosure Initiative”
Amendments to IFRS 11, “Accounting for Acquisitions of Interests in Joint
Operations”
exceptions)
1 July 2014
1 January 2016
1 January 2016
1 January 2016
1 January 2016
Amendments to IAS 16 and IAS 38, “Clarification of Acceptable Methods of
1 January 2016
Depreciation and Amortisation”
Amendments to IAS 16 and IAS 41, “Agriculture: Bearer Plants”
Amendments to IAS 27, “ Equity Method in Separate Financial Statements ”
Amendments to IFRS 10 and IAS 28, “ Sale or Contribution of Assets between
1 January 2016
1 January 2016
1 January 2016
an Investor and its Associate or Joint Venture”
Amendments to IFRS 10, IFRS 12 and IAS 28, “ Investment Entities:
1 January 2016
Applying the Consolidation Exception”
IFRS 15, “Revenue from Contracts with Customers”
IFRS 9, “Financial Instruments”
1 January 2017
1 January 2018
The Group is in the process of making an assessment of the impact that will result from adopting the
amendments and new standards issued by the IASB which are not yet effective for the accounting period
ended on 31 December 2014. Except for IFRS 15, “Revenue from Contracts with Customers”, so far the Group
believes that the adoption of these amendments and new standards is unlikely to have a significant impact on
its financial position and the results of operations.
In addition, the related requirements of Part 9, “Accounts and Audit”, of the new Hong Kong Companies
Ordinance (Cap.622) would affect the applicable disclosure provisions of the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited. The related requirements come into operation form
the Company’s first financial year commencing after 3 March 2014 in accordance with section 358 of that
Ordinance. The Group is in the process of making an assessment of the expected impact of the changes
in the Hong Kong Companies Ordinance on the consolidated financial statements in the period of its initial
application. So far the Group believes that the related requirements will primarily only affect the presentation
and disclosure of financial statements, but will unlikely have a significant impact on its financial position and the
results of operation.
42. Parent and Ultimate Holding Company
The parent and ultimate holding company of the Group as at 31 December 2014 is China Telecommunications
Corporation, a state-owned enterprise established in the PRC.
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
193
FINANCIAL SUMMARY
(Amounts in millions, except per share data)
Year ended 31 December
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
2014
RMB
33,587
54,673
112,431
17,332
106,371
–
324,394
66,345
68,651
62,719
50,653
47,518
295,886
28,508
(5,291)
6
34
23,257
(5,498)
17,759
(54)
14
3
(3)
(40)
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
Total comprehensive income for the year
17,719
17,902
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
17,680
79
17,759
17,640
79
17,719
0.22
17,545
121
17,666
17,781
121
17,902
0.22
194
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
2012
RMB
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
2011
RMB
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)
2010
RMB
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
FINANCIAL SUMMARY
(Amounts in millions)
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
2014
RMB
2013
RMB
2012
RMB
2011
RMB
2010
RMB
372,876
53,181
75,674
21,815
37,728
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
561,274
543,239
545,291
419,331
420,708
206,325
64,841
200,098
64,477
193,610
85,581
127,397
34,979
127,012
47,482
271,166
264,575
279,191
162,376
174,494
Total equity attributable to equity holders of the
Company
Non-controlling interests
Total equity
289,183
925
277,741
923
265,139
961
256,167
788
245,718
496
290,108
278,664
266,100
256,955
246,214
Total liabilities and equity
561,274
543,239
545,291
419,331
420,708
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
195
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
2014 share price
HK$ per H share
US$ per ADS
High
5.19
Low
3.12
Close
High
Low
Close
4.54
66.85
40.25
58.71
Number of issued shares: (as at 31 December 2014)
80,932,368,321
Market capitalization: (as at 31 December 2014)
HK$367.4 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 2014.
600
500
400
300
200
100
0
2
0
0
1/2
1
China Telecom (+213%)
HSI (+139%)
MSCI (+58%)
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
8
0
0
1/2
1
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
1/2
1
4
1
0
2/2
1
China Telecom
HSI
MSCI
196
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
SHAREHOLDER INFORMATION
Distribution of shares and shareholdings
The share capital of the Company as at 31 December 2014 was RMB80,932,368,321, divided into 80,932,368,321
shares of RMB1.00 each. As at 31 December 2014, 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 2014:
Name of shareholder
JPMorgan Chase & Co.
Commonwealth Bank of Australia
BlackRock, Inc.
The Capital Group Companies Inc.
Templeton Investment Counsel, LLC
Percentage of the
total number of
H shares in issue
(%)
Number of shares
1,792,139,463
12.91
1,380,231,874
1,129,819,307
971,875,000
694,547,094
9.95
8.14
7.00
5.00
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
197
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
2014 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
1 June 2015
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
27 May 2015
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
17 July 2015
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
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 27 May 2015.
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 2014 with the
United States Securities and Exchange Commission by 30 April 2015.
2014 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 2013”. 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$15,000 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 2014”, 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.
198
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
SHAREHOLDER INFORMATION
Annual General Meeting
To be held at 11 a.m. on 27 May 2015 in Conrad Hong Kong
Registered office
Address: 31 Jinrong Street
Xicheng District
Beijing
PRC 100033
86 10 6642 8166
86 10 6601 0728
Tel:
Fax:
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 2014
199
SHAREHOLDER INFORMATION
Any enquiries relating to ADSs, please contact the depositary:
ADS depositary
The Bank of New York Mellon
Address: Shareowner Services
P.O. Box 30170
College Station
TX 77842-3170
1-888-269-2377 (toll free in USA)
1-201-680-6825 (international)
shrrelations@cpushareownerservices.com
Tel:
Email:
200
CHINA TELECOM CORPORATION LIMITED ANNUAL REPORT 2014
China Telecom Corporation Limited
HKEx Stock Code: 728
NYSE Stock Code: CHA
Annual Report 2014
STAY Hungry
STAY Hungry
STAYRICH
STAYRICH
China Telecom Corporation Limited
31 Jinrong Street, Xicheng District, Beijing, PRC, 100033
www.chinatelecom-h.com
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