About China Telecom
China Telecom Corporation Limited (“China Telecom” or the
“Company”, a joint stock limited company incorporated in
the People’s Republic of China with limited liability, together
with its subsidiaries, collectively the “Group”) is a large-
scale and leading integrated information services operator in
the world, providing wireline & mobile telecommunications
services, Internet access services, information services and
other value-added telecommunications services primarily in
the PRC. As at the end of 2018, the Company had mobile
subscribers of about 303 million, wireline broadband
subscribers of about 146 million and access lines in service
of about 116 million. The Company’s H shares and American
Depositary Shares (“ADSs”) are listed on The Stock Exchange
of Hong Kong Limited (the “Hong Kong Stock Exchange”)
and the New York Stock Exchange respectively.
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.
Contents
003 Contents
004 2018 Milestones
005 Corporate Information
006 Financial Highlights
010 Statement from the Board
020 Biographical Details of Directors,
Supervisors and Senior
Management
032 Management’s Discussion and
Analysis
032 Business Review
044 Financial Review
054 Report of the Directors
076 Report of the Supervisory
Committee
080 Recognition and Awards
082 Environmental, Social and
Governance Report
084 Corporate Social
Responsibility Report
106 Human Resources
Development Report
116 Table of the ESG
Indicators
122
Independent Assurance
Report
123 Appendix – ESG
Reporting Guide Index
127 Corporate Governance
Report
158 Independent Auditor’s Report
163 Consolidated Statement of
Financial Position
165
Consolidated Statement of
Comprehensive Income
166 Consolidated Statement of
Changes in Equity
167 Consolidated Statement of
Cash Flows
169 Notes to the Consolidated
Financial Statements
262 Financial Summary
264 Shareholder Information
Corporate Culture
China Telecom Corporation Limited Annual Report 2018 003
2018 Milestones
Apr
May
• Completed the nation’s first 5G network-based remote-
controlled driving trial in Xiongan
• Published the White Paper of Artificial Intelligence Terminal,
specified and defined AI smartphone from AI calculation, AI
capability and AI application aspects, promoting the
convergence of multi-mode terminal value chain and China
Telecom’s AI capabilities in network security, Big Data and
cloud computing etc., to bring more intelligent AI experiences
and services for users
Jun
• Published the China Telecom’s 5G Technology White Paper,
which was the first time to fully elaborate 5G technology
perspectives and the overall strategy as a global operator;
from the view points of business development, network
evolution and user perception, comprehensively elaborated
the “Three Clouds” characterised 5G target network
structure initiated by China Telecom namely control cloud,
access cloud and transfer cloud
Jul
•
Implemented “Speed Upgrade and Tariff Reduction” and
ceased charging domestic mobile data roaming tariff
Aug
Dec
• The number of e-Surfing HD (IPTV) subscribers achieved a
breakthrough of 100 million
• Being granted the approval to utilise the 3,400-3,500MHz
spectrum nationwide for 5G system trial
• The total number of mobile subscribers exceeded 300 million
with a net addition of 53.04 million, reaching a new record
high for the Company
• Restructuring the R&D system by launching China Telecom
Research Institutes and 5G Innovation Centre; achieving
innovative breakthroughs in career advancement and
employee incentive mechanism for technical talents and
mastering key technologies in key information
communications areas
• Fully promoting “cloudification” and comprehensively
upgrading services and network to cloud in terms of
infrastructure, products service capabilities and sales mode
surrounding cloud computing so as to finally achieve
one-stop service covering cloud, network, terminal,
application and service aiming at meeting the diversified
cloud and network demand for users
004
Corporate Information
Board of Directors
Supervisory Committee
Executive Directors
Ke Ruiwen (Exercising the powers of
Chairman & Chief Executive Officer;
President & Chief Operating Officer)
Gao Tongqing
Chen Zhongyue
Zhu Min (Chief Financial Officer &
Secretary of the Board)
Sui Yixun (Chairman)
Zhang Jianbin (Employee Representative)
Yang Jianqing (Employee Representative)
Xu Shiguang
Ye Zhong
Company Secretary
Wong Yuk Har
Non-Executive Director
International Auditor
Chen Shengguang
Deloitte Touche Tohmatsu
Independent Non-Executive
Directors
Legal Advisers
Haiwen & Partners
Freshfields Bruckhaus Deringer
Sullivan & Cromwell LLP
Stock Code
HKEx: 728
NYSE: CHA
Company Website
www.chinatelecom-h.com
Tse Hau Yin, Aloysius
Xu Erming
Wang Hsuehming
Yeung Chi Wai, Jason
Audit Committee
Tse Hau Yin, Aloysius (Chairman)
Xu Erming
Wang Hsuehming
Yeung Chi Wai, Jason
Remuneration Committee
Xu Erming (Chairman)
Tse Hau Yin, Aloysius
Wang Hsuehming
Nomination Committee
Wang Hsuehming (Chairlady)
Tse Hau Yin, Aloysius
Xu Erming
China Telecom Corporation Limited Annual Report 2018 005
Financial Highlights
Operating revenues (RMB millions)
352,534
366,229
377,124
2016
2017
2018
EBITDA1 (RMB millions)
EBITDA margin2
Net profit3 (RMB millions)
Capital expenditure (RMB millions)
Free cash flow4 (RMB millions)
Total debt/Equity5
Earnings per share (RMB)
Dividend per share (HK$)
95,162
30.7%
18,018
96,817
(7,648)
35.7%
0.2226
0.105
102,171
104,207
30.9%
18,617
88,712
7,267
32.0%
0.2300
0.115
29.7%
21,210
74,940
22,457
27.9%
0.2621
0.125
1
2
3
4
5
EBITDA was calculated based on operating revenues minus operating expenses plus depreciation and
amortisation.
EBITDA margin was calculated based on EBITDA divided by service revenues.
Net profit represented profit attributable to equity holders of the Company.
Free cash flow was calculated from EBITDA minus capital expenditure and income tax.
Equity represented equity attributable to equity holders of the Company.
For further information,
please browse our website at
www.chinatelecom-h.com
006
Financial Highlights
Operating
Revenues
(RMB millions)
377,124
366,229
352,534
2018
2017
2016
EBITDA
(RMB millions)
104,207
102,171
95,162
2018
2017
2016
Net Profit
(RMB millions)
21,210
18,617
18,018
2018
2017
2016
Dividend Per
Share
(HK$)
0.125
0.115
0.105
2018
2017
2016
China Telecom Corporation Limited Annual Report 2018 007
Co-building Intelligent Networks
Leading to New Emerging Areas
Statement from the Board
As an ancient
Chinese philosopher
wrote, a tree has
to strike a firm
root before it
can flourish.
Facing exceptionally fierce competition in the past
year, we focused on customer demands with
precision insights, and brought edges of ecosphere
convergence into full play to forge ahead against
headwinds. As a result, we broke the record in many
aspects including subscriber net addition and
revenue scale, exuberating vigorous growth
momentum. 5G is just around the corner and will
bring profound changes to our life. We have been
proactively promoting the technology upgrades,
while forcefully cementing our network foundation,
in the hope of bringing a fresh experience to our
customers through the convergence of innovative
services. We will leverage our deep-rooted
integrated information services capabilities as well
as ecosphere edges to enthusiastically embrace new
opportunities. We firmly believe that China Telecom,
which is full of vibrancy, will soar to a new height
and achieve greater success!
010
Statement from the Board
Dear shareholders,
Operating Results
In 2018, the Company firmly grasped the
opportunities arising from the
development of digital economy, and rode
on the tide by leveraging the precision
insights into market trends and customer
demands. We adhered to the new
development principles and carried out
supply-side structural reforms. We
responded effectively to the complicated
and challenging external environment, as
well as increasingly fierce competition,
achieving new breakthroughs in
expanding our business scale while firmly
elevating our corporate value, thereby
reaching a new high in terms of overall
competitiveness and market position. Over
the past year, the Company deepened its
implementation of step-up transformation
while promoting reform and innovation
on all fronts. We also proactively
prospected the landscape for 5G
development and built all-rounded
competitive advantages. We accelerated
the development of new impetus, deeply
incentivised corporate vitality, strove to
break new ground in terms of high-quality
development, and remained committed to
creating new value for shareholders.
Net Profit
13.9%
In 2018, operating revenues of the
Company amounted to RMB377.1 billion,
of which, service revenues1 amounted to
RMB350.4 billion, representing an
increase of 5.9% compared to last year (if
excluding the impact of the application of
International Financial Reporting Standard
15 for the current year, it represented an
increase of 7.2% over last year), with
revenue growth having surpassed the
industry average for many consecutive
years. Revenues from emerging
businesses2 accounted for 51.9% of
service revenues, representing an increase
of nearly 6 percentage points compared
to last year following a continual
optimisation of the revenue structure.
EBITDA3 reached RMB104.2 billion,
representing an increase of 2.0% over the
same period last year. Net profit
amounted to RMB21.2 billion,
representing an increase of 13.9%
compared to last year, while basic
earnings per share were RMB0.262,
achieving rapid growth. Capital
expenditure was RMB74.9 billion,
representing a decrease of 15.5%
compared to last year, the third
consecutive annual decline. Free cash
flow4 reached RMB22.5 billion,
representing a remarkable increase
compared to last year.
DPS
8.7%
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.
Revenues from emerging businesses included revenues from data traffic, Internet applications and ICT
services.
EBITDA was calculated based on operating revenues minus operating expenses plus depreciation and
amortisation.
Free cash flow was calculated from EBITDA minus capital expenditure and income tax.
China Telecom Corporation Limited Annual Report 2018 011
Statement from the Board
Taking shareholder returns into
consideration, alongside the Company’s
profitability, cash flow level and capital
requirement for future development, the
Board of Directors has decided to
recommend at the forthcoming
shareholders’ meeting that a final dividend
equivalent to HK$0.125 per share for the
year 2018 to be declared, representing an
8.7% increase over the year 2017. Going
forward, the Company will continue to
create shareholder value, while fully
balancing the cash flow required for the
long-term development of the Company
with returns to shareholders.
Taking Business Operation and
Development to the Next Level
In 2018, the Company seized the precious
opportunities arising from the benefits
released from data traffic, while actively
capitalising on increasing demand from
corporates subscribing for cloud services.
The Company expedited products
innovation, promoted overall upgrade of
its services convergence, strengthened its
network edges, and improved its
operational capability. As a result, the
Company rapidly improved its
competitiveness, achieved a record high
pace in terms of market expansion, and
rapidly magnified its growth momentum.
012
New breakthroughs in business
scale
The Company’s mobile service revenues
amounted to RMB167.7 billion,
representing an increase of 9.1%
compared to last year. The total number
of mobile subscribers reached 303 million,
a net addition of 53.04 million
subscribers, which hit a record high. The
market share of mobile subscribers net
addition reached 44%, while overall
market share increased to 19.6%. Out of
this, the number of 4G subscribers was
242 million, a net addition of 60.39
million, maintaining an all-time high pace
of growth. 4G penetration rate reached
80%, making the Company an industry
leader. Aggregate handset data traffic
also grew strongly by nearly 3 times, with
4G DOU reaching 5.5GB. Handset Internet
access revenue grew by 22.4% compared
to last year. Wireline service revenues
Total Number of
Mobile Subscribers Exceeded
300Mil
Net Addition
Hit Historical High
amounted to RMB182.7 billion,
representing an increase of 3.1%
compared to last year. The number of
wireline broadband subscribers reached
146 million, a net addition of 12.26
million, achieving a 6-year high. Out of
this, the proportion of wireline broadband
subscribers of 100Mbps or above
accounted for 66%.
Fostering new impetus
The growth of revenues from the
Company’s Intelligent Applications
ecospheres5 accelerated further and
contributed over 50% to incremental
service revenues. With “cloudification”6
on all fronts, the development of the
Company’s DICT and Internet of Things
Intelligent
Applications Ecospheres
Revenues
50%
of Incremental
Service Revenues
Statement from the Board
(IoT) businesses was accelerated by the
uptake of cloud-network integration and
IoT-cloud integration. Revenues from IDC
and cloud services increased by 22.4%
and 85.9% respectively compared to last
year, contributing nearly 2 percentage
points to service revenues growth. The
Company made further breakthroughs in
accelerating the growth of IoT services,
with IoT revenue and the scale of
connected devices doubled yet again.
With the overall upgrade of services
convergence, the Company rapidly
expanded the market through the
bundling of “large data traffic, 100Mbps
broadband, and Smart Family” products.
The number of e-Surfing HD (IPTV)
subscribers reached a new high of above
100 million, enabling Smart Family
application to achieve a meaningful scale.
The Company also built an integrated
platform for Internet Finance, resulting in
synergies with the mobile business to
promote mutual scale development. The
number of average monthly active users
of BestPay exceeded 43 million, and the
aggregate gross merchandise value for the
year exceeded RMB1.6 trillion.
Taking a New Step in Corporate
Transformation
Taking advantage of the historical
opportunities brought about by industrial
integration, consumption upgrade and
new technological breakthroughs, the
Company built on its current achievements
and forged ahead. Focusing on our three
major goals of “building Cyberpower,
building first-class enterprise, and building
better lives”, we expedited step-up
5
6
Intelligent Applications ecospheres include ecospheres of Smart Family, DICT, IoT and Internet Finance. DICT
is the converged smart application service integrating three technologies, namely communications
technology, information technology and cloud & Big Data technology.
Cloudification refers to the comprehensive upgrade of services and network to cloud in terms of
infrastructure, products service capabilities and sales mode, with a focus on cloud computing.
China Telecom Corporation Limited Annual Report 2018 013
Statement from the Board
transformation on all fronts, and further
promoted reform and innovation. We
continued to strengthen our capabilities at
all levels, while planning future
development from all angles.
Propelling intelligent upgrade of
network in response to customer
needs
Focusing on user experience, business
scale expansion and value management,
the Company pushed forward the
construction and intelligent upgrade of its
network to build up comprehensive
network advantages. Leveraging Big Data
analysis, we deployed dynamic capacity
expansion of 4G network with precision,
and further optimised in-depth coverage
at key locations. The number of 4G base
stations reached 1.38 million, effectively
supporting the upgrade to VoLTE high
definition voice, as well as the continuous
growth of large data traffic business. Our
fibre network now fully covers all cities
and towns in the service area of the
Company, enabling a leading customer
experience. By leading the deployment of
Gigabit fibre broadband, we established a
new edge in broadband network. We
continued to enhance our NB-IoT network,
and built a whole-range speed rate IoT
structure, which combines high, medium
and low speeds, supporting further
expansion in vertical industries. By pushing
forward cloud-network integration at full
throttle, we continued to optimise our
nationwide deployment of cloud resources
and backbone network coverage, resulting
in the establishment of a cloud-led
network. By introducing new technologies
such as Software-Defined Networking
(SDN) and Network Functions
Virtualisation (NFV), the Company
accelerated the re-constitution of its
networks, and rolled out scale promotion
of intelligent self-selecting bandwidth
network products for government and
enterprise customers as well as home
gateway products based on SDN
technology, which allows our network
products to be activated within minutes.
We also launched a VoLTE virtual IP
Multimedia Subsystem (vIMS) core
network with software and hardware
decoupling, facilitating the progress of
cloudification and virtualisation. This
significantly strengthened our
competitiveness and differentiation in the
cloud market, while laying a foundation
for 5G network cloudification in the
future. The Company proactively
contributed to the formulation of
international standards for 5G
technologies and conducted large-scale
network trial runs in a number of
locations. We achieved some preliminary
progress in areas such as voice call, 4G/5G
interoperability, and interoperability
between equipment, among others. By
supporting the Ultra HD live broadcast for
CCTV’s 2019 Spring Festival Evening Gala
with “5G+4K” and “5G+VR” solutions,
we took an important step towards the
successful accomplishment of enhanced
mobile broadband (eMBB) application
scenarios. The Company also actively
explored applications for other vertical
industries, such as 5G autonomous driving
bus, smart water treatment and mobile
remote medical service.
Integration and mutual
development: supporting the swift
expansion of service ecology
The Company accurately grasped changing
market demand and expanded the market
by leveraging its data traffic and cloud
products, cultivating convergence
operation, and effectively bundling its
services. As a result, the overall
014
Statement from the Board
competitiveness of our bundled products
was significantly strengthened, which
facilitated rapid breakthroughs in
expanding market scale, thereby creating
new avenues for value growth. The
synergies that resulted from the
integration and mutual development of
our five ecospheres enabled us to explore
new paths towards future sustainable
development.
In the field of Intelligent Connections,
insisting on customers’ value
management, we upgraded convergence
to expand in the incremental market space
and extend our reach to the fields of
content, applications and services. We
also broadened sales channels and
promoted products value, laying a
foundation for Intelligent Applications
such as e-Surfing HD, DICT, and IoT to
grow rapidly. In the field of Smart Family,
by leveraging e-Surfing HD service as a
portal, we developed a number of
differentiated core applications including
Smart Home Networking services and
family cloud products. We expanded our
extensive range of smart home products
and implemented strategic planning in
Ultra HD video market ahead of time, in
order to grab the opportunities from
consumption upgrade of smart home
products. In the field of DICT, we
strengthened the edge from cloud-
network integration, and continued to
drive the development of dedicated line,
DICT and IoT services through
“cloudification”. This allowed us to
vigorously expand our solutions and
service capabilities for supporting vertical
industry applications and proactively
explore the applications of 5G
technologies in areas such as smart cities,
autonomous driving, and industrial
Internet. We also explored new business
models by leveraging features of 5G
technologies to enable vertical industries.
In the field of IoT, in order to extend to
the high end of the industry value chain,
we leveraged our competitive edges in
network and platforms to quickly expand
application scenarios and explore
application services based on IoT-cloud
integration and data operation. In the
field of Internet Finance, riding the
momentum from China’s leadership in
global mobile payments, the number of
BestPay customers and participating
merchants grew rapidly alongside the
gross merchandise value. We also
developed red packet and instalment
payment platforms, which significantly
boosted the stickiness of mobile
subscribers and fuelled strong subscriber
growth, while also effectively promoted
the expansion of new retail and integrated
retail channels.
The integration and mutual development
of ecospheres achieved outstanding
results. The triple-play penetration rate7 of
broadband subscribers reached 65%,
representing an increase of 13 percentage
points compared to last year. Out of this,
the penetration rate of e-Surfing HD
subscribers reached 72%, effectively
expanding the potential market space for
Smart Family. The growth of DICT revenue
exceeded 20%, gradually becoming a new
growth driver for the Company. The
number of IoT connected devices
exceeded 100 million, moving into the
fast track of development and accelerating
readiness for the arrival of 5G era. Active
participating merchants of BestPay more
than doubled, enabling the mobile
payment ecosystem to become a key
means of differentiation in mobile
business development.
7
Triple-play penetration rate represented the proportion of broadband subscribers who also subscribe for
mobile and e-Surfing HD services at the same time.
China Telecom Corporation Limited Annual Report 2018 015
Statement from the Board
Higher efficiency from intelligent
and data-driven operation
Following the consolidation of our IT
infrastructure and the greater adoption of
new technologies such as Big Data and
artificial intelligence (AI), the Company
injected more intelligent elements into
operation, leading to efficiency
improvement and productivity
enhancement. Our data utilisation
capability was also enhanced considerably.
We continued to intensify our efforts to
establish a corporate core backed by data
utilisation and completed IT cloudification,
which facilitated the transformation of IT
towards agile development, agile
operation and intelligent decision-making,
in order to develop an open system for
digital capabilities. Our channel
operational capability continued to
strengthen with the establishment of an
integrated channel system of “self-owned
+ third party”, “online + offline” and
“platform + sales reach” channels. The
proportion of customers acquired from
online channels increased significantly.
The coverage rate of precision marketing
backed by Big Data exceeded 60%, which
enabled per customer acquisition costs to
decline by over 15%. The advantages of
intelligent customer service capability have
begun to emerge. As we progressively
introduced AI-based customer service,
service volume delivered by chatbots
reached 460 million times, while the
proportion of interactions facilitated by
intelligent voice services exceeded 30%.
We have the lowest customer complaint
rate in the industry, and are currently
ranked the industry’s best for customer
satisfaction with mobile and broadband
services as well as in overall terms. Our
network operational capability also
reached a new level. In-depth end-to-end
quality assurance for our mobile business
was carried out, while our fibre broadband
business has formed a closed loop of
“probe management — quality monitoring
— network optimisation”. Our
management and operational capabilities
have steadily enhanced, while our
efficiently-centralised and co-sharing
financial capability has continued to
improve. We also pushed forward
centralised procurement as well as
centralised supply chain, while
continuously improving the efficiency of
resource allocation and value
management. We also strengthened our
risk prevention and control mechanisms,
ensuring our ongoing sustainable and
healthy corporate development.
Renewed Vitality through
Reform and Innovation
The Company sought to implement reform
and foster innovation in all parts of its
operation, constantly enhancing the
vitality of corporate development and
operational capability. We continued
deepening the three-dimensional inter-
driven reform and mixed ownership
reform in the emerging areas, which
deeply stimulated the vitality of corporate
development. We also intensified the
reform of “Sub-dividing Performance
Evaluation Units, Professional Operation,
and Top-Down Service Support System”,
through which we introduced a
mechanism for market-oriented
recruitment, incentivisation and resource
016
Statement from the Board
allocation. As a result, we effectively
motivated our employees and improved
the efficiency of sub-dividing operation.
The aggregate number of sub-dividing
performance evaluation units reached
nearly 60,000, which basically covers our
entire frontline units. We laid a solid
foundation for leapfrog development,
with our BestPay company completing the
introduction of first round strategic
investors, which helped diversify its
shareholding structure and push forward
mixed ownership reform. The Company
also promoted its ecological endowment
and accelerated the reform of
technological innovation system, focusing
on the enhancement of operational
capability. We also formed a new
blueprint with capability development
centres in areas such as cloud, DICT
applications, Smart Family and IoT. We
beefed up headquarters’ overall planning,
strengthened our expansion in local
markets, and elevated the core capability
of our products and our business scale.
We also restructured our R&D system and
consolidated our research capability by
launching China Telecom Research
Institutes and 5G Innovation Centre. We
also made further breakthroughs in
reforming our career advancement and
employee incentive mechanism for
technical talents, enabling us to master
key technologies in the field of
information communications.
Corporate Governance and
Social Responsibility
We have always been committed to
upholding a high level of corporate
governance and insist on governing the
Company in accordance with laws and
regulations. We attach great importance
to risk management and control, and have
continuously enhanced corporate
transparency to ensure the healthy and
sustainable growth of the Company. Our
efforts have been widely recognised by
the capital market. In 2018, we once
again received a number of awards,
including “Most Honoured Company in
Asia”, awarded by Institutional Investor,
for the eighth consecutive year. We were
also awarded “Best Managed Company”
and received a special accolade of “Most
Honoured Company (2009-2018)” by
FinanceAsia. In addition, we were also the
only telecom operator in mainland China
and Hong Kong awarded the “Most
Outstanding Company in Hong Kong
— Telecommunication Services Sector” by
Asiamoney. Other awards received
included “The Best of Asia — Icon on
Corporate Governance” by Corporate
Governance Asia; “Platinum Award —
Excellence in Environmental, Social and
Governance” and “Best Initiative in
Diversity and Inclusion” by The Asset.
These awards demonstrate the Company’s
excellent level of execution, as well as its
leading position in the industry within the
Asia Pacific region.
China Telecom Corporation Limited Annual Report 2018 017
Statement from the Board
We continued to proactively meet our
social responsibility obligations, while
adhering to the principles of innovation,
coordination, environmentalism, openness
and sharing. In line with our status as a
major force for constructing “Cyberpower,
Digital China and Smart Society” and as a
network infrastructure provider, we
continued to implement the “Speed
Upgrade and Tariff Reduction” policy, by
cancelling domestic data roaming fees as
of 1 July 2018, which benefited our
customers and propelled the upgrade of
information consumption and industrial
digitalisation. In addition, we earnestly
carried out industry regulatory policies,
maintained market order and protected
customers’ rights. We safeguarded
network and information security, striving
to create a clean and healthy cyberspace.
We also fulfilled our obligations to
customers and enhanced the capability
and efficiency of our smart services. We
also actively provided platforms for our
employees to display their talents, and
fostered coordinated value enhancement
between individuals and the Company. By
pushing forward energy saving and
emissions reduction, as well as green
development, the per unit general energy
consumption of information data traffic
was reduced by 16.8% year on year.
Through the co-building and co-sharing of
communications infrastructure, we also
effectively reduced the duplication of
projects. Through our proactive adherence
to “the Belt and Road” initiative, we
connected cross-border information
passageways across the Guangdong-Hong
Kong-Macau Greater Bay Area, and
achieved a number of breakthroughs in
the construction of strategic passageways,
thereby progressively enhancing our
capability to provide global network
resource services. We also received a high
level of recognition and appreciation from
the wider society for our efforts in
successfully delivering telecommunication
assurance for major conferences and
events including The Shanghai
Cooperation Organisation (SCO) Qingdao
Summit, as well as for combating flooding
and disaster relief.
Outlook
At present, the national economy has
entered a stage of high-quality
development, which is accelerating the
conversion of old impetus into new ones.
New technologies represented by 5G and
AI are integrating and evolving, enabling
them to support supply-side structural
reforms, which will lead to a rapid
China Telecom performed the first 5G HD live broadcast
of Hangzhou Marathon
018
Statement from the Board
as the core, the Company will
continuously push forward with
“cloudification” and accelerate ecological
endowment. The Company will build a
“Trinity” value management system,
featuring convergence, integration and
intelligentisation, for high-quality
development, while marching towards
becoming a leading integrated intelligent
information services provider and
constantly creating new value for
shareholders.
Finally, on behalf of the Board of
Directors, I would like to take this
opportunity to express our sincere
appreciation to all our shareholders and
customers for their support. I would also
like to express our sincere thanks to all
our employees for their hard work and
contributions. Furthermore, I would like to
extend our sincere gratitude towards Mr.
Yang Jie for his outstanding contributions
towards step-up transformation and
sustainable development of the Company
during his tenure. At the same time, I
would like to welcome Madam Zhu Min
and Mr. Yeung Chi Wai, Jason to our
Board of Directors team.
Ke Ruiwen
Executive Director, President and
Chief Operating Officer
Beijing, China
19 March 2019
expansion of potential value for digital
economy. As the next generation
infrastructure, 5G network will become
even more intertwined with applications
and telecom operators will play an
increasingly pivotal role in the information
communications industry. The Company
will actively explore commercial
applications of various new technologies,
accelerate the development of operation
mechanisms that are adapted for 5G, and
capitalise on its advantages to promote
ecological services ahead of time.
Recently, China Telecom was awarded the
3.5GHz band to conduct nationwide 5G
network trials. Leveraging the advantages
of the 5G mainstream frequency band and
insisting on open cooperation, we will
accelerate 5G deployment proactively and
pragmatically. Persisting in a market-
oriented and demand-driven approach, we
will appropriately manage the momentum,
propel the development of non-standalone
(NSA) and standalone (SA) concurrently,
and progressively expand the scale of
network trials and the pilot project of
2B/2C applications.
Whilst the vigorous development of digital
economy has presented us with historical
opportunities, we are clearly aware that
our future external environment is
becoming complicated and challenging.
While the macro economy is facing
downward pressure, cross-industry and
homogeneous competition is also
becoming increasingly intense. As a result,
transforming development model and
pursuing high-quality development have
now become the Company’s top priorities.
Persisting in the principle of new
development and supply-side structural
reforms, the Company will accelerate its
advancement towards high-quality
development, and proactively fulfill the
requirements of “Speed Upgrade and
Tariff Reduction”. With scale development
as the foundation and value management
China Telecom Corporation Limited Annual Report 2018 019
Biographical Details of Directors,
Supervisors and Senior Management
Mr. Ke Ruiwen
Age 55, is an Executive Director, President and Chief
Operating Officer of the Company, joined the Board
of Directors of the Company in May 2012 and has
exercised the powers of the Chairman and Chief
Executive Officer of the Company since 8 March
2019. 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, Executive Vice
President of the Company, Vice President of China
Telecommunications Corporation and the Chairman
of Supervisory Committee of China Tower
Corporation Limited. He is also a Director and
President of China Telecommunications Corporation.
Mr. Ke has extensive experience in management and
the telecommunications industry.
Mr. Gao Tongqing
Age 55, is an Executive Director and Executive Vice
President of the Company, joined the Board of
Directors of the Company in May 2017. Mr. Gao
graduated from the Changchun Institute of Posts and
Telecommunications with a major in
telecommunications engineering and received a
doctorate degree in business administration from the
Hong Kong Polytechnic University. Mr. Gao served as
Deputy Director General of Xinjiang Uygur
Autonomous Region Posts and Telecommunications
Administration, Deputy General Manager and General
Manager of Xinjiang Uygur Autonomous Region
Telecom Company and General Manager of China
Telecom Jiangsu branch. He is also a Vice President of
China Telecommunications Corporation. Mr. Gao has
extensive experience in management and the
telecommunications industry.
020
Biographical Details of Directors,
Supervisors and Senior Management
Mr. Chen Zhongyue
Age 47, is an Executive Director and Executive Vice
President of the Company, joined the Board of
Directors of the Company in May 2017. Mr. Chen
received a bachelor degree from Shanghai
International Studies University, a master degree in
economics from Zhejiang University and an executive
master of business administration (EMBA) from
Xiamen University. Mr. Chen served as Deputy
General Manager of China Telecom Zhejiang branch,
Managing Director of the Public Customers
Department of the Company and China
Telecommunications Corporation and General
Manager of China Telecom Shanxi branch. He is also
a Vice President of China Telecommunications
Corporation. Mr. Chen has extensive experience in
management and the telecommunications industry.
Madam Zhu Min
Age 54, is an Executive Director, Executive Vice
President, Chief Financial Officer and Secretary of the
Board of the Company, joined the Board of Directors
of the Company in October 2018. Madam Zhu is a
senior accountant. She received a master degree in
system engineering from the Faculty of Management
Engineering at the Beijing Institute of Posts and
Telecommunications and a doctorate degree in
business administration from the Hong Kong
Polytechnic University. Madam Zhu served as
Managing Director of Finance Department of China
Telecom (Hong Kong) Limited, Managing Director of
Finance Department of China Mobile (Hong Kong)
Group Limited, Deputy Chief Financial Officer and
Managing Director of Finance Department of China
Mobile Limited, Director General of Finance
Department of China Mobile Communications
Corporation, Deputy Chief Accountant and Director
General of Finance Department of China Mobile
Communications Group Co., Ltd. and Director of
Shanghai Pudong Development Bank Co., Ltd.. She is
currently the Chief Accountant of China
Telecommunications Corporation. Madam Zhu has
extensive experience in finance, management and the
telecommunications industry.
China Telecom Corporation Limited Annual Report 2018 021
Biographical Details of Directors,
Supervisors and Senior Management
Mr. Chen Shengguang
Age 55, is a Non-Executive Director of the Company,
joined the Board of Directors of the Company in May
2017. Mr. Chen graduated from Zhongnan University
of Economics with a major in finance and accounting,
and obtained a postgraduate degree in economics
from Guangdong Academy of Social Sciences and a
master degree in business administration (MBA) from
Lingnan College of Sun Yat-sen University. Mr. Chen
is currently the Director and General Manager of
Guangdong Rising Assets Management Co., Ltd. (one
of the domestic shareholders of the Company). Mr.
Chen served as the Manager of Finance Department
and Deputy General Manager of Guangdong Foreign
Trade Import & Export Corporation, Head of Finance
Department, Assistant to General Manager and Chief
Accountant of Guangdong Guangxin Foreign Trade
Group Co., Limited, Director of FSPG Hi-Tech Co.,
Ltd., Non-Executive Director of Xingfa Aluminium
Holdings Limited, Director of Guangdong Silk-Tex
Group Co., Ltd., Chief Accountant and Deputy
General Manager of Guangdong Guangxin Holdings
Group Ltd.. Mr. Chen has extensive experience in
finance and corporate management.
022
Biographical Details of Directors,
Supervisors and Senior Management
Mr. Tse Hau Yin, Aloysius
Age 71, is an Independent Non-Executive Director of
the Company, joined the Board of Directors of the
Company in September 2005. Mr. Tse is currently an
Independent Non-Executive Director of CNOOC
Limited, Sinofert Holdings Limited, SJM Holdings
Limited and China Huarong Asset Management Co.,
Ltd., all of 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 also an Independent Non-
Executive Director of Daohe Global Group Limited
(formerly known as “Linmark Group Limited”), which
is listed on the HKSE Main Board, from 2005 to 2016.
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 2018 023
Biographical Details of Directors,
Supervisors and Senior Management
Professor Xu Erming
Age 69, is an Independent Non-Executive Director of
the Company, joined the Board of Directors of the
Company in September 2005. Professor Xu is a
professor and Dean of Business School of Shantou
University and Vice Chairman of the Chinese
Enterprise Management Research Association. He is
entitled to the State Council’s special government
allowances and is the Independent Non-Executive
Director of Comtec Solar Systems Group Limited.
Professor Xu served as a professor, Ph.D supervisor of
the Graduate School and Dean of Business School at
the Renmin University of China, and the Independent
Supervisor of Harbin Electric Company Limited. Over
the years, Professor Xu has conducted research in
areas related to strategic management, innovation
and entrepreneurship 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 awarded the Fulbright Scholar
of U.S.A. twice and the visiting scholar of McGill
University, Canada. 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, Panyapiwat Institute of
Management, Thailand and the Hong Kong
Polytechnic University.
024
Biographical Details of Directors,
Supervisors and Senior Management
Madam Wang Hsuehming
Age 69, is an Independent Non-Executive Director of
the Company, joined the Board of Directors of the
Company in May 2014. Madam Wang received a
bachelor of arts degree from the University of
Massachusetts and attended Columbia University. She
was a Senior Advisor and former Chairman of
BlackRock China. She was also the former Chairman
of China at Goldman Sachs Asset Management. She
joined Goldman Sachs in 1994, became a Partner in
2000 and an Advisory Director from 2010 to 2011.
With nearly 30 years of experience in financial
services, she participated in pioneering efforts in
China’s economic reform and development. She was
instrumental in advising Ministry of Posts and
Telecommunications and Ministry of Information
Industry (now known as Ministry of Industry and
Information Technology) in the privatisations and
listings of its mobile and fixed line businesses. She
also participated in advising appropriate operators in
strategic investments by international telecom
companies. The early cross-border financings of
aircraft and other capital equipment in China’s
aviation sector, as well as the separate listings of
national airlines, and important provincial and
municipal credit restructurings also formed part of
Madam Wang’s understanding of China’s economic
growth in the past three decades.
China Telecom Corporation Limited Annual Report 2018 025
Biographical Details of Directors,
Supervisors and Senior Management
Mr. Yeung Chi Wai, Jason
Age 64, is an Independent Non-Executive Director of
the Company, joined the Board of Directors of the
Company in October 2018. Mr. Yeung is currently the
Group Chief Compliance and Risk Management
Officer of Fung Holdings (1937) Limited and its listed
companies in Hong Kong, an Independent Non-
Executive Director of Bank of Communications Co.,
Ltd. and a member of Hospital Authority Board of
Hong Kong. He served as an Independent Non-
Executive Director of AviChina Industry & Technology
Company Limited. Mr. Yeung has extensive
experience in handling legal, compliance and
regulatory matters and previously worked in the
Securities and Futures Commission of Hong Kong,
law firms and enterprises practising corporate,
commercial and securities laws. Mr. Yeung served as
a Director and the General Counsel of China
Everbright Limited and was also a partner of Woo,
Kwan, Lee, & Lo.. He acted as the Board Secretary of
BOC Hong Kong (Holdings) Limited from 2001 to
2011 and concurrently acted as the Board Secretary
of Bank of China Limited from 2005 to 2008. He also
served as the Deputy Chief Executive (Personal
Banking) of Bank of China (Hong Kong) Limited from
April 2011 to February 2015. Mr. Yeung received a
bachelor degree in social sciences from the University
of Hong Kong. He then graduated from The College
of Law, United Kingdom and received a bachelor
degree in law and a master degree in business
administration from the University of Western
Ontario, Canada.
026
Biographical Details of Directors,
Supervisors and Senior Management
Mr. Zhang Zhiyong
Age 53, was appointed as an Executive Vice President
of the Company on 10 July 2018. Mr. Zhang is a
senior engineer. He graduated from the Changchun
Institute of Posts and Telecommunications with a
bachelor degree in radio engineering. He also
received a master degree in control engineering from
Yanshan University and a master of management
degree from BI Norwegian School of Management.
Mr. Zhang served as Managing Director of the
Sideline Industrial Management Department of China
Telecommunications Corporation, President and
Executive Director of China Communications Services
Corporation Limited, General Manager of Xinjiang
branch and Beijing branch of China Telecom
Corporation Limited. He is also a Vice President of
China Telecommunications Corporation, the
Chairman of the board of directors and an Executive
Director of China Communications Services
Corporation Limited and a Non-Executive Director of
China Tower Corporation Limited. Mr. Zhang has
extensive experience in management and the
telecommunications industry.
Mr. Liu Guiqing
Age 52, was appointed as an Executive Vice President
of the Company on 10 July 2018. Mr. Liu is a
professor-level senior engineer. He received a
doctorate degree in engineering science from
National University of Defense Technology. Mr. Liu
served as Deputy General Manager and General
Manager of China Unicom Hunan branch and General
Manager of China Unicom Jiangsu provincial branch.
He is also a Vice President of China
Telecommunications Corporation. Mr. Liu has
extensive experience in management and the
telecommunications industry.
China Telecom Corporation Limited Annual Report 2018 027
Biographical Details of Directors,
Supervisors and Senior Management
Mr. Wang Guoquan
Age 46, was appointed as an Executive Vice President
of the Company on 11 March 2019. Mr. Wang
received an executive master degree of business
administration (EMBA) from Business School, Renmin
University of China. Mr. Wang served as Deputy
General Manager and General Manager of the China
Telecom Hebei branch and General Manager of the
Marketing Department of China Telecommunications
Corporation. He is also a Vice President of China
Telecommunications Corporation and a director of
Besttone Holding Co.,Ltd.. Mr. Wang has extensive
experience in management and the
telecommunications industry.
Supervisors
Mr. Sui Yixun
Age 55, is the Chairman of the Supervisory Committee of the Company, joined the Supervisory Committee of
the Company in May 2015. Mr. Sui is currently the Managing Director of audit department of the Company, a
Supervisor of Tianyi Telecom Terminals Company Limited and a Supervisor of China Tower Corporation Limited.
Mr. Sui received a bachelor degree from Beijing Institute of Posts and Telecommunications and a master degree
in business administration from Tsinghua University. Mr. Sui served as Deputy General Manager of China
Telecom Shandong branch, Deputy General Manager of the Northern Telecom of China Telecommunications
Corporation and General Manager of China Telecom Inner Mongolia Autonomous Region branch. Mr. Sui is a
senior economist and has extensive experience in operational and financial management in the
telecommunications industry.
Mr. Zhang Jianbin
Age 53, is an Employee Representative Supervisor of the Company, joined the Supervisory Committee of the
Company in October 2012. 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.
028
Biographical Details of Directors,
Supervisors and Senior Management
Mr. Yang Jianqing
Age 59, is an Employee Representative Supervisor of the Company, joined the Supervisory Committee of the
Company in May 2017. Mr. Yang is currently the senior consultant of Corporate Culture Department of the
Company. Mr. Yang graduated from the Beijing Institute of Posts and Telecommunications with a bachelor
degree in 1982 and obtained a master degree in business administration from the University of Hong Kong. Mr.
Yang served as Director General of Xining Telecommunications Bureau in Qinghai province, Deputy General
Manager and General Manager of China Telecom Qinghai branch, General Manager of China Telecom Gansu
branch, financial controller of the Company and General Manager of Corporate Culture Department of the
Company. Mr. Yang is a senior engineer and has extensive experience in operational and financial management
in the telecommunications industry.
Mr. Xu Shiguang
Age 39, is a Supervisor of the Company, joined the Supervisory Committee of the Company in October 2018.
Mr. Xu is currently the Director of general office of audit department of the Company. Mr. Xu received a
bachelor degree in auditing and a master degree in accounting from the Nankai University and is studying the
PhD course at the Chinese Academy of Fiscal Sciences. Mr. Xu served at various positions in internal control and
auditing at China Telecommunications Corporation for many years. Mr. Xu is a member of the Chinese Institute
of Certified Public Accountants and a Certified Internal Auditor with extensive experience in internal control and
auditing.
Mr. Ye Zhong
Age 59, is a Supervisor of the Company, joined the Supervisory Committee of the Company in May 2015. Mr. Ye
is a senior accountant. He holds a bachelor degree. Mr. Ye is the Director of Zhejiang Provincial Financial
Holdings Co., Ltd., Chairman and General Manager of Zhejiang Provincial Innovation and Development
Investment Co. Ltd., and Chairman of Zhejiang Financial Market Investment Co. Ltd.. Mr. Ye served as Deputy
General Manager of Zhejiang Financial Development Company (one of the domestic shareholders of the
Company), Chairman of Zhejiang Venture Capital Fund of Funds Management Co. Ltd., Chairman and General
Manager of Zhejiang Agricultural Investment and Development Fund Co. Ltd., Chairman and General Manager
of Zhejiang Infrastructure Investment (including PPP) Fund Co. Ltd., Director of Zhejiang Provincial Industry Fund
Co., Ltd., Deputy Director of the Social Security Division of the Department of Finance of Zhejiang Province,
Deputy Director of the Discipline Inspection Division and Director of Supervisory Office of the Department of
Finance of Zhejiang Province delegated by the Discipline Inspection Commission and Department of Supervision
of Zhejiang Province. Mr. Ye has extensive experience in government’s work and state-owned enterprise
management.
China Telecom Corporation Limited Annual Report 2018 029
Co-creating Brand-new Models to
Build New Intelligent Coverage
Management’s Discussion and Analysis
Business Review
The following table sets out the key operating data for 2016, 2017 and 2018:
Mobile subscribers
of which: 4G subscribers
Mobile voice usage
Handset data traffic
4G subscribers DOU
Wireline broadband subscribers
of which: Fibre-to-the-Home
(FTTH) subscribers
e-Surfing HD subscribers
Internet of Things connected
devices
BestPay average monthly active users
Access lines in service
Wireline local voice usage
Unit
2016
2017
2018
Million
Million
Million minutes
kTB
GB/month/user
Million
215.00
121.87
720,566
1,277
1.0
123.12
249.96
182.04
769,152
3,597
2.0
133.53
303.00
242.43
827,724
14,073
5.5
145.79
2018
change
over 2017
21.2%
33.2%
7.6%
291.2%
182.3%
9.2%
Million
Million
105.99
61.33
126.17
85.76
140.66
105.35
11.5%
22.8%
Million
Million
Million
Million pulses
14.19
16.21
126.86
93,403
44.30
33.00
121.80
75,144
106.93
43.41
116.48
60,213
141.4%
31.5%
–4.4%
–19.9%
World
Internet
Con ference
032
Management’s Discussion and Analysis
Business Review
In 2018, the Company adhered to the new
development principles, deepened reform
and innovation, and continued to promote
network intelligentisation, service
ecologicalisation, and operation
intellectualisation. The Company also
accelerated scale development, improved
quality and efficiency and continuously
increased its corporate value.
Key Operating Performance in
2018
1. Healthy growth in operating
revenues and continuous
optimisation of business
structure
In 2018, the Company’s operating
revenues increased by 3.0% year on
year to RMB377.1 billion. Service
revenues increased by 5.9% year on
year to RMB350.4 billion. The
Company’s revenue structure was
further optimised, with revenues
from emerging businesses accounting
for 51.9% of service revenues, up
nearly 6 percentage points year on
year. Of which, handset Internet
access revenue and DICT revenue
increased by 22.4% and 21.4%
respectively year on year, forming
the major drivers of revenue growth.
DICT Revenue
21.4%
World Conference on VR Industry
China Telecom Corporation Limited Annual Report 2018 033
Management’s Discussion and Analysis
Business Review
2. Capitalising on opportunities
arising from the development
of large data traffic business:
scale expansion of mobile
business reached a new high
In 2018, mobile subscribers net
addition of the Company was 53.04
million, which represented an
increase of 51.7% compared to last
year and was the all-time high in the
Company’s history. The total number
of mobile subscribers now exceeds
300 million, with market share
climbing to 19.6%, representing an
increase of 2.0 percentage points
compared to the end of last year. Of
which, 4G subscribers reached 242
million, with a net addition of 60.39
million.
Six-Year High
Broadband Subscribers
Net Addition
303.00
21.2%
242.43
33.2%
133.53
126.17
145.79
9.2%
140.66
11.5%
Mobile
4G
Mobile
Subscribers
(Million)
Broadband
FTTH
Wireline
Broadband
Subscribers
(Million)
2017 2018
2017
2018
249.96
182.04
034
Management’s Discussion and Analysis
Business Review
The Company firmly grasped
opportunities brought by the rising
demand for data consumption, and
further sped up the expansion of
mobile subscribers scale. The market
share of mobile subscribers net
addition reached 43.6%, ranking the
first in the industry. While
maintaining the strategy to position
large data traffic packages as the key
products, the Company optimised its
package portfolio and reduced the
number of packages. Focusing on
cooperation with Internet companies
leading in video and e-commerce
areas, the Company promoted the
convergence of large data traffic,
content, applications and users-only
offers. Leveraging on differentiation
advantages from BestPay red packet
and Orange Instalment Payment
Service, the Company strengthened
the coordination among channels
and enhanced user experience to
drive volume and value growth of
data traffic. As a result, handset data
traffic and handset Internet access
revenue registered increases of
291% and 22.4% year on year,
respectively. User satisfaction with
the Company’s handset Internet
access ranked the first in the
industry. The Company insisted on
the multi-mode handset strategy,
promoted industry chain
development, and published the
industry’s first white paper on multi-
mode AI handsets. The accumulated
number of multi-mode handsets
within the industry now exceeded 1
billion, maintaining a stable market
share of over 80% of the entire
handset market. In 2018, the number
of self-registered multi-mode
handsets of the Company was 160
million, an increase of 23% over the
previous year.
China Telecom Corporation Limited Annual Report 2018 035
Management’s Discussion and Analysis
Business Review
3. Comprehensive Smart Family
services upgrade, with
leadership in broadband
service quality maintained
In 2018, the Company’s wireline
broadband subscribers net addition
was 12.26 million, with the total
number of subscribers reaching 146
million, of which, subscribers of
100Mbps or above accounted for
66%. The e-Surfing HD subscribers
net addition was 19.59 million, with
the total number of subscribers
reaching 105 million.
Insisting on the positioning of Gbps
service as the Company’s top
broadband product and a
convergence-driven development
approach, the Company fulfilled the
needs of individual and family
consumers with convergence
packages that feature high-speed
premium broadband, large data
traffic, e-Surfing HD, and Smart
Family applications. In this way, the
Company created new edges in
terms of smart broadband services,
with the net addition of broadband
subscribers reaching a six-year high.
Focusing on the needs of its family
customers, the Company scaled up
its introduction of Smart Family
applications, built a nationwide
Total Number of e-Surfing HD
Subscribers Exceeded
100Mil
Management investigated remote medical services infrastructure in Guizhou Provincial
People’s Hospital
036
Management’s Discussion and Analysis
Business Review
centralised platform for value-added
services, and unified previously
separate accounts for broadband and
e-Surfing HD services. The Company
also sourced popular content to
create members-only packages of
e-Surfing HD with movies and TV
shows, education and sports. This
enables a shift in the Company’s
business model from charging
connection fees to charging
membership-based fees, thereby
propelling the e-Surfing HD business
towards value creation. The
Company further enhanced the user
experience of family cloud, whose
subscribers number exceeded 26
million. The Company also built
professional Smart Family
engineering teams, and promoted
the standardisation of Smart Home
Networking service, whose number
of services delivered was close to 20
million times during the year. The
Company also maintained its leading
edge in broadband services, sped up
the upgrade of installation and
maintenance systems and
capabilities, and promoted services
and products upselling on top of
installation and maintenance. The
success rate for honouring the
Company’s “same-day installation,
same-day maintenance service
guarantee, compensation for service
delay” was significantly improved,
while the satisfaction rate for
broadband services continued to
outperform the industry.
4. Robust growth of emerging
businesses supported by
integration and mutual
development
In 2018, the growth of revenues
from the Company’s Intelligent
Applications ecospheres accelerated
and accounted for 16.9% of service
revenues, an increase of 2.2
percentage points compared to last
year. The Intelligent Applications
ecospheres also contributed over
50% of incremental service revenues
and increased revenue growth by 3.3
percentage points.
The Company sped up service
ecologicalisation through
enhancement of core product
capability induced by accelerated
ecosphere endowment. DICT
business achieved rapid growth, with
products capabilities centred on
cloud-network integration being
proactively promoted. The Company
developed industry dedicated lines
and dedicated cloud access, while its
IoT Connected Devices
Exceeded
100Mil
China Telecom Corporation Limited Annual Report 2018 037
Management’s Discussion and Analysis
Business Review
capability of developing holistic
industry cloud-network solutions was
significantly enhanced. The Company
also explored vertical “Internet+”
services area in detail, spurred
upgrade of conventional industries
with “Internet+” services and the
number of projects with annualised
revenue higher than RMB10 million
exceeded 100. DICT revenue
increased by 21.4%, of which,
revenue for cloud business increased
by 85.9% compared to last year. The
Internet of Things (IoT) business has
entered high-speed phase of
development. Based on the
framework of “Cloud – Pipes –
Devices – Applications”, the
Company continued to focus on
developing its core IoT capabilities
and providing one-stop solutions for
industrial IoT applications. Net
addition of IoT users doubled year on
year, with the number of connected
devices exceeding 100 million. IoT
revenue also doubled compared to
last year. Internet Finance ecosphere
also made new breakthroughs. The
Company leveraged the advantages
offered by its traditional channels to
Inauguration of China Telecom’s first Smart Sales Outlet
widely expand consumption
scenarios, while the Company’s
innovative integration of payment
channels provided one-for-all receipt
and payment solution. The number
of BestPay active participating
merchants increased by more than 2
times, while the number of average
monthly active users exceeded 43
million. Innovative products like
BestPay red packet and the Orange
Instalment Payment Service drove
mobile subscribers to increase by
approximately 20%, achieving
integration and mutual development
among ecospheres.
Broadband Service
User Satisfaction
Handset
Internet Access
User Satisfaction
Industry #1
Continued to
Outperform
the Industry
038
Management’s Discussion and Analysis
Business Review
5. Building three systems to
strengthen the foundation for
scale development
The Company continued to build
three systems in terms of ecosphere
products, customer management and
integrated sales channels,
surrounding the “Trinity” value
management system featuring
“convergence for scale expansion,
integration for application
development and intelligentisation
for efficiency enhancement”. Such
measures created competitive
advantages based on factors of
productivity plus capabilities, further
cemented the capability foundation
for scale development of the five
ecospheres.
The Company promoted the
construction of an ecosphere
products system, accelerated the
consolidation of its resources and
mechanism innovation, formed
capability development centres for
cloud, DICT applications, Smart
Family and IoT. The Company also
fostered high-quality products and
enhanced its supply-side capability.
Focusing on user experience and
value management, the Company
established a customer lifecycle
management system, injected
intelligent elements to and provided
ecological endowment for its
channels through precision
marketing leveraging Big Data. The
Company propelled the process of
existing customers upgrading to
multi-featured convergence packages
as well as large data traffic packages,
and commenced ongoing uplift of its
customer service quality. The
precision marketing backed by Big
Data covered more than 60% of the
Company’s customers, whereas the
triple-play penetration rate of
broadband subscribers increased by
12.7 percentage points compared to
last year. The Company built an
integrated sales channel system of
“self-owned + third-party”, “online
+ offline” and “platform + sales
reach” channels, in order to adapt to
the trend of sales channels’ step-up
transformation in the new retail era,
and to bolster efficiency and
effectiveness. As a result, the
proportion of outlets with high sales
volume further increased compared
to last year. The intelligent upgrade
of our self-owned outlets set a new
industry benchmark, while innovative
collaborations with third-party
channels expanded our sales reach.
Through extensive cooperation with
new retail stores, we also scaled up
the expansion of our integrated sales
channels. The operational capability
of our sales channels was
continuously enhanced, while the
establishment of a corporate core
was further promoted, injecting
intelligent elements to our marketing
and operational management. As a
result, average system processing
time for services was greatly
reduced, and operational efficiency
and customer experience were
significantly enhanced.
China Telecom Corporation Limited Annual Report 2018 039
Management’s Discussion and Analysis
Business Review
6. Progressive enhancement of
network capability, significant
uplift in perceptions of service
quality
With customer experience as the
focus, the Company continued to
promote the quality enhancement
and intelligent upgrade of its
network. To strengthen its
fundamental network, the Company
leveraged Big Data to enhance in-
depth coverage in key locations and
support dynamic capacity expansion
of its 4G network. The total number
of 4G base stations reached 1.38
million. Nationwide commercial trials
for VoLTE services were carried out.
Fibre network now fully covers all
cities and towns in the service area
of the Company. The Company
proactively explored the Gbps
market, with Gbps connections now
enabled in 180 cities. The bandwidth
of IP metropolitan network and
backbone network remained industry
leading. To maintain the leading
edges in attaining comprehensive IoT
network coverage, NB-IoT network
was optimised continuously, while
the scale of eMTC pilot trial was
expanded according to demand. The
Company accelerated cloud-network
integration, and carried out
coordinated deployment of IDC and
cloud resources to further enhance
its service capability. The Company
connected cloud resource pools with
the carrying network, enabling a
cloud-led network. Furthermore, the
Company introduced new
technologies of SDN/NFV, and rolled
out scale deployment of intelligent
user-customised network products as
well as home gateway products
based on SDN technology, which
allowed service activation within
minutes, and supported rapid access
to cloud services. By improving NFVI
standards and building virtualised
core networks, the Company
established a foundation for future
network cloudification.
040
Management’s Discussion and Analysis
Business Review
The Company built a comprehensive
customer service system involving all
aspects, processes and personnel in order
to enhance its customer service capability.
The Company optimised user experience
of its mobile network, offered equal rights
to new and existing subscribers, and
provided higher transparency regarding
customers’ spending. The Company also
enhanced user experience of its
broadband speed as well as video service
quality, strengthened cloud-network
integration and IoT service system, and
offered relevant one-stop solutions. As a
result, the Company achieved the lowest
rate of complaints and the highest
satisfaction level in overall terms in the
industry. The advantages of the
Company’s intelligent customer service
capability began to emerge, with the
roll-out of “Smart 10000” hotline
accelerating, and service volume delivered
by chatbots reaching 460 million times.
Outlook for 2019
In 2019, focusing on network
intelligentisation, service ecologicalisation,
and operation intellectualisation, the
Company will continue to propel the
establishment of a “Trinity” value
management system featuring
convergence, integration and
intelligentisation, in order to further
expand the scale of its five business
ecospheres and accelerate its high-quality
development. Firstly, regarding
convergence for scale expansion, the
Company will reinforce and strengthen its
position in the fundamental businesses
market, striving to achieve more
breakthroughs in terms of market share of
mobile subscribers and more prominent
edges in broadband services quality by
deepening convergence of its fundamental
businesses, insisting on a market-share
oriented approach while leveraging large
data traffic packages, full-service
convergence and handset-driven
strategies. The Company will accelerate
China Telecom Corporation Limited Annual Report 2018 041
Management’s Discussion and Analysis
Business Review
cloud-network integration, constantly
enrich and upgrade its products and
solutions based on cloud-network
integration, and try to create a vertically
integrated support system for service
delivery, in the hope of shaping user
experience featuring high quality, low
latency and differentiation. The Company
will also promote the innovation of
convergence of Intelligent Applications
services, optimise and upgrade its large
data traffic packages and intelligent
broadband services, while enriching
applications such as Smart Home
Networking, smart TV, smart home
appliances, smart surveillance, and family
cloud for family customers. Integrated
“cloud + network + smart applications”
solutions will be offered to government
and enterprise customers, with a focus on
cloud network applications in areas of
administration, enterprise, finance,
education and medical service, as well as
ready-made solutions for small and
medium-sized enterprises. Secondly,
regarding integration for application
development, the sharing of capabilities
will be facilitated by consolidating
capabilities that are common in the
Company’s five ecospheres to drive
business innovation and mutual
development. In terms of sales channels
sharing, the Company will coordinate the
cross-ecosphere utilisation of physical
channels from Intelligent Connections
ecosphere, merchant channels from
Internet Finance as well as government
and enterprise channels from DICT, in
order to enhance sales capabilities of
convergence products and emerging
services. With regard to data sharing, the
Company will aggregate data of the five
ecospheres to better support business
development and service capabilities
enhancement. The Company will also
promote mutual development of its
businesses and design all-in-one solutions
for various customer groups through
integrating products from different
ecospheres, to achieve complementation
of offers to customers. Thirdly, regarding
intelligentisation for efficiency
enhancement, the Company will promote
precision marketing, and accelerate the
launch and application of next-generation
BSS, in order to gain an accurate insight
of the market and its customers. The
Company will enhance customer
experience by pushing forward precision
service and refining its customer
management. The Company will also
promote precision network operation by
elevating the intelligence level of its
network operation backed by
042
Management’s Discussion and Analysis
Business Review
strengthened use of Big Data analysis. The
Company will also adopt precision
management and extend the use of Big
Data and AI in areas such as human
resources and finance-related functions to
enhance personnel efficiency.
The Company will continue to construct
high-quality networks. Guided by
CTNet2025, the Company will propel
network intelligentisation, and constantly
optimise its three superior networks,
namely mobile network, fibre broadband
network and IoT network. By fully
promoting “cloudification” of
infrastructure and cloud-network
integration, the Company will further
enhance the comprehensive competitive
advantages of its integrated cloud network
resources. Firmly grasping the new
window of market opportunities presented
by 5G, the Company will work with both
upstream and downstream partners along
the value chain to explore ways to build
an industry ecosystem in the future ahead
of time. This will allow us to take a lead in
shaping the market structure in the
future, and laying a foundation for the
development of 5G businesses.
The Company will adhere to the new
development principles and supply-side
structural reforms, accelerate the
promotion of high-quality development.
Persisting in scale development as the
foundation and value management as the
core, the Company will continue to strive
to become a leading integrated intelligent
information services operator, and
promote the common growth in its
corporate value, its customers’ value and
its employees’ value.
China Telecom Corporation Limited Annual Report 2018 043
Management’s Discussion and Analysis
Financial Review
Summary
Operating Revenues
In 2018, the Company insisted on new
development ideas, continuously
promoted transformation and upgrades,
comprehensively deepened its reform and
innovation, and accelerated scale
development. The growth of the
Company’s service revenues continued to
surpass the industry average. Meanwhile,
with deepened value operations,
reasonable and optimised allocation of
resources and reinforced cost delicate
management, the Company’s operation
efficiency and effectiveness were
continuously enhanced. As a result, the
overall operating results achieved
favourable growth. Operating revenues in
2018 were RMB377,124 million,
representing an increase of 3.0% from
year 2017; service revenues1 were
RMB350,434 million, representing an
increase of 5.9% from year 2017;
operating expenses were RMB348,410
million, representing an increase of 2.8%
from year 2017; profit attributable to
equity holders of the Company was
RMB21,210 million, representing an
increase of 13.9% from year 2017; basic
earnings per share were RMB0.26;
EBITDA2 was RMB104,207 million,
representing an increase of 2.0% from
year 2017 and the EBITDA margin3 was
29.7%.
The Company firmly seized the
development opportunities of digital
economy and deepened integrated
operation. The growth of subscriber scale
set a new record high. Revenues
continued to maintain favourable growth
while revenue structure was continuously
optimised. Operating revenues in 2018
were RMB377,124 million, representing
an increase of 3.0% from year 2017.
Service revenues were RMB350,434
million, representing an increase of 5.9%
from year 2017 (if excluding the impact of
the application of International Financial
Reporting Standard 15 (“IFRS 15”) on the
service revenues for the current year, it
represented an increase of 7.2% from
year 2017). Of which, mobile service
revenues were RMB167,705 million,
representing an increase of 9.1% from
year 2017; wireline service revenues were
RMB182,729 million, representing an
increase of 3.1% from year 2017.
Service Revenues
7.2%*
Surpassing Industry
Average for Many
Consecutive Years
*If excluding the impact of the application of IFRS 15
on the service revenues for the current year
1
2
Service revenues were calculated based on operating revenues minus sales of mobile terminals (2018:
RMB18,836 million; 2017: RMB26,759 million), sales of wireline equipment (2018: RMB5,659 million; 2017:
RMB6,446 million) and other non-service revenues (2018: RMB2,195 million; 2017: RMB1,980 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.
3
EBITDA margin was calculated based on EBITDA divided by service revenues.
044
Management’s Discussion and Analysis
Financial Review
The following table sets forth a breakdown of the operating revenues for 2017 and 2018,
together with their respective rates of change:
For the year ended 31 December
(RMB millions, except percentage data)
2018
2017
Voice
Internet
Information and application services
Telecommunications network resource and
equipment services
Others4
Total operating revenues
Rates of
change
–17.6%
10.6%
14.3%
50,811
190,871
83,478
61,678
172,554
73,044
20,211
31,753
19,125
39,828
5.7%
–20.3%
377,124
366,229
3.0%
4
Other revenues in 2018 refers to the aggregate amount of sales of goods and others, included in revenue
from contracts with customers, and revenue from other sources.
Voice
In 2018, being continuously affected by
the substitution effect of mobile Internet
services such as OTT, revenue from voice
services was RMB50,811 million,
representing a decrease of 17.6% from
year 2017, accounting for 13.5% of
operating revenues. The proportion of
revenue from voice services to total
operating revenues continued to decline
while the revenue structure was
continuously optimised.
Internet
In 2018, revenue from Internet services
was RMB190,871 million, representing an
increase of 10.6% from year 2017,
accounting for 50.6% of operating
revenues. To proactively respond to the
impact of the domestic data roaming fee
cancellation policy, the Company
optimised its data traffic operation system
and promoted large data traffic package,
fully leveraging on the benefits of data
price elasticity. The data traffic revenues
maintained rapid growth momentum.
Mobile handset Internet access revenue
was RMB111,218 million, representing an
increase of 22.4% from year 2017. The
Company continuously promoted the scale
development of broadband subscribers
and reinforced its efforts in integration.
The expansion from basic Internet access
to customer value operations was
accelerated with more superior network
and services strengthening customer
loyalty. At the end of 2018, the number
of wireline broadband subscribers reached
146 million, with a net increase of 12.26
million. Due to intensified market
competition, the wireline broadband
revenue was RMB74,262 million,
representing a decrease of 3.2% from
year 2017.
Information and Application
Services
In 2018, the mutual integration and
mutual promotion of the Company’s
service ecology achieved prominent
results. Revenue from information and
application services was RMB83,478
million, representing an increase of 14.3%
from year 2017, accounting for 22.1% of
operating revenues which became strong
revenue growth area. The growth was
mainly benefited from the rapid
development of emerging businesses such
as IDC, cloud and e-Surfing HD services.
China Telecom Corporation Limited Annual Report 2018 045
Management’s Discussion and Analysis
Financial Review
Telecommunications Network
Resource and Equipment Services
Operating Expenses
In 2018, revenue from telecommunications
network resource and equipment services
was RMB20,211 million, representing an
increase of 5.7% from year 2017,
accounting for 5.4% of operating
revenues. The growth was mainly due to
the favourable growth in revenues from
digital circuit service and IP-VPN service.
Others
In 2018, other revenues were RMB31,753
million, representing a decrease of 20.3%
from year 2017, accounting for 8.4% of
operating revenues. The decline was
mainly due to the increasing number in
mobile terminals sold through open
channels and the reduction in the revenue
from terminals sold through our own
distribution channels.
The Company firmly seized the prime
period for scale development
opportunities and appropriately increased
the deployment of resources. At the same
time, with continuous implementation of
precise allocation of resources and multi-
dimensional sub-division, cost efficiency
was enhanced while the increase rate of
expenses was lower than the increase rate
of revenues, effectively supporting the
scale development and the value
enhancement of the enterprise. In 2018,
operating expenses were RMB348,410
million, representing an increase of 2.8%
from year 2017. Operating expenses
accounted for 92.4% of operating
revenues, representing a decrease of 0.2
percentage point from year 2017.
The following table sets forth a breakdown of the operating expenses in 2017 and 2018
and their respective rates of change:
For the year ended 31 December
(RMB millions, except percentage data)
2018
2017
Depreciation and amortisation
Network operations and support
Selling, general and administrative
Personnel expenses
Other operating expenses
75,493
116,062
59,422
59,736
37,697
74,951
103,969
58,434
56,043
45,612
Rates of
change
0.7%
11.6%
1.7%
6.6%
–17.4%
Total operating expenses
348,410
339,009
2.8%
046
Management’s Discussion and Analysis
Financial Review
Depreciation and Amortisation
In 2018, depreciation and amortisation
was RMB75,493 million, representing an
increase of 0.7% from year 2017, which
was basically the same as that of year
2017, accounting for 20.0% of operating
revenues.
Network Operations and Support
In 2018, network operations and support
expenses were RMB116,062 million,
representing an increase of 11.6% from
year 2017, accounting for 30.8% of
operating revenues. It was mainly due to
the Company’s persistent efforts in
optimising and enhancing network quality
and capabilities and supporting rapid
development of emerging businesses
through appropriate increase in resource
input in order to further enhance the
Company’s competitiveness and to lay a
strong foundation for the Company’s
future development.
Selling, General and
Administrative
In 2018, selling, general and
administrative expenses amounted to
RMB59,422 million, representing an
increase of 1.7% from year 2017,
accounting for 15.8% of operating
revenues. Selling expenses were
RMB50,794 million, representing an
increase of 0.9% from year 2017. In order
to maintain the competitiveness in the
market, the Company appropriately
invested in sales and marketing resources
and promoted the growth of subscriber
scale. At the same time, with the
Company’s continuous optimisation of its
sales and marketing model and
enhancement in its precision
management of sales and marketing
resources, taking into consideration the
impact of the application of IFRS 15, the
growth of the selling expenses slowed
down. The general and administrative
expenses amounted to RMB8,628 million,
representing an increase of 6.7% from
year 2017, which was mainly due to the
increase in research and development
expenditure to support the transformation
and development of the Company and the
innovative research and development of
new business.
Personnel Expenses
In 2018, personnel expenses were
RMB59,736 million, representing an
increase of 6.6% from year 2017,
accounting for 15.8% of operating
revenues. The main reason for the increase
was that the Company increased
performance-oriented incentives tilted
towards frontline employees as well as the
motivation to induce emerging businesses
and technical talents. For details of the
number of employees, remuneration
policies and training schemes, please refer
to the Environmental, Social and
Governance Report in this annual report.
Other Operating Expenses
In 2018, other operating expenses were
RMB37,697 million, representing a
decrease of 17.4% from year 2017,
accounting for 10.0% of operating
revenues. It was mainly due to the
decrease in cost of terminal equipment
sold over last year in connection with the
decline in revenue from sales of terminals.
Net Finance Costs
Seizing favourable market opportunities,
the Company allocated low cost financing
products in a flexible manner and
increased its efforts in capital
centralisation, effectively controlling the
scale of indebtedness and enhancing the
turnover and utilisation efficiency of its
capital. In 2018, net finance costs were
RMB2,708 million, representing a decrease
of 17.7% from year 2017. Net exchange
gain amounted to RMB79 million in year
2018. The fluctuation of foreign exchange
gain or loss was mainly due to the effect
of changes in the exchange rate of RMB
against USD.
China Telecom Corporation Limited Annual Report 2018 047
Management’s Discussion and Analysis
Financial Review
Profitability Level
Changes in Accounting Policies
Income Tax
The Company’s statutory income tax rate
is 25%. In 2018, income tax expenses
were RMB6,810 million with the effective
income tax rate of 24.2%. The difference
between the effective income tax rate and
the statutory income tax rate was mainly
due to the preferential income tax rate
enjoyed by some of the subsidiaries and
some branches that are located in Western
region of China. Meanwhile, the one-off
disposal gain from the listing of China
Tower Corporation Limited (“China
Tower”) was not subject to tax in the
current year.
Profit Attributable to Equity
Holders of the Company
In 2018, profit attributable to equity
holders of the Company was RMB21,210
million, representing an increase of 13.9%
from year 2017.
Cash Flows
On 1 January 2018, the Company has
applied IFRS 15, “Revenue from Contracts
with Customers” and IFRS 9, “Financial
Instruments” for the first time. For the
specific impacts of the application of the
above standards, please refer to note 2 of
the audited consolidated financial
statements for the year for details.
Capital Expenditure and Cash
Flows
Capital Expenditure
In 2018, the Company continued to
implement Big Data precision investment,
persistently established superior network
and at the same time reinforced
management and control in capital
expenditure. In 2018, capital expenditure
was RMB74,940 million, representing a
decrease of 15.5% from year 2017.
Net decrease in cash and cash equivalents in 2018 was RMB2,939 million while the net
decrease in cash and cash equivalents in year 2017 was RMB4,908 million.
The following table sets forth the cash flow position in 2017 and 2018:
(RMB millions)
Net cash flow from operating activities
Net cash flow used in investing activities
Net cash flow used in financing activities
Net decrease in cash and cash equivalents
For the year ended
31 December
2018
2017
99,298
(85,954)
(16,283)
(2,939)
96,502
(85,263)
(16,147)
(4,908)
CAPEX
15.5%
048
Management’s Discussion and Analysis
Financial Review
In 2018, the net cash inflow from
operating activities was RMB99,298
million, representing an increase of 2.9%
from year 2017, the growth of which was
basically in line with the growth of
revenues.
In 2018, the net cash outflow used in investing
activities was RMB85,954 million, representing
an increase of 0.8% from year 2017.
In 2018, the net cash outflow used in financing
activities was RMB16,283 million, representing
an increase of 0.8% from year 2017.
Working Capital
The Company consistently upheld prudent
financial principles and stringent fund
management policies. At the end of 2018,
working capital (total current assets minus
total current liabilities) deficit was
RMB185,915 million, representing a
decrease in deficit of RMB17,943 million
from year 2017. The liquidity of the
Company continuously improved. As at 31
Indebtedness
December 2018, the unutilised credit
facilities were RMB150,693 million (2017:
RMB154,793 million). Given the stable net
cash inflow from operating activities and
the sound credit record, the Company has
sufficient working capital to satisfy the
operation requirement. At the end of
2018, cash and cash equivalents
amounted to RMB16,666 million, among
which cash and cash equivalents
denominated in Renminbi accounted for
64.0% (2017: 81.6%).
Assets and Liabilities
In 2018, the Company continued to
maintain a solid financial position. At the
end of 2018, the total assets increased by
0.3% to RMB663,382 million from
RMB661,194 million at the end of 2017.
Total indebtedness decreased to
RMB95,744 million from RMB104,377
million at the end of 2017. The gearing
ratio5 decreased to 21.8% from 24.3% at
the end of 2017.
The indebtedness analysis as at the end of 2017 and 2018 is as follows:
(RMB millions)
Short-term debt
Long-term debt maturing within one year
Long-term debt
Finance lease obligations (including current portion)
Total indebtedness
For the year ended
31 December
2018
2017
49,537
1,139
44,852
216
95,744
54,558
1,146
48,596
77
104,377
5
Gearing ratio was calculated based on total indebtedness divided by total capital while total capital was
calculated based on total equity attributable to equity holders of the Company plus total indebtedness.
China Telecom Corporation Limited Annual Report 2018 049
Management’s Discussion and Analysis
Financial Review
By the end of 2018, the total indebtedness
Most of the revenues received and
was RMB95,744 million, representing a
expenses paid in our business were
decrease of RMB8,633 million from the
denominated in Renminbi, therefore there
end of 2017, which was mainly due to the
were no significant risk exposures arising
effective reduction in the scale of interest-
from foreign exchange fluctuations.
bearing debt as a result of the efficient
centralised capital management
implemented by the Company. Of the
total indebtedness, loans denominated in
Renminbi, US Dollars and Euro accounted
for 99.4% (2017: 99.4%), 0.4% (2017:
0.4%) and 0.2% (2017: 0.2%),
respectively. 99.8% (2017: 99.5%) of the
indebtedness are loans with fixed interest
rates, while the remaining portion of the
indebtedness represented loans with
floating interest rates.
As at 31 December 2018, neither the
Company nor any of its subsidiaries
pledge any assets as collateral for debt
(2017: Nil).
Investment in China Tower
In 2018, China Tower was listed and the
Company’s shareholding in China Tower
was diluted from 27.9% to 20.5%. Please
refer to note 9 of the audited consolidated
financial statements for its financial
performance during the year. In the
future, the Company can enjoy more
fundamental network resources through
China Tower. As one of the shareholders
of China Tower, it is expected that we can
benefit from the enhancement of profits
and values from China Tower.
Management visited Shanghai Telecom Information Life Experience Hall and conducted
on-site research of BestPay development
050
Management’s Discussion and Analysis
Financial Review
Contractual Obligations
Contractual obligations as at 31 December 2018 are as follows:
(RMB millions)
Short-term debt
Long-term debt
Operating lease
commitments
Capital commitments
Total contractual
obligations
Total
51,091
52,625
65,805
15,303
Within
1 year
Between
1 to 2 years
Between
2 to 3 years
Between
3 to 4 years
Between
4 to 5 years
Thereafter
51,091
2,602
15,658
15,303
–
19,604
14,466
–
–
1,942
13,440
–
–
21,953
12,682
–
–
1,166
3,461
–
–
5,358
6,098
–
184,824
84,654
34,070
15,382
34,635
4,627
11,456
Note: Amounts of short-term debt and long-term debt include recognised and unrecognised interest payable, and
are not discounted.
China Telecom Corporation Limited Annual Report 2018 051
Co-flourishing Terminal Industry Chain to
Co-develop Ecosystem
Report of the Directors
the consideration the long-term interest
and sustainable development of the
Company. The following factors will be
considered by the Company when
formulating the dividend distribution plan:
1.
2.
the operating results and cash flow
level of the Company;
the Company’s future business
development position and the capital
expenditure requirements;
3.
capital needs and gearing ratio;
4.
5.
the expectation from shareholders
and investors;
other factors that the Board deems
appropriate.
The Board is responsible for formulating
the dividend distribution plan and will
execute the relevant approval procedures
in accordance with relevant laws, rules,
regulations and articles of association of
the Company (the “Articles of
Association”) before proceeding with the
distribution. In the future, the Company
will strive for improvement on profitability
and at the same time continue to deliver
favourable dividend return for the
shareholders.
The Board of Directors (the “Board”) of
China Telecom Corporation Limited (the
“Company”) hereby presents its report
together with the audited consolidated
financial statements of the Company and
its subsidiaries (collectively, the “Group”)
prepared in accordance with the
International Financial Reporting
Standards for the year ended 31
December 2018.
Principal Business
The principal business of the Company
and the Group is the provision of
fundamental telecommunications services
including comprehensive wireline
telecommunications services, mobile
telecommunications services, value-added
services such as Internet access services,
information services and other related
services within the service area of the
Group.
Results
Results of the Group for the year ended
31 December 2018 and the financial
position of the Group as at that date are
set out in the audited consolidated
financial statements on pages 163 to 261
of this annual report.
Dividend Policy
The Company attaches great importance
to the investment returns of shareholders,
strives to maintain the continuity and
stability of the dividend policy taking into
054
Dividend
The Board proposes a final dividend in the
amount equivalent to HK$0.125 per share
(pre-tax), totalling approximately
RMB8,629 million for the year ended 31
December 2018. The dividend proposal
will be submitted for consideration at the
annual general meeting to be held on 29
May 2019 (the “Annual General
Meeting”). Dividends will be denominated
and declared in Renminbi.
Dividends for holders of domestic shares
and the investors of the Shanghai Stock
Exchange and Shenzhen Stock Exchange
(including enterprises and individuals)
investing in the H shares of the Company
listed on the Hong Kong Stock Exchange
(the “Southbound Trading Link”) (the
“Southbound Investors”) will be paid in
Renminbi, whereas dividends for H share
shareholders other than Southbound
Investors will be paid in Hong Kong
dollars. The relevant exchange rate will be
the average median 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
26 July 2019 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 2018 final dividends to
non-resident enterprise shareholders of
overseas H shares (including HKSCC
Nominees Limited, other corporate
nominees or trustees, and other entities or
Report of the Directors
organisations) whose names appear on
the Company’s H share register of
members on 11 June 2019.
According to regulations by the State
Administration of Taxation (Guo Shui Han
[2011] No. 348) and relevant laws and
regulations, if the individual H share
shareholders who are Hong Kong or
Macau residents and those whose country
of domicile is a country which has entered
into a tax treaty with PRC stipulating a
dividend tax rate of 10%, the Company
will finally withhold and pay individual
income tax at the rate of 10% on behalf
of the individual H share shareholders. If
the individual H share shareholders whose
country of domicile is a country which has
entered into a tax treaty with PRC
stipulating a dividend tax rate of less than
10%, the Company will finally withhold
and pay individual income tax at the rate
of 10% on behalf of the individual H
share shareholders. If the individual H
share shareholders whose country of
domicile is a country which has entered
into a tax treaty with PRC stipulating a
dividend tax rate of more than 10% but
less than 20%, the Company will withhold
and pay individual income tax at the
actual tax rate stipulated in the relevant
tax treaty. If the individual H share
shareholders whose country of domicile is
a country which has entered into a tax
treaty with PRC stipulating a dividend tax
rate of 20%, or a country which has not
entered into any tax treaties with PRC, or
under any other circumstances, the
Company will withhold and pay individual
income tax at the rate of 20% on behalf
of the individual H share shareholders.
The Company will determine the country
of domicile of the individual H share
shareholders based on the registered
address as recorded in the H share register
of members of the Company on 11 June
China Telecom Corporation Limited Annual Report 2018 055
Report of the Directors
2019 (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, 4 June
2019. 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
attend or appoint a representative to
attend to the procedures in accordance
with the requirements under the tax
treaties notice if they do not provide the
relevant supporting documents to the
Company within the time period stated
above.
For Southbound Investors (including
enterprises and individuals), the Shanghai
branch of China Securities Depository and
Clearing Corporation Limited and the
Shenzhen branch of China Securities
Depository and Clearing Corporation
Limited, as the nominees of the investors
of the Southbound Trading Link, will
receive all dividends distributed by the
Company and will distribute the dividends
to the relevant investors under the
Southbound Trading Link through its
depositary and clearing system. According
to the relevant provisions under the
“Notice on Taxation Policies for Shanghai-
Hong Kong Stock Connect Pilot
Programme (Cai Shui [2014] No. 81)” and
“Notice on Taxation Policies for Shenzhen-
Hong Kong Stock Connect Pilot
Programme (Cai Shui [2016] No. 127)”,
the Company shall withhold and pay
individual income tax at the rate of 20%
with respect to dividends received by the
Mainland individual investors for investing
in the H shares of the Company listed on
the Hong Kong Stock Exchange through
the Southbound Trading Link. In respect
of the dividends received by Mainland
securities investment funds investing in
the H shares of the Company listed on
Hong Kong Stock Exchange through the
Southbound Trading Link, the tax levied
shall be ascertained by reference to the
rules applicable to individual investors.
The Company is not required to withhold
and pay income tax on dividends derived
by the Mainland enterprise investors under
the Southbound Trading Link, and such
enterprises shall report the income and
make tax payment by themselves. The
record date for entitlement to the
shareholders’ rights and the relevant
arrangements of dividend distribution for
the Southbound Investors are the same as
those for the 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 relating to
the tax withholding and payment
mechanism or arrangements.
056
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
Ke Ruiwen
Gao Tongqing
Chen Zhongyue
Zhu Min
Chen Shengguang
Tse Hau Yin, Aloysius
Xu Erming
Wang Hsuehming
Yeung Chi Wai, Jason
Zhang Zhiyong
Liu Guiqing
Wang Guoquan
55
55
47
54
55
71
69
69
64
53
52
46
Date of
appointment as
Directors/Senior
Management
30 May 2012
23 May 2017
23 May 2017
26 October 2018
Age
Position in the Company
Exercising the powers of the Chairman
and Chief Executive Officer;
Executive Director, President and
Chief Operating Officer
Executive Director and
Executive Vice President
Executive Director and
Executive Vice President
Executive Director, Executive Vice
President, Chief Financial Officer
and Secretary of the Board
Non-Executive Director
23 May 2017
Independent Non-Executive Director
9 September 2005
Independent Non-Executive Director
9 September 2005
Independent Non-Executive Director
29 May 2014
Independent Non-Executive Director
26 October 2018
Executive Vice President
Executive Vice President
Executive Vice President
10 July 2018
10 July 2018
11 March 2019
China Telecom Corporation Limited Annual Report 2018 057
the extraordinary general meeting of the
Company. On the same date, Mr. Ke
Ruiwen no longer acts as the Authorised
Representative of the Company due to
change in work arrangement and Madam
Zhu was appointed as the Authorised
Representative of the Company.
Meanwhile, the appointment of Mr.
Yeung Chi Wai, Jason as an Independent
Director of the Company was approved at
the extraordinary general meeting of the
Company and he was also appointed as a
member of the Audit Committee of the
Company.
On 4 March 2019, Mr. Yang Jie resigned
from his positions as an Executive
Director, Chairman and Chief Executive
Officer of the Company due to change in
work arrangement. On 8 March 2019, the
Board resolved to approve Mr. Ke Ruiwen,
the Executive Director, President and Chief
Operating Officer of the Company, to
exercise the powers of the Chairman and
Chief Executive Officer. On 11 March
2019, Mr. Wang Guoquan was appointed
as an Executive Vice President of the
Company.
Report of the Directors
As mentioned in the announcements in
relation to the changes in Directors and
senior management published by the
Company in the following dates: On 29
January 2018, Mr. Sun Kangmin retired
from his positions as an Executive Director
and Executive Vice President of the
Company due to his age. On 28 May
2018, Madam Cha May Lung, Laura
resigned from her positions as an
Independent Non-Executive Director as
well as a member and the Chairlady of the
Nomination Committee of the Company
due to her intention to focus on other
business commitments and engagements.
On the same date, Madam Wang
Hsuehming, an Independent Non-
Executive Director of the Company was
appointed as a member and the Chairlady
of the Nomination Committee of the
Company. On 10 July 2018, Mr. Zhang
Zhiyong and Mr. Liu Guiqing were
appointed as Executive Vice Presidents of
the Company. On 19 July 2018, Mr. Liu
Aili resigned from his positions as an
Executive Director, President and Chief
Operating Officer of the Company due to
change in work arrangement. On 20 July
2018, Madam Zhu Min was appointed as
an Executive Vice President, the Chief
Financial Officer and Secretary of the
Board of the Company. On the same date,
Mr. Ke Ruiwen resigned from his position
as a Joint Company Secretary of the
Company due to change in work
arrangement. On 25 October 2018, Mr.
Ke Ruiwen was appointed as the President
and Chief Operating Officer of the
Company and no longer held the position
of the Executive Vice President of the
Company. On 26 October 2018, the
appointment of Madam Zhu Min as a
Director of the Company was approved at
058
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
Sui Yixun
Zhang Jianbin
Yang Jianqing
Xu Shiguang
Ye Zhong
55
53
59
39
59
Age
Position in the Company
Chairman of the Supervisory
Committee
Date of
appointment as
Supervisors
27 May 2015
Supervisor (Employee Representative)
16 October 2012
Supervisor (Employee Representative)
23 May 2017
Supervisor
Supervisor
26 October 2018
27 May 2015
Xu Shiguang
40
Supervisor
26 October 2018
On 27 February 2018, Mr. Hu Jing resigned from his position as a Supervisor of the
Company due to change in work arrangement. On 26 October 2018, the appointment of
Mr. Xu Shiguang as a Supervisor of the Company was approved at the extraordinary
general meeting of the Company.
Share Capital
The share capital of the Company as at 31 December 2018 was RMB80,932,368,321,
divided into 80,932,368,321 shares of RMB1.00 each. As at 31 December 2018, the share
capital of the Company comprised:
Share category
Total number of Domestic shares
(held by the companies as follows):
China Telecommunications Corporation
Number of
shares as at
31 December
2018
67,054,958,321
57,377,053,317
Guangdong Rising Assets Management Co., Ltd.
5,614,082,653
Zhejiang Financial Development Company
2,137,473,626
Fujian Investment & Development Group Co., Ltd
969,317,182
Jiangsu Guoxin Group Limited
Total number of H shares (including ADSs)
Total
957,031,543
13,877,410,000
80,932,368,321
Percentage (%)
of the total
number of
shares
in issue as at
31 December
2018
82.85
70.89
6.94
2.64
1.20
1.18
17.15
100.00
China Telecom Corporation Limited Annual Report 2018 059
Report of the Directors
Material Interests and Short Positions in Shares and Underlying
Shares of the Company
As at 31 December 2018, 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 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
China Telecommunications
Corporation
57,377,053,317
(Long Position)
Domestic
shares
Guangdong Rising Assets
Management Co., Ltd.
JPMorgan Chase & Co.
5,614,082,653
(Long Position)
Domestic
shares
1,659,402,128
(Long Position)
H shares
Percentage of
the respective
type
of shares
in issue
Percentage of
the total
number
of shares
in issue Capacity
85.57%
70.89% Beneficial owner
8.37%
6.94% Beneficial owner
11.96%
2.05% 220,567,873 shares as interest of
controlled corporation; 1,740,600 shares
as investment manager; 54,658,331
shares as person having a security
interest in shares; 100,000 shares as
trustee; and 1,382,335,324 shares as
approved lending agent
79,275,927
(Short Position)
H shares
0.57%
0.10% 78,657,927 shares as interest of controlled
corporation; and 618,000 shares as
investment manager
1,382,335,324
(Shares available
for lending)
1,245,294,634
(Long Position)
9,914,632
(Short Position)
1,201,292,983
(Shares available
for lending)
1,190,211,519
(Long Position)
625,101,100
(Short Position)
534,051,135
(Shares available
for lending)
1,132,947,753
(Long Position)
22,056,000
(Short Position)
1,087,529,062
(Long Position)
Citigroup Inc.
The Bank of New York
Mellon Corporation
BlackRock, Inc.
Templeton Global Advisors
Limited
H shares
9.96%
1.71% Approved lending agent
H shares
8.97%
1.54% 44,001,651 shares as interest of controlled
corporation; and 1,201,292,983 shares
as approved lending agent
H shares
H shares
H shares
H shares
H shares
H shares
H shares
H shares
0.07%
0.01% Interest of controlled corporation
8.66%
1.48% Approved lending agent
8.58%
1.47% Interest of controlled corporation
4.50%
0.77% Interest of controlled corporation
3.85%
0.66% Interest of controlled corporation
8.16%
1.40% Interest of controlled corporation
0.16%
7.84%
0.03% Interest of controlled corporation
1.34% Investment manager
060
Report of the Directors
Finance Co., Ltd.. Mr. Yang Jie, the then
Chairman of the Company who also
served as the then Chairman of China
Telecommunications Corporation, and Mr.
Sun Kangmin, a then executive Director,
who was the then Chairman of CCS, both
abstained from voting on the relevant
board resolutions. Please refer to page 64
of this annual report for further details.
At the Board meeting held on 20 August
2018 in relation to the renewal of
continuing connected transactions
between the Company and China
Telecommunications Corporation, Mr.
Yang Jie, the then Chairman of the
Company who also served as the then
Chairman of China Telecommunications
Corporation, abstained from voting on the
relevant board resolutions. Please refer to
pages 73 to 74 of this annual report for
details of the above renewal.
In addition, save as disclosed above and
the service agreements with the Company,
for the year ended 31 December 2018,
the Directors and Supervisors of the
Company did not have any material
interest, whether directly or indirectly, in
any transactions, arrangement or contract
which was significant to the Company’s
business and which was entered into by
the Company, its parent company or any
of its subsidiaries or fellow subsidiaries.
None of the Directors or Supervisors of
the Company has entered into any service
contract which is not determinable by the
Company within one year without
payment of compensation (other than
statutory compensation).
Emoluments of the Directors
and Supervisors
Please refer to note 33 of the audited
consolidated financial statements for
details of the emoluments of all Directors
and Supervisors of the Company in 2018.
Save as disclosed above, as at 31
December 2018, 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 and underlying shares of the
Company.
Directors’ and Supervisors’
Interests and Short Positions in
Shares, Underlying Shares and
Debentures
As at 31 December 2018, none of the
Directors and Supervisors of the Company
had any interests or short positions in the
shares, underlying shares or debentures of
the Company or its associated
corporations (as defined in Part XV of the
SFO) as recorded in the register required
to be maintained under Section 352 of the
SFO or as otherwise notified to the
Company and the Hong Kong Stock
Exchange pursuant to the Model Code for
Securities Transactions by Directors of
Listed Issuers.
During the year in 2018, the Company has
not granted its Directors or Supervisors, or
their respective spouses or any of their
respective minor child (natural or adopted)
or on their behalf any rights to subscribe
for the shares or debentures of the
Company or any of its associated
corporations and none of them has ever
exercised any such right.
Directors’ and Supervisors’
Interests in Transactions,
Arrangements or Contracts
On 22 June 2018, the Company, China
Telecommunications Corporation and
China Communications Services
Corporation Limited (“CCS”) entered into
the Capital Contribution Agreement to
jointly establish a finance company
currently named as China Telecom Group
China Telecom Corporation Limited Annual Report 2018 061
Report of the Directors
Purchase, Sale and Redemption
of Shares
Fixed Assets
Neither the Company nor any of its
subsidiaries has purchased, sold or
redeemed any securities of the Company
during the reporting period.
Material Acquisitions and
Disposals
For the year ended 31 December 2018,
the Company had no material acquisitions
and disposals.
Public Float
As at the date of this report, based on the
information that is publicly available to
the Company and within the knowledge
of the Directors, the Company has
maintained the prescribed public float
under the Listing Rules and as agreed with
the Hong Kong Stock Exchange.
Summary of Financial
Information
Please refer to pages 262 to 263 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 2018.
Bank Loans and Other
Borrowings
Please refer to note 19 of the audited
consolidated financial statements for
details of bank loans and other
borrowings of the Group.
Please refer to note 4 of the audited
consolidated financial statements for
movements in the fixed assets of the
Group for the year ended 31 December
2018.
Reserves
Pursuant to Article 149 of 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 2018,
calculated on the above basis and before
deducting the proposed final dividends for
2018, amounted to RMB133,076 million.
Please refer to note 25 of the audited
consolidated financial statements for
details of the movements in the reserves
of the Company and the Group for the
year ended 31 December 2018.
Equity-linked Agreements
For the year ended 31 December 2018,
the Company has not entered into any
equity-linked agreement.
Capitalised Interest
Donations
Please refer to note 31 of the audited
consolidated financial statements for
details of the Group’s capitalised interest
for the year ended 31 December 2018.
For the year ended 31 December 2018,
the Group made charitable and other
donations with a total amount of RMB20
million.
062
Report of the Directors
For the year ended 31 December 2018,
purchases from the five largest suppliers
of the Group accounted for an amount of
less than 30% of the total annual
purchases of the Group.
Share Appreciation Rights
At the second extraordinary general
meeting held by the Company on 26
October 2018, the adoption of share
appreciation rights scheme was approved.
The share appreciation rights scheme shall
remain valid for 10 years from the
effective date of the scheme. During the
effective period of the share appreciation
rights scheme, the Company may grant
the share appreciation rights to the
incentive recipients pursuant to the
scheme. Upon the expiry of the share
appreciation rights scheme, the Company
shall not grant any share appreciation
rights to any incentive recipients pursuant
to the scheme; however, all provisions
contemplated thereunder the scheme shall
remain in force for any share appreciation
rights granted pursuant to the scheme.
As set out in the Company’s supplemental
circular dated 4 October 2018, the
purpose of the share appreciation rights
scheme is to provide incentives to certain
key personnel (excluding independent
Directors and Supervisors) of the
Company. The scheme will enable the
Company to establish and optimise the
performance-oriented culture for value
creation for the shareholders so as to
promote long-term stable development as
well as strengthen the core
competitiveness of the Group.
Subsidiaries and Associated
Companies
Please refer to note 8 and note 9 of the
audited consolidated financial statements
for details of the Company’s subsidiaries
and the Group’s interests in associated
companies as at 31 December 2018.
Permitted Indemnity
For the year ended 31 December 2018
and as at the date of approval of this
report, the Company has arranged
appropriate insurance cover in respect of
legal actions against the directors of the
Group.
Changes in Equity
Please refer to the consolidated statement
of changes in equity as contained in the
audited consolidated financial statements
of the year (page 166 of this annual
report).
Retirement Benefits
Please refer to note 44 of the audited
consolidated financial statements for
details of the retirement benefits provided
by the Group.
Pre-Emptive Rights
There are no provisions for pre-emptive
rights in the Articles of Association
requiring the Company to offer new
shares to the existing shareholders in
proportion to their shareholdings.
Major Customers and Suppliers
For the year ended 31 December 2018,
revenue generated from the five largest
customers of the Group accounted for an
amount of less than 30% of the total
operating revenues of the Group.
China Telecom Corporation Limited Annual Report 2018 063
Report of the Directors
Under the share appreciation rights
scheme, (1) the total number of share
appreciation rights units to be granted to
the key personnel of the Company within
the effective period of the scheme shall
not exceed 10% of the total share capital
of the Company; (2) the number of share
appreciation rights units to be granted to
each grantee in any 12-month period shall
not exceed 1% of the total share capital
of the Company; (3) the highest
proportion of the earnings from exercise
of share appreciation rights to the total
remuneration of the incentive recipient at
the grant of the share appreciation rights
shall be 40%. The above total share
capital refers to the total issued share
capital of the Company at the time of the
most recent grant under the scheme.
The effective date of grant of the share
appreciation rights shall be determined by
the Board after the respective grant is
approved by the State-owned Assets
Supervision and Administration
Commission of the State Council of the
PRC. The exercise price of the share
appreciation rights under the scheme shall
be the highest of the following three
prices:
(1)
(2)
the closing price of the H Shares of
the Company stated in the daily
quotations sheets of the Hong Kong
Stock Exchange on the date of grant;
the average closing price of the H
Shares of the Company stated in the
daily quotations sheets of the Hong
Kong Stock Exchange for the five
consecutive trading days prior to the
date of grant;
(3) nominal value of the H Shares of the
Company.
Please refer to note 45 of the audited
consolidated financial statements for
other details of the share appreciation
rights scheme of the Company.
Connected Transactions
Establishment of a Finance
Company
On 22 June 2018, the Company, China
Telecommunications Corporation and CCS
entered into the Capital Contribution
Agreement, pursuant to which the parties
agreed to jointly establish China Telecom
Group Finance Co., Ltd. (“China Telecom
Finance”), a limited liability company
incorporated in the PRC for the purpose
of providing capital and financial
management services to the member units
of China Telecommunications
Corporation. Pursuant to the Capital
Contribution Agreement, the registered
capital of China Telecom Finance is
RMB5,000 million. The Company, China
Telecommunications Corporation and CCS
respectively contributed RMB3,500 million,
RMB750 million and RMB750 million,
which respectively represent 70%, 15%
and 15% of the total registered capital of
China Telecom Finance. Please refer to the
announcement published by the Company
on 22 June 2018 for further details.
On 1 February 2019, the Board of the
Company announced that the respective
financial services framework agreements
were entered into by the Company and
China Telecom Finance, China Telecom
Finance and China Telecommunications
Corporation, China Telecom Finance and
CCS on 1 February 2019. For the terms of
the financial services framework
agreements, please refer to the
announcement published by the Company
on 1 February 2019 and the Company’s
circular dated 27 February 2019.
064
Report of the Directors
Continuing Connected Transactions
The following table sets out the amounts of the Group’s continuing connected
transactions with China Telecommunications Corporation and its subsidiaries (except for
the Group) (the “China Telecom Group”)1 for the year ended 31 December 2018:
Transactions
Net transaction amount of centralised services
Net expenses for interconnection settlement
Mutual leasing of properties
Provision of IT services by China Telecom Group
Provision of IT services by the Group
Provision of community services by
China Telecom 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 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)
519
124
761
1,895
531
3,296
3,760
2,760
16,396
16,744
298
1,300
800
1,600
2,200
700
4,000
7,000
5,500
19,500
17,000
4,000
Note 1: China Telecommunications Corporation is a controlling shareholder of the Company. Each of China
Telecommunications Corporation and its subsidiaries (except for the Group) constitutes a connected person
of the Company under the Listing Rules.
China Telecom Corporation Limited Annual Report 2018 065
Report of the Directors
On 23 September 2015, the Company and
China Telecommunications Corporation
entered into supplemental agreements
and renewed the Engineering Framework
Agreement, the Ancillary
Telecommunications Services Framework
Agreement, the Interconnection
Settlement Agreement, the Community
Services Framework Agreement, the
Centralised Services Agreement, the
Property Leasing Framework Agreement,
the IT Services Framework Agreement, the
Supplies Procurement Services Framework
Agreement and the Internet Applications
Channel Services Framework Agreement
(the “Agreements”) with the same terms
(except the pricing terms) for a further
term of 3 years expiring on 31 December
2018. The pricing terms of the agreements
were elaborated or amended with a view
to complying with the guidance letter on
pricing policies for continuing connected
transactions and their disclosure published
by the Hong Kong Stock Exchange in
March 2014 (HKEx-GL73-14) and aligning
with the transactions contemplated under
the agreements. Details of the respective
Agreements are shown below:
Centralised Services Agreement
Pursuant to the centralised services
agreement signed between the Company
and China Telecommunications
Corporation on 10 September 2002 and
the related supplemental agreements
subsequently entered into between the
two parties (collectively, the “Centralised
Services Agreement”), centralised services
include centralised business management
and operational services provided by the
Group to China Telecom Group in relation
to key corporate customers, its network
management centre and business support
centre. Centralised services also include
the provision of certain premises by China
Telecom Group to the Group and the
common use of international
telecommunications facilities by both
parties. The aggregate costs incurred by
066
the Group and China Telecom Group for
the provision of management and
operation services will be apportioned
between the Group and China Telecom
Group on a pro rata basis according to the
revenues generated by each party. Where
the Group uses the premises provided by
China Telecom Group, the Group will pay
premises usage fees to China Telecom
Group on a pro rata basis according to the
apportioned actual area allocated to the
Group. The premises usage fees shall be
determined through negotiation between
the two parties based on comparable
market rates. When both parties use
international telecommunications facilities
provided by third parties and accept
services by such third parties (for example,
restoration maintenance costs, the annual
utilisation fee and related service costs)
and when both parties use the
international telecommunications facilities
of China Telecom Group, the associated
costs shall be shared on a pro rata basis
according to volume of the inbound and
outbound voice calls to and from
international regions, Hong Kong, Macau
and Taiwan originating from each party
divided by the proportion of the aggregate
volume of the inbound and outbound
voice calls to and from international
regions, Hong Kong, Macau and Taiwan
originating from both parties. When the
two parties use international
telecommunications facilities provided by
a third party and accept restoration
maintenance costs, such fees shall be
determined according to the actual
utilisation fee each year. The utilisation
fee associated with the shared use of the
international telecommunications facilities
provided by China Telecom Group shall be
determined through negotiation between
the two parties based on market rates.
Market rates shall mean the rates at which
the same or similar type of products or
services are provided by independent third
parties in the ordinary course of business
and under normal commercial terms.
When determining whether the relevant
Report of the Directors
according to the “Notice Concerning the
Issue of the Measures on Interconnection
Settlement between Public
Telecommunications Networks and
Sharing of Relaying Fees (Xin Bu Dian
[2003] No. 454)” promulgated by the
Ministry of Information Industry of the
PRC. The Ministry of Industry and
Information Technology of the PRC may,
from time to time, take into account the
relevant regulatory rules and market
conditions, amend or promulgate new
rules or regulations in respect of
interconnection settlement which will be
announced on its official website at
www.miit.gov.cn. If the Ministry of
Industry and Information Technology of
the PRC amends the existing, or
promulgates new rules or regulations in
respect of interconnection settlement, the
parties shall apply such amended or new
rules and regulations as acknowledged by
both parties. The settlement regions
include Beijing Municipality, Tianjin
Municipality, Hebei Province, Heilongjiang
Province, Jilin Province, Liaoning Province,
Shanxi Province, Henan Province,
Shandong Province, Inner Mongolia
Autonomous Region and Xizang
Autonomous Region.
The Company and China
Telecommunications Corporation have
entered into a supplemental agreement
on 23 September 2015 and renewed the
Interconnection Settlement Agreement on
the same terms (except the pricing terms)
for a further term of 3 years expiring on
31 December 2018. No later than 30 days
prior to the expiry of the Interconnection
Settlement Agreement, the Company is
entitled to serve a written notice to China
Telecommunications Corporation to renew
the Interconnection Settlement
Agreement, and the parties shall consult
and decide on matters relating to such
renewal.
market rates, to the extent practicable,
management of the Company shall take
into account the rates of at least two
similar and comparable transactions
entered into with or carried out by
independent third parties in the ordinary
course of business in the corresponding
period for reference.
The Company and China
Telecommunications Corporation have
entered into a supplemental agreement
on 23 September 2015 and renewed the
Centralised Services Agreement on the
same terms (except the pricing terms) for
a further term of 3 years expiring on 31
December 2018. No later than 30 days
prior to the expiry of the Centralised
Services Agreement, the Company is
entitled to serve a written notice to China
Telecommunications Corporation to renew
the Centralised Services Agreement, and
the parties shall consult and decide on
matters relating to such renewal.
Interconnection Settlement
Agreement
Pursuant to the interconnection settlement
agreement signed between the Company
and China Telecommunications
Corporation on 10 September 2002 and
the related supplemental agreements
subsequently entered into between the
two parties (collectively, the
“Interconnection Settlement Agreement”),
the telephone operator connecting a
telephone call made to its local access
network shall be entitled to receive from
the operator from which the telephone
call originated a fee prescribed by the
Ministry of Industry and Information
Technology of the PRC from time to time.
Interconnection charges are currently
RMB0.06 per minute for local calls
originated from the Group to China
Telecom Group. The interconnection
settlement charges will be calculated
China Telecom Corporation Limited Annual Report 2018 067
Report of the Directors
Property Leasing Framework
Agreement
Pursuant to the property leasing
framework agreement signed between the
Company and China Telecommunications
Corporation on 30 August 2006 and the
related supplemental agreement
subsequently entered into between the
two parties (collectively, the “Property
Leasing Framework Agreement”), the
Group and China Telecom Group can
lease properties from the other party for
use as business premises, offices,
equipment storage facilities and sites for
network equipment. The rental charges
under the Property Leasing Framework
Agreement shall be determined according
to market rates. Market rates shall mean
the rental charges at which the same or
similar type of properties or adjacent
properties are leased by independent third
parties in the ordinary course of business
under normal commercial terms. When
determining the relevant market rates, to
the extent practicable, management of
the Company shall take into account the
rental charges of at least two similar and
comparable transactions entered into with
or carried out by independent third parties
in the ordinary course of business in the
corresponding period for reference. The
rental charges are subject to review every
3 years.
The Company and China
Telecommunications Corporation have
entered into a supplemental agreement
on 23 September 2015 and renewed the
Property Leasing Framework Agreement
on the same terms (except the pricing
terms) for a further term of 3 years
expiring on 31 December 2018. No later
than 30 days prior to the expiry of the
Property Leasing Framework Agreement,
the Company is entitled to serve a written
notice to China Telecommunications
Corporation to renew the Property Leasing
Framework Agreement, and the parties
shall consult and decide on matters
relating to such renewal.
IT Services Framework Agreement
Pursuant to the IT services framework
agreement signed between the Company
and China Telecommunications
Corporation on 30 August 2006 and the
related supplemental agreements
subsequently entered into between the
two parties (collectively, the “IT Services
Framework Agreement”), the Group and
China Telecom Group can provide the
other party with information technology
services, including office automation and
software testing. Each of the Group and
China Telecom Group is entitled to
participate in bidding for the right to
provide information technology services to
the other party in accordance with the IT
Services Framework Agreement. The
charges payable for such services shall be
determined by reference to the market
rates. Market rates shall mean the rates at
which the same or similar type of products
or services are provided by independent
third parties in the ordinary course of
business and under normal commercial
terms. When determining the relevant
market rates, to the extent practicable,
management of the Company shall take
into account the rates of at least two
similar and comparable transactions
entered into with or carried out by
independent third parties in the ordinary
course of business in the corresponding
period for reference.
068
In the circumstances where the relevant
laws or regulations in the PRC specify that
the prices and/or the fee standards for
particular services to be provided pursuant
to such agreement are to be determined
by a tender process, the charges payable
for such services shall be finally
determined in accordance with the
“Bidding Law of the PRC” and the
“Regulations on the Implementation of
the Bidding Law of the PRC” or the
relevant tender procedures. The Group
shall solicit at least three tenderers for the
tender process. If the terms offered by the
Group or China Telecom Group are no less
favourable than those offered by an
independent third party provider, the
Group or China Telecom Group may
award the tender to the other party.
The Company and China
Telecommunications Corporation have
entered into a supplemental agreement
on 23 September 2015 and renewed the
IT Services Framework Agreement on the
same terms (except the pricing terms) for
a further term of 3 years expiring on 31
December 2018. No later than 30 days
prior to the expiry of the IT Services
Framework Agreement, the Company is
entitled to serve a written notice to China
Telecommunications Corporation to renew
the IT Services Framework Agreement, and
the parties shall consult and decide on
matters relating to such renewal.
Community Services Framework
Agreement
Pursuant to the community services
framework agreement signed between the
Company and China Telecommunications
Corporation on 30 August 2006 and the
related supplemental agreements
subsequently entered into between the
two parties (collectively, the “Community
Services Framework Agreement”), China
Report of the Directors
Telecom Group provides the Group with
community services such as culture,
education, property management, vehicle
service, health and medical care, hotel
and conference service, community and
sanitary service. The community services
under the Community Services Framework
Agreement are provided at:
(1) market prices, which shall mean the
prices at which the same or similar
type of products or services are
provided by independent third
parties in the ordinary course of
business and under normal
commercial terms. When determining
the relevant market prices, to the
extent practicable, management of
the Company shall take into account
the prices of at least two similar and
comparable transactions entered into
with or carried out by independent
third parties in the ordinary course
of business over the corresponding
period for reference;
(2) where there is no or it is not possible
to determine the market prices, the
prices are to be agreed between the
parties based on the reasonable costs
incurred in providing the services
plus the amount of the relevant taxes
and reasonable profit margin. For
this purpose, “reasonable profit
margin” is to be fairly determined by
negotiations between the parties in
accordance with the internal policies
of the Group. When determining the
relevant “reasonable profit margin”,
to the extent practicable,
management of the Company shall
take into account the profit margin
of at least two similar and
comparable transactions entered into
with independent third parties in the
corresponding period or the relevant
industry profit margin for reference.
China Telecom Corporation Limited Annual Report 2018 069
Report of the Directors
The Company and China
Telecommunications Corporation have
entered into a supplemental agreement
on 23 September 2015 and renewed the
Community Services Framework
Agreement on the same terms (except the
pricing terms) for a further term of 3 years
expiring on 31 December 2018. No later
than 30 days prior to the expiry of the
Community Services Framework
Agreement, the Company is entitled to
serve a written notice to China
Telecommunications Corporation to renew
the Community Services Framework
Agreement, and the parties shall consult
and decide on matters relating to such
renewal.
Supplies Procurement Services
Framework Agreement
Pursuant to the supplies procurement
services framework agreement signed
between the Company and China
Telecommunications Corporation on 30
August 2006 and the related supplemental
agreements subsequently entered into
between the two parties (collectively, the
“Supplies Procurement Services
Framework Agreement”), China Telecom
Group and the Group provide each other
with supplies procurement services,
including comprehensive procurement
services, the sale of proprietary
telecommunications equipment, resale of
third-party equipment, management of
tenders, verification of technical
specifications, storage, transportation and
installation services.
Where the procurement services are
provided on an agency basis, the
maximum commission for such
procurement services shall be calculated
at:
(1) not more than 1% of the contract
value for procurement of imported
telecommunications supplies; or
(2) not more than 3% of the contract
value for the procurement of
domestic telecommunications
supplies and domestic non-
telecommunications supplies.
The pricing basis of the services for the
provision of supplies procurement other
than on an agency basis under the
Supplies Procurement Services Framework
Agreement is the same as those set out in
the Community Services Framework
Agreement.
The Company and China
Telecommunications Corporation have
entered into a supplemental agreement
on 23 September 2015 and renewed the
Supplies Procurement Services Framework
Agreement on the same terms (except the
pricing terms) for a further term of 3 years
expiring on 31 December 2018. No later
than 30 days prior to the expiry of the
Supplies Procurement Services Framework
Agreement, the Company is entitled to
serve a written notice to China
Telecommunications Corporation to renew
the Supplies Procurement Services
Framework Agreement, and the parties
shall consult and decide on matters
relating to such renewal.
070
Engineering Framework
Agreement
Pursuant to the engineering framework
agreement signed between the Company
and China Telecommunications
Corporation on 30 August 2006 and the
related supplemental agreements
subsequently entered into between the
two parties (collectively, the “Engineering
Framework Agreement”), China Telecom
Group through bids provides to the Group
services such as construction, design,
equipment installation and testing and/or
engineering project supervision services.
The charges payable for such engineering
services shall be determined by reference
to market rates. Market rates shall mean
the rates at which the same or similar type
of products or services are provided by
independent third parties in the ordinary
course of business and under normal
commercial terms. When determining the
relevant market rates, to the extent
practicable, management of the Company
shall take into account the rates of at
least two similar and comparable
transactions entered into with or carried
out by independent third parties in the
ordinary course of business in the
corresponding period for reference. The
charges payable for the design or
supervision of engineering projects with a
value of over RMB500,000 or engineering
construction projects with a value of over
RMB2 million shall be determined by the
tender award price, which is determined
in accordance with the relevant tendering
procedure of the Group and the relevant
laws and regulations in the PRC, including
the “Bidding Law of the PRC” and the
“Regulations on the Implementation of
the Bidding Law of the PRC”. The Group
shall solicit at least three tenderers for the
tender process.
Report of the Directors
The Group does not accord any priority to
China Telecom Group to provide such
services, and the tender may be awarded
to an independent third party. However, if
the terms of an offer from China Telecom
Group are at least as favourable as those
offered by other tenderers, the Group may
award the tender to China Telecom
Group.
The Company and China
Telecommunications Corporation have
entered into a supplemental agreement
on 23 September 2015 and renewed the
Engineering Framework Agreement on the
same terms (except the pricing terms) for
a further term of 3 years expiring on 31
December 2018. No later than 30 days
prior to the expiry of the Engineering
Framework Agreement, the Company is
entitled to serve a written notice to China
Telecommunications Corporation to renew
the Engineering Framework Agreement,
and the parties shall consult and decide
on matters relating to such renewal.
Ancillary Telecommunications
Services Framework Agreement
Pursuant to the ancillary
telecommunications services framework
agreement signed between the Company
and China Telecommunications
Corporation on 30 August 2006 and the
related supplemental agreements
subsequently entered into between the
two parties (collectively, the “Ancillary
Telecommunications Services Framework
Agreement”), China Telecom Group
provides the Group with certain repair and
maintenance services, including repair of
telecommunications equipment,
maintenance of fire equipment and
telephone booths, as well as other
customer services. The pricing terms for
such services are the same as those set
out in the Community Services Framework
Agreement.
China Telecom Corporation Limited Annual Report 2018 071
Report of the Directors
The Company and China
Telecommunications Corporation have
entered into a supplemental agreement
on 23 September 2015 and renewed the
Ancillary Telecommunications Services
Framework Agreement on the same terms
(except pricing terms) for a further term
of 3 years expiring on 31 December 2018.
No later than 30 days prior to the expiry
of the Ancillary Telecommunications
Services Framework Agreement, the
Company is entitled to serve a written
notice to China Telecommunications
Corporation to renew the Ancillary
Telecommunications Services Framework
Agreement, and the parties shall consult
and decide on matters relating to such
renewal.
The Company and China
Telecommunications Corporation have
entered into a supplemental agreement
on 23 September 2015 and renewed the
Internet Applications Channel Services
Framework Agreement on the same terms
(except the pricing terms) for a further
term of 3 years expiring on 31 December
2018. No later than 30 days prior to the
expiry of the Internet Applications
Channel Services Framework Agreement,
the Company is entitled to serve a written
notice to China Telecommunications
Corporation to renew the Internet
Applications Channel Services Framework
Agreement, and the parties shall consult
and decide on matters relating to such
renewal.
Internet Applications Channel
Services Framework Agreement
Review of Continuing Connected
Transactions
Pursuant to the Internet Applications
Channel Services Framework Agreement
signed between the Company and China
Telecommunications Corporation on 16
December 2013 and the related
supplemental agreement subsequently
entered into between the two parties
(collectively, the “Internet Applications
Channel Services Framework Agreement”),
the Company provides Internet
applications channel services to China
Telecom Group. The channel services
mainly include the provision of
telecommunications channel and
applications support platform, provision of
billing and deduction services,
coordination of sales promotion and
development of customers services, etc.
The pricing terms for such services are the
same as those set out in the Community
Services Framework Agreement.
The Company confirms that it has
complied with the disclosure requirements
in accordance with Chapter 14A of the
Listing Rules in respect of the connected
transactions the Company conducted in
the year 2018.
The Company’s external auditor was
engaged to report on the Group’s
continuing connected transactions for the
year ended 31 December 2018 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.
072
The auditors of the Group have reviewed
the continuing connected transactions of
the Group for the year ended 31
December 2018 and have confirmed to
the Board that nothing has come to their
attention that causes them to believe that
the relevant continuing connected
transactions:
(1) have not been approved by the
Board of the Company;
(2)
(for transactions involving the
provision of goods or services by the
Group) were not entered into, in all
material respects, in accordance with
the pricing policies of the Group;
(3) were not entered into, in all material
respects, in accordance with the
terms of the agreements governing
such transactions; and
(4) have exceeded the annual caps as set
by the Company.
A copy of the auditors’ letter in relation to
the continuing connected transactions has
been provided by the Company to the
Hong Kong Stock Exchange.
The Independent Non-Executive Directors
of the Company have confirmed that all
continuing connected transactions for the
year ended 31 December 2018 to which
the Group was a party:
(1) had been entered into, and the
agreements governing those
transactions were entered into, by
the Group in the ordinary and usual
course of business;
Report of the Directors
(2) had been entered into either:
(i)
(ii)
on normal commercial terms or
better; or
if there are not sufficient
comparable transactions to
judge whether they are on
normal commercial terms, on
terms no less favourable to the
Company than those available
to or (if applicable) from
independent third parties; and
(3) had been entered into in accordance
with the relevant terms that are fair
and reasonable and in the interests
of the shareholders of the Company
as a whole.
The Independent Non-Executive Directors
have further confirmed that:
The values of continuing connected
transactions for the year ended 31
December 2018 entered into between the
Group and its connected persons which
are subject to annual caps have not
exceeded their respective annual caps.
Renewal of Continuing Connected
Transactions
On 20 August 2018, the Company and
China Telecommunications Corporation
entered into supplemental agreements,
and renewed the Engineering Framework
Agreement, the Ancillary
Telecommunications Services Framework
Agreement, the Interconnection
Settlement Agreement, the Community
Services Framework Agreement, the
Centralised Services Agreement, the
China Telecom Corporation Limited Annual Report 2018 073
Report of the Directors
Property Leasing Framework Agreement,
the IT Services Framework Agreement, the
Supplies Procurement Services Framework
Agreement and the Internet Applications
Channel Services Framework Agreement
for a further term of three years from 1
January 2019 to 31 December 2021.
Pursuant to the Engineering Framework
Agreement as amended by the
supplemental agreement dated 20 August
2018, the charges payable for the design
or supervision of engineering projects
with a value of over RMB1,000,000 or
engineering construction projects with a
value of over RMB4,000,000 shall be the
tender award price, which is determined
in accordance with the “Bidding Law of
the PRC” and the “Regulations on the
Implementation of the Bidding Law of the
PRC” or the final confirmed price in the
relevant tender process. The Group shall
solicit at least three tenderers for the
tender process. In the circumstances there
are amended rules or regulations in
respect of tender scope and scale of the
engineering construction projects
promulgated by PRC laws and regulations,
both parties agreed to apply such
amended rules and regulations and no
amendment to the supplemental
agreement is required. The renewal of the
Engineering Framework Agreement and
the Ancillary Telecommunications Services
Framework Agreement and the applicable
renewed annual caps thereto were
approved at the second extraordinary
general meeting of the Company held on
26 October 2018. For details of the
pricing terms of all other renewed
agreements, please refer to the
announcement published by the Company
on 20 August 2018 and the circular dated
10 September 2018.
Commercial Pricing
Arrangement in respect of the
Lease of Telecommunications
Towers and Related Assets
from China Tower Corporation
Limited
On 8 July 2016, the Company and China
Tower entered into the Commercial
Pricing Agreement pursuant to which the
provincial companies of both parties
entered into the Provincial Service
Agreement (I) therein. On 1 February
2018, both parties entered into a
supplemental agreement on the basis of
the original agreement for adjustment of
certain pricing terms. Please refer to the
announcements published by the
Company on 8 July 2016 and 1 February
2018 for further details.
Business Review
Relating to the details of the material
development of the Group in 2018, a fair
review of the business and a discussion
and analysis of the Group’s performance
during the year and the material factors
underlying its results and financial position
are provided in the Statement from the
Board on pages 10 to 19, Business Review
on pages 32 to 43 and Financial Review
on pages 44 to 51 of this annual report.
Description of the principal risks and
uncertainties faced the Group can be
found throughout this annual report,
particularly in the Environmental, Social
and Governance Report on pages 82 to
155 of this annual report. Particulars of
important events affecting the Group that
have occurred after 31 December 2018, if
any, can also be found in the Notes to the
Consolidated Financial Statements. The
outlook of the Group’s business is
discussed throughout this annual report
including in the Statement from the
Board.
074
Description of the Group’s key
relationships with its employees,
customers, suppliers and others that have
a significant impact on the Company and
on which the Company’s success depends
can be found throughout this annual
report, particularly in the Environmental,
Social and Governance Report on pages
82 to 155 of this annual report. In
addition, more details regarding the
Group’s performance by reference to
financial key performance indicators and
environmental policies, as well as
compliance with relevant laws and
regulations which have a significant
impact on the Group, are provided in the
Statement from the Board, Business
Review, Financial Review, Environmental,
Social and Governance Report of this
annual report. Each of the above-
mentioned relevant contents form an
integral part of this Report of the
Directors.
Compliance with the Corporate
Governance Code
Please refer to the Environmental, Social
and Governance Report set out on pages
82 to 155 of this 2018 annual report of
the Company for details of our compliance
with the Corporate Governance Code.
Material Legal Proceedings
Report of the Directors
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 2018. Deloitte Touche
Tohmatsu has audited the accompanying
consolidated financial statements, which
have been prepared in accordance with
the International Financial Reporting
Standards. The Company has appointed
Deloitte Touche Tohmatsu and Deloitte
Touche Tohmatsu Certified Public
Accountants LLP since 29 May 2013. The
relevant re-appointment of Deloitte
Touche Tohmatsu and Deloitte Touche
Tohmatsu Certified Public Accountants LLP
as the Company’s international and
domestic auditors, respectively for the
year ending 31 December 2019 will be
proposed to the Annual General Meeting
of the Company to be held on 29 May
2019.
By Order of the Board
Ke Ruiwen
Executive Director, President and
Chief Operating Officer
As at 31 December 2018, the Company
was not involved in any material litigation
or arbitration, and as far as the Company
is aware, no material litigation or claims
Beijing, China
19 March 2019
China Telecom Corporation Limited Annual Report 2018 075
Report of the Supervisory Committee
Committee has communicated with the
Finance Department, Internal Audit
Department and external auditors and
raised certain recommendations. During
the reporting period, members of the
Supervisory Committee 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 Board meetings
and Audit Committee meetings.
II. The overall assessment of
the operation management and
performance during the
reporting period
The Supervisory Committee believed that
during the reporting period, all members
of the Board and members of senior
management have complied with rules
and regulations, upheld the principles of
diligence and integrity, safeguarded the
interests of shareholders, fully fulfilled
their responsibilities in accordance with
the Articles of Association of the
Company, diligently implemented the
resolutions of shareholders’ meetings and
the Board meetings, and strictly complied
with the relevant regulations governed 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, 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 the
shareholders, the Company and the
employees.
I. The work status of the
Supervisory Committee of the
Company
During the reporting period, the
Supervisory Committee held two
meetings. At the second meeting of the
Sixth Session of the Supervisory
Committee held on 20 March 2018, the
Supervisory Committee reviewed and
approved five agenda items, including the
financial statements for the year 2017,
the auditor’s report issued by the external
auditors, the profit distribution and
dividend proposal, the Supervisory
Committee’s report for the year 2017, the
working plan of the Supervisory
Committee for the year 2018, and passed
the relevant resolutions. Regarding profit
distribution and dividend proposal,
internal control formulation and
connected transactions, the Supervisory
Committee has communicated with the
Finance Department, Internal Audit
Department and external auditors and
raised certain recommendations. At the
third meeting of the Sixth Session of the
Supervisory Committee held on 13 August
2018, the Supervisory Committee
reviewed and approved the interim
financial statements of the Company for
year 2018 and the review report of the
external auditors, and passed the relevant
resolutions. Regarding the Company’s
operating results, the review of the
interim financial statements and
connected transactions, the Supervisory
076
Report of the Supervisory Committee
In summary, the Company seized the
precious opportunities arising from the
benefits released from data traffic, while
actively capitalising on increasing demand
from corporates subscribing for cloud
services. The Company expedited products
innovation, promoted overall upgrade of
integration, strengthened its network
edges, and improved its operational
capability. As a result, the Company
rapidly improved its competitiveness,
achieved a record high pace in terms of
market expansion, and rapidly magnified
corporate growth momentum. Meanwhile,
while conscientiously fulfilling its
responsibility to shareholders, the
Company voluntarily committed itself to
the sustainable economic, social and
environmental development and persisted
in as well as excelled in fulfilling its social
responsibilities, such as its inherent
corporate responsibilities, responsibilities
towards customers, responsibilities
towards employees, environmental
responsibilities and social welfare
responsibilities.
During the reporting period, the Company
grasped the opportunities arising from the
development of digital economy and rode
on the tide by leveraging the precision
insights into market trends and customer
demands. With deepened implementation
of step-up transformation, promotion of
reform and innovation on all fronts, and
proactive accumulation of 5G capability,
the Company accelerated the development
of new impetus, effectively responding to
the complicated and challenging external
environment, as well as increasingly fierce
competition and achieving new
breakthroughs in expanding the business
scale while firmly elevating the corporate
value. In 2018, the operating revenues of
the Company amounted to RMB377.1
billion, of which, service revenues
amounted to RMB350.4 billion,
representing an increase of 5.9% over last
year (if excluding the impact of the
application of International Financial
Reporting Standard 15 for the current
year, it represented an increase of 7.2%
over last year), with revenue growth
surpassing the industry average for many
consecutive years. Revenues from
emerging businesses accounted for 51.9%
of service revenues, representing an
increase of nearly 6 percentage points
over last year with continual optimisation
of revenue structure. EBITDA reached
RMB104.2 billion, representing an
increase of 2.0% over last year. Net profit
amounted to RMB21.2 billion,
representing an increase of 13.9% over
last year, while basic earnings per share
were RMB0.262, achieving rapid growth.
Capital expenditure was RMB74.9 billion,
representing a decrease of 15.5% over
last year being the third consecutive
annual decline. Free cash flow reached
RMB22.5 billion, representing a
remarkable increase over last year.
China Telecom Corporation Limited Annual Report 2018 077
Report of the Supervisory Committee
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 PRC, the Supervisory
Committee monitored the convening
procedures and resolutions of the
meetings of the Board, the
implementation by the Board of the
resolutions approved by the shareholders’
meetings, the performance of duties by
the 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 legitimate
rights and interests of the Company and
the shareholders as a whole especially
those of the minority shareholders,
actively promoted the regulated
operations of the Company, enhanced the
level of corporate governance of the
Company, followed lawful procedures in
their decision-making, implemented
resolutions of the shareholders’ meetings.
The Supervisory Committee was not aware
of any behaviours of the Directors or the
senior management which violated the
laws, regulations, the Articles of
Association of the Company or were
detrimental to the interests of the
Company.
2. The opinion raised by the
Supervisory Committee on the
financial implementations of the
Company
Through the supervision and inspection of
the 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. The Supervisory Committee
suggested the Company to strengthen risk
control as well as investment efficiency
assessment in the area of emerging
businesses. Upon the review of the
financial statements for the year 2018
with unqualified audit opinion and other
078
Report of the Supervisory Committee
relevant information to be tabled at
shareholders’ meetings, 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 respectively, 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.
In 2019, the Supervisory Committee will
continue to strictly adhere to the Articles
of Association of the Company and
relevant regulations, assume its
responsibility to protect the interests of
the shareholders and the Company and
monitor the Company to fulfill its
commitment to its shareholders. The
Supervisory Committee will supervise the
Company’s implementation of important
measures committed to shareholders and
focus on “Three Goals, Three Missions
and Three Initiatives to drive
transformation”, to speedily promote the
implementation of important measures in
the process of corporate high-quality
development, and will further broaden the
work plan of the Supervisory Committee
and strengthen its efforts in monitoring so
as to protect the interests of all investors.
By Order of the Supervisory Committee
Sui Yixun
Chairman of the Supervisory Committee
Beijing, China
19 March 2019
China Telecom Corporation Limited Annual Report 2018 079
Our Achievements
Soar to New Height
GREEN DEVELOPMENT
OPERATING WITH INTEGRITY
WIN-WIN COOPERATION
CREATING VALUE TOGETHER
082
Environmental, Social and Governance Report
GREEN DEVELOPMENT
OPERATING WITH INTEGRITY
WIN-WIN COOPERATION
CREATING VALUE TOGETHER
082
GREEN DEVELOPMENT
OPERATING WITH INTEGRITY
WIN-WIN COOPERATION
CREATING VALUE TOGETHER
Environmental, Social and Governance Report
As a large-scale and leading integrated information services operator in
the world, China Telecom all along persists in incorporating the
environmental, social and governance (“ESG”) responsibilities into
corporate operation and management, and has established and continues
to optimise effective risk management and internal control systems in
relation to ESG. With rapid development of mobile Internet and swift
upgrade of information consumption, the Company continues to promote
corporate transformation and accelerates business upgrade, endeavouring
to provide premium network information services for users and striving to
be a leading integrated intelligent information services operator.
The Company has strictly complied with the provisions of the
Environmental, Social and Governance (ESG) Reporting Guide as set out
in Appendix 27 to the Listing Rules of The Stock Exchange of Hong Kong
Limited in 2018, and considers the concerns of stakeholders and the
environmental, social and governance issues identified by the Company in
the course of operations as a basis for reporting. In 2018, the Company
further refined its own System of Environmental, Social and Governance
(ESG) Indicators, improved the internal process for collecting and
monitoring the data on ESG performance and strengthened procedures
on ESG data collection, review and application to ensure detailed
information on how the Company fulfills its responsibility in the aspect of
environmental, social and governance as required under the relevant
provisions has been disclosed. This report is a yearly report which covers
the Company and its subsidiaries (branches) for the period from 1 January
2018 to 31 December 2018. For details of compliance with ESG Reporting
Guide, please see the ESG Reporting Guide Index in this report. There are
no significant changes in the scope of this report from the ESG Report
published in the 2017 annual report.
This report has been reviewed and approved by the Board of Directors
of the Company for publication.
China Telecom Corporation Limited Annual Report 2018 083
Environmental, Social and Governance Report
Corporate Social Responsibility Report
By adhering to the core values of “comprehensive innovation, pursuing
truth and pragmatism, people-oriented approach and creating shared
value”, China Telecom persists in incorporating corporate responsibilities
in the aspect of Environmental, Social and Governance (ESG) into
development strategy, daily operation and management activities. The
Company also perseveres in the fulfillment of its responsibilities for the
stakeholders, while committing to step on a responsible development
path and continuously enhancing corporate comprehensive values.
Inherent Corporate
Responsibilities
Responsibilities
towards Employees
Building “Cyberpower”
Caring for Employees
A leading
Responsibilities
towards
Shareholders
integrated
intelligent
Environmental
Responsibilities
Persistent
Enhancement of
Corporate Value
information
Implementing Green
Development
services
operator
Responsibilities
towards Customers
Providing Heartfelt
Services to Customers
084
Social Welfare
Responsibilities
Enthusiastically
Participating in
Community Charity
Affairs
Environmental, Social and Governance Report
Corporate Social Responsibility Report
Inherent corporate
responsibilities:
Responsibilities towards
employees:
Employees are the most valuable assets of
a corporation. China Telecom safeguards
the interests of its employees in
accordance with laws, promotes staff
development, encourages employees to
participate in management, takes care of
its employees’ well-being, and strives to
enable employees and the Company to
grow together.
Environmental responsibilities:
It is a mission of all mankind to develop a
green and environmentally friendly
environment. Through promoting green
elements in management, procurement,
operation, office administration and
community welfare activities, China
Telecom strives to achieve an
environmentally friendly green
development to assist the green
development of economy and society.
Social welfare responsibilities:
Commitment to charitable social activities
facilitates a better society. China Telecom
takes the initiatives to give back to society
by enthusiastically participating in
community charity affairs.
As a national mainstream
telecommunications operator, there are
inherent corporate responsibilities towards
the fundamental network, new style
communication facilities, universal
services, network information security,
emergency communications, technology
innovation and value chain development.
China Telecom unwaveringly exerts the
backbone function and persistently
contributes to the establishment of
“Cyberpower”.
Responsibilities towards
shareholders:
Shareholders are investors of a
corporation. China Telecom insists on
carrying out robust operations, striving to
honour its commitment to shareholders
through achieving excellent operating
results and continuously enhancing its
corporate values.
Responsibilities towards
customers:
Customers are the foundation for
corporate sustainable development. China
Telecom strives to protect customers’
rights in accordance with law, gain in-
depth understanding of customers’ need,
unwaveringly innovate products for
customers, and provide heartfelt services
to customers, all of which enable our
customers to fully enjoy their digital lives.
China Telecom Corporation Limited Annual Report 2018 085
Environmental, Social and Governance Report
Corporate Social Responsibility Report
I. Promoting responsibility
management
The Company strictly complies with the
provisions of the Environmental, Social
and Governance Reporting Guide as set
out in Appendix 27 to the Listing Rules of
The Stock Exchange of Hong Kong
Limited. The Board of Directors of the
Company attaches high importance to the
work on Environmental, Social and
Governance (“ESG”), and is responsible to
evaluate and determine the Company’s
ESG-related risks, ensuring the Company
has established effective ESG risk
management and internal control systems
and formulated the Company’s ESG
management policy and strategy. The
Board also regularly reviews the
Company’s performance and approves
the disclosure of ESG reports to ensure
the Company’s level in fulfilling ESG
responsibility is persistently improved. This
report has been reviewed and approved
by the Board of Directors for publication.
The Company establishes an ESG working
group which is managed by senior
management, while the corporate strategy
department coordinates the daily work of
ESG with relevant departments in the
headquarters, provincial branches,
professional companies and units directly
under the headquarter. ESG working
group is authorised to be responsible for
the implementation of the Company’s ESG
strategies, continuously promoting ESG
performance management and
monitoring, information disclosure and
relevant fundamental management work.
Board of Directors
Senior Management
Corporate Strategy Department coordinates
with Related Functional Departments
Provincial Branches, Professional Companies,
Units directly under the Headquarter
ESG working group
086
Environmental, Social and Governance Report
Corporate Social Responsibility Report
The Company established its own system
of ESG Indicators, set up the internal
process of collecting and monitoring the
data on ESG performance and refined
procedures on ESG data’s collection,
review and application. In accordance
with A Step-By-Step Guide to ESG
Reporting issued by the Hong Kong Stock
Exchange in 2018, the Company perfected
its information disclosure and regulated
the disclosure of detailed information on
how the Company fulfills its responsibility
in the aspect of ESG governance.
The Company promotes communication
with its investors, customers, employees,
government and regulatory institutions,
communities and other stakeholders
through various channels including
announcements, reports, meetings,
seminars, visits, service hotlines,
questionnaires and events. The Company
earnestly listens to the expectations,
interests and needs of the stakeholders,
sorts out the opinions and suggestions
from all parties and actively respond to
the concerns raised.
Stakeholders’ Expectations on the Company and Our Response
Stakeholders
Investors
Communication
Mechanism and
Method
• Statements and
announcements
• Reports and visits
• Daily communication
• Investor conferences
Expectations on
the Company
Our Response
• Value retention and
• Operate steadily and
appreciation
• Regulating corporate
governance
• Operational risk
prevention
• Regulating information
disclosure
Customers
• Customer service
hotline
• Suitable and good
business products
• Account manager’s
• Enhancement of service
visits
quality
• Customer surveys
• Customer
communication
activities
• Tariff charges reduction
• Harmful information
prevention
• Personal privacy
protection
continue to create value
for shareholders
• Improve corporate
governance level and
continuously improve
internal control system
• Protect the rights of
investors, especially
small and medium
investors, in accordance
with laws
• Strictly comply with the
disclosure requirements
of corporate information
• Promote business and
products innovation
• Promote transparent
consumption
• Set reasonable and
preferential tariff
charges
• Regulate value-added
service cooperation
management
• Protect customer
information in
accordance with laws
China Telecom Corporation Limited Annual Report 2018 087
Environmental, Social and Governance Report
Corporate Social Responsibility Report
Stakeholders
Communication
Mechanism and
Method
Employees
• Employees‘
representative
congress
• Employee-management
conversations
• Employee opinion
surveys
• Complaints and
grievances
Government and
Regulatory
Institutions
• Meetings
• Statements or reports
• Reports and visits
Expectations on
the Company
• Legal rights protection
• Realisation of
professional
development
• Management
participation
• Caring for employees
• Compliance with laws
and regulations
• Government
management
requirement
implementation
• Facilitation of industry
development
• Promotion of
Employment
Our Response
• Regulate labour
management
• Optimise income
distribution and welfare
protection mechanism
• Reinforce employee
training and improve
career development
• Exploit the function of
employees’
representative congress
• Improve work conditions
• Govern the corporate in
accordance with laws,
and operate with
integrity
• Pay taxes in accordance
with laws, and foster
employment
opportunities
• Provide innovative
informationalised
products and services,
promote high-quality
economic development
• Actively provide advice
and suggestions
Supply Chain
• Business
• Equal and mutually
• Cooperate with
communication
• Business trainings
• Seminars or forums
beneficial cooperation
• Co-creation of value
• Promotion of industry
integrity, create mutual
benefit and achieve
win-win
development
• Actively create an
Peers
• Forums or conferences
• Dispute coordination
• Lawful and fair
competition
and resolution
• Working groups
• Visits
• Reinforcement in
communication and
cooperation and
promotion of healthy
development of the
industry
industrial ecosphere and
promote industry
development
• Actively communicate
and exchange
experience
• Promote inter-
connection
• Actively engage in
co-construction and
co-sharing
088
Environmental, Social and Governance Report
Corporate Social Responsibility Report
Stakeholders
Communication
Mechanism and
Method
Community
• Community
communication
activities
• Community co-
construction activities
• Social welfare activities
Expectations on
the Company
Our Response
• Environment protection
• Universal services
• Emergency
communications
assurance
• Assisting vulnerable
• Implement energy
conservation and
emission reduction as
well as environmental
protection measures
• Actively fulfill universal
groups
services obligation
• Maintain smooth
communication
• Promote poverty
alleviation and help the
disabled and people in
need
In accordance with the ESG subject areas contained in the Environmental, Social and
Governance Reporting Guide, while taking into consideration the expectations and needs
of stakeholders based on the characteristics of our business operation and the industry as
well as the impact of our business operation on the economy, environment and society,
the Company assesses ESG issues that are relevant and material to the Company’s
operation from the dual perspectives of its importance to stakeholders and its impact on
the Company’s business operations, and selects and establishes a materiality matrix (see
below) as the basis for the Company’s ESG report’s disclosure.
i
H
g
h
I
m
p
o
r
t
a
n
c
e
t
o
s
t
a
k
e
h
o
d
e
r
s
l
Maintaining network
information security
Protecting the rights of customers
Assuring emergency
communications
Speed upgrade and
tariff reduction
Operating with integrity and
in compliance with laws
Integrity governance
and anti-corruption
Safeguarding the rights of employees
in compliance with laws
Promoting energy conservation
and emission reduction
Enhancing service capabilities
Promoting the co-construction and
co-sharing of communication
infrastructure
Actively promoting employee development
Promoting universal services
Caring for employees’
well-being
Promoting responsible
supply chain
Enhancing production safety and
health and safety management
Conservation of natural resources
Participation in social
welfare activities
Child and forced labour prevention
Impact on the Company’s business operations
High
China Telecom Corporation Limited Annual Report 2018 089
Environmental, Social and Governance Report
Corporate Social Responsibility Report
The main issues of this report are presented in the following table:
Environmental, social and governance
areas listed in the Environmental, Social
and Governance Reporting Guide of the
Hong Kong Stock Exchange
Main issues of environmental,
social and governance
for the Company
Subject Area A: Environmental
A1 Emissions
• Promoting energy conservation and
emission reduction
A2 Use of Resources
A3 The Environment and Natural
• Conservation of natural resources
• Emphasising environmental protection in
Resources
engineering construction
Subject Area B: Social
Employment
B1
B2 Health and Safety
• Promoting the co-construction and co-
sharing of communication infrastructure
• Safeguarding the rights of employees in
compliance with laws
• Caring for employees’ well-being
• Enhancing production safety and health
and safety management
B3 Development and Training
• Actively promoting employee
B4
B5
B6
Labour Standards
Supply Chain Management
Product Responsibility
B7 Anti-corruption
B8 Community Investment
development
• Child and forced labour prevention
• Promoting responsible supply chain
• Speed upgrade and tariff reduction
• Promoting universal services
• Maintaining network information security
• Assuring emergency communications
• Protecting the rights of customers
• Enhancing service capabilities
• Operating with integrity and in
compliance with laws
Integrity governance and anti-corruption
•
• Participation in social welfare activities
This report is a yearly report which covers the policies, measures and performance on the
ESG-related issues of the Company and its subsidiaries (branches) for the period from 1
January 2018 to 31 December 2018 (reporting period). For details of compliance with the
Environmental, Social and Governance Reporting Guide of the Hong Kong Stock
Exchange, please refer to the ESG Reporting Guide Index in this report.
090
Environmental, Social and Governance Report
Corporate Social Responsibility Report
II. Operating with integrity and
in compliance with laws
China Telecom governs the corporate in
accordance with laws and regulations,
persists in operating in compliance with
laws and integrity through abidance by
relevant laws and regulations and industry
regulations. We established an all-rounded
and seamless compliance system featuring
internal control, audit supervision, anti-
corruption and comprehensive risk
management. The Company has
established a sound, long-term and
effective communication mechanism in
order to regulate the disclosure of
corporate information, and is open to
government supervision and public
scrutiny.
In accordance with Company Law of the
People’s Republic of China, Accounting
Law of the People’s Republic of China,
Contract Law of the People’s Republic of
China, Cybersecurity Law of the People’s
Republic of China, Anti-Monopoly Law of
the People’s Republic of China, Anti-
Unfair Competition Law of the People’s
Republic of China, Securities Law of the
People’s Republic of China, Code of
Corporate Governance for Listed
Companies in China published by the
China Securities Regulatory Commission
and other laws and regulations and the
regulatory requirements governing internal
control of listed companies in capital
markets such as the USA and Hong Kong,
the Company established its Internal
Control Manual to ensure that the
Company’s operation management is in
compliance with laws and regulations, the
assets are secured, and the financial
reports and relevant information are
accurate and complete.
In compliance with the Trademark Law of
the People’s Republic of China, Patent
Law of the People’s Republic of China and
other laws and regulations, the Company
implemented systems and measures
including Guidance Opinions of China
Telecom on Strengthening Intellectual
Property Work, Operation Guidelines of
Intellectual Property Management in
Product Development, Administrative
Measures on Trademark Management of
China Telecom Group, Interim Measures
for the Patent Management of China
Telecom Group. The Company established
a sound intellectual property management
system and strengthened the protection
of intellectual property rights.
The Company strictly executed the laws
and regulations on integrity governance
and anti-corruption, established and
optimised five major mechanisms
including anti-corruption education and
prevention, system monitoring, discipline
and accountability, fault tolerance and
correction, and inspection and check. The
Company formulated guidance opinions
on construction of integrity culture and
code of conduct such as integrity manual,
and opened and operated a public
WeChat account called “China Telecom
with Integrity”; set up whistleblowing
postal mailbox, emails and hotline to
address any report of whistleblowing
allegations and relevant complaints
against its employees as well as relevant
criticism, opinions and recommendations
on integrity construction and anti-
corruption work.
China Telecom Corporation Limited Annual Report 2018 091
Environmental, Social and Governance Report
Corporate Social Responsibility Report
In 2018, according to the laws and
regulations and the requirements of
regulatory authorities, in line with the
changes in business operations, the
Company continuously strengthened
compliance management, perfected the
Internal Control Manual and other rules
and regulations, continuously assessed the
implementation of rules and regulations,
and timely rectified the problems once
being identified.
III. Providing high quality
network assurance
China Telecom promoted the construction
of fundamental network and new style
fundamental infrastructure, while at the
same time commencing network “Speed
Upgrade and Tariff Reduction”, promoting
universal services, maintaining network
information security and assuring
emergency communications in order to
provide high quality network assurance.
Promoting “Speed Upgrade and
Tariff Reduction”
To construct higher quality 4G and fibre
broadband network, the Company
enhanced in-depth coverage level of 4G
network and devoted to improve network
quality, particularly in traffic-intensive and
voice-intensive zones such as high-speed
trains, expressways, colleges and
universities, high-density residential areas,
high data traffic commercial areas and
subways by applying dynamic bandwidth
expansion in our base stations on a
monthly basis, and thus enhancing
customer experience. To achieve
commercial trials of VoLTE (based on 4G
network calls), the Company further
enhanced the fibre broadband coverage in
urban cities and towns, and integrated
customers’ needs to actively deploy
Thousand-Mbps fibre broadband network.
The Company continued to reduce
handset data tariff and ceased to charge
domestic data roaming fees, while the
long-distance tariff charges for
international, Hong Kong, Macau and
Taiwan were further reduced and standard
tariff for business dedicated line products
was reduced. “Speed Upgrade and Tariff
Reduction” has benefited a broad range
of users. The requirement of reducing
data tariff of mobile network by at least
30% has been accomplished, while the
average wireline broadband access
bandwidth increased to 104 Mbps.
Promoting universal services
The Company continuously promotes the
construction of communication networks
in rural areas and remote rural villages
and strives to improve broadband access
coverage in rural areas. The Company has
set up local services points for rural
villages, proactively promoted
informatisation applications and
e-commerce development in rural areas,
which accelerated to promote the
prosperity of rural villages. The Company
also accelerated the construction of
universal services projects and
accomplished the construction task of
building the fibre cables of approximately
50,000 administrative villages during the
year. Continuing to promote network
poverty alleviation, we achieved “Double
75%” coverage of fibre broadband and
4G for administrative villages in the deep
poverty regions, including “Three Districts
and Three Prefectures”. “Three Districts“
means Tibet, Sidi Prefecture in southern
Xinjiang, and Tibetan areas in Qinghai,
Sichuan, Yunnan and Gansu Provinces.
“Three Prefectures” means Linxia
Prefecture in Gansu, Liangshan Prefecture
in Sichuan, and Nujiang Prefecture in
Yunnan, creating better
telecommunications and network
condition for poverty-stricken villages to
alleviate poverty.
092
Environmental, Social and Governance Report
Corporate Social Responsibility Report
Maintaining network information
security
The Company complies with the
Cybersecurity Law of the People’s Republic
of China and other laws and regulatory
requirements in relation to network
information security, conscientiously
implements the requirements of the
Ministry of Industry and Information
Technology, Ministry of Public Security
and other authorities on prevention and
cracking down on communication
information frauds, and proactively takes
preventative and corrective actions on
various network and information security
risks. In 2018, the Company further
improved the network and information
security management systems and
perfected normalised discussion and work
mechanism. The Company strengthened
network and information security trainings
and carried out promotion activities widely
to the public through sales outlets and
other channels during the promotion
week for national network security. With
the implementation of the measures on
preventing communication information
frauds such as real name authentication
of IoT cards, the accountability and
punishment system has been
strengthened. We also strengthened the
response plan on network and information
security risks and governed the network
security flaws promptly. As a result, the
number of network security flaws of China
Telecom informed by the Ministry of
Industry and Information Technology had
significant decreased compared to last
year. We undertook the requirement from
the Ministry of Industry and Information
Technology on ratification of Internet
environment, with over 12,000 phishing
and fraud websites disposed of during the
year. In response to the network security
emergency plan promulgated by the
Cyberspace Administration of China and
the Ministry of Industry and Information
Technology, the Company formulated the
public Internet network security
emergency plan.
China Telecom Corporation Limited Annual Report 2018 093
Environmental, Social and Governance Report
Corporate Social Responsibility Report
IV. Providing heartfelt services
to customers
China Telecom has a profound
understanding of the customers’ needs.
While being dedicated to providing
customers with fundamental service such
as high-quality 4G and fibre broadband,
as well as emerging businesses including
HD IPTV, cloud computing, Big Data,
Internet of Things, digitalised ICT
industrial informatisation application and
mobile payments, the Company focuses
on protecting customer rights, persists in
construction of service capability,
promotes intelligent service, endeavouring
to improve service quality and service
level.
Assuring emergency
communications
The Company is truly committed to the
mission of providing safe and smooth
assurance communications, and is devoted
to fight against a number of severe
natural disasters such as earthquake,
typhoon, flood and landslide and to
safeguard important events. In 2018, we
successfully accomplished disaster relief
and emergency telecommunications
assurance for debris flow in places
including Gansu and Sichuan, typhoon
“Mangkhut” and typhoon “Ampil”,
earthquake in Yunnan Mojiang, landslide
in Jinsha River and Yarlung Zangbo River
with over 80,000 relief workers, over
20,000 rescue vehicles and over 17,000
pieces of emergency communication
equipments deployed and over 37 million
emergency public service messages sent.
We also successfully provided
telecommunications assurance for
important events including the Shanghai
Cooperation Organisation Qingdao
Summit, Beijing Summit of the Forum on
China-Africa Cooperation, the first China
International Import Expo, Boao Forum for
Asia, World Internet Conference, the first
Digital China Summit with over 150,000
assurance personnel and over 20,000
rescue vehicles were deployed.
The then Chairman and CEO Mr. Yang Jie shook hands with
frontline telecommunications assurance technicians in the World
Internet Conference
Information and communications assurance of Shanghai
Cooperation Organisation Qingdao Summit
094
Environmental, Social and Governance Report
Corporate Social Responsibility Report
Protecting the rights of customers
The Company strictly conforms to the laws
and regulations regarding consumer rights
and interests such as Law of the People’s
Republic of China on Protection of
Consumer Rights and Interests and
Advertising Law of the People’s Republic
of China, dedicates to provide products
and services in compliance with laws and
regulations, performs compliance checks
on advertisement campaigns and
continuously standardises the business
tariff management.
The Company strictly complies with the
Cybersecurity Law of the People’s Republic
of China and other laws and regulatory
requirements, implements the relevant
regulatory requirements of the
government, continuously improves the
users’ personal information protection
management system, and strengthens the
protection of users’ personal information.
In 2018, the Company conscientiously
followed the Administrative Measures of
China Telecom on Security Management
of Personal Information of Users and the
Administrative Measures of China Telecom
on Security Management of Information
of Users and other regulations, carried out
supervision and inspection on users’
personal information and urged
enterprises at all levels to implement the
division of responsibility on protection of
users’ personal information in order to
ensure that business, operations and
systems must thoroughly protect
information security. We regulated
behaviours of collecting, storing,
transmitting, using and destroying of user
information and strictly controlled the
authorisation permission for sales staff to
access and edit customers account
information in order to “collect
information for a proper purpose, store
and use the information properly, record
the supporting for information usage, and
investigate the abuse of information”.
The Company collected and listened to
users’ opinions via channels like “Hotline
10000”, online and physical stores, and
continuously carried out events such as
“Customer Rights Day”, “General
Manager’s Service Day” and “Listen to
Hotline 10000”. In 2018, we strengthened
the control and management on
complaints that we received, accelerated
the process on handling the complaints
and established a two-level complaint
tracking and improvement mechanism at
headquarters and provincial branches in
order to promptly rectify issues. Among
them, in respect of the hot topics such as
the controversial issue on the fee of value-
added services and the different rights
between new and old users, the Company
remediated in a timely manner and carried
out a “zero tolerance” policy on
illegitimate deduction of tariff. The
customer complaint rate of China Telecom
for 2018 was lower than the target set by
the Ministry of Industry and Information
Technology, which remained at a relatively
low level amongst its industry peers.
Enhancing services capabilities
The Company enhanced capabilities for
core services. In 2018, we endeavoured to
enhance the capabilities on network
connection for government-enterprise
customers, cloud computing and Internet
of Things services, shortened the response
time of installation, transfer and repairs
for normal broadband and business
dedicated line, enhanced the timely
provision of end-to-end services for wifi
networking and enhanced the timely
provision of repair services for Internet of
Things services. We monitored and
analysed the video quality of e-Surfing HD
business to improve the quality of video
streaming.
The intelligent service capability has been
enhanced. We created “Smart 10000”
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hotline by continually using artificial
intelligence and Big Data technology. On
the one hand, the Company deepened the
operation of “Smart 10000” hotline and
enhanced the proportion of intelligent
interactive services. On the other hand,
the Company proactively developed smart
tools to enhance the efficiency of handling
complicated problems, of which, the smart
predicative tool can effectively reduce the
traffic processing time, and smart tools
such as smart bill and one-click diagnosis
help customer service representatives to
handle questions on topics such as fee or
network usage asked by the users.
The network service capability has been
enhanced. We established a service model
and service process named “self-service,
assistance and support” to facilitate the
convenience of customers, improved 46
items of service capabilities such as top-up
data traffic for mobile users, change of
service package and invoice and bills. We
promoted and achieved the common
service functions such as enquiry of
broadband resources, new installation and
renewal of contracts and launched special
services area named “My customer
services”. We continually enhanced the
new media customers services capabilities,
introduced services robots at online
service points in order to facilitate the
convenience for customers to pay bills and
enable us to handle enquiries and
complaints promptly. We adjusted to
adapt to the video watching habits of
customers, further promoted the video
customers services by showing short
videos directly to solve customers’
problems vividly.
According to assessment conducted by the
Ministry of Industry and Information
Technology, in 2018, the customer
satisfaction rate on handset Internet
access, mobile voice, wireline broadband
and wireline voice has increased at
different levels compared to the previous
year while the Internet access from mobile
and wireline broadband of China Telecom
continued to maintain leading position in
the industry.
V. Caring for employees
China Telecom safeguards the interests of
its employees in accordance with laws,
attaches great importance to building
harmonious labour relations, supports
labour unions in carrying out their
functions, encourages the employees to
participate in the management and
actively helps the employees to improve
their capabilities, so that the Company
and the employees can grow together.
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implements the Notice on Issues
concerning Labour Dispatch Management,
improves the business operation models
and job role classification, determines the
employment form of each role,
standardises the agreements signed with
contract or agency workers and urges
these dispatch units and dispatch works
to sign employment contracts, pay social
insurance and to protect the rights and
interests of contract or agency workers.
The Company adheres to principles of
gender equality and equal pay for equal
work, protects the privacy of employees in
accordance with laws and implements the
paid annual leave system. The Company
prohibits child labour and forced labour in
accordance with laws. In 2018, no child
labour or forced labour were found. The
Company supports the labour unions in
Safeguarding the rights of
employees in compliance with
laws
The Company strictly complies with and
implements the relevant laws and
regulations regarding labour and
protection of the employees’ rights and
interests including the Labour Law of the
People’s Republic of China, the Labour
Contract Law of the People’s Republic of
China and the Trade Union Law of the
People’s Republic of China, and protects
the rights and interests of employees with
respect to labour rights, democracy rights
and spiritual culture in accordance with
the laws. The Company strictly implements
the Notice on Standardisation of Labour
Management in Strict Compliance with
the Labour Contract Law of the People’s
Republic of China, improves labour and
management system conducts workforce
employment in accordance with laws and
regulations. The Company also ensures
that all contract employees have their
labour contracts signed and their social
insurances paid. The Company strictly
Installation and maintenance at frontline
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carrying out their functions in accordance
with laws, encourages employee
participation in management and
continuously establishes stable and
harmonious relationship with the
employees.
Actively promoting employee
development
The Company strengthens the
construction of the high-level professional
teams. In 2018, we further implemented
China Telecom High-Level Professional
Talent Management Measures,
strengthened the establishment of the
professional teams equipped with abilities
to support the transformation. We
initialised a new session of China Telecom
Chief Expert selection and carried out a
project named “Spark Programme” for the
cultivation of professional leading talents
in the aspects of 5G, cloud computing and
Big Data in order to select and cultivate
outstanding young professionals. To
further leverage on the professional
workstation’s function in cultivating and
developing the potential of professionals,
the new generation of business supporting
system was built to operate and maintain
the professional workstation, optimise the
existing talent inter-changeable
mechanism and the recruitment of talent
team of professional workstation,
encouraged professionals to develop and
bring out their expertise in the important
projects such as intelligent network,
digitalised ICT solution plan, research and
development of cloud service platform for
business supporting system. We carried
out the pilot programme of Talent Zone in
the area of cloud computing such as the
selection and management of innovative
project manager, team building, talent
communications, evaluation,
incentivisation and services. We
proactively discovered and promoted the
talent development in a new approach
and new model.
The Company strengthens employees’
training. The Company fully exerted the
online and offline training capabilities of
China Telecom College and China Telecom
Online College and developed training
courses focusing on enhancing abilities for
various job levels and skills at all levels. In
2018, we strengthened the leadership
training to operation management
personnel at all levels, strengthened the
establishment of employees’ cultivation
training system, and continuously carried
out training of professionals at all levels.
We organised and initiated a new round
of “Unit CEO” capabilities enhancement
and talent cultivation work through
practical curriculum built on business
development needs and the career
requirements of “Unit CEO” to strengthen
the training of techniques of internal
trainers and project managers. The
training session arranged by China
Telecom College has been attended over
4,600 times. China Telecom’s new
employees structured tutor project and
the physical channel “training &
promotion” practice project were awarded
“2018 ATD Excellence in Practice Award”.
The Company actively promotes skills and
value enhancement of employees. The
Company continually deepened the
featured reform model of three-
dimensional inter-driven forces comprising
“sub-division of performance evaluation
units, professional operation and top-
down support”, strengthened the
incentivisation and support to grassroots
autonomous operation entities,
encouraged junior employees to fully
develop their skills and continually
enhance their values in the development
of entrepreneurship. We implemented the
revised the Administrative Measures of
China Telecom on Skills Competition and
other measures, consistently held various
staff skill competitions and knowledge
contests, fully mobilised the function of
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innovation workshops, guided the staff to
improve their capabilities and quality and
encouraged them to strive for innovations
in their daily job. In 2018, cumulatively
over 1,200 staff innovation workshops
were built, more than 2,500 times for the
selection activities for the innovations
work of the staff were organised, over
19,000 innovation results or cases were
collected and over 5,500 results were
recognised and promoted. 18 employees
were awarded the title of “Technical
Master of China’s State-owned
Enterprises”, 116 employees were
awarded the title of “Technical/Labour
Master of the Company”, and 847
employees were awarded the title of
“Technical/Labour Pacesetter of the
Company”.
Enhancing production safety and
health and safety management
The Company strictly implements the
Work Safety Law of the People’s Republic
of China, fully fulfills the core
responsibilities for corporate safety
production, develops sound accountability
systems, implements safety responsibilities
at all levels, strictly implements safety
production assessment and punishment
system and continually solidifies the
foundation of safety production
management. The Company continually
carried out supervision and assessment on
all professional categories and units of
safety production, timely eliminated
hazards and achieved standardisation of
early elimination of hidden dangers and
closed-loop management mechanism. The
Company widely promoted through
communication and education of relevant
laws and regulations, internal policies and
rules on production safety, persistently
increased the employees awareness on
safety and emergency prevention
techniques. The Company strengthened
the safety management of engineering
projects, strictly implemented licences
obtaining system for special operation
employees, perfected the accidents
emergency drill and strengthened the
emergency drill. In 2018, there has been
no occurrence of severe casualties and
accidents.
The Company attaches great importance
to occupational health and safety by
regularly organising the employee medical
examination and continuously improving
workplace environment, thus effectively
eliminating the occurrences of
occupational diseases. The Company
continuously conducts counselling
activities concerning mental health of the
employees and assistance work, and
proactively helps the employees reduce
their physical stress.
Caring for employees’ well-being
The Company perfects the closed-loop
management mechanism from gathering,
analysing, processing and giving feedback
to understand employees’ needs and
establishes communications channels such
as seminars, online or offline surveys,
visiting employees’ family, frontline visits,
face-to-face communication, reception
visits, handling incoming mail or email,
striving to enhance the communications
and to deeply understand the thoughts,
working and living conditions of
employees as well as the hot topics and
problems that the employees care about.
Enterprises at all levels actively helped the
employees solve practical problems or
difficulties through regularising visits,
responding to hot issues and helping
employees in need, over 18,900
employees were helped during the year.
The Company continually built and
promoted ‘Four-Smalls’ namely small
canteens, small bathrooms, small
washrooms and small activity rooms, built
infant rooms according to the special
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needs of female employees, organised
cultural and sports activities in which the
employees were interested, assisting
employees in achieving work-life balance
and increasing their well-being.
VI. Practicing green
development
China Telecom complies with the
Environmental Protection Law of the
People’s Republic of China, the Energy
Conservation Law of the People’s Republic
of China and other laws and regulations
related to environmental protection,
practises the concept of green
development and proactively devotes itself
to the establishment of ecological
civilisation. The Company endeavours to
build a green network, pushes forward
green operation, sets up environmental
indicators, analyses and releases collected
performance data on a regular basis,
proactively communicates with the society
of its environmental protection actions
and effectiveness and willingly opens itself
to public scrutiny. There was no violation
of environmental protection laws and
regulations as well as no incident having
an material impact on the environment
caused by the Company in 2018.
Promoting energy conservation
and emission reduction
The Company’s greenhouse gas emissions
are mainly from energy use. The Company
implemented measures such as the
Administrative Measures of China Telecom
on Energy Conservation, Emission
Reduction and established an energy
saving and emission reduction system.
Through means like rules and regulations,
work plans, assessment evaluation etc.,
the Company applies energy conservation
and emission reduction requirements to
link through various operational activities
such as procurement, construction,
operation and office administration. The
Company preferred energy-efficient
products when purchasing new equipment
and actively applied energy-saving
technologies in the facilities of machine
rooms and base stations, extended the
coverage of the energy-saving
technological application for fundamental
ancillary facilities, constantly promoted
the integration of our business platforms
with ‘cloud resource pool’ and promoted
innovation of management of energy
conservation and emission reduction. The
Company endeavours to reduce energy
consumptions of all kinds as well as
greenhouse gas emission. In 2018, the
Company further increased investment in
energy conservation and emission
reduction — reaching RMB674 million, an
increase of 26.8% over last year. Focusing
on Internet data centres that consumed
more energy, the Company used Big Data
technology to launch intelligent energy
conservation pilot programme for servers.
Having accomplished efficient power
saving, the Company further expanded
the pilot programme to some provincial
branches. The Company utilised the
energy performance contracting model,
actively introduced social capital and
technologies to carry out the reform of
energy conservation and emission
reduction. The Company actively adopted
cleaner energy sources and reduced coal
consumption. Coal consumption in 2018
decreased by 46.2% comparing to last
year. Due to business growth, total
electricity consumption in 2018 had
increased comparing to the previous year,
with a growth rate of 5.0%. The Company
carried out technical and management
innovation by strengthening energy
conservation and emission reduction
management. In 2018, the unit energy
consumption per information flow was
5.91 kgce/TB, representing a decrease of
16.8% over last year.
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Conservation of natural resources
The Company actively takes action in
promotion of corporate philosophy, policy
system, and specific measures to improve
resource utilisation and conserve natural
resources.
The Company promotes water
conservation. The Company emphasises
water conservation in its daily business
operations, consumes water rationally and
efficiently, and reduces water
consumption. The Company actively
promotes and advocates water
conservation, reminds employees to
conserve water by posting reminders
regarding water conservation near water
facilities and appliances, raising
employees’ awareness on water
conservation. The Company strengthens
the management on water usage, actively
carries out sewage disposal and treatment
work, and promotes reuse of water. The
Company encourages replacing fresh
water with reclaimed water. In 2018, the
Company’s reclaimed water usage has
increased by 22%. The Company
promotes water-saving appliances, and
performs regular checks and repairs on
each part of the water supply system to
prevent occurrences of water leakage and
water wastage. In 2018, the total water
consumption was 42.85 million tons,
which decreased by 1.30 million tons over
last year, achieving a 3% reduction while
the water consumption per unit operating
revenue decreased by 5.8% over last year.
The Company encourages paper saving.
The Company actively promotes
measurements on its paper use. According
to the preliminary estimation, the amount
of paper used in 2018 was approximately
2,000 tons. Advocating paper savings, the
Company promotes the green office
concept and advocates the use of both
sides of the papers in office use. The
Company, from the perspectives of
technology and institution, actively
promotes reduction of paper use in
operation and office facilities sites. In
2018, the Company continuously
promoted electronic accounting files
management, VAT invoice, electronic bills
and paperless operation in order to reduce
the use of papers. According to the
requirement of taxation reforms of the
State, the Company actively investigated
the inter-connection between the
enterprises financial reporting data and
the declaration system of the tax bureau,
and promoted automatic and paperless
process of tax declaration.
The Company enhances the recycling,
disposal and utilisation of waste and used
materials. The Company strictly follows
the Law of the People’s Republic of China
on the Prevention and Control of
Environment Pollution Caused by Solid
Wastes and other laws and regulations
regarding waste disposal and utilisation,
and carries out waste disposal in
accordance with regulatory requirements.
The Company implemented the
Administrative Measures of China Telecom
on Reverse Logistics and the revised
Administrative Measures of China Telecom
on Waste and Idle Recycling and Disposal
in 2018, enriched the form of disposal of
waste and unused materials, regulated the
disposal procedures, strengthened the
centralised management of provincial and
municipal branches, focused on
prevention of disposal risk and promotes
the standardisation of the disposal. The
Company formulated the incentive policy
for cleaning up idle materials, which
specifies the incentive standards,
encourages all levels of enterprises to
conserve resources and reduce
environmental pollution through recycling,
disposal and utilisation of the waste and
used materials. In 2018, the Company
constantly enhanced the professional
management of waste, promoted the
recycling, utilisation and harmless disposal
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of such waste and old materials as
batteries, copper cable and devices. Since
the traditional lead-acid battery contains
large amounts of heavy metal, waste acid,
waste alkali and other electrolyte solution,
the battery will pollute the environment if
handled inappropriately. The Company,
on the one hand, conducts overall on-site
inspection of environmental protection
practices of the battery supplier, and
constantly purchases green and energy-
saving products such as lithium iron
phosphate battery, and on the other hand,
the Company established a management
system for battery recycling and disposal
to prevent pollution to the environment.
The Company transfers waste copper
cables generated from the “Fibre Roll-
out” campaign to the third parties for
recycling and disposal. The Company
implemented wireline closed-loop
management and strengthened the
recycling and reuse of equipment like
wireline terminals through measures such
as refurbishment and cross provincial
re-allocation, etc. Waste and used
materials without recovery value are
properly disposed in strict accordance with
state regulations after taking full account
of the environmental impact. In 2018, the
Company recycled and disposed various
types of waste and used materials over
100,000 tons.
The Company’s main business is
telecommunications information services.
Therefore, the use of packaging materials
for finished goods is identified as an
immaterial issue.
Emphasising environmental
protection in engineering
construction
China Telecom attaches great importance
to protecting the ecological environment
during project construction process. The
Company has taken proactive
environmental protection measures
regarding issues in telecommunications
engineering construction responding to
concerns of the government and the
public, such as farmland protection,
equipment pollution, construction impact
and electromagnetic radiation, to minimise
the negative impact on the ecological
environment as much as possible.
In the area of farmland protection, the
existing residence and barren land will be
preferred in site selection for base
stations, as much as possible no additional
farmland will be occupied, to ensure the
rational use of land resource.
In the area of equipment pollution, non-
polluted equipment with no noise and no
electromagnetic radiation and free of
pollutants is preferred, in order to assure
that the operating equipment does not
pose a safety hazard risk to surrounding
communities and the environment.
In the area of construction impact, areas
such as mineral reserves, forest,
grasslands, wildlife habitats, natural and
cultural relics, natural reserves and scenery
areas are intentionally avoided when
conducting routing roll-out deployment
for fibre cables, so as to avoid changing
the surrounding environment as much as
possible.
In the area of electromagnetic radiation,
the Company continuously standardises
the environmental protection management
of base station electromagnetic radiation,
monitors and assesses the electromagnetic
radiation around the base station,
enhances communication with the
community, opens itself to public scrutiny,
strictly controls the quality of network
equipment by imposing controls from the
source and actively takes advanced
technical means to refine the layout of
base station, ensuring the emission
standard is stricter than the national
emission standards.
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Promoting co-construction and
co-sharing of communication
infrastructure
The Company earnestly implemented the
suggestions on implementation of
enhancing co-building and co-sharing of
telecommunications infrastructure
promulgated by the Ministry of Industry
and Information Technology and the
State-owned Assets Supervision and
Administration Commission of the State
Council. We closely worked with other
telecommunications operators and China
Tower Corporation Limited and actively
promoted the co-construction and co-
sharing of communication infrastructures
such as base stations, channels and pole
lines, to effectively reduce repeated
construction in order to protect the
natural environment and landscape, and
to reduce the land use and energy and
raw materials consumption. In 2018, the
Company provided more than 20,000
kilometres of co-shared pole line, more
than 1,300 kilometres of co-shared
pipeline, and more than 900 sets of
shared indoor distribution system.
VII. Promoting responsible
supply chain
The Company strictly follows the Bidding
Law of the People’s Republic of China and
the purchase-related laws and regulations,
implemented the regulation such as the
Administrative Measures of China Telecom
on Purchase, consistently adhered to the
management concepts focusing on value-
added, transparent and green
procurement, committed to a trusted
relationship with suppliers to achieve
win-win situations and actively
communicated with and encouraged its
suppliers to fulfill social responsibilities
together.
Regarding value-added procurement, the
Company implements the requirements
such as the Administrative Measures of
China Telecom on Quality of the
Purchased Materials. In 2018, the
Company further enhanced the post-
annual assessment on suppliers, daily
review complaints to obligation
fulfillment, arrival inspection and the
comprehensive assessment system
combined with the quality on inspection
of network operation. The Company
enhanced the application of data from
abovementioned supplier management
activities in purchase bidding evaluation,
and facilitated suppliers to improve
delivery performance. The formulation of
the Administrative Measures of China
Telecom on IT Procurement Product
Evaluation promoted the regulation on the
assessment of IT products and improved
the coverage rates for the arrival
inspection supplier and category coverage.
Regarding transparent procurement, the
Company strictly complies with
requirements of regulations on the
Administrative Measures of China Telecom
on the Purchase Bidding and Tendering,
and constantly promotes open bidding
and transparent sourcing. In 2018, the
Company used bidding process for 100%
of the projects which it ought to have
used bidding process for as required by
law, encouraged bidding on a
consolidated basis of small value projects
and bidding with pre-qualification on
service projects. Public bidding rate and
public procurement rate were further
enhanced.
Regarding green procurement, the
Company constantly promotes the
application of green procurement index in
the sourcing process and prioritised
resources saving and environmentally
friendly products. Energy efficient power
modules purchased in 2018 accounted for
almost 100% of all purchased modules
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and the unit energy consumption of the
sourced key specialised equipment was
4.3% lower than that in 2017.
VIII. Participation in social
welfare activities
The Company participates in social welfare
activities. We implemented the Welfare
Donations Law of the People’s Republic of
China and other laws and regulations and
the Administrative Measures on Donation
of China Telecom Group under the
principles of ’voluntariness, clear
responsibility, action within capabilities,
honesty and trustworthiness’, supports
the development of technology,
education, culture, sports and health care
through various ways, and actively helps
the vulnerable, disabled and
disadvantaged. The Company encourages
its employees to carry forward the spirit of
volunteerism, and actively participate in
volunteering activities of different kinds.
The Company deepened its engagement
in poverty alleviation and supported in
targeted areas. The parent company
carried out poverty alleviation in targeted
areas including Yanyuan and Muli
Counties of Sichuan Province, Shufu
County of Xinjiang Uygur Autonomous
Region, Tianlin County of Guangxi Zhuang
Autonomous Region and provided support
in Banbar County of Tibet Autonomous
Region, Jiuzhi County of Qinghai Province,
all of which were deep-poverty regions.
The Company cooperated with the parent
company to assign the cadre team to carry
out poverty alleviation work in the above
6 counties in 2018. The Company
conducted poverty alleviation through
projects focusing on network,
informatisation, industry, employment,
intelligence and social welfare in order to
improve the living condition, develop the
economy, and increase the income of local
residents. In addition, the Company also
cooperates with the parent company to
participate in local poverty alleviation
projects in other provinces (autonomous
regions and municipalities).
The Company actively relieves poverty by
informatisation and facilities the
development in rural areas. The Company
constantly promotes the application of the
Big Data Management platform for
targeted poverty alleviation to all regions
which makes it possible for the poverty
alleviation administration authority to
manage at village, household and
individual levels and to facilitate the
measurement implementation. By the end
of 2018, the management platform was
deployed to more than 930 counties in 15
provinces (autonomous regions,
municipalities), benefiting more than 38
million registered population living in
poverty. The Company actively supports
the construction of information system for
poverty alleviation developed by the State
Council Leading Group Office of Poverty
Alleviation and Development and actively
provides technical support and expands
the poverty alleviation channel to Social
Participation Poverty Alleviation and
Development of China. The Company
constantly promotes farmer cooperatives
and assists the economy development in
rural areas based on their actual needs.
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IX. Outlook
In 2019, the Company will deeply embrace
new development philosophies featuring
innovation, coordination, openness and
co-sharing. The Company will increase
communication with stakeholders and
closely cooperate with all parties in the
industry, endeavouring to establish
advanced and developed information
infrastructure. Promoting deep integration
between information technology and
various sectors and industries, we
persistently enhanced the efficiency of
corporate operation management and the
operation services level, so as to facilitate
high-quality economic development and
accomplish the building of well-off
society.
Poverty alleviation work in Liangshan County of Sichuan Province led by management
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In 2018, our work on human resources
has firmly adhered to the Company’s
overall strategies in transformation and
upgrades. We further liberalised our
thoughts, innovated mechanisms,
solidified foundation, standardised
management and optimised the allocation
of existing resources in order to
continuously enhance human resources
efficiency and provide sound
organisational assurance and personnel
support for the corporate’s sustainable
and healthy development.
Strengthen senior management and
executive team building
We continue to promote younger cadre
team and optimise the leadership structure
of our provincial and municipal branches.
Through methods including selection and
recruitment, job exchange programme and
rotation, as well as succession and
retirement, we optimised our executive
teams among headquarters, provincial
branches and professional units. A group
of well-recognised executives with superb
qualities, distinguished capabilities and
outstanding performance were selected
and promoted to important management
positions, hence the professional and age
structure of our management teams
became more reasonable and balanced.
We increased our efforts in training
excellent young cadres and development
of excellent young cadres training
management system, and established
database of excellent young cadres talents
with unified management, hierarchical
implementation and dynamic adjustment,
so as to provide organisational assurance
for the corporate’s sustainable and healthy
development.
Strengthen the supervision and
guidance on staff selection and
appointment
We established specialised cadres
supervisory organisation to strengthen the
supervision on staff selection and
appointment. We embedded staff
selection and appointment inspections
into internal review, and continuously
carried out special inspections, specific
governance, and rectification according to
categories so as to ensure specific
governance work attaining effective
results. By continually deepened
rectification, the Company further
standardised the work on staff selection
and appointment, improved the quality of
staff selection and appointment, enhanced
the creditability on staff selection and
appointment and created better
employment environment.
Continuously promote and implement
“Talent Strong Enterprise” project
In 2018, the Company updated and
published the Measures of China Telecom
on High-Level Professional Talent
Management Service and further defined
work planning and development goals of
“Hundred, Thousand and Ten Thousand
Professional Talent Project”. We improved
mechanism on the talents selection and
inducing, use and evaluation, nurturing
and development, merit-based and
dynamic management and talents services.
The cloud computing branch of the
Company established a pilot “Talent
Zone” programme, while promoting a
more proactive, open and effective talent
policy. The Company further optimised
system of professional workstations, broke
the units, department and geographical
boundaries and enhanced co-sharing of
talents. With the combination of MSS
centralised human resources system, we
solidified talents data foundation and
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carried forward the work focusing on the
enterprise’s key tasks in transformation
and upgrades.
Further solidify human resources
foundation management
In 2018, the Company optimised and
perfected the function of centralised
human resources system, established the
master data of human resources
management platform, realised
convergence of key business data. The Big
Data analysis of human resources
supported the establishment of resources
allocation and talent teams which
promoted intelligent management of
human resources. The Company continued
to promote intelligent human resources
management projects, strengthened
system modeling and analysis and
application of intelligentised business and
enhanced precision management level of
human resources, which facilitated
corporate scientific decision-making.
Information of Employees
As at the end of 2018, the Group had 280,747 employees. The number of employees
working under each classification and their respective proportions were as follows:
Management, Finance and Administration
Sales and Marketing
Operations and Maintenance
Research and Development
Total
Number of
Employees
Percentage
45,045
138,001
87,512
10,189
280,747
16.0%
49.2%
31.2%
3.6%
100.0%
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Relationship between the
Company and Employees
Communication between
Management and Employees
We endeavour to maintain close
connection with the employees,
understand the employees in all aspects
and do our best in relation to employee
ideological work. The Company organised
employee representatives to put forward
proposals. The proportions of the
classification of the proposals are 20%
business development, 16% employee
welfare, 13% business products, 11%
labour, 10% talent team construction,
10% network construction and
maintenance and 7% core business
synergy.
Cadres of labour unions at all levels,
employees’ representatives and heads of
labour unions insisted on in-depth
investigations of frontline employees’
conditions. Through attending employees
forum, conducting questionnaire surveys
and visits, having face-to-face
communication with staff, handling the
letters or emails, as well as through the
channels of chairman mail box, staff
forum, YiChat and WeChat account. We
investigated and understood the staff’s
situation for 54,700 times. We pushed
forward handling of requests from
employees proactively and resolved
12,500 requests.
Roles and Duties of Labour Unions
We dedicatedly carry out job innovation
activities around stimulation of vitality of
employees, enhancement of capabilities
and strengthening execution capability to
motivate employees to love and respect
their jobs and to make contributions. The
Company launched activity for nominating
innovative and excellent working team
and individual. Approximately 4,000
outstanding teams and individuals shared
and presented on the “Dual Hundred”
platform, among which 99 innovative
teams and 99 outstanding individuals
were recognised.
Labour unions of the Company organised
“May 1st” recognition seminar. The
Company received a total of 254 external
honours on comprehensive and specific
categories at national, provincial and
ministerial levels, including 14 national
honours, 240 provincial and ministerial
honours, 101 group honours and 153
individual honours while the number of
honours within each category reaches a
historical high. 48 units of pioneer group
of China Telecom and 149 outstanding
workers were recognised. 1 grassroots
unit was awarded the title of pioneer
group of china national defense posts and
telecommunications industry, 1 junior
staff was awarded the title of outstanding
workshop manager, 1 vice chairman of
labour unions at provincial level was
awarded the title of the most dependable
colleague and 6 employees were awarded
the title of craftsman in
telecommunications industry.
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Caring for Employees
The Company included the establishment
of “Four-Smalls” into the key work
evaluation. The Company’s labour unions
evaluated the establishment of “Four-
Smalls” on a quarterly basis. Responding
to everyday demands of our employees,
enterprises at all levels newly built 2,203
“Four-Smalls” facilities, consolidated and
enhanced 7,353 established “Four-
Smalls”, and invested over RMB237
million. We selected and set over 1,100
“Four-Smalls” benchmarks. The “Four-
Smalls” established by northern counties’
branches increased to 82% from 31%.
Standardised and regulated construction
of “Four-Smalls” was promoted by the
Anhui and Tibet branches and the
comprehensive improvement on the
environment of the counties’ branches
was promoted by branches in Hunan,
Guizhou and Jiangsu which enriched the
connotation of “Four-Smalls” brand.
Coordination and Communication
between the Company and the
Labour Unions
Surrounding the key tasks of business
development, the Company’s unions and
business department organised 6 skills
competitions and 6 labour competitions.
18 technical masters of state-owned
enterprises (B2 grade), 116 company
technical/labour masters (C2 grade) and
847 company technical/labour pacesetters
(C3 grade) were selected through the
competitions. We organised real-practice
competitions and selection contests such
as concurrent enhancement on the quality
of mobile and fibre networks, IT skills,
maintenance skills at company level and
cloud base facilities which earned a good
reputation among the employees. All
levels of enterprises and unions carried
out more than 3,700 labour competitions,
held “My job, my innovation” series
activities, and organised over 2,500
activities such as job innovation contest,
case sharing and micro-innovation
activities resulting in more than 19,000
job innovation achievements and where
they have been imitated by others for
more than 5,500 times. The Company
established 1,246 innovation workshops
named after innovative and outstanding
employees.
China Telecom Corporation Limited Annual Report 2018 109
Environmental, Social and Governance Report
Human Resources Development Report
Labour unions at all levels actively
responded to employee’s needs, and
helped with over 14,000 tasks for
employees cumulatively, and installed
more than 1,600 air purifiers in offices
and almost 6,000 water purifiers for
grassroots. We expanded the channels
and contents for employees’ services,
organised more than 2,700 health seminar
and EAP pressure relief activities. The
labour unions provided medical services to
more than 47,000 individuals and travel
convenience for over 60,000 employees.
We organised more than 7,000 group
buying activities for employees and
improved the accommodation conditions
for over 9,000 employees. Labour unions
at all levels assisted 18,900 employees
who were in hardship.
During New Year and Lunar New Year
holidays, which were critical periods for
operations and production, all levels of
management visited frontline employees
to show their care for employees. The
Company expressed sympathy and care to
more than 60,000 frontline employees
who insisted on staying on duty during
national holidays. We timely visited
employees from 12 provinces affected by
disasters. Labour unions at all levels
congratulated employees who had
newborns, whose children were admitted
to schools and universities and whose
children were enlisted, expressed their
sympathy when the employees suffer from
sickness and death of their family
members. Over 1,500 knowledge
exchange activities among outstanding
workers were held by all level of labour
unions.
The “Scholar Family”reading activities
were held by the labour unions for four
consecutive years and the selection
activities of 100 “Elite Female” store
managers and excellent channel managers
had been held by the labour unions for
five consecutive years. Provincial branches
in Anhui and Guangdong arranged 2,221
outstanding female representatives and
female workers to subscribe for the HPV
vaccine injection project organised by
Women Workers’ Department of All-China
Federation of Trade Union. We built over
1,000 Mommy Cabins, purchased over
3,000 radiation protection suits for female
employees during pregnancy, organised
over 700 female-worker themed seminars
and carried out approximately 3,000
activities for female employees on
Women’s Day.
The labour unions organised the
“e-Surfing Cup” employee table tennis
match. We organised participation in
various activities which was organised by
Communication Sports Association, and
got excellent results in matches such as
national bridge game tournament,
national representative employees table
tennis and football matches and table
tennis and volleyball matches in
telecommunications industry. Employees
in China Telecom gave brilliant
performances. Labour unions at all levels
carried out cumulatively 37,000 various
activities with the participation rate of
employees reaching 88%. Recreational
and sports activities went deep into the
frontlines which enriched the cultural life
of employees and strengthened their team
spirit.
110
Environmental, Social and Governance Report
Human Resources Development Report
Strengthening Human Capital
Supporting National Key Training
Programme
become the service platform for
cultivating high-level, urgently-needed
and backbone professional and technical
personnel for the nation.
China Telecom actively undertook and
participated in the national professional
knowledge update projects for
professional and technical personnel. In
October 2018, we held the knowledge
update project seminar of the Ministry of
Human Resources and Social Sciences at
China Telecom College — “Advanced
Training Class on Key Technology in
Supply Chain of Internet of Things”.
Professional technicians or managers in
advanced professional and technical
positions from 72 units, such as Internet
of Things, information technology
management and intelligent product
innovation attended the seminar.
We actively promoted the construction of
national-level professional and technical
personnel continuing education base. In
2018, the training centre in China
Telecom Zhejiang branch was used as a
national-level professional and personnel
continuing education base. We updated
the knowledge for national-level
professional and technical personnel,
expanded their knowledge structure and
improved the comprehensive quality and
innovation capabilities of the participants.
Focusing on the four areas of
“Information, Equipment Manufacturing,
Financial Accounting and Social Works”,
we implemented training programme for
training and cultivation of talents that are
in urgent demand and job training
programme with trainees almost reaching
10,000 people. We endeavoured to
Efficient Operations of Online
College
In 2018, China Telecom Online College
focused on the Company’s annual training
key areas. We promoted the open sharing
of products, data and capabilities by
creating an open platform, continually
strengthened the resources building and
operation by constructing quality
resources and carrying out theme
resources marketing activities and
effectively enhanced the application level
in aspects of centralised management
training of the Company,
intellectualisation of talent development
and intelligentisation of employee
learning.
In 2018, China Telecom Online College
had cumulatively supported 36,514 face-
to-face training classes. With 148,828
people using the Online College to study,
we had added 4,705 online learning
resources, held 181 skills certification and
professional examinations for 32 job units,
organised and held 530 online training
classes.
Focusing on key business areas, China
Telecom Online College organised study
activities such as knowledge contest and
case collection for positions such as “Unit
CEO”. Focusing on the government-
enterprise line, the Online College
organised the 59th political enterprise
business learning courses, further
enhancing business development in key
areas.
China Telecom Corporation Limited Annual Report 2018 111
Environmental, Social and Governance Report
Human Resources Development Report
Building up the Internal Training
Team
Cultivating Professional Talents
In 2018, China Telecom held the score
based evaluation and star-grade
recognition on the special recruitment,
recruitment and trial recruitment of the
internal trainers of the Company. Two
internal trainer teams at the group-level
relating to enterprise information and
cloud computing were added. By
December 2018, there were a total of
10,799 internal trainers at all levels in
China Telecom, of which the company-
level internal trainers reached 885 people.
Following 5 steps of recruitment,
selection, cultivation, utilisation and
evaluation, and leveraging the internal
trainers management IT system, we built
the internal trainers team and
implemented the tiered management
training mode.
In 2018, in the aspect of cultivating
professional and leading talents in
advanced high-level transformation, we
commenced “Spark Programme” for the
transformation of cultivating professional
and high-level talents in three professional
fields including Big Data, 5G and cloud
computing through cooperating with top
research and development institutions,
laboratories and enterprises. In the aspect
of cultivating high-level professional
talents, the Company held 23 professional
talents training courses at a corporate
level with 630 trainees. In the aspect of
capabilities enhancement of professional
and technical talents, the Company
proactively organised various training
courses and talent training camps.
Through society recognition, industry
recognition, company recognition and
various other methods, the perfect and
highly skilled talents assessment system
which met the requirements of the
characteristics of telecommunications
industry and enterprise talent current
status was established.
The “Five-Phase Training Programme” was commenced
for newly recruited young employees in the
Government and Enterprise Business Department
112
Environmental, Social and Governance Report
Human Resources Development Report
Building Junior Employees’
Capacity
We organised a new session of “Unit
CEO” Capacity Improvement and
Cultivation for the period of 3 years
(2018-2020). The number of “Unit CEO”
training courses at the corporate level
broke through 100 during this year for the
first time with 4,685 participants, which
was 43% more than that in 2017. We
organised 26 training courses such as
courses development, training sessions
with top professors and training sessions
for core employees, providing courses,
teachers, operational standards and case
studies in all aspects for provincial and
municipal branches. We organised joint
training for six major areas nationwide,
with total of 74 training courses, which
successfully promoted the sharing of
training resources and cross-regional
experience.
Good news arose from each professional
lines, real-life training. The first was the
government-enterprise professional line.
On 9 May 2018, the “Value-Creation
Marketing” of China Telecom’s
government-enterprise professionals were
awarded “2017 ATD excellence in Practice
Award“. The second was the “store
manager training”of the distribution
channel line, it was awarded “2018 the
Best Practical Award” by the China
International Society of Performance
Improvement. The third was the
“e-Surfing crossing together” activity for
promoting experience of transformation
and practical benchmark organised by the
marketing department with various
departments, which effectively promoted
seizing opportunities in different areas,
accelerated development and
transformation while the way of delivering
training to grassroots was widely
welcomed. The fourth was the network
operation and IT operation focused on the
emerging area “Cloud Network
Integration” with talent cultivation project
and construction of real training base,
while the development of cloud business
and cloud changing project had made new
exploration and breakthrough.
Inducing and Nurturing Brilliant
Young Talents
We continuously promoted regularised
operation management of the internship
programme. Leveraging our internship
platform, we organised spring internship,
summer internship, day-to-day internship
and other activities to expand the
channels to induce brilliant young talents
for campus recruitment. We also
continued to organise top graduate
cultivation programme, while over 1,300
top graduates for this programme were
selected by units at all levels. The
Company organised 3 sessions of
corporate-level outstanding graduate
demonstration class, which drove the
Company to strengthen the training of
outstanding young employees.
China Telecom Corporation Limited Annual Report 2018 113
Environmental, Social and Governance Report
Human Resources Development Report
Recruitment
The Company recruits fresh university
graduates and mature talents from the
society. The Company organised unified
platform, unified advertising and unified
key universities promotions and talks to
recruit fresh graduates. Throughout the
year, the Company recruited more than
7,000 new graduates. The Company
promoted the realisation of full coverage
of the pilot programme for new employee
tutoring projects within the Company, and
formulated the Administrative Measures
of China Telecom Pilot Programme for
New Employee Tutoring Projects to guide
units at all levels to carry out the work of
pilot programme for new employee
tutoring projects. For the recruitment of
mature talents from the society, the units
at all levels orderly organised recruitment
in accordance with business development
needs.
To provide opportunities for the
employees’ career development, the
Company developed a comprehensive dual
promotion channel. Promotion is based on
the principles of fairness, justice, openness
and transparency. The Company fully
respects employees’ rights of choice,
knowledge and scrutiny.
In the recruitment and promotion
processes, the Company treats all
candidates and employees equally
regardless of gender, age and race.
The Company strictly abides by the
national regulations relating to employees’
working hours and implemented the
Regulations on Paid Annual Leave for
Employees promulgated by the State
Council and formulated the relevant
policies in relation to employee vacation.
The Company strictly abides by the laws
and regulations such as the Labour 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 and implements special
regulations to protect female employees’
rights and interests. There were no
discriminatory policies or regulations, nor
had there been any circumstance whereby
child labour or forced labour was
employed. The Company strictly abides by
relevant regulations of the labour contract
law and constantly improved the relevant
employee management systems. Taking
into account the actual circumstances of
the Company, we established relevant
system and developed detailed provisions
for termination of employee labour
contracts.
114
Environmental, Social and Governance Report
Human Resources Development Report
Remuneration and Performance
Management
Remuneration
The Company implemented the
differentiated remuneration distribution
system under which positions are used as
the foundation, a close and direct linkage
between performance and contribution is
established and which is applicable to
characteristics of different positions. The
system is mainly comprised of post salary,
performance salary, allowance and
subsidies, insurance benefits, etc..
Meanwhile, all units are encouraged to
actively explore remuneration distribution
methods that meet different positions’
characteristics according to business
development requirements, including
annual salary system, commission fee
system, project wage system and piece-
rate wage system. We adhere to being
performance-oriented and fair in internal
distribution and tilt towards high-quality
professionals and frontline staff so as to
encourage more pay for more work.
Persisting in the optimisation and
perfection of labour costs resources
allocation, as well as the close linkage
between corporate development and
performance contribution, we
implemented different resources allocation
model for various units integrating with
its own characteristics, and fully mobilised
the enthusiasm and initiatives of
development of various units, encouraging
everyone to adhere to “high contribution,
high yield” and “early development, early
benefit”.
Performance management
The Company has established a relatively
comprehensive performance evaluation
system for all of its employees. Branches
at all levels have established employees’
performance evaluation teams which are
led by the respective general managers of
the relevant branches and have
formulated evaluation methods for
deputies, functional departments,
subordinated units and general
employees. The Company improves its
employee evaluation and incentive
mechanism and the related scrutiny and
supervision system to ensure fair and
reliable performance evaluation results. At
the same time, we further optimise and
improve the performance evaluation
system and implement performance
evaluation by categories of business units,
deputies, mid-level management and
employees of all levels, enhancing the
specificity of the performance evaluation.
China Telecom Corporation Limited Annual Report 2018 115
Environmental, Social and Governance Report
Table of the ESG Indicators
Issues
Name of Indicators
Units
Year 2018
Year 2017
0.28
11.75
12.02
31.88
36.42
65.69
101,917.88
11,397.72
10,201.40
67,891.16
625.63
11,801.97
21,711.10
170.96
9.21
0.49
6.28
1.73
1,464,480.69
2,285,326.69
5.91
0.29
11.22
11.51
31.42
37.55
122.11
121,276.15
11,588.42
14,005.04
85,561.88
587.56
9,533.23
19,134.93
162.76
8.50
0.91
6.15
2.04
1,500,277.53
2,191,379.37
7.10
Scope 1: Direct greenhouse gas emissions1
million tons CO2e
Scope 2: Indirect greenhouse gas emissions1 million tons CO2e
Total greenhouse gas emissions1
million tons CO2e
tCO2e/million yuan
Greenhouse gas emissions per unit
operating revenue
Sewage emissions2
SO2 emissions3
Waste disposal amount4
Waste storage batteries disposal amount4
Waste telecommunications equipment
disposal amount4
Waste cables disposal amount4
Waste terminals disposal amount4
Other waste disposal amount4
Domestic waste emissions5
million tons
tons
tons
tons
tons
tons
tons
tons
tons
100 million kwh
million m3
10,000 tons
10,000 tons
10,000 tons
GJ
tce
kgce/TB
Electricity consumption
Natural gas consumption
Coal consumption
Gasoline consumption
Diesel consumption
Purchased heat consumption amount
Overall energy consumption6
Overall energy consumption per unit
of information flow
Overall energy consumption per
operating revenue
Power consumption per carrier frequency
at base stations
Water consumption
Water consumption per unit
operating revenue
Coverage rate of energy-saving technology
at base stations
Coverage rate of energy-saving technology
at telecommunications equipment room
Reclaimed water consumption
kgce/million yuan
6,059.89
5,983.63
kwh/carrier
frequency
million tons
tons/million yuan
%
%
tons
678.31
721.77
42.85
113.61
63.03
67.85
44.18
120.63
67.00
72.81
44,574.97
36,531.37
Emissions
Use of Resources
116
Environmental, Social and Governance Report
Table of the ESG Indicators
Issues
Name of Indicators
Units
Year 2018
Year 2017
The Environment
and Natural
Resources
Investment in energy saving and
emission reduction
Times of video conferencing
4G international roaming countries
and regions
Domestic administrative village fibre
broadband coverage7
Domestic administrative village 4G
network coverage
Internet backbone interconnection
bandwidth
International interconnection bandwidth
Call drop rate of mobile communication
Call completing rate of
mobile communication network
Call completing rate for access line
Packet loss rate of broadband Internet
ChinaNet backbone network
Degree of satisfaction of mobile Internet
users8
Degree of satisfaction of mobile voice users8
Degree of satisfaction of fixed Internet
users8
Degree of satisfaction of access line users8
Percentage of in-time response to
customer repair reports
Degree of satisfaction of international
customers
Number of newly acquired patent
authorisation
Number of newly acquired invention
patent authorisation
Number of phishing and fraud websites
blocked
Anti-corruption education programmes
organised
Attendance of anti-corruption education
and trainings
Product
Responsibility
Anti-corruption
million yuan
674.36
531.94
–
–
%
%
Gbps
Gbps
%
%
%
%
points9
points9
points9
points9
%
points9
–
–
–
–
39,406
158
92
91
36,896
137
85
88
5,886.00
4,656.31
5,640.64
0.22
97.81
4,902.15
0.24
97.51
92.35
0.06
78.92
83.80
79.86
84.98
98.80
90.40
520
490
94.86
0.02
76.40
80.92
75.03
79.41
98.30
90.10
432
406
12,283
3,744
20,242
11,478
person-times
782,658
598,778
China Telecom Corporation Limited Annual Report 2018 117
Environmental, Social and Governance Report
Table of the ESG Indicators
Issues
Name of Indicators
Units
Year 2018
Year 2017
Employment
Percentage of employees participating in
%
labour union
%
Percentage of female employees at
management level
Total number of employees10
–
Percentage of employees aged 30 and below %
%
Percentage of employees aged 31 to 50
Percentage of employees aged 51 and above %
%
Percentage of male employees
Percentage of female employees
%
Percentage of employees of ethnic minorities %
%
Percentage of local employees hired in
Hong Kong, Macau, Taiwan and
overseas branches
Total number of newly-hired employees
–
Percentage of newly-hired male employees %
Percentage of newly-hired female employees %
–
Number of resigned employees
%
Percentage of male employees among
resigned employees
Percentage of female employees among
resigned employees
Total number of dismissed employees
Percentage of male employees among
dismissed employees
Percentage of female employees among
dismissed employees
%
–
%
%
100
19.63
280,747
13.50
71.60
14.90
67.83
32.17
6.44
43
9,641
58.88
41.12
4,704
64.90
35.10
253
66.80
33.20
100
19.39
284,206
13.89
72.37
13.74
67.61
32.39
6.39
42
8,888
58.44
41.56
4,599
65.80
34.20
337
73.29
26.71
118
Environmental, Social and Governance Report
Table of the ESG Indicators
Issues
Name of Indicators
Units
Year 2018
Year 2017
Death rate in accidents per 1,000 employees %
Injury rate in accidents per 1,000 employees %
–
Loss of working days due to work-related
0
0
0
0.0035
0
0
Health and Safety
injury
Number of participants in safety emergency
drills
Number of participants in health and safety
trainings
person-times
258,598
192,958
person-times
415,361
263,598
Participation rate of employee health
checkup
%
100
100
Development and
Training
yuan/person
Training expenses per employee
–
Number of internal trainers
10,000 person-times
Number of training participants
Number of senior management trained
person-times
Number of middle-level management trained person-times
person-times
Number of general employees trained
person-times
Number of male employees trained
person-times
Number of female employees trained
10,000 persons
Number of employees enrolled in
online college
Average training time per employee11
Average training time per senior
management11
Average training time per middle-level
management11
Average training time per general
employee11
Average training time per male employee11
hours/person
Average training time per female employee11 hours/person
hours/person
Average training time in online college
per employee
hours/person
hours/person
hours/person
hours/person
2,630.99
10,799
51.42
456
73,846
439,853
338,644
175,511
14.88
25.03
54.07
35.40
23.53
26.16
22.81
27.95
2,584.60
10,151
46.62
360
58,884
406,913
309,534
156,666
27.03
23.52
56.71
33.01
21.88
23.60
22.33
16.60
China Telecom Corporation Limited Annual Report 2018 119
Environmental, Social and Governance Report
Table of the ESG Indicators
Issues
Name of Indicators
Units
Year 2018
Year 2017
Community
Investment
Number of registered employee volunteers
Total service time of volunteers
Number of participants in volunteering
activities
Number of volunteering activities
Volunteer service activities input amount
Total donation
Number of participated pole line
co-construction
Number of provided pole line co-sharing
Number of participated pipeline
co-construction
Number of provided pipeline co-sharing
Number of participated indoor distribution
system co-construction
Number of provided indoor distribution
system co-sharing
Personnel involved in emergency
communication support
Number of emergency communication
equipment dispatched
Number of emergency communication
vehicles dispatched
Number of emergency public service
messages sent
10,000 persons
10,000 hours
10,000 person-times
sessions
million yuan
million yuan
kilometres
kilometres
kilometres
kilometres
–
–
5.96
53.11
10.45
8,791
13.86
20
3,268
20,291
5,207
1,346
6,094
927
4.38
47.39
8.97
9,867
10.75
23
5,687
22,198
3,564
1,533
9,249
1,299
person-times
87,046
111,610
set-times
17,379
19,494
vehicle-times
22,780
25,990
million pieces
37.48
23.01
120
Environmental, Social and Governance Report
Table of the ESG Indicators
Notes:
1.
2.
3.
4.
5.
6.
7.
8.
The greenhouse gas is measured based on the Greenhouse Gas Protocol — Enterprise Accounting and
Reporting Standards of World Resources Institute (WRI) and World Business Council for Sustainable
Development (WBCSD), the 2006 IPCC Guidelines for National Greenhouse Gas Inventories of
Intergovernmental Panel on Climate Change (IPCC) and the Fourth Assessment Report 2007 of
Intergovernmental Panel on Climate Change (IPCC), etc.
Scope I: direct greenhouse gas emission includes the greenhouse gas emission from use of natural gas, coal,
kerosene, gasoline and diesel.
Scope II: indirect greenhouse gas emission includes the greenhouse gas emission from purchased electricity
and heating power, where the electricity emission factors shall refer to the base line emission factors of
regional power grids in China released by National Development and Reform Commission, Department of
Climate Change.
Total greenhouse gas emission shall be the sum of Scope I (direct greenhouse gas emission) and Scope II
(indirect greenhouse gas emission).
The quantity of sewage emission is measured based on water consumption, and the wastewater discharge
coefficient shall refer to GB50318-2017 Code of Urban Wastewater Engineering Planning of the National
Standards of the PRC and relevant documents of National Bureau of Statistics of the PRC.
SO2 emissions is calculated with the method of the State-owned Assets Supervision and Administration
Commission of the State Council of the PRC.
The major types of waste of the Company include worn out facilities, equipment and materials. The Company
generally does not disassemble the waste facilities, but hand over to a qualified third party to dispose in
accordance with the relevant regulations of the country and the area of operation. Since it is difficult to
separate hazardous waste and non-hazardous waste, the major processed waste is disclosed in a detail list in
this report.
The quantity of domestic waste emission in 2017 is measured based on the per capita household waste
output coefficient as specified in the guidance released by the State Council of the PRC in 2008. The quantity
of domestic waste emission in 2018 is converted based on the current commonly used per capita household
waste production coefficient.
Overall energy consumption is calculated with the energy statistics calculation method applied by National
Bureau of Statistics of the PRC.
Domestic administrative village fibre broadband coverage targets the fixed network service area of China
Telecom Corporation Limited.
The 2018 results of “degree of satisfaction of mobile Internet users”, “degree of satisfaction of mobile voice
users”, “degree of satisfaction of fixed Internet users” and “degree of satisfaction of access line users” are
quoted from the 2018 national telecom service quality satisfaction evaluation by the Ministry of Industry and
Information Technology of the PRC.
9.
The full mark of user satisfaction measurement is 100.
10.
The total number of employees includes the number of contract workers and the number of labour dispatch.
11.
Training time per employee refers to offline training time for employees.
China Telecom Corporation Limited Annual Report 2018 121
Environmental, Social and Governance Report
Independent Assurance Report
122
Environmental, Social and Governance Report
Appendix — ESG Reporting Guide Index
Aspect
Description of Indicators
A1: Emissions
General Disclosure
Information on:
Page
100–102
(a)
(b)
the policies; and
compliance with relevant laws and regulations that
have a significant impact on the issuer
relating to air and greenhouse gas emissions, discharges
into water and land, and generation of hazardous and
non-hazardous waste.
Note: Air emissions include NOx, SOx, and other pollutants
regulated under national laws and regulations. Greenhouse
gases include carbon dioxide, methane, nitrous oxide,
hydrofluorocarbons, perfluorocarbons and sulphur
hexafluoride. Hazardous wastes are those defined by
national regulations.
A1.1 The types of emissions and respective emissions
116
data.
A1.2 Greenhouse gas emissions in total (in tonnes) and,
116
where appropriate, intensity (e.g. per unit of
production volume, per facility).
A1.3 Total hazardous waste produced (in tonnes) and,
116
where appropriate, intensity (e.g. per unit of
production volume, per facility).
A1.4 Total non-hazardous waste produced (in tonnes)
116
and, where appropriate, intensity (e.g. per unit of
production volume, per facility).
A1.5 Description of measures to mitigate emissions and
100–102
results achieved.
A1.6 Description of how hazardous and non-hazardous
101–102
wastes are handled, reduction initiatives and
results achieved.
China Telecom Corporation Limited Annual Report 2018 123
Environmental, Social and Governance Report
Appendix — ESG Reporting Guide Index
Aspect
Description of Indicators
A2: Use of Resources
General Disclosure
Page
100–102
Policies on the efficient use of resources, including
energy, water and other raw materials.
Note: Resources may be used in production, in storage,
transportation, in buildings, electronic equipment, etc.
A2.1 Direct and/or indirect energy consumption by type
116
(e.g. electricity, gas or oil) in total (kWh in ’000s)
and intensity (e.g. per unit of production volume,
per facility).
A2.2 Water consumption in total and intensity
116
(e.g. per unit of production volume, per facility).
A2.3 Description of energy use efficiency initiatives and
100–102
results achieved.
A2.4 Description of whether there is any issue in
101–102
sourcing water that is fit for purpose, water
efficiency initiatives and results achieved.
A2.5 Total packaging material used for finished
Not
products (in tonnes) and, if applicable, with
Applicable1
reference to per unit produced.
A3: The Environment and
General Disclosure
101–103
Natural Resources
Policies on minimising the issuer’s significant impact
on the environment and natural resources.
A3.1 Description of the significant impacts of activities
101–103
on the environment and natural resources and the
actions taken to manage them.
B1: Employment
General Disclosure
Information on:
96–100,
114–115
(a)
(b)
the policies; and
compliance with relevant laws and regulations that
have a significant impact on the issuer
relating to compensation and dismissal, recruitment and
promotion, working hours, rest periods, equal
opportunity, diversity, anti-discrimination, and other
benefits and welfare.
B1.1 Total workforce by gender, employment type, age
107, 118
group and geographical region.
B1.2 Employee turnover rate by gender, age group and
118
geographical region.
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Appendix — ESG Reporting Guide Index
Aspect
Description of Indicators
B2: Health and Safety
General Disclosure
Information on:
(a)
(b)
the policies; and
compliance with relevant laws and regulations that
have a significant impact on the issuer
relating to providing a safe working environment and
protecting employees from occupational hazards.
B2.1 Number and rate of work-related fatalities.
B2.2 Lost days due to work injury.
B2.3 Description of occupational health and safety
measures adopted, how they are implemented and
monitored.
B3: Development and
General Disclosure
Page
99
119
119
99
98–99,
Training
Policies on improving employees’ knowledge and skills
111–113
for discharging duties at work. Description of training
activities.
Note: Training refers to vocational training. It may include
internal and external courses paid by the employer.
B3.1 The percentage of employees trained by gender
119
and employee category (e.g. senior management,
middle management).
B3.2 The average training hours completed per
119
employee by gender and employee category.
B4: Labour Standards
General Disclosure
97–98, 114
Information on:
(a)
(b)
the policies; and
compliance with relevant laws and regulations that
have a significant impact on the issuer
relating to preventing child and forced labour.
B4.1 Description of measures to review employment
97–98, 114
practices to avoid child and forced labour.
B4.2 Description of steps taken to eliminate such
97–98, 114
practices when discovered.
B5: Supply Chain
General Disclosure
103–104
Management
Policies on managing environmental and social risks of
the supply chain.
B5.2 Description of practices relating to engaging
103–104
suppliers, number of suppliers where the practices
are being implemented, how they are implemented
and monitored.
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Environmental, Social and Governance Report
Appendix — ESG Reporting Guide Index
Aspect
Description of Indicators
B6: Product Responsibility General Disclosure
Information on:
Page
91–96
(a)
(b)
the policies; and
compliance with relevant laws and regulations that
have a significant impact on the issuer
relating to health and safety, advertising, labelling and
privacy matters relating to products and services
provided and methods of redress.
B6.1 Percentage of total products sold or shipped
Not
subject to recalls for safety and health reasons.
Applicable2
B6.2 Number of products and service related complaints
95
received and how they are dealt with.
B6.3 Description of practices relating to observing and
91–92
protecting intellectual property rights.
B6.4 Description of quality assurance process and recall
Not
procedures.
Applicable2
B6.5 Description of consumer data protection and
95
privacy policies, how they are implemented and
monitored.
B7: Anti-corruption
General Disclosure
91–92
Information on:
(a)
(b)
the policies; and
compliance with relevant laws and regulations that
have a significant impact on the issuer
relating to bribery, extortion, fraud and money
laundering.
B7.2 Description of preventive measures and whistle-
91–92
blowing procedures, how they are implemented
and monitored.
B8: Community Investment General Disclosure
104
Policies on community engagement to understand the
needs of the communities where the issuer operates
and to ensure its activities take into consideration the
communities’ interests.
B8.1 Focus areas of contribution (e.g. education,
104
environmental concerns, labour needs, health,
culture, sport).
B8.2 Resources contributed (e.g. money or time) to the
120
focus area.
Notes:
1.
Packaging materials used for the finished products do not apply to the practice of the Company. Through
the identification of substantive issues, we mainly reported the recycling and reusing of the resources such
as storage batteries, cables, terminals that the Company mainly use, in the process of operations and
services. For more details, please refer to “VI. Practicing green development” of Corporate Social
Responsibility Report.
2.
Recalling products shall not apply to the practice of the Company. Through the identification of substantive
issues, we mainly reported on maintaining network information security, assuring emergency
communications and protecting the rights of customers. For more details, please refer to “III. Providing high
quality network assurance” and “IV. Providing heartfelt services to customers” of Corporate Social
Responsibility Report.
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Environmental, Social and Governance Report
Corporate Governance Report
An Overview of Corporate
Governance
The Company strives to maintain high
level of corporate governance and has
always adhered to excellent, prudent and
efficient corporate governance principles
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 2018, the shareholders’
meeting, the Board and the Supervisory
Committee operate soundly and
efficiently, and the Company insisted on
reform and innovation and strived to
promote corporate transformation and
upgrades, while continuously optimising
its internal control system and
comprehensive risk management in order
to effectively ensure corporate steady
operation. The standard of the Company’s
corporate governance continued to
improve and is aligned with the long-term
best interest of shareholders, ensuring
that the interests of shareholders were
effectively assured.
The Company persists in refining the basic
system of its corporate governance. As a
company incorporated in the PRC, the
Company adopts the Company Law of the
People’s Republic of China and other
relevant 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
Company strives to ensure compliance
with the Rules Governing the Listing of
Securities on The Stock Exchange of Hong
Kong Limited (the “Listing Rules”) and the
regulatory requirements for non-US
companies listed in the United States. In
Shareholders’ Meeting
Board of Directors
Supervisory
Committee
Audit
Committee
Remuneration
Committee
Nomination
Committee
China Telecom Corporation Limited Annual Report 2018 127
Environmental, Social and Governance Report
Corporate Governance Report
In 2018, 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
named the “Most Honoured Company
(2009-2018)” in the Asia’s Best Managed
Companies Poll 2018 by FinanceAsia. The
Company was voted as the “Most
Honoured Company in Asia” in 2018
All-Asia-Executive-Team ranking organised
by Institutional Investor, a prestigious
financial magazine, for eight consecutive
years. The Company was voted as the
“Most Outstanding Company in Hong
Kong — Telecommunication Services
Sector” in the Asia’s Outstanding
Companies Poll 2018 by Asiamoney, and
was the only telecom operator in China
and Hong Kong to have received such an
honour. The Company was accredited
with “Platinum Award — Excellence in
Environmental, Social and Governance” in
the poll of Corporate Awards 2018 by The
Asset, and was the only
telecommunications company that
received the Platinum recognition for 10
consecutive years. Meanwhile, the
Company was honoured with four other
top awards, of which Mr. Yang Jie, the
then Chairman and CEO of the Company,
was awarded with the “Best CEO in
addition, 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 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
2018, the roles of Chairman and Chief
Executive Officer of the Company were
performed by the same individual. In the
Company’s opinion, through supervision
by the Board and the Independent Non-
Executive Directors, with effective control
of the Company’s internal check and
balance mechanism, the same individual
performing the roles of Chairman and
Chief Executive Officer can enhance the
Company’s efficiency in decision-making
and execution and effectively capture
business opportunities. Many leading
international corporations around the
world also have similar arrangements. The
Company attaches high importance to the
annual general meeting which provides an
opportunity for direct communication
between the Board of Directors of the
Company and the shareholders. Mr. Yang
Jie, the then Chairman of the Company,
was unable to attend the annual general
meeting of the Company for the year
2017 convened on 28 May 2018 due to
other important work arrangement.
Therefore, another executive director was
appointed to chair the said annual general
meeting and answer the questions raised
by the shareholders.
Save as stated above, the Company was in
compliance with all the code provisions
under the Corporate Governance Code as
set out in Appendix 14 to the Listing Rules
in the year 2018.
The then Chairman and CEO Mr. Yang Jie received the “Best CEO”
award by The Asset
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Environmental, Social and Governance Report
Corporate Governance Report
Telecommunications” for his excellence in
leadership, strategic thinking, team- and
relationship-building, effective
communication and change management.
The Company was also awarded “Best
Initiative in Diversity and Inclusion” for
adopting policies, programs and practices
that promote and strengthen diversity and
inclusion within the organisation as well
as in the community and industry. In
addition, the Company was accredited
with “The Best of Asia — Icon on
Corporate Governance” by Corporate
Governance Asia, a renowned regional
journal on corporate governance, for six
consecutive years, and Mr. Yang Jie was
honoured with “Asia’s Best CEO” award.
Overall Structure of the
Corporate Governance
A two-tier structure is adopted as the
overall structure for corporate governance:
the Board and the Supervisory Committee
are established under the shareholders’
meeting; the Audit Committee,
Remuneration Committee and Nomination
Committee are established under the
Board. The Board is authorised by the
Articles of Association to make major
operational decisions of the Company and
to oversee the daily management and
operations of the senior management. The
Supervisory Committee is mainly
responsible for the supervision of the
performance of duties of the Board and
the senior management. Each of the Board
and the Supervisory Committee is
independently accountable to the
shareholders’ meeting.
Shareholders’ Meeting
In 2018, the Company convened 3
shareholders’ meetings including an
annual general meeting (“AGM”) for the
year 2017 and 2 extraordinary general
meetings (“EGM”). At the first EGM held
on 4 January 2018, the amendments to
the Articles of Association of the Company
including the updates of contact
information of the Company, setting up
Party organisations in the Company, the
amendment to the number of
CORPORATE
GOVERNANCE
ASIA
Icon on Corporate
Governance
INSTITUTIONAL
INVESTOR
Most Honoured
Company in Asia
THE ASSET
Platinum Award –
Excellence in
Environmental,
Social and
Governance
FINANCEASIA
Most Honoured
Company (2009-2018)
China Telecom Corporation Limited Annual Report 2018 129
Environmental, Social and Governance Report
Corporate Governance Report
announcements in newspaper in the
events of reducing its registered capital,
merger, division and establishment of
liquidation committee, change of the way
of affixing the seal on share certificates
and updated description on dividend
payment were reviewed and approved. At
the AGM held on 28 May 2018, numerous
resolutions such as the consolidated
financial statements for the year 2017 of
the Company, report of the international
auditor, proposal for profit and dividend
distribution, re-appointment of auditors
and amendments to the Articles of
Association of the Company (which mainly
include the updates of the provisions
regarding the Company’s scope of
business) were reviewed and approved. No
significant changes to the Articles of
Association of the Company during the
year were made. Meanwhile, the Board
was authorised to prepare the budget for
the year 2018, fix the remuneration of the
auditors and issue debentures, etc.. At the
second EGM held on 26 October 2018,
the renewal of the continuing connected
transactions and the applicable renewed
annual caps thereto, the election of
Madam Zhu Min and Mr. Yeung Chi Wai,
Jason as a Director and independent
Director of the Company respectively and
the election of Mr. Xu Shiguang as a
Supervisor of the Company were
approved.
Since the Company’s listing in 2002, at
each of the shareholders’ meetings, a
separate shareholders’ resolution was
proposed by the Company in respect of
each independent item. The circulars to
shareholders also provided details of the
resolutions. All votes on resolutions tabled
at the shareholders’ meetings of the
Company were conducted by poll and all
voting results were published on the
websites of the Company and The Stock
Exchange of Hong Kong Limited. The
Company attaches great importance to
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Corporate Governance Report
the shareholders’ meetings and the
communication between Directors and
shareholders. The Directors provided
detailed and sufficient answers to the
questions raised by shareholders at the
shareholders’ meetings. The Board
implemented the Shareholders
Communication Policy to ensure that the
shareholders are provided with
comprehensive, equal, understandable
and public information of the Company
on a timely basis and to facilitate the
communication amongst the Company,
the shareholders and investors.
Board of Directors
As at 31 December 2018, the Board of the
Company comprised 10 Directors
including 5 Executive Directors, 1 Non-
Executive Director and 4 Independent
Non-Executive Directors. The Audit
Committee, Remuneration Committee and
Nomination Committee under the Board
consist solely of Independent Non-
Executive Directors, which ensure that the
Committees are able to provide sufficient
check and balance, and make independent
judgements to protect the interests of
shareholders and the Company as a
whole. The number of Independent Non-
Executive Directors exceeds one-third of
the members of the Board of the
Company. Mr. Tse Hau Yin, Aloysius, the
Chairman of the Audit Committee, is an
internationally renowned financial expert
with extensive expertise in accounting and
financial management. The term of office
for the 6th session of the Board lasts for 3
years, starting from May 2017 until the
day of the Company’s annual general
meeting for the year 2019 to be held in
2020, upon which the 7th session of the
Board will be elected.
In August 2013, the Company
implemented the Board Diversity Policy.
The Company strongly believes that board
diversity will contribute significantly to the
enhancement of the overall performance
of the Company. The Company views
board diversity as the key element for
accomplishing its strategic goals and
sustainable development. In determining
the composition of the Board, the
Company takes into account diversity of
the Board from a number of perspectives,
including but not limited to gender, age,
education background or professional
experience, skills, knowledge, duration of
service and time commitment, etc. All
appointments made or to be made by the
Board are merit-based, and candidates are
selected based on objective criteria taking
full consideration of board diversity. Final
decisions are comprehensively made based
on each candidate’s attributes and the
consideration for his/her value
contributions to be made to the Board.
The Nomination Committee oversees the
implementation of Board Diversity Policy,
reviews the existing policy as and when
appropriate, and recommends proposals
for revisions for the Board’s approval.
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Corporate Governance Report
In 2018, the Board and the Nomination
Committee proposed to appoint Madam
Zhu Min (“Madam Zhu”) and Mr. Yeung
Chi Wai, Jason (“Mr. Yeung”) as an
Executive Director and an Independent
Non-Executive Director of the Company
respectively. When conducting the
evaluation on the candidates, the Board
and the Nomination Committee take into
account the diversity of the Board and
relevant policies. The Board and the
Nomination Committee considered that
Madam Zhu has extensive experience in
finance, management and the
telecommunications industry and her
appointment to the Board can maintain
the proportion of female members in the
Board composition. There are currently
two female Directors on the Board.
Meanwhile, Mr. Yeung is considered as
independent and has extensive experience
in handling legal, regulatory, compliance
and banking matters, and is familiar with
relevant laws and regulations. He also
complies with the guidelines on
independence as set out in Rule 3.13 of
the Listing Rules and has sufficient time to
discharge his responsibilities as an
Independent Non-Executive Director of the
Company. The Board believes that the
appointments of Madam Zhu and Mr.
Yeung as Board members can further
strengthen supervision and management
capabilities in finance and legal areas.
They can bring different views and
perspectives to the Board and further
enhance board diversity while promoting
the independence and objectiveness in
decision-making of the Board and the
comprehensive and impartial supervision
of the management in accordance with
the interests of the Company and its
shareholders as a whole. The
appointments of Madam Zhu and Mr.
Yeung as Directors were approved at the
second EGM held on 26 October 2018 by
the Company.
Biographical details of existing Directors
are set out in the “Biographical details of
Directors, Supervisors and Senior
Management” section of this Annual
Report. The Company considers that the
Board currently comprises experts from
diversified professions such as
telecommunications, accounting, finance,
law, banking and management with
diversification in terms of gender, age,
duration of service, etc., advancing the
enhancement of management standard
and the further standardisation of
corporate governance practices, which
results in a more comprehensive and
balanced Board structure and decision-
making process.
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The below sets out the analysis of the Board composition as at 31
December 2018:
Female
Male
10 Years or
Above
5 Years to
10 Years
5 Years or
Below
Independent
Non-Executive
Directors
61-75
Years Old
Non-Executive
Director
Executive
Directors
51-60
Years Old
41-50
Years Old
Gender
Designation
Age Group
Duration
of service
(years)
The Company strictly complies with the
Corporate Governance Code under the
Listing Rules to rigorously regulate the
operating procedures of the Board and its
Committees, and to ensure that the
procedures of the Board meetings are in
compliance with related rules in terms of
organisation, regulations and personnel.
The Board responsibly and earnestly
supervises the preparation of financial
statements for each financial period, so
that such financial statements truly and
fairly reflect the financial condition, the
operating results and cash flows of the
Company for such period. In preparing the
financial statements for the year ended 31
December 2018, the Directors adopted
appropriate accounting policies and made
prudent, fair and reasonable judgements
and estimates, and prepared the financial
statements on a going concern basis.
China Telecom Corporation Limited Annual Report 2018 133
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Corporate Governance Report
The Articles of Association of the
Company clearly defines the respective
duties of the Board and the management.
The Board is accountable to the
shareholders’ meetings, and its duties
mainly include the execution of
resolutions, formulation of major
operational decisions, financial proposals
and policies, formulation of the
Company’s basic management system and
the appointment of senior management
personnel of the Company. The
management is responsible for leading the
operation and management of the
Company, the implementation of 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 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 meeting notice 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 enquiries to
the Company Secretary for details to
ensure that they have received sufficient
information on various matters set out in
the meeting agendas.
The Board holds at least 4 meetings in
each year. Additional Board meetings will
be held in accordance with practical
needs. In 2018, the Board played a pivotal
role in the Company’s operation,
budgeting, supervision, internal control,
risk management and other significant
decisions and corporate governance. The
Board reviewed significant matters
including the Company’s annual and
interim financial statements, quarterly
financial results, financial and investment
budgets, risk management and internal
control implementation and assessment
report, annual proposal for profit
distribution, share appreciation rights
scheme and the grant proposal, renewal
of the continuing connected transactions,
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Directors’ training and
continuous professional
development
The Company provides guidelines on
duties, continuing obligations, relevant
laws and regulations, operation and
business of the Company to newly
appointed Directors so that they are
provided with the tailored induction
relating to their appointment. To ensure
that the Directors are familiar with the
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. Meanwhile, through regular Board
meetings and reports from management,
the Directors are able to have clearer
understandings on the operations,
business strategy, the latest development
of the Company and the industry. In
addition, the Company reminds the
Directors of their functions and duties by
continuously providing them with
information regarding the latest
development of the Listing Rules and
other applicable regulations, and
arranging internal training on topics
related to the latest development of the
industry and operational focus of the
Company for mutual exchange of ideas
and discussion. The Directors actively
participate in training and continuous
professional development to develop and
refresh their knowledge and skills in order
to contribute to the Company.
and the applicable renewed annual caps
thereto, the implementation of continuing
connected transactions, changes of
Directors and Board Committee members,
Supervisors and senior management,
remuneration proposal for the newly
appointed Directors, re-appointment and
remuneration of auditors, establishment
of independent board committee and
appointment of independent financial
adviser and implementation of new Lease
Standard. During the year, the Company
convened 4 Board meetings and
completed various written resolutions. In
2018, the Chairman held a meeting to
communicate with Non-Executive Directors
(including Independent Non-Executive
Directors) without the presence of
Executive Directors independently to
ensure their opinions can be fully
expressed, further facilitating the
exchange of different views on the Board.
The Company determines the Directors’
remuneration with reference to factors
such as their respective duties and
responsibilities in the Company, as well as
their experience and market conditions at
the relevant time.
The Board formulates and reviews the
Company’s policies and practices on
corporate governance; reviews and
monitors the training and continuous
professional development of Directors and
senior management; reviews and monitors
the Company’s policies and practices on
compliance with legal and regulatory
requirements; develops, reviews and
monitors the code of conducts for
employees; and reviews the Company’s
compliance with the Corporate
Governance Code and disclosure in the
Corporate Governance Report.
China Telecom Corporation Limited Annual Report 2018 135
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During the year, the Directors as at 31 December 2018 have participated in training and
continuous professional development activities, and the summary is as follows:
Directors
Executive Directors
Yang Jie
Ke Ruiwen
Gao Tongqing
Chen Zhongyue
Zhu Min
Non-Executive Director
Chen Shengguang
Independent Non-Executive Directors
Tse Hau Yin, Aloysius
Xu Erming
Wang Hsuehming
Yeung Chi Wai, Jason
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:
attending relevant seminars and/or conferences and/or forums; or delivering speeches at relevant seminars
and/or conferences and/or forums
reading or writing relevant newspapers, journals and articles relating to economy, general business,
telecommunications, corporate governance or directors’ duties
Compliance with the Model
Code for Securities
Transactions by Directors and
Supervisors and Confirmation of
Independence by the
Independent Non-Executive
Directors
The Company has adopted the Model
Code for Securities Transactions by
Directors of Listed Issuers as set out in
Appendix 10 to the Listing Rules to govern
securities transactions by the Directors
and Supervisors. Based on the written
confirmation from the Directors and
Supervisors, the 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 for the year 2018.
Meanwhile, the Company has received
annual independence confirmation from
each of the Independent Non-Executive
Directors and considered them to be
independent.
Audit Committee
As at 31 December 2018, the Audit
Committee comprised 4 Independent Non-
Executive Directors, Mr. Tse Hau Yin,
Aloysius as the Chairman and Mr. Xu
Erming, Madam Wang Hsuehming and Mr.
Yeung Chi Wai, Jason as the members. On
26 October 2018, Mr. Yeung Chi Wai,
Jason was appointed as a member of
Audit Committee. The Audit Committee is
responsible to the Board. The Charter of
the Audit Committee clearly defines the
status, structure and qualifications, work
procedures, duties and responsibilities,
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funding and remuneration, etc. of the
Audit Committee. The Audit Committee’s
principal duties include the supervision of
the truthfulness and completeness of the
Company’s financial statements, the
effectiveness and completeness of the
Company’s internal control and risk
management systems as well as the work
of the Company’s Internal Audit
Department. It is also responsible for the
supervision and review of the
qualifications, selection and appointment,
independence and services of external
independent auditors. The Audit
Committee ensures that the management
has discharged its duty to establish and
maintain an effective risk management
and internal control system including the
adequacy of resources, qualifications and
experience of staff fulfilling the
accounting, internal control and financial
reporting function of the Company
together with the adequacy of the staff’s
training programmes and the related
budget. The Audit Committee also has the
authority to set up a reporting system on
whistleblowing to receive and handle
cases of complaints or complaints made
on an anonymous basis regarding the
Company’s accounting, internal control
and audit matters.
In 2018, 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 2018, the Audit Committee convened 5
meetings and passed 1 written resolution,
in which it reviewed important matters
related to the Company’s annual and
interim financial statements, quarterly
financial results, assessment of the
qualifications, independence,
performance, appointments and
remuneration of the external auditors,
effectiveness of risk management and
internal control systems, internal audit,
renewal of the continuing connected
transactions and the applicable renewed
annual caps thereto, implementation of
continuing connected transactions and the
implementation of new Lease Standard.
The Audit Committee reviewed the annual
auditor’s report, interim review report 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
regularly received risk management
reports, quarterly reports in relation to the
internal audit and continuing connected
transactions and provided guidance to the
Internal Audit Department. Additionally,
the Audit Committee reviewed the internal
control assessment and the attestation
report, followed up with the
implementation procedures of the
recommendations proposed by the
external auditors, reviewed the U.S.
annual report, and communicated
independently with the external auditors
twice a year.
On 17 December 2018, the Charter of the
Audit Committee was amended to reflect
the changes to the Listing Rules relating
to the independence requirement of
Committee members.
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Remuneration Committee
Nomination Committee
As at 31 December 2018, the
Remuneration Committee comprised 3
Independent Non-Executive Directors, Mr.
Xu Erming as the Chairman and Mr. Tse
Hau Yin, Aloysius and Madam Wang
Hsuehming as the members. The
Remuneration Committee is responsible to
the Board. The Charter of the
Remuneration Committee clearly defines
the status, structure and qualifications,
work procedures, duties and
responsibilities, funding and
remuneration, etc. of the Remuneration
Committee. The Remuneration Committee
assists the 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 personnel including benefits
in kind, pension rights and compensation
payments (including any compensation
payable for loss or termination of their
office or appointment). Its responsibilities
comply with the requirements of the
Corporate Governance Code. The
Remuneration Committee convened 1
meeting and completed 1 written
resolution in 2018, in which it reviewed
and discussed the remuneration proposal
for the newly appointed Directors, share
appreciation rights scheme and the grant
proposal.
On 17 December 2018, the Charter of the
Remuneration Committee was amended
to reflect the change to the independence
requirement of Committee members.
As at 31 December 2018, the Nomination
Committee comprised 3 Independent Non-
Executive Directors, Madam Wang
Hsuehming as the Chairlady and Mr. Tse
Hau Yin, Aloysius and Mr. Xu Erming as
the members. On 28 May 2018, Madam
Cha May Lung, Laura resigned from her
positions as a member and the Chairlady
of the Nomination Committee of the
Company. On the same date, Madam
Wang Hsuehming was appointed as a
member and the Chairlady of the
Nomination Committee of the Company.
The Nomination Committee is responsible
to the Board. The Charter of the
Nomination Committee clearly defines the
status, structure and qualifications, work
procedures, duties and responsibilities,
funding and remuneration, etc. of the
Nomination Committee, and it specifically
requires that the Nomination Committee
members shall have no significant
connection to the Company, and comply
with the regulatory requirements related
to “independence”. The Nomination
Committee assists the Board to formulate
standardised, prudent and transparent
procedures for the appointment and
succession plans of Directors, and to
further optimise the composition of the
Board. The principal duties of the
Nomination Committee include regularly
reviewing the structure, number of
members, composition and diversity of the
Board; identifying candidates and advising
the Board with the appropriate
qualifications for the position of Directors;
reviewing the Board Diversity Policy as
appropriate to ensure its effectiveness;
evaluating the independence of nominees
for Independent Non-Executive Directors;
advising the Board on matters regarding
the appointment or re-appointment of
Directors (especially Chairman and Chief
Executive Officer) and succession plans for
the Directors. The Nomination Committee
convened 1 meeting and passed 1 written
resolution in 2018, in which it performed
a review of the structure and operations
of the Board and the proposed candidate
for Director and other related matters.
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Independent Board Committee
Pursuant to the requirement under the
Listing Rules, the Company convened 1
Independent Board Committee meeting in
2018, with all 3 Independent Non-
Executive Directors attended where it
reviewed the renewal of the continuing
connected transactions and the applicable
renewed annual caps thereto and gave the
relevant confirmation as well as submitted
the recommendations on these matters to
the independent shareholders.
Number of Board and Committee Meetings Attended/Held in 2018
Board
Meeting
Audit
Committee
Meeting
Nomination
Committee
Meeting
Remuneration
Committee
Meeting
Independent
Board
Committee
Meeting
Shareholders’
Meeting
Executive Directors
Yang Jie
Liu Aili*
Ke Ruiwen
Sun Kangmin*
Gao Tongqing
Chen Zhongyue
Zhu Min*
Non-Executive Director
Chen Shengguang
Independent Non-Executive Directors
Tse Hau Yin, Aloysius
Cha May Lung, Laura*
Xu Erming
Wang Hsuehming
Yeung Chi Wai, Jason*
4/4
1/1
3/4
0/0
4/4
4/4
2/2
2/4
4/4
0/1
3/4
4/4
2/2
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
5/5
N/A
4/5
5/5
2/2
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1/1
0/1
1/1
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1/1
N/A
0/1
1/1
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
N/A
1/3
2/2
2/3
0/1
2/3
3/3
N/A
2/3
3/3
1/2
2/3
2/3
N/A
Note: Certain Directors (including Non-Executive Director and Independent Non-Executive Directors) could not
attend some of the shareholders’ meetings, Board meetings and other Committee meetings due to other
important business commitments. Such Directors have reviewed the relevant meeting agendas and papers
before the meetings and authorised other Directors in writing to vote on their behalf so as to ensure their
views were fully reflected in the meetings.
*
On 29 January 2018, Mr. Sun Kangmin retired from his positions as an Executive Director and an Executive
Vice President of the Company due to his age. On 28 May 2018, Madam Cha May Lung, Laura resigned from
her positions as an Independent Non-Executive Director as well as a member and the Chairlady of the
Nomination Committee of the Company due to her intention to focus on other business commitments and
engagement. On the same date, Madam Wang Hsuehming was appointed as a member and the Chairlady of
the Nomination Committee of the Company. On 19 July 2018, Mr. Liu Aili resigned from his positions as an
Executive Director, President and Chief Operating Officer of the Company due to change in work
arrangement. On 26 October 2018, the appointments of Madam Zhu Min and Mr. Yeung Chi Wai, Jason, as
a Director and an Independent Director of the Company respectively were approved at the extraordinary
general meeting of the Company. On the same date, Mr. Yeung Chi Wai, Jason was appointed as a member
of the Audit Committee of the Company.
China Telecom Corporation Limited Annual Report 2018 139
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The Company will identify suitable
Director candidates through multiple
channels such as internal recruitment and
recruiting from the labour market. The
criteria of identifying candidates include,
but not limited to, their gender, age,
educational background or professional
experience, skills, knowledge and length
of service and capability to commit to the
affairs of the Company and, in the case of
Independent Non-Executive Director, the
candidates should fulfill the independence
requirements set out in the Listing Rules
from time to time. After the Nomination
Committee and the Board have reviewed
and resolved to appoint the appropriate
candidate, the relevant proposal will be
put forward in writing to the shareholders’
meeting for approval.
Directors shall be elected at the
shareholders’ meeting for a term of 3
years. At the expiry of a 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 2 or more
shareholders holding in aggregate 10% or
more of the shares carrying the right to
vote at the meeting sought to be held and
they shall sign one or more written
requisitions in the same format and with
the same content, requiring the Board to
convene an extraordinary general meeting
and stating the resolutions of meeting
(such as election of Directors). The Board
shall convene an extraordinary general
meeting within 2 months. The minimum
period during which written notice given
to the Company of the intention to
propose a person for election as a
Director, and during which written notice
to the Company by such person of his/her
willingness to be elected may be given,
will be at least 7 days. Such period will
commence no earlier than the day after
the despatch of the notice of the meeting
for the purpose of considering such
election and shall end no later than 7 days
prior to the date of such meeting. The
ordinary resolution to approve the
appointment of Directors shall be passed
by votes representing more than one-half
of the voting rights represented by the
shareholders (including proxies) present at
the meeting.
Supervisory Committee
As at 31 December 2018, the Company’s
Supervisory Committee comprised 5
Supervisors, including 2 Employee
Representative Supervisors. The principal
duties of the Supervisory Committee
include supervising, in accordance with
the law, the 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 usually holds
meetings at least twice a year. The
Supervisory Committee convened 2
meetings in 2018. The term of office for
the 6th session of the Supervisory
Committee lasts for 3 years, starting from
May 2017 until the day of the Company’s
annual general meeting for the year 2019
to be held in year 2020, upon which the
7th session of the Supervisory Committee
will be elected.
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Number of Supervisory Committee Meetings Attended/Held in 2018
Supervisors
Sui Yixun (Chairman of the Supervisory Committee)
Zhang Jianbin (Employee Representative Supervisor)
Yang Jianqing (Employee Representative Supervisor)
Hu Jing*
Xu Shiguang*
Ye Zhong
Number of
Meetings
Attended/
Held
2/2
2/2
2/2
0/0
0/0
1/2
Note: Certain Supervisors could not attend some of the meetings of the Supervisory Committee due to other
important business commitments.
*
On 27 February 2018, Mr. Hu Jing resigned from his position as a Supervisor of the Company due to change
in work arrangement. On 26 October 2018, the appointment of Mr. Xu Shiguang as a Supervisor of the
Company was approved at the extraordinary general meeting of the Company.
External Auditors
The international and domestic auditors of the Company are Deloitte Touche Tohmatsu
and Deloitte Touche Tohmatsu Certified Public Accountants LLP, respectively. The non-
audit services provided by the external auditors did not contravene the requirements of
the US Sarbanes-Oxley Act and therefore enabling them to maintain the independence.
A breakdown of the remuneration received by the external auditors for audit and non-
audit services provided to the Company for the year ended 31 December 2018 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)
76.8
3.4
80.2
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The Directors of the Company are
responsible for the preparation of
consolidated financial statements that
give a true and fair view in accordance
with the International Financial Reporting
Standards as issued by the International
Accounting Standards Board and the
disclosure requirements of the Hong Kong
Companies Ordinance, and for such
internal control as the Directors determine
is necessary to enable the preparation of
consolidated financial statements that are
free from material misstatement, whether
due to fraud or error.
The statements by the external auditors of
the Company, Deloitte Touche Tohmatsu,
regarding their reporting responsibilities
on the consolidated financial statements
of the Company is set out in the
Independent Auditor’s Report on pages
158 to 162.
Since the approval at the annual general
meeting of the Company for the financial
year 2012, the external auditors, Deloitte
Touche Tohmatsu and Deloitte Touche
Tohmatsu Certified Public Accountants LLP
have provided audit services for the
Company for six consecutive years. The
Audit Committee and the Board of the
Company have resolved to re-appoint
Deloitte Touche Tohmatsu and Deloitte
Touche Tohmatsu Certified Public
Accountants LLP as the international and
domestic auditors respectively for the
financial year 2019, subject to the
approval at the 2018 annual general
meeting of the Company.
Risk Management and Internal
Control Systems
The Board attaches great importance to
the establishment and perfection of the
risk management and internal control
systems. 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 but not absolute assurance
against material misstatements or losses.
The Board oversees management in the
design, implementation and monitoring of
the risk management and internal control
systems. The Board takes effective
approaches to supervise the
implementation of related control
measures, whilst enhancing operation
efficiency and effectiveness, and
optimising corporate governance, risk
assessment, risk management and internal
control so that the Company can achieve
long-term development goals. The risk
management and internal control systems
of the Company is built on clear
organisational structure and management
duties, an effective delegation and
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accountability system, definite targets,
policies and procedures, comprehensive
risk assessment and management, a sound
financial accounting system, and
continuing analysis and supervision of
operational performance, which plays a
pivotal role in the Company’s overall
operation. The Company has formulated a
code of conduct for the senior
management personnel 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
featured 5-step risk management
approach based on risk management
theory and practice to achieve closed-loop
management of risk identification, risk
assessment, key risk analysis, risk reaction
and risk management assessment. In
continuously strengthening the risk
process control and management and
focusing on significant risk which may be
encountered, the Company established a
risk monitoring team, to follow and report
the status of risk management and control
regularly, improve the collecting
mechanism of risk-related information and
identify the potential flaws of risk in a
timely manner. Following the efforts made
over the years, the Company has
established a structured and highly-
effective comprehensive risk management
system and has gradually perfected its
comprehensive risk monitoring and
prevention mechanism.
In 2018, pursuant to the requirement of
provision C2 of the Corporate Governance
Code promulgated by the Hong Kong
Stock Exchange, the Company
concentrated resources on the prevention
of significant potential risks, and strived
to reduce negative effect from significant
risks, the Company was not confronted by
any major risk event throughout the whole
year.
The Company has identified, assessed and
analysed potential major risks faced by the
Company in 2019, including economic
and policy environment adaptation risks,
business development risks and network
and information security risks etc., and
has put forward detailed response plans.
Through strict and appropriate risk
management procedures, the Company
will ensure the potential impact from the
above risks on the Company is limited and
within an expected range.
In 2019, the potential significant risks and
the major risk-prevention and countering
measures are as follows:
Economic and policy environment
adaptation risks: Facing the risks and
challenges such as the downward pressure
under the macroeconomic environment,
upgrade of 5G technology, change of
regulatory policies in the industry and
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Corporate Governance Report
complicated and changing international
environment, the Company will actively
adapt to the change of environment,
increase effort on stringent control of
accounts receivable, proactively embark
the trial and application of 5G and
innovation on business models, implement
the requirements of regulatory policies,
promote comprehensive in-depth reform,
improve the outside compliance
management system and further enhance
the quality, efficiency, and motivation of
development.
Business development risks: Facing
continuously intensified competition in
the industry, the Company will insist on
customer-oriented focus to build a
“Trinity” market value operation system
featuring convergence, integration and
intelligentisation, promoting cloud-
network integration, deepening value
operations and promoting high-quality
development.
Network and information security risks:
Facing the all-round risks and challenges
of network and information security, the
Company will proactively carry out the
obligation of network security protection,
increase initiatives on security, enhance
the network security protection capability
and respond to emergencies in a timely
and appropriate manner.
The Company highly values the
compliance with the laws and regulations
of the People’s Republic of China as well
as the places of listing of the Company
and where the Company’s business
operations are located, strictly complies
with all laws and regulations and timely
and proactively incorporates the laws and
regulations into the Company’s rules and
regulations to protect the Company’s
legitimate business management, maintain
the Company’s legitimate rights and
support corporate to achieve long-term
healthy development target.
The Standing Committee of the National
People’s Congress (the “NPCSC”)
promulgated the Anti-Unfair Competition
Law of the People’s Republic of China,
which has come into force on 1 January
2018. The amended Anti-Unfair
Competition Law of the People’s Republic
of China defined acts of unfair
competition, supplemented unfair
competition practices that should be
prohibited, clearly identified the rules for
confusing behaviour and targets of
commercial bribery, strengthened the
protection of trade secrets, revised the
rules concerning the recognition of prize
sales, increased the maximum amount of
sales rewards, broadened the terms for
unfair competition behaviour in Internet,
strengthened the measures for supervision
and inspection, and perfected the legal
liability systems with priority for civil
liability and by paralleling the civil liability
and administrative penalty, aggravated
the punishment for violations, sorted out
and maintained relationship with other
laws and regulations.
In August 2018, the NPCSC approved the
E-Commerce Law of the People’s Republic
of China, which was formally implemented
on 1 January 2019. E-Commerce Law
consisted of seven chapters and eighty-
nine articles which further regulated the
parties conducting e-commerce activities
including e-commerce platform operators
(“e-commerce platforms”). It was the first
time to define and confirm the obligation
of e-commerce platforms to protect the
consumers’ security and request the
e-commerce platforms to bear the
corresponding responsibility when the
obligation is breached. It further refined
the regulation for the responsibility of
intellectual property infringement on the
e-commerce platforms, regulated the
industrial and commercial registration and
tax collection and management of
e-commerce operators, requested the
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Corporate Governance Report
e-commerce operators to publish
information when independently
terminating the transactions, prohibited
fabricating transactions, made up user
comments to defraud and mislead
consumers, prohibited the e-commerce
platforms to abuse the dominant market
position and excluded and restricted the
competition, regulated the rules of
deposits collection and return, marked the
ranking of bidding products, etc.
On 23 August 2018, the Ministry of
Industry and Information Technology
promulgated the Notice of Ministry of
Industry and Information Technology on
Further Regulating Activities to Market
Telecommunications Tariff Schemes (the
“Notice”) and became effective from 23
August 2018. The Notice encouraged the
fundamental telecommunications
enterprises to provide a tiered discount
pricing formula for tariff plans according
to the usage amount of the users and
simplify the structure of tariff package. In
formulating and implementing the tariff
plans of packaging and sales, the tariff
plans on each respective service should be
provided at the same time and should
further improve the tariff rates disclosure
policy. When promoting the tariff plans,
reminder obligation should be carried out
for the matters drawing users’ attention
to the restrictive condition, the validity
period and the billing principle, and for
the same type of users with the same
transaction conditions should be
guaranteed with equal rights to the tariff
plans.
Apart from implementing the latest and
newly-amended laws and regulations in a
timely manner, the Company also actively
and closely monitors forthcoming changes
in the relevant laws and regulations in
order to strengthen the management of
the relevant business operation behaviour,
safeguards the effective adherence to
relevant laws and regulations so as to
ensure that the Company’s operations are
in full compliance with the laws.
Since 2003, based on the requirements of
the U.S. securities regulatory authorities
and the COSO Internal Control
Framework, and with the assistance of
other advisory institutions including
external auditors, the Company has
formulated manuals, implementation rules
and related rules in relation to internal
control, and has developed the Policies on
Internal Control Management and Internal
Control Accountability Management to
ensure the effective implementation of
the above systems. The Company has all
along continuously revises and improves
the manuals and implementation rules in
view of the ever changing internal and
external operation environment as well as
the requirements of business development
over the years. While continuing to
improve the internal control related
policies, the Company has also been
strengthening its IT internal control
capabilities, which has 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. At the
same time, the Company attaches great
importance to the control and monitoring
of network information safety. The
Company persistently optimises the
relevant rules and guidances, further
defines the responsible entities and
regularly commences the inspection of
network safety and information safety in
order to promote the enhancement of the
awareness of network information safety
and relevant skills and knowledge.
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In 2018, based on external regulatories
supervision, changes in policy
environment, and requirements for
prevention and control of the Company’s
key risks, the Company also took into
accounts of various measures and business
development of its deepening reforms. In
order to focus on responding quickly to
market demands and supporting business
innovation and operational innovation for
enterprises, the Company conducted
annual revision of internal control manuals
and implementation guidance. Branches
at all levels further optimised and
improved the list of internal audit
authority, strengthened the Company’s
internal supervision and stringent control
on problem ratification, continuously
improved internal control procedures and
policies for capital utilisation, amended
the protection for users’ information and
customer service related procedures,
perfected taxation and e-channel partner
management; supplemented the contents
of outsourcing management of sales
outlets and property leasing management,
IDC and Internet services management,
funds and accounts management,
guarantee and legal issues management.
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, which are independent of
the Company’s business operations, are
complementary with the functions of the
external auditors while the Internal Audit
Department plays an important role in the
monitoring of the Company’s internal
management. The Internal Audit
Department is responsible for internal
control assessment of the Company, and
provides an objective assurance to the
Audit Committee and the Board that the
risk management and internal control
systems are maintained and operated by
the management in compliance with
agreed processes and standards. The
Internal Audit Department regularly
reports the internal audit results to the
Audit Committee on a quarterly basis, and
reports the internal audit results to the
Board through the Audit Committee.
Annual Evaluation of Risk
Management and Internal
Control Systems
The Company has been continuously
improving its risk management and
internal control systems so as to meet the
regulatory requirements of its places of
listing, including the United States and
Hong Kong, and strengthen its internal
control while guarding against operational
risk.
The Company has adopted the COSO
Internal Control Framework (2013) as the
standard for the internal control
assessment. With the management’s
internal control testing guidelines and the
Auditing Standard No. 5 that were issued
by PCAOB as its directives, the Company’s
internal control assessment system is
composed of the self-assessment
conducted by the persons responsible for
internal control together with the
independent assessment conducted by the
Internal Audit Department. In order to
evaluate the nature of internal control
deficiencies and reach a conclusion as to
the effectiveness of the internal control
system, the Company adopts the following
4 major steps of assessment: (1) analyse
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and identify areas which require
assessment, (2) assess the effectiveness of
the design of internal control, (3) assess
the operating effectiveness 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 amended “Interim
Measures for the Internal Control
Assessment”, “Manual for the Self-
Assessment of Internal Control”, “Manual
for the Independent Assessment of
Internal Control” and other documents,
the Company has ensured the assessment
procedures are in compliance. In 2018,
the Company’s Internal Audit Department
initiated and coordinated the assessment
of internal control all over the Company,
and reported the results to the Audit
Committee and the Board.
Self-assessment of internal control adopts
a top-down approach which further
reinforces assessment in respect of control
points in relation to control environment
and material financial statements items.
The Company insisted on risk-oriented
principles with 100% coverage and
focusing on assessing key control areas
and control points identified from risk
analysis. In 2018, the internal control
self-assessment takes the prevention of
systemic risk as top priority. Focusing on
efforts in the depth and breadth of self-
assessment with full exploitation of
leading business department in the
coordination of self-assessment and risk
control, the Company identified major
risk, confirmed the key control areas and
key control points while conducting self-
identification, self-assessment and self-
improvement vertically. Focusing on the
internal control deficiencies identified
during the self-assessment, the Company
promptly identified the responsibilities
and timely rectified the deficiencies,
effectively control and eliminate any
potential risks. The Company also worked
towards perfecting the systems and
procedures, and deepening its governance
measures, while continuously enhancing
the design and operating effectiveness of
internal control.
On the basis of risk-oriented independent
assessment, the Company continued to
strengthen the independent assessment of
internal control and increased the
assessment strength on the major work,
major business and the effectiveness of
internal control in key risk areas. In 2018,
on the basis of conducting regular and
independent assessment of internal
control, the Company solidified
fundamental risk control capabilities to
check the quality on self-assessment of
internal control and effectiveness of key
internal control, conduct independent
assessment on city-level branches, and
deeply understand and analyse the risks
existed in the grassroots operating units,
and seek improvement on the flaws of
internal control. We also identified
successful experiences and applied them
to boarder areas to increase the economic
radiation effects while effectively
promoting implementation of risk
prevention measures in different levels,
urging all level units to further enhance
self-assessment on working quality and
rectification in order to effectively
enhancing the quality and effectiveness of
assessment, enhancing the self-healing
ability and promoting the healthy
development of the Company.
Furthermore, the Company organised the
risk management and internal control
assessment team and other relevant
departments to closely coordinate with
the external auditors’ audit of internal
China Telecom Corporation Limited Annual Report 2018 147
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control over financial reporting. The
internal control audit covered the
Company and all its subsidiaries as well as
the key processes and control points in
relation to material financial statements
items. The external auditors regularly
communicated with the management in
respect of the audit results.
All levels of the Company have been
attaching great importance to rectifying
internal control deficiencies. Focusing on
deficiencies identified through self-
assessment, independent assessment,
internal control audit and audit from
National Audit Office, the Company
required all units to carry out rectification
measures and established a collaborative
risk prevention mechanism to promote
different professional reporting lines of
various departments in the headquarters
office to execute vertical supervision and
system improvement for the rectification
work. To ensure effective rectification, the
Company also strengthened the
verification and supervision of the
rectification measures of internal control
deficiencies and issued measures to rectify
the audit problem identified. All
subordinates entities proactively rectified
deficiencies identified from the internal
and external assessments on the request
from the Company.
Through self-assessments and
independent assessments conducted at
different levels, the Company carried out
multi-layered and full-dimensional reviews
of its internal control system, and put its
utmost efforts into rectifying the problems
which were identified. Through this
method, the Company was able to ensure
the effectiveness of its internal control
and successfully passed the year-end
attestation undertaken by the external
auditors.
The Board oversees the Company’s risk
management and internal control systems
on an on-going basis and the Board,
through the Audit Committee, conducted
an annual review of the risk management
and internal control systems of the
Company and its subsidiaries for the
financial year ended 31 December 2018,
which covered all material areas including
financial controls, operational controls
and compliance controls, as well as its risk
management functions. After receiving
the reports from the Internal Audit
Department and the confirmation from
the management to the Board on the
effectiveness of the Company’s risk
management and internal control systems
(including Environmental, Social and
Governance risk management and internal
control systems), the Board is of the view
that these systems are solid, well-
established, effective and sufficient. The
annual review also confirms the adequacy
of resources relating to the Company’s
accounting, internal control 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 established an Investor
Relations Department which is responsible
for providing shareholders and investors
with the necessary information, data and
services in a timely manner. It also
maintains proactive communications with
shareholders, investors and other capital
market participants so as to allow them to
fully understand the operation and
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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, senior management
provides the capital market and media
with important information and responds
to key questions which are of prime
concerns to the investors. This has helped
to reinforce the understanding of the
Company’s business and the overall
development of the telecommunications
industry in China. Since 2004, the
Company has been holding the Annual
General Meetings in Hong Kong to
provide convenience and encourage its
shareholders, especially the public
shareholders, to actively participate in the
Company’s Annual General Meetings and
to promote direct and two-way
communications between the Board and
shareholders. Meanwhile, the Company
set up a dedicated investor relations
enquiry line, for the purpose of providing
a direct channel to address enquiries from
the investment community. This allows the
Company to better serve its shareholders
and investors.
With an aim of strengthening
communications with the capital market
and enhancing transparency of
information disclosure, the Company has
provided quarterly disclosure of revenue,
operating expenses, EBITDA, net profit
figures and other key operational data,
and monthly announcements of the
number of access lines in service, mobile
and wireline broadband subscribers. The
Company attaches great importance to
maintaining daily communication with
shareholders, investors and analysts. In
2018, the Company participated in a
number of investor conferences held by a
number of major international investment
banks in order to maintain active
communication with institutional
investors.
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In 2018, the Company attended the following investor conferences held by major
international investment banks:
Date
Name of Conference
Location
January 2018
DBS Vickers Pulse of Asia Conference 2018
Singapore
January 2018
Deutsche Bank Access China Conference 2018
January 2018
Morgan Stanley China TMT Conference 2018
January 2018
UBS 18th Greater China Conference
Beijing
Beijing
Shanghai
Hong Kong
May 2018
May 2018
May 2018
May 2018
May 2018
May 2018
May 2018
May 2018
May 2018
May 2018
June 2018
June 2018
June 2018
Nomura Hong Kong & China A/H TMT
Corporate Day 2018
J.P. Morgan Global China Summit 2018
Beijing
BNP Paribas 9th Asia Pacific TMT Conference
Hong Kong
Macquarie Greater China Conference 2018
Hong Kong
HSBC China Conference 2018
Goldman Sachs TechNet Conference
— Asia Pacific 2018
Shenzhen
Hong Kong
Guotai Junan International Investor Forum 2018
Shenzhen
Morgan Stanley China Summit 2018
Beijing
CICC 7th Annual New York Investor Forum
United States
Deutsche Bank Access Asia Conference 2018
Nomura Investment Forum Asia 2018
UBS Asia TMT Conference 2018
Singapore
Singapore
Hong Kong
CICC Investment Strategy Conference 2018
Shanghai
June 2018
Maybank KimEng Invest Asia Conference 2018
United Kingdom
August 2018
Morgan Stanley China TMT Conference
Beijing
September 2018
Morgan Stanley Asia Pacific Corporate Day 2018
London
September 2018
HSBC GEMs Investor Forum 2018
September 2018
Nomura China Investor Forum 2018
September 2018
Haitong International AI Conference 2018
September 2018
25th CLSA Investors’ Forum
London
Shanghai
Hong Kong
Hong Kong
November 2018
Credit Suisse China Investment Conference 2018
Shenzhen
November 2018
Goldman Sachs China Conference 2018
Shenzhen
November 2018
Jefferies 8th Annual Greater China Conference
Hong Kong
November 2018
J.P. Morgan Global TMT Conference 2018
Hong Kong
November 2018
Citi China Investor Conference 2018
November 2018
Morgan Stanley European Technology,
Media & Telecom Conference 2018
November 2018
Daiwa Investment Conference 2018
November 2018
Daiwa Asia Communication Days 2018
Macau
Barcelona
Hong Kong
London
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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,
media 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 launched a
responsive website with the latest
technology, which allows automatic
adjustment to fit for different screen
resolution and user interface, assuring the
best browsing experience of website
content with desktop computers, laptops
or mobile devices. This allows investors,
shareholders, reporters and the general
public to browse the updated information
on the Company’s website with any device
more easily and promptly anytime
anywhere. 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, historical stock quote,
add investor events to calendars, content
sharing to social media, etc. In addition to
setting up a dedicated investor relations
enquiry line, a specialised appointment
function to schedule a meeting with
investor relations professionals was also
launched on the Company’s website, to
promote direct and close communication
between the Company and investors, as
well as to increase transparency. The
Company’s website was accredited a
number of awards including the “Best
Website” by Institutional Investor, and
“Best IR Website Award” by IR Magazine,
indicating that the Company’s website is
highly recognised by the professionals.
The Company also strives to enhance the
disclosure quality and format of annual
report. The Company further enhanced
the transparency of disclosure in
environmental, social and governance
areas, by following Environmental, Social
and Governance Reporting Guide,
Appendix 27 of Listing Rules, to report the
Company’s achievements and key
performance indicators on environmental
protection, while also took initiative to
add quantitative disclosures on social
responsibility. The data disclosed was
analysed and assessed by independent
third party to ensure compliance with
relevant requirements. The Company also
actively seeks recommendations on how
to improve the Company’s annual report
from shareholders through survey, and
prepared and distributed the annual
report in a more environmentally-friendly
and cost-saving manner according to the
recommendations received. Shareholders
can ascertain their choice of receiving the
annual reports and communications by
electronic means, or receiving printed
version in English and/or Chinese. The
Company clearly and precisely delivered
the messages about its strategies and
goals in its 2017 Annual Report “Co-
Building Our Smart Future”, so that
shareholders and investors can easily
understand the Company’s development
directions and focus. The print and online
versions of 2017 Annual Report won a
number of top accolades in international
competitions, including being awarded
the Grand Award and 12 gold awards in
“2018 International ARC Awards”, as well
as winning 7 gold awards in “LACP 2017
Vision Awards Annual Report
Competition”. The prestigious honours
reflect the unanimous worldwide
recognition towards China Telecom’s
tireless pursuit of excellence and globally
leading performance on corporate
governance and disclosure, on both
conventional and digital channels.
China Telecom Corporation Limited Annual Report 2018 151
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Corporate Governance Report
The Company has always maintained a
sound and effective information disclosure
mechanism while keeping highly
transparent communications with media,
analysts and investors. Meanwhile, we
attach great importance to the handling
of inside information and have formulated
rules on information disclosures and
guidelines on inside information which
encompass (including but not limited to)
disclosure of sensitive information and
rules on confidential information,
identifying the scope of inside
information, procedures and management
guidelines on handling inside information.
In general, the authorised speakers only
clarify and explain on information that are
available on the market, and avoid
providing or divulging any unpublished
inside information either as an individual
or as a team. Before conducting any
external interview, if the authorised
speaker has any doubt about the
information to be disclosed, he/she would
seek verification from the relevant person
or the person-in-charge of the relevant
department, so as to determine if such
information is accurate. In addition,
discussions on the Company’s key
financial data or other financial indicators
are avoided during the blackout periods.
Shareholders
Details of shareholders by type and public
float capitalisation can be referred to the
Report of the Directors on pages 54 to 75
of this annual report.
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Shareholders’ Rights
According to the Articles of Association,
shareholders who request for the
convening of an extraordinary general
meeting or a class meeting shall comply
with the following procedures:
2 or more shareholders holding in
aggregate 10% or more of the shares
carrying the right to vote at the meeting
sought to be held shall sign 1 or more
written requisitions in the same format
and with the same content, stating the
proposed matters to be discussed at the
meeting, and requiring the Board to
convene an extraordinary general meeting
or a class meeting thereof. If the Board
fails to issue a notice of such a meeting
within 30 days from the date of receipt of
the requisitions, the shareholders who
make the requisitions may themselves
convene such a meeting (in a manner as
similar as possible to the manner in which
shareholders’ meetings are convened by
the Board) within 4 months from the date
of receipt of the requisitions by the Board.
When the Company convenes an annual
general meeting, shareholders holding 5%
or more of the total voting shares of the
Company shall have the right to propose
new motions in writing, and the Company
shall place such proposed motions on the
agenda for such annual general meeting if
they are matters falling within the
functions and powers of shareholders’
meetings.
Process of forwarding shareholders’
enquiries to the Board or requesting for
convening of an extraordinary general
meeting or a class meeting or proposing
new motions:
Shareholders may at any time send their
enquiries, requests, proposals 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
28th Floor, Everbright Centre,
108 Gloucester Road, Wanchai,
Hong Kong
Email: ir@chinatelecom-h.com
Tel No.: (852) 2877 9777
IR Enquiry: (852) 2582 0388
Fax No.: (852) 2877 0988
China Telecom Corporation Limited Annual Report 2018 153
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Corporate Governance Report
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, which will answer the
shareholders’ questions. Information on
the Company’s website is updated
regularly.
Significant Differences Between
the Corporate Governance
Practices followed by the
Company and those followed by
NYSE-Listed U.S. Companies
The Company was established in the PRC
and is currently listed on The Stock
Exchange of Hong Kong Limited and the
New York Stock Exchange (“NYSE”). As a
foreign private issuer in respect of its
listing on the NYSE, the Company is not
required to comply with all corporate
governance rules of Section 303A of the
NYSE Listed Company Manual. However,
the Company is required to disclose the
significant differences between the
corporate governance practices of the
Company and the listing standards
followed by NYSE-listed U.S. companies.
Pursuant to the requirements of the NYSE
Listed Company Manual, the Board of
Directors of all NYSE-listed U.S. companies
must be made up by a majority of
Independent Directors. Under currently
applicable PRC and Hong Kong laws and
regulations, the Board of the Company is
not required to be formed with a majority
of Independent Directors. As a listed
company on The Stock Exchange of Hong
Kong Limited, the Company needs to
comply with the Listing Rules. The Listing
Rules require that at least one-third of the
Board of Directors of a listed company in
Hong Kong be Independent Non-Executive
Directors. The Board of the Company
currently comprises 9 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.
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Pursuant to the requirements of the NYSE
Listed Company Manual, companies shall
formulate separate corporate governance
guidelines. Under the currently applicable
PRC and Hong Kong laws and regulations,
the Company is not required to formulate
any guidelines for corporate governance;
therefore, the Company has not
formulated any separate corporate
governance guidelines. 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 2018.
Continuous Evolution of
Corporate Governance
The Company continuously analyses the
corporate governance development of
international advanced enterprises and the
investors’ desires, constantly examines
and strengthens the corporate governance
measures and practice, and improves the
current practices at the appropriate time;
we strongly believe that by adhering to
good corporate governance principles,
and improving the transparency of
operations, as well as the establishment of
the effective accountability system, we
can ensure the long-term stable
development of the Company and seek
sustainable returns for the shareholders
and investors.
For further information, please browse our
website at www.chinatelecom-h.com
China Telecom Corporation Limited Annual Report 2018 155
Co-sharing Value of
Innovation for a New Smart Life
Independent Auditor’s Report
TO THE SHAREHOLDERS OF CHINA TELECOM CORPORATION LIMITED
(Incorporated in The People’s Republic of China with limited liability)
Opinion
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 163 to 261, which comprise the
consolidated statement of financial position as at 31 December 2018, 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 notes to the consolidated financial statements, including a summary of significant
accounting policies.
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial
position of the Group as at 31 December 2018, and of its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards
(“IFRSs”) and have been properly prepared in compliance with the disclosure requirements of the Hong Kong
Companies Ordinance.
Basis for Opinion
We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the Hong
Kong Institute of Certified Public Accountants (“HKICPA”). Our responsibilities under those standards are further
described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our
report. We are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional
Accountants (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the consolidated financial statements of the current period. These matters were addressed in the context of our
audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
158
Key Audit Matters (continued)
Key audit matter
Revenue recognition
We identified revenue recognition as a key audit matter
because there is an inherent industry risk around the
accuracy of revenue recorded by the IT billing systems
given the complexity of the systems and the
significance of volumes of data processed by the
systems.
Revenues from the provision of telecommunications
services are, in general, recognised as performance
obligations are satisfied. Fees for telecommunications
packages are recognised for each service type in the
packages. The data records are captured and the
revenue transactions are recorded by the IT billing
systems.
Details of the accounting policies for revenue
recognition and an analysis of revenues are disclosed in
Notes 3(m) and 26, respectively, to the consolidated
financial statements.
Independent Auditor’s Report
How our audit addressed the key audit matter
Our procedures in relation to revenue recognition
comprising both control testing and substantive
procedures on a sample basis, included involving our
internal IT specialists to assist with:
•
•
•
•
•
•
Testing the IT environment in which the billing
systems reside, including interface controls
between different IT applications.
Testing the key controls over the calculation of
the amounts billed to customers and the capturing
and recording of the revenue transactions.
Testing the key controls over the authorisation of
the rate changes and the input of such rates to
the billing systems.
Testing the end-to-end reconciliations from data
records to the billing systems and to the general
ledger.
Testing material journals processed between the
billing systems and the general ledger.
Testing the accuracy of customer bill calculations
and the respective revenue transactions recorded.
China Telecom Corporation Limited Annual Report 2018 159
Independent Auditor’s Report
Key Audit Matters (continued)
Key audit matter
How our audit addressed the key audit matter
Valuation of goodwill and long-lived assets
We identified the valuation of goodwill and long-lived
assets as a key audit matter because the impairment
assessment of goodwill and long-lived assets requires
the management to exercise significant judgments
relating to the estimation of level of revenue, amount
of operating costs and applicable discount rate.
Details of the accounting policies for impairment of
goodwill and long-lived assets and the related
accounting estimates are disclosed in Notes 3(i) and 46,
respectively, to the consolidated financial statements.
Details of goodwill impairment assessment are disclosed
in Note 6 to the consolidated financial statements.
Our procedures in relation to the valuation of goodwill
and long-lived assets included:
• With the assistance of our internal valuation
specialists, assessing the discount rate and
assumptions used by the management in the value
in use model and comparing the discount rate
used by the management to externally derived
data and our own assessments of key inputs used
in deriving the discount rate.
• With the assistance of our internal valuation
specialists, comparing the key inputs to the
projected cash flows, such as the number of
subscribers, average revenue per subscriber and
amount of operating cost, with corresponding
historical data to evaluate the reasonableness of
the management’s projections.
•
Assessing and challenging the significant
judgments and estimates used in the
management’s impairment assessment and
evaluating the sensitivity analysis performed by
the management.
Other Information
The directors of the Company are responsible for the other information. The other information comprises the
information included in the annual report, but does not include the consolidated financial statements and our
auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
160
Independent Auditor’s Report
Responsibilities of Directors and Those Charged with Governance for the
Consolidated Financial Statements
The directors of the Company are responsible for the preparation of the consolidated financial statements that
give a true and fair view in accordance with IFRSs 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.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or
have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes 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. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
•
•
•
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going concern.
China Telecom Corporation Limited Annual Report 2018 161
Independent Auditor’s Report
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
(continued)
As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also: (continued)
•
•
Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely responsible
for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the consolidated financial statements of the current period and are therefore
the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in the independent auditor’s report is Ip Kan Wah.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
19 March 2019
162
Consolidated Statement of Financial Position
at 31 December 2018 (Amounts in millions)
ASSETS
Non-current assets
Property, plant and equipment, net
Construction in progress
Lease prepayments
Goodwill
Intangible assets
Interests in associates
Investments
Equity instruments at fair value through other
comprehensive income
Deferred tax assets
Other assets
Total non-current assets
Current assets
Inventories
Income tax recoverable
Accounts receivable, net
Contract assets
Prepayments and other current assets
Short-term bank deposits
Cash and cash equivalents
Total current assets
Total assets
31 December
2018
RMB
31 December
2017
RMB
Notes
4
5
6
7
9
10
11
12
13
14
15
16
17
18
407,795
66,644
21,568
29,922
14,161
38,051
–
852
6,544
4,840
406,257
73,106
22,262
29,920
12,391
35,726
1,154
–
5,479
3,349
590,377
589,644
4,832
121
20,475
478
23,619
6,814
16,666
73,005
4,123
693
22,096
–
22,128
3,100
19,410
71,550
663,382
661,194
The notes on pages 169 to 261 form part of these consolidated financial statements.
China Telecom Corporation Limited Annual Report 2018
163
Consolidated Statement of Financial Position
at 31 December 2018 (Amounts in millions)
LIABILITIES AND EQUITY
Current liabilities
Short-term debt
Current portion of long-term debt
Accounts payable
Accrued expenses and other payables
Contract liabilities
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
Finance lease obligations
Deferred revenues
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Equity
Share capital
Reserves
Total equity attributable to equity holders
of the Company
Non-controlling interests
Total equity
Total liabilities and equity
31 December
2018
RMB
31 December
2017
RMB
Notes
19
19
20
21
22
23
19
23
12
24
25
49,537
1,139
107,887
43,497
55,783
601
101
375
258,920
54,558
1,146
119,321
98,695
–
404
51
1,233
275,408
(185,915)
(203,858)
404,462
385,786
44,852
115
1,454
13,138
804
60,363
48,596
26
1,828
8,010
629
59,089
319,283
334,497
80,932
262,137
343,069
1,030
344,099
663,382
80,932
244,935
325,867
830
326,697
661,194
Approved and authorised for issue by the Board of Directors on 19 March 2019.
Ke Ruiwen
Executive Director,
President and
Chief Operating Officer
Zhu Min
Executive Director,
Executive Vice President and
Chief Financial Officer
The notes on pages 169 to 261 form part of these consolidated financial statements.
164
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2018 (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
Income from investments in associates
Profit before taxation
Income tax
Profit for the year
Other comprehensive income for the year
Items that will not be reclassified subsequently to profit or loss:
Change in fair value of investments in equity instruments
at fair value through other comprehensive income
Deferred tax on change in fair value of investments in equity
instruments at fair value through other comprehensive income
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
Notes
26
2018
RMB
2017
RMB
377,124
366,229
27
28
29
30
31
9
32
(75,493)
(116,062)
(59,422)
(59,736)
(37,697)
(348,410)
28,714
(2,708)
38
2,104
28,148
(6,810)
21,338
(74,951)
(103,969)
(58,434)
(56,043)
(45,612)
(339,009)
27,220
(3,291)
147
877
24,953
(6,192)
18,761
(324)
82
(242)
–
–
154
(7)
147
(95)
–
–
–
(400)
100
(259)
7
(552)
(552)
Total comprehensive income for the year
21,243
18,209
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)
21,210
128
21,338
21,115
128
21,243
0.26
80,932
18,617
144
18,761
18,065
144
18,209
0.23
80,932
37
37
The notes on pages 169 to 261 form part of these consolidated financial statements.
China Telecom Corporation Limited Annual Report 2018
165
Consolidated Statement of Changes in Equity
for the year ended 31 December 2018 (Amounts in millions)
Attributable to equity holders of the Company
Share
premium
RMB
Surplus
reserves
RMB
Other
reserves
RMB
Exchange
reserve
RMB
Retained
earnings
RMB
Non-
controlling
interests
RMB
Total
RMB
Total
equity
RMB
10,746
–
72,611
–
711
–
(622)
–
133,839
18,617
315,377
18,617
971
144
316,348
18,761
Share
capital
RMB
80,932
–
Capital
reserve
RMB
17,160
–
–
–
–
–
–
–
–
–
–
–
(80)
46
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,686
–
80,932
17,126
10,746
74,297
80,932
17,126
10,746
74,599
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
680
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,875
–
–
–
–
–
(4)
414
–
414
–
(293)
(259)
–
(552)
–
(552)
(293)
(259)
18,617
18,065
144
18,209
–
–
–
–
–
–
(7)
–
–
(7,530)
(1,686)
–
(87)
46
–
(7,530)
–
(4)
–
(87)
(196)
(150)
(89)
–
–
–
(89)
(7,530)
–
(4)
(881)
143,233
325,867
830
326,697
–
2,673
2,975
(1)
2,974
(881)
145,906
328,842
–
21,210
21,210
(249)
154
–
(95)
829
128
–
329,671
21,338
(95)
(249)
154
21,210
21,115
128
21,243
(5)
–
–
–
–
–
–
–
–
–
–
–
–
–
5
–
–
–
–
–
680
–
–
(7,568)
(1,875)
–
(7,568)
–
–
5
265
(20)
(177)
–
–
–
5
945
(20)
(177)
(7,568)
–
80,932
17,806
10,746
76,474
160
(727)
157,678
343,069
1,030
344,099
Notes
1
36
25
Balance as at 1 January 2017
Profit for the year
Other comprehensive
income for the year
Total comprehensive
income for the year
Acquisition of the Eighth
Acquired Group
Acquisition of
non-controlling interests
Distribution to
non-controlling interests
Dividends
Appropriations
Others
Balance as at 31 December
2017
Balance as at 1 January 2018,
as restated
Profit for the year
Other comprehensive income
for the year
Total comprehensive income
for the year
Disposal of investments in
equity instruments at fair
value through other
comprehensive income
Disposal of a subsidiary
Contribution from
non-controlling interests
Reduction of capital
by non-controlling interests
Distribution to non-controlling
interests
Dividends
Appropriations
Balance as at 31 December
2018
36
25
Changes in accounting policies
2
–
–
–
302
The notes on pages 169 to 261 form part of these consolidated financial statements.
166
Consolidated Statement of Cash Flows
for the year ended 31 December 2018 (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
Proceeds from disposal of investments
Net cash (outflow)/inflow from disposal of subsidiaries
Purchase of short-term bank deposits
Maturity of short-term bank deposits
Net cash used in investing activities
Cash flows used in financing activities
Principal element of finance lease payments
Proceeds from bank and other loans
Repayments of bank and other loans
Repayment of deferred consideration in respect of the
Mobile Network Acquisition
Payment of the acquisition price of the Eighth Acquisition (Note 1)
Payment of dividends
Distribution to non-controlling interests
Payment for the acquisition of non-controlling interests
Contribution from non-controlling interests
Reduction of capital by non-controlling interests
Net cash used in financing activities
Net 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
Note
(a)
2018
RMB
2017
RMB
99,298
96,502
(83,835)
(20)
(328)
1,866
45
96
(1)
(7,726)
3,949
(85,954)
(73)
97,829
(106,923)
–
(87)
(7,568)
(177)
(119)
855
(20)
(16,283)
(2,939)
19,410
195
16,666
(87,334)
(89)
(443)
2,066
72
–
184
(2,815)
3,096
(85,263)
(84)
123,250
(69,953)
(61,710)
–
(7,530)
(89)
(31)
–
–
(16,147)
(4,908)
24,617
(299)
19,410
The notes on pages 169 to 261 form part of these consolidated financial statements.
China Telecom Corporation Limited Annual Report 2018
167
Consolidated Statement of Cash Flows
for the year ended 31 December 2018 (Amounts in millions)
(a) Reconciliation of profit before taxation to net cash from operating activities
Profit before taxation
Adjustment for:
Depreciation and amortisation
Credit impairment losses, net of reversal
Impairment losses for long-lived assets
Write down of inventories
Investment income
Income from investments in associates
Interest income
Interest expense
Net foreign exchange (gain)/loss
Net loss on retirement and disposal of long-lived assets
Operating profit before changes in working capital
Increase in accounts receivable
Decrease in contract assets
(Increase)/decrease in inventories
Increase in prepayments and other current assets
Decrease/(increase) in other assets
Decrease in accounts payable
Increase in accrued expenses and other payables
Decrease in contract liabilities
Decrease in deferred revenues
Cash generated from operations
Interest received
Interest paid
Investment income received
Income tax paid
Net cash from operating activities
2018
RMB
2017
RMB
28,148
24,953
75,493
2,050
–
66
(38)
(2,104)
(306)
3,093
(79)
1,757
108,080
(1,848)
170
(622)
(1,349)
271
(3,181)
9,842
(6,414)
(138)
104,811
306
(3,094)
34
(2,759)
99,298
74,951
2,036
10
178
(147)
(877)
(429)
3,586
134
1,841
106,236
(2,770)
–
905
(2,618)
(231)
(4,213)
7,232
–
(202)
104,339
433
(3,707)
63
(4,626)
96,502
The notes on pages 169 to 261 form part of these consolidated financial statements.
168
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
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 voice, Internet, telecommunications network resource and equipment services, information and
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”). 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 network equipment services, international Internet access and transit, Internet data
centre and mobile virtual network services in certain countries and regions of the Asia Pacific, Europe,
Africa, South America and North America. 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 in consideration for 68,317 million ordinary
domestic shares of the Company. The shares issued to China Telecommunications Corporation have a par
value of RMB1.00 each and represented the entire registered and issued share capital of the Company at
that date.
On 31 December 2003, the Company acquired the entire equity interests in Anhui Telecom Company
Limited, Fujian Telecom Company Limited, Jiangxi Telecom Company Limited, Guangxi Telecom Company
Limited, Chongqing Telecom Company Limited and Sichuan Telecom Company Limited (collectively the
“First Acquired Group”) and certain network management and research and development facilities from
China Telecommunications Corporation for a total purchase price of RMB46,000 million (hereinafter,
referred to as the “First Acquisition”).
On 30 June 2004, the Company acquired the entire equity interests in Hubei Telecom Company Limited,
Hunan Telecom Company Limited, Hainan Telecom Company Limited, Guizhou Telecom Company Limited,
Yunnan Telecom Company Limited, Shaanxi Telecom Company Limited, Gansu Telecom Company Limited,
Qinghai Telecom Company Limited, Ningxia Telecom Company Limited and Xinjiang Telecom Company
Limited (collectively the “Second Acquired Group”) from China Telecommunications Corporation for a total
purchase price of RMB27,800 million (hereinafter, referred to as the “Second Acquisition”).
On 30 June 2007, the Company acquired the entire equity interests in China Telecom System Integration
Co., Ltd. (“CTSI”), China Telecom Global Limited (“CT Global”) and China Telecom (Americas) Corporation
(“CT Americas”) (collectively the “Third Acquired Group”) from China Telecommunications Corporation for
a total purchase price of RMB1,408 million (hereinafter, referred to as the “Third Acquisition”).
China Telecom Corporation Limited Annual Report 2018 169
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
1. Principal Activities, Organisation and Basis of Presentation (continued)
Organisation (continued)
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
(“E-surfing Pay”) and E-surfing Media Co., Ltd. (“E-surfing Media”), acquired the e-commerce business and
video media business (collectively the “Fifth Acquired Group”) from China Telecommunications Corporation
and its subsidiaries for a total purchase price of RMB61 million (hereinafter, referred to as the “Fifth
Acquisition”). The Company disposed the equity interest in E-surfing Media to China Telecommunications
Corporation in 2013.
On 30 April 2012, the Company acquired the digital trunking business (the “Sixth Acquired Business”)
from Besttone Holding Co., Ltd. (“Besttone Holding”), a subsidiary of China Telecommunications
Corporation, at a purchase price of RMB48 million (hereinafter, referred to as the “Sixth Acquisition”).
On 31 December 2013, CT Global, a subsidiary of the Company, 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”).
On 31 October 2017, the Company disposed of the 100% equity interest in Chengdu E-store Technology
Co., Ltd (“E-store”), a subsidiary of the Company, to Besttone Holding. The final consideration for the
disposal of the equity interest in E-store was arrived at RMB251 million, among which RMB249 million was
received on 16 November 2017 and the remaining balance of RMB2 million was received in 2018.
In December 2017, the Company acquired the satellite communications business (the “Satcom Business”)
from China Telecom Satellite Communication Co., Ltd., a wholly owned subsidiary of China
Telecommunications Corporation, at a purchase price of RMB70 million. In the same month, E-surfing Pay
acquired a 100% interest in Shaanxi Zhonghe Hengtai Insurance Agent Limited (“Zhonghe Hengtai”), a
wholly owned subsidiary of Shaanxi Communications Services Company Limited (“Shaanxi Comservice”, a
company ultimately held by China Telecommunications Corporation), from Shaanxi Comservice, at a
purchase price of RMB17 million. The acquisitions of the Satcom Business and Zhonghe Hengtai (collectively
referred to as the “Eighth Acquired Group”) are two separate transactions, which are collectively referred
to as the “Eighth Acquisition”. The total final consideration of the Eighth Acquisition was paid by 30 June
2018.
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, the Seventh Acquired Company
and the Eighth Acquired Group are collectively referred to as the “Acquired Groups”.
170
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
1. Principal Activities, Organisation and Basis of Presentation (continued)
Basis of presentation
Since the Group and the Acquired Groups are under common control of China Telecommunications
Corporation, the Group’s acquisitions of the Acquired Groups have been accounted for as a combination
of entities under common control in a manner similar to a pooling-of-interests. Accordingly, the assets and
liabilities of these entities have been accounted for at historical amounts and the consolidated financial
statements of the Group prior to the acquisitions are combined with the financial statements of the
Acquired Groups. The considerations for the acquisition of the Acquired Groups are accounted for as an
equity transaction in the consolidated statement of changes in equity.
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 agreement 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. Application of New and Amendments to International Financial Reporting
Standards (“IFRSs”) and Interpretation
In the current year, the Group has applied, for the first time, the following new and amendments to IFRSs
and interpretation issued by IASB that are mandatorily effective for the current year:
•
•
•
•
•
•
•
IFRS 9, “Financial Instruments”
IFRS 15, “Revenue from Contracts with Customers” and the related Amendments
IFRIC 22, “Foreign Currency Transactions and Advance Consideration”
Amendments to IFRS 2, “Classification and Measurement of Share-based Payment Transactions”
Amendments to IFRS 4, “Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts”
Amendments to IAS 40, “Transfers of Investment Property”
Amendments to IAS 28 as part of the “Annual Improvements to IFRS Standards 2014–2016 Cycle”
China Telecom Corporation Limited Annual Report 2018 171
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
2. Application of New and Amendments to International Financial Reporting
Standards (“IFRSs”) and Interpretation (continued)
Except for IFRS 9, “Financial Instruments” and IFRS 15, “Revenue from Contracts with Customers” and the
related Amendments as described below, the application of the above amendments to IFRSs and
interpretation has had no material effect on the Group’s consolidated financial statements.
The Group has not yet applied any new and revised standard or interpretation that is not yet effective for
the current year (Note 47).
2.1 IFRS 15, “Revenue from Contracts with Customers”
The Group has applied IFRS 15 for the first time in the current year. IFRS 15 superseded IAS 18,
“Revenue”, IAS 11, “Construction Contracts” and the related interpretations.
The Group has applied IFRS 15 retrospectively with the cumulative effect of initially applying this
standard recognised at the date of initial application, 1 January 2018. Any difference at the date of
initial application is recognised in the opening reserves and comparative information has not been
restated. Furthermore, in accordance with the transition provisions in IFRS 15, the Group has elected
to apply the standard retrospectively only to the contracts that are not completed at 1 January 2018.
Accordingly, certain comparative information may not be comparable as comparative information was
prepared under IAS 18, “Revenue” and the related interpretations.
The Group recognises revenue from the following major sources which arise from contracts with
customers:
•
Telecommunications services, including voice, Internet, information and application and
telecommunications network resource and equipment services, and resale of mobile services
(MVNO); and
•
Sales, and repair and maintenance of telecommunications equipment and others.
Information about the Group’s performance obligations and the accounting policies resulting from
application of IFRS 15 are disclosed in Notes 26 and 3(m) respectively.
Summary of effects arising from initial application of IFRS 15
The following table summarises the impacts of transition to IFRS 15 on reserves at 1 January 2018.
Reserves
Consideration payable to customers
Contract with multiple performance obligations
Incremental costs of obtaining contracts
Tax effect
Increase at 1 January 2018
RMB millions
2,884
663
1,210
(1,066)
3,691
172
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
2. Application of New and Amendments to International Financial Reporting
Standards (“IFRSs”) and Interpretation (continued)
2.1 IFRS 15, “Revenue from Contracts with Customers” (continued)
Summary of effects arising from initial application of IFRS 15 (continued)
The following adjustments were made to the amounts recognised in the consolidated statement of
financial position at 1 January 2018. Line items that were not affected by the changes have not been
included.
Carrying
amounts
previously
reported at
31 December
Notes
2017 Reclassification Remeasurement
RMB millions
RMB millions
RMB millions
Carrying
amounts
under
IFRS 15 at
1 January 2018*
RMB millions
Non-current assets
Other assets
Current assets
Accounts receivable, net
Contract assets
Prepayments and
other current assets
Current liabilities
Accrued expenses and
other payables
Contract liabilities
Current portion of deferred
revenues
Non-current liabilities
Deferred tax liabilities
Equity
Reserves
(a)
3,349
–
1,210
4,559
(b)
(b, e)
(b)
(c)
(c, d, e)
(c)
22,096
–
22,128
98,695
–
1,233
(596)
633
(37)
–
23
–
21,500
656
22,091
(64,912)
65,699
–
(3,524)
33,783
62,175
(787)
–
446
(a, d, e)
8,010
244,935
–
–
1,066
9,076
3,691
248,626
* The amounts in this column are before the adjustments from the application of IFRS 9.
China Telecom Corporation Limited Annual Report 2018 173
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
2. Application of New and Amendments to International Financial Reporting
Standards (“IFRSs”) and Interpretation (continued)
2.1 IFRS 15, “Revenue from Contracts with Customers” (continued)
Summary of effects arising from initial application of IFRS 15 (continued)
Notes:
(a)
(b)
(c)
(d)
(e)
The Group incurred incremental commission paid/payable to third party agents in connection with obtaining the contracts
with customers. These amounts were previously expensed as incurred. At the date of initial application of IFRS 15,
incremental costs of obtaining contracts, netted off deferred tax, amounting to RMB940 million were recognised with
corresponding adjustments to reserves.
At the date of initial application of IFRS 15 unbilled revenues of RMB633 million arising from information and application
service contracts are conditional on the Group’s achieving specified milestones as stipulated in the contracts, and hence
such balance was reclassified from accounts receivable and prepayments and other current assets to contract assets.
At the date of initial application of IFRS 15, considerations received from telecommunications service contracts included in
receipts in advance and deferred revenues amounting to RMB64,912 million and RMB787 million, respectively, were
reclassified from accrued expenses and other payables and current portion of deferred revenues to contract liabilities.
Certain subsidies payable to third party agents incurred by the Group in respect of customer contracts, which will be
ultimately enjoyed by end customers, and other subsidies incurred by the Group directly payable to its customers, were
previously expensed as incurred. At the date of initial application of IFRS 15, such subsidies were considered as
consideration payable to customers and the related impact, netted off deferred tax, amounting to RMB2,224 million were
recognised with corresponding adjustments to reserves.
The sales of terminal equipment and the provision of telecommunications services represent separate performance
obligations from the Group’s direct sales of promotional packages. The total contract consideration of a promotional
package is previously allocated to revenues generated from the provision of telecommunications services and the sales of
terminal equipment using the residual method. At the date of initial application of IFRS 15, the transaction price was
allocated to each performance obligation in the contract on a relative stand-alone selling price basis, and the consideration
allocated to sales of terminal equipment was recognised as revenue at contract inception, i.e. when the equipment are
delivered, while consideration allocated to provision of telecommunications services would be subsequently recognised as
revenue as services are delivered during the contract period, with the impact, netted of deferred tax, amounting to RMB527
million recognised with corresponding adjustments to reserves.
174
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
2. Application of New and Amendments to International Financial Reporting
Standards (“IFRSs”) and Interpretation (continued)
2.1 IFRS 15, “Revenue from Contracts with Customers” (continued)
Summary of effects arising from initial application of IFRS 15 (continued)
The following tables summarise the impacts of applying IFRS 15 on the Group’s consolidated
statement of financial position as at 31 December 2018 and its consolidated statement of
comprehensive income and consolidated statement of cash flows for the current year for each of the
line items affected. Line items that were not affected by the changes have not been included.
Impact on the consolidated statement of financial position
As reported at
31 December
2018
RMB millions
Notes
Adjustments
RMB millions
Amounts
without
application of
IFRS 15 at
31 December
2018
RMB millions
(a)
4,840
(1,287)
3,553
(b)
(b, e)
(c, d, e)
(c)
(c)
20,475
478
43,497
55,783
375
461
(478)
20,936
–
57,681
(55,783)
765
101,178
–
1,140
13,138
(869)
12,269
262,137
(3,098)
259,039
Non-current assets
Other assets
Current assets
Accounts receivable, net
Contract assets
Current liabilities
Accrued expenses and other payables
Contract liabilities
Current portion of deferred revenues
Non-current liabilities
Deferred tax liabilities
Equity
Reserves
China Telecom Corporation Limited Annual Report 2018 175
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
2. Application of New and Amendments to International Financial Reporting
Standards (“IFRSs”) and Interpretation (continued)
2.1 IFRS 15, “Revenue from Contracts with Customers” (continued)
Summary of effects arising from initial application of IFRS 15 (continued)
Impact on the consolidated statement of comprehensive income
Notes
As reported
for 2018
RMB millions
Adjustments
RMB millions
Amounts
without
application of
IFRS 15 for
2018
RMB millions
Operating revenues
(d, e)
377,124
4,377
381,501
Operating expenses
Selling, general and administrative
Other operating expenses
Total operating expenses
(a, d, e)
(e)
Operating profit
Profit before taxation
Income tax
Profit for the year
Total comprehensive income for the year
59,422
37,697
348,410
28,714
28,148
6,810
21,338
21,243
3,956
(369)
3,587
790
790
197
593
593
63,378
37,328
351,997
29,504
28,938
7,007
21,931
21,836
176
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
2. Application of New and Amendments to International Financial Reporting
Standards (“IFRSs”) and Interpretation (continued)
2.1 IFRS 15, “Revenue from Contracts with Customers” (continued)
Summary of effects arising from initial application of IFRS 15 (continued)
Impact on the consolidated statement of cash flows
As reported
for 2018
RMB millions
Adjustments
RMB millions
Amounts
without
application of
IFRS 15 for
2018
RMB millions
Profit before taxation
28,148
790
28,938
Operating profit before changes in
working capital
Increase in accounts receivable
Decrease in contract assets
Decrease in other assets
Increase in accrued expenses and
other payables
Decrease in contract liabilities
Decrease in deferred revenues
Net cash from operating activities
108,080
790
108,870
(1,848)
170
271
9,842
(6,414)
(138)
99,298
164
(170)
77
(7,253)
6,414
(22)
(1,684)
–
348
2,589
–
(160)
–
99,298
Notes:
(a)
(b)
(c)
The Group incurred incremental commission paid/payable to third party agents in connection with obtaining the contracts
with customers. These amounts were previously expensed as incurred. Upon application of IFRS 15, incremental costs of
obtaining contracts were recognised as an asset if the Group expects to recover such cost. The asset so recognised was
subsequently amortised to consolidated statement of comprehensive income on a systematic basis that is consistent with the
transfer to the customer of the goods or services to which the asset relates. This change in accounting policy resulted in a
reduction of operating expenses by RMB77 million for the year ended 31 December 2018, and an increase in contract costs,
included in other assets, by RMB1,287 million as at 31 December 2018.
At 31 December 2018, upon application of IFRS 15, unbilled revenue of RMB461 million arising from information and
application service contracts are conditional on the Group’s achieving specified milestones as stipulated in the contracts,
and hence such balance was recognised as contract assets. Before application of IFRS 15, such balance was presented as
accounts receivable.
At 31 December 2018, upon application of IFRS 15, consideration received from telecommunications service contracts
amounting to RMB55,783 million was recognised as contract liability. Before application of IFRS 15, such balance was
presented as receipts in advance (included in accrued expenses and other payables) and current portion of deferred revenues
amounting to RMB55,018 million and RMB765 million, respectively.
China Telecom Corporation Limited Annual Report 2018 177
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
2. Application of New and Amendments to International Financial Reporting
Standards (“IFRSs”) and Interpretation (continued)
2.1 IFRS 15, “Revenue from Contracts with Customers” (continued)
Summary of effects arising from initial application of IFRS 15 (continued)
Notes: (continued)
(d)
(e)
Certain subsidies payable to third party agents incurred by the Group in respect of customer contracts, which will be
ultimately enjoyed by end customers, and other subsidies incurred by the Group directly payable to its customers, were
previously expensed as incurred. Upon application of IFRS 15, such subsidies were considered as consideration payable to a
customer and were accounted for as a reduction of operating revenues unless the payment to the customer is in exchange
for a distinct good or service that the customer transfers to the Group and the fair value of the good or service received
from the customer can be reasonably estimated. This change in accounting policy resulted in a reduction of operating
revenues by RMB3,897 million and a reduction of operating expenses by RMB3,510 million for the year ended 31 December
2018, and a reduction of contract liabilities, which was presented as accrued expenses and other payables before application
of IFRS 15, by RMB2,497 million, as at 31 December 2018.
The sales of terminal equipment and the provision of telecommunications services represent separate performance
obligations from the Group’s sales of promotional packages. The total contract consideration of a promotional package is
previously allocated to revenues generated from the provision of telecommunications services and the sales of terminal
equipment using the residual method. Upon application of IFRS 15, the transaction price was allocated to each performance
obligation in the contract on a relative stand-alone selling price basis, and the consideration allocated to sales of terminal
equipment was recognised as revenue at contract inception, i.e. when the equipment are delivered, while consideration
allocated to provision of telecommunications services would be subsequently recognised as revenue as services are delivered
during the contract period. This change in accounting policy resulted in a reduction of operating revenues by RMB480
million for the year ended 31 December 2018, a reduction of contract liabilities, which was presented as accrued expenses
and other payables before application of IFRS 15, by RMB166 million, and an increase of contract assets by RMB17 million,
as at 31 December 2018.
2.2 IFRS 9, “Financial Instruments”
In the current year, the Group has applied IFRS 9, “Financial instruments” and the related
consequential amendments to other IFRSs. IFRS 9 introduces new requirements for (1) the
classification and measurement of financial assets and financial liabilities, (2) expected credit losses
(“ECL”) for financial assets and other items (for example, contract assets) and (3) general hedge
accounting.
The Group has applied IFRS 9 in accordance with the transition provisions set out in IFRS 9, i.e.
applied the classification and measurement requirements (including impairment under ECL model)
retrospectively to instruments that have not been derecognised as at 1 January 2018 (date of initial
application) and has not applied the requirements to instruments that have already been derecognised
as at 1 January 2018. The difference between carrying amounts as at 31 December 2017 and the
carrying amounts as at 1 January 2018 are recognised in the opening reserves, without restating
comparative information.
Accordingly, certain comparative information may not be comparable as comparative information was
prepared under IAS 39, “Financial Instruments: Recognition and Measurement”.
Accounting policies resulting from application of IFRS 9 are disclosed in Note 3(k).
178
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
2. Application of New and Amendments to International Financial Reporting
Standards (“IFRSs”) and Interpretation (continued)
2.2 IFRS 9, “Financial Instruments” (continued)
Summary of effects arising from initial application of IFRS 9
The table below illustrates the classification and measurement of financial assets and other items
subject to ECL under IFRS 9 and IAS 39 at the date of initial application, 1 January 2018.
Equity
instruments
at fair value
through other
Prepayments
and other
Deferred
Deferred
comprehensive
Accounts
Contract
Investments
income
receivable
assets
current
assets
tax
tax
assets
liabilities
Reserves
interests
Notes
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
Non-
controlling
Closing balance at
31 December 2017
— IAS 39
Effect arising from initial
application of IFRS 15
Effect arising from initial
application of IFRS 9:
Reclassification
From investments
Remeasurement
Impairment under ECL model
(b)
Opening balance at
1 January 2018
Notes:
–
–
1,154
–
–
–
22,096
–
22,128
5,479
8,010
244,935
830
(596)
656
(37)
1,066
3,691
–
–
–
–
–
–
–
–
–
(919)
(1)
203
(716)
(1)
(a)
(1,154)
1,154
–
–
–
1,154
20,581
656
22,090
5,682
9,076
247,910
829
(a)
Available for sale (“AFS”) investments
From AFS equity investments to equity instruments at fair value through other comprehensive income (“FVTOCI”)
The Group elected to present in other comprehensive income (“OCI”) for the fair value changes of all its equity investments
previously classified as available-for-sale investments. These investments are not held for trading and not expected to be
sold in the foreseeable future. At the date of initial application of IFRS 9, RMB1,154 million were reclassified from
investments to equity instruments at FVTOCI, of which RMB185 million related to unquoted equity investments previously
measured at cost less impairment under IAS 39. The fair value gains of RMB674 million relating to those investments
previously carried at fair value continued to accumulate in other reserves.
China Telecom Corporation Limited Annual Report 2018 179
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
2. Application of New and Amendments to International Financial Reporting
Standards (“IFRSs”) and Interpretation (continued)
2.2 IFRS 9, “Financial Instruments” (continued)
Summary of effects arising from initial application of IFRS 9 (continued)
Notes: (continued)
(b)
Impairment under ECL model
The Group applies the IFRS 9 simplified approach to measure ECL which uses a lifetime ECL for all accounts receivable and
contract assets. To measure the ECL, accounts receivable and contract assets have been grouped based on shared credit risk
characteristics, nature of services provided as well as type of customers. The contract assets relate to unbilled work in
progress and have substantially the same risk characteristics as accounts receivable for the same types of contracts. The
Group has therefore concluded that the expected loss rates for accounts receivable are a reasonable approximation of the
loss rates for contract assets.
Loss allowances for other financial assets at amortised cost mainly comprise of financial assets included in prepayments and
other current assets, are measured on 12-month ECL (“12m ECL”) basis and there have been no significant increase in credit
risk since initial recognition.
As at 1 January 2018, the additional credit loss allowance of RMB920 million and the related deferred tax impact of RMB203
million have been recognised against reserves and non-controlling interests. The additional loss allowance is charged against
the respective assets.
All loss allowances for financial assets measured at amortised cost, including accounts receivable and financial assets
included in prepayments and other current assets as at 31 December 2017 reconciled to the opening loss allowance as at 1
January 2018 are as follows:
At 31 December 2017 — IAS 39
Amount remeasured through opening reserves
At 1 January 2018
Accounts
receivable
RMB millions
Prepayments
and other
current assets
RMB millions
3,842
919
4,761
370
1
371
180
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
2. Application of New and Amendments to International Financial Reporting
Standards (“IFRSs”) and Interpretation (continued)
2.3 Impacts on opening consolidated statement of financial position arising from the
application of all new standards
As a result of the changes in the Group’s accounting policies above, the opening consolidated
statement of financial position had to be restated. The following table shows the adjustments
recognised for each of the line items affected.
31 December
2017
RMB
millions
(audited)
IFRS 15
RMB
millions
IFRS 9
RMB
millions
1 January
2018
RMB
millions
(restated)
1,154
–
(1,154)
–
–
5,479
3,349
579,662
589,644
22,096
–
22,128
27,326
71,550
661,194
98,695
–
1,233
175,480
275,408
(203,858)
–
–
1,210
–
1,210
(596)
656
(37)
–
23
1,233
(64,912)
62,175
(787)
–
(3,524)
3,547
1,154
203
–
–
203
(919)
–
(1)
–
(920)
(717)
–
–
–
–
–
1,154
5,682
4,559
579,662
591,057
20,581
656
22,090
27,326
70,653
661,710
33,783
62,175
446
175,480
271,884
(920)
(201,231)
385,786
4,757
(717)
389,826
Non-current assets
Investments
Equity instruments at fair value
through other comprehensive
income
Deferred tax assets
Other assets
Others with no adjustments
Total non-current assets
Current assets
Accounts receivable, net
Contract assets
Prepayments and other
current assets
Others with no adjustments
Total current assets
Total assets
Current liabilities
Accrued expenses and
other payables
Contract liabilities
Current portion of deferred
revenues
Others with no adjustments
Total current liabilities
Net current liabilities
Total assets less current
liabilities
China Telecom Corporation Limited Annual Report 2018 181
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
2. Application of New and Amendments to International Financial Reporting
Standards (“IFRSs”) and Interpretation (continued)
2.3 Impacts on opening consolidated statement of financial position arising from the
application of all new standards (continued)
31 December
2017
RMB
millions
(audited)
8,010
51,079
59,089
334,497
80,932
244,935
325,867
830
326,697
661,194
IFRS 15
RMB
millions
IFRS 9
RMB
millions
1,066
–
1,066
(2,458)
–
3,691
3,691
–
3,691
1,233
–
–
–
–
–
(716)
(716)
(1)
(717)
(717)
1 January
2018
RMB
millions
(restated)
9,076
51,079
60,155
332,039
80,932
247,910
328,842
829
329,671
661,710
Non-current liabilities
Deferred tax liabilities
Others with no adjustments
Total non-current liabilities
Total liabilities
Equity
Share capital
Reserves
Total equity attributable to
equity holders of the
Company
Non-controlling interests
Total equity
Total liabilities and equity
Note:
For the purpose of reporting cash flows from operating activities under indirect method for the year ended 31 December
2018, movements in working capital have been computed based on opening consolidated statement of financial position
as at 1 January 2018 as disclosed above.
182
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies
(a) Basis of preparation
The accompanying consolidated financial statements have been prepared in accordance with IFRSs as
issued by IASB. The consolidated 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 (“Listing Rules”). The
consolidated financial statements of the Group have been prepared on a going concern basis.
The consolidated financial statements are prepared on the historical cost basis as modified by the
revaluation of certain financial instruments measured at fair value (Note 3(k)).
The preparation of consolidated financial statements in conformity with IFRSs requires management
to make judgments, 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
consolidated financial statements and the reported amounts of revenues and expenses during the
reporting period. The estimates and associated assumptions are based on historical experience and
various other factors that management believes are reasonable under the circumstances, the results of
which form the basis of making the judgments about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from those estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that
period or in the period of the revision and future periods if the revision affects both current and
future periods.
Judgments made by management in the application of IFRSs that have significant effect on the
consolidated financial statements and major sources of estimation uncertainty are discussed in Note
46.
(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 the 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 over that entity, only substantive rights (held by the
Company and other parties) are considered.
China Telecom Corporation Limited Annual Report 2018 183
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(b) Basis of consolidation (continued)
The financial results of subsidiaries are included in the consolidated financial statements from the
date that control commences until the date that control ceases, and the profit attributable to non-
controlling interests is separately presented on the face of the consolidated statement of
comprehensive income as an allocation of the profit or loss for the year between the non-controlling
interests and the equity holders of the Company. Non-controlling interests represent the equity in
subsidiaries not attributable directly or indirectly to the Company. For each business combination,
other than business combination under common control, 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.
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) after reassessment. 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.
184
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(c) Foreign currencies
The accompanying consolidated financial statements are presented in Renminbi (“RMB”). The
functional currency of the Company and its subsidiaries in mainland China is RMB. The functional
currency of the Group’s foreign operations is the currency of the primary economic environment in
which the foreign operations operate. Transactions denominated in currencies other than the
functional currency during the year are translated into the functional currency at the applicable rates
of exchange prevailing on the transaction dates. Foreign currency monetary assets and liabilities are
translated into the functional currency using the applicable exchange rates at the end of the reporting
period. The resulting exchange differences, other than those capitalised as construction in progress
(Note 3(e)), are recognised as income or expense in profit or loss. For the periods presented, no
exchange differences were capitalised.
When preparing the Group’s consolidated financial statements, the results of operations of the
Group’s foreign operations are translated into RMB at average rate prevailing during the year. Assets
and liabilities of the Group’s foreign operations are translated into RMB at the foreign exchange rates
ruling at the end of the reporting period. The resulting exchange differences are recognised in other
comprehensive income and accumulated separately in equity in the exchange reserve.
(d) Property, plant and equipment
Property, plant and equipment are initially recorded at cost, less subsequent accumulated depreciation
and impairment losses (Note 3(i)). 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 held under finance leases (Note 3(o)) are amortised over the shorter of the lease term and their
estimated useful lives on a straight-line basis. As at 31 December 2018, no asset was held by the
Group under finance leases (31 December 2017: nil).
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 respective 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
5 to 10 years
5 to 10 years
China Telecom Corporation Limited Annual Report 2018 185
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(d) Property, plant and equipment (continued)
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.
(e) 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 3(i)). 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.
(f) 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.
(g) 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 3(i)). 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.
(h)
Intangible assets
The Group’s intangible assets are primarily software.
Software that is not an integral part of any tangible assets, is recorded at cost less subsequent
accumulated amortisation and impairment losses (Note 3(i)). Amortisation of software is mainly
calculated on a straight-line basis over the estimated useful lives, which range from 3 to 5 years.
186
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(i)
Impairment of goodwill and long-lived assets
The carrying amounts of the Group’s long-lived assets, including property, plant and equipment,
intangible assets with finite useful lives, construction in progress and contract costs included in other
assets 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.
Before the Group recognises an impairment loss for assets capitalised as contract costs under IFRS 15,
the Group assesses and recognises any impairment loss on other assets related to the relevant
contracts in accordance with applicable standards. Then, impairment loss, if any, for assets capitalised
as contract costs is recognised to the extent the carrying amounts exceeds the remaining amount of
consideration that the Group expects to receive in exchange for related goods or services less the
costs which relate directly to providing those goods or services that have not been recognised as
expenses. The assets capitalised as contract costs are then included in the carrying amount of the
cash-generating unit to which they belong for the purpose of evaluating impairment of that cash-
generating unit.
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. The recoverable amount of a tangible and an intangible asset is estimated
individually. 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 for
which the estimates of future cash flows have not been adjusted. 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 2018 187
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(j)
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 are stated at the lower of cost and 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.
(k) Financial instruments
Financial assets and financial liabilities are recognised when the Group becomes a party to the
contractual provisions of the instrument. All regular way purchases or sales of financial assets are
recognised and derecognised on a settlement date basis. Regular way purchases or sales are purchases
or sales of financial assets that require delivery of assets within the time frame established by
regulation or convention in the market place.
Financial assets and financial liabilities are initially measured at fair value except for accounts
receivables arising from contracts with customers which are initially measured in accordance with IFRS
15 since 1 January 2018. Transaction costs that are directly attributable to the acquisition or issue of
financial assets and financial liabilities, other than financial assets or financial liabilities at fair value
through profit or loss (“FVTPL”) are added to or deducted from the fair value of the financial assets
or financial liabilities, as appropriate, on initial recognition.
The effective interest method is a method of calculating the amortised cost of a financial asset or
financial liability and of allocating interest income and interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts estimated future cash receipts and payments
(including all fees and points paid or received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) through the expected life of the financial asset or
financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial
recognition.
188
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(k) Financial instruments (continued)
Financial assets
Classification and subsequent measurement of financial assets (upon application of IFRS 9 in
accordance with transitions in note 2.2)
The Group’s financial assets include financial assets measured subsequently at amortised cost and
equity instruments designated as at FVTOCI.
(i)
Financial assets measured subsequently at amortised cost
Financial assets that meet the following conditions are subsequently measured at amortised cost:
•
•
the financial asset is held within a business model whose objective is to collect contractual
cash flows; and
the contractual terms give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
Interest income is recognised using the effective interest method for financial assets measured
subsequently at amortised cost. Interest income is calculated by applying the effective interest
rate to the gross carrying amount of a financial asset, except for financial assets that have
subsequently become credit-impaired (see below). For financial assets that have subsequently
become credit-impaired, interest income is recognised by applying the effective interest rate to
the amortised cost of the financial asset from the next reporting period. If the credit risk on the
credit-impaired financial instrument improves so that the financial asset is no longer credit-
impaired, interest income is recognised by applying the effective interest rate to the gross
carrying amount of the financial asset from the beginning of the reporting period following the
determination that the asset is no longer credit-impaired.
(ii)
Equity instruments designated as at FVTOCI
At the date of initial application/initial recognition of a financial asset, the Group may
irrevocably elect to present subsequent changes in fair value of an equity investment in OCI, and
accumulate in other reserves, if that equity investment is neither held for trading nor contingent
consideration recognised by an acquirer in a business combination to which IFRS 3, “Business
Combinations” applies. These equity instruments are not subject to impairment assessment. The
cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity
investments, and will be transferred to retained earnings.
Dividend from these investments in equity instruments are recognised in profit or loss when the
Group’s right to receive the dividends is established, unless the dividends clearly represent a
recovery of part of the cost of the investment. Dividends are included in the “investment
income” line item in profit or loss.
China Telecom Corporation Limited Annual Report 2018 189
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(k) Financial instruments (continued)
Financial assets (continued)
Impairment of financial assets (upon application of IFRS 9 with transitions in accordance with note 2.2)
The Group recognises a loss allowance for ECL on financial assets which are subject to impairment
under IFRS 9 (including accounts receivables and financial assets included in prepayments and other
current assets) and contract assets. The amount of ECL is updated at each reporting date to reflect
changes in credit risk since initial recognition.
Lifetime ECL represents the ECL that will result from all possible default events over the expected life
of the relevant instrument. In contrast, 12m ECL represents the portion of lifetime ECL that is
expected to result from default events that are possible within 12 months after the reporting date.
Assessments are done based on the Group’s historical credit loss experience, adjusted for factors that
are specific to the debtors, general economic conditions and an assessment of both the current
conditions at the reporting date as well as the forecast of future conditions.
The Group always recognises lifetime ECL for accounts receivable and contract assets. The ECL on
these assets are assessed individually for debtors with significant balances and collectively using a
provision matrix with appropriate groupings based on shared credit risk characteristics, nature of
services provided as well as type of customers, such as receivable from telephone and Internet
subscribers and from enterprise customers.
For all other instruments, i.e. financial assets included in prepayments and other current assets, the
Group measures the loss allowance equal to 12m ECL, unless when there has been a significant
increase in credit risk since initial recognition, the Group recognises lifetime ECL. The assessment of
whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of
a default occurring since initial recognition.
(i)
Significant increase in credit risk
In assessing whether the credit risk has increased significantly since initial recognition, the Group
compares the risk of a default occurring on the financial instrument as at the reporting date
with the risk of a default occurring on the financial instrument as at the date of initial
recognition. In making this assessment, the Group considers both quantitative and qualitative
information that is reasonable and supportable, including historical experience and forward-
looking information that is available without undue cost or effort.
190
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(k) Financial instruments (continued)
Financial assets (continued)
Impairment of financial assets (upon application of IFRS 9 with transitions in accordance with note 2.2)
(continued)
(i)
Significant increase in credit risk (continued)
In particular, the following information is taken into account when assessing whether credit risk
has increased significantly:
•
•
•
•
failure to make payments of principal or interest on their contractually due dates;
an actual or expected significant deterioration in a financial instrument’s external or
internal credit rating (if available);
an actual or expected significant deterioration in the operating results of the debtor; and
existing or forecast changes in the technological, market, economic or legal environment
that have a significant adverse effect on the debtor’s ability to meet its obligation to the
Group.
(ii) Definition of default
For internal credit risk management, the Group considers an event of default occurs when
information developed internally or obtained from external sources indicates that the debtor is
unlikely to pay its creditors, including the Group, in full (without taking into account any
collaterals held by the Group).
China Telecom Corporation Limited Annual Report 2018 191
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(k) Financial instruments (continued)
Financial assets (continued)
Impairment of financial assets (upon application of IFRS 9 with transitions in accordance with note 2.2)
(continued)
(iii) Credit-impaired financial assets
A financial asset is credit-impaired when one or more events of default that have a detrimental
impact on the estimated future cash flows of that financial asset have occurred. Evidence that a
financial asset is credit-impaired includes observable data about the following events:
•
•
•
•
•
significant financial difficulty of the issuer or the borrower;
a breach of contract, such as a default or past due event;
the lender(s) of the borrower, for economic or contractual reasons relating to the
borrower’s financial difficulty, having granted to the borrower a concession(s) that the
lender(s) would not otherwise consider;
it is becoming probable that the borrower will enter bankruptcy or other financial
reorganisation; or
the disappearance of an active market for that financial asset because of financial
difficulties.
(iv) Write-off policy
The Group writes off a financial asset when there is information indicating that the counterparty
is in severe financial difficulty and there is no realistic prospect of recovery, for example, when
the counterparty has been placed under liquidation or has entered into bankruptcy proceedings.
A write-off constitutes a derecognition event. Financial assets written off may still be subject to
enforcement activities under the Group’s recovery procedures, taking into account legal advice
where appropriate. Any subsequent recoveries are recognised in profit or loss.
(v) Measurement and recognition of ECL
The measurement of ECL is a function of the probability of default, loss given default (i.e. the
magnitude of the loss if there is a default) and the exposure at default. The assessment of the
probability of default and loss given default is based on the historical data adjusted by forward-
looking information.
192
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(k) Financial instruments (continued)
Financial assets (continued)
Impairment of financial assets (upon application of IFRS 9 with transitions in accordance with note 2.2)
(continued)
(v) Measurement and recognition of ECL (continued)
Generally, the ECL is the difference between all contractual cash flows that are due to the Group
in accordance with the contract and all the cash flows that the Group expects to receive,
discounted at the effective interest rate determined at initial recognition.
Where ECL is measured on a collective basis or cater for cases where evidence at the individual
instrument level may not be available, the financial instruments are grouped on the following
basis:
•
•
•
•
Nature of financial instruments (i.e. the Group’s accounts receivable and financial assets
included in prepayments and other current assets are each assessed as a separate group);
Past-due status;
Nature, size and industry of debtors; and
External credit ratings where available.
The grouping is regularly reviewed by management to ensure the constituents of each group
continue to share similar credit risk characteristics.
The Group recognises an impairment gain or loss in profit or loss for all financial instruments
measured at amortised cost by adjusting their carrying amount, with the exception of accounts
receivable and other receivables where the corresponding adjustment is recognised through a
loss allowance account.
China Telecom Corporation Limited Annual Report 2018 193
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(k) Financial instruments (continued)
Financial assets (continued)
Classification and subsequent measurement of financial assets (before application of IFRS 9 on 1
January 2018)
The Group’s financial assets are classified into the following specified categories: AFS financial assets
and loans and receivables. The classification depends on the nature and purpose of the financial
assets and is determined at the time of initial recognition. All regular way purchases or sales of the
financial assets are recognised and derecognised on a settlement date basis. Regular way purchases or
sales are purchases or sales of financial assets that require delivery of assets within the time frame
established by regulation or convention in the marketplace.
(i) AFS financial assets
Investments in available-for-sale listed 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 listed 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 unlisted 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 (see below).
(ii)
Loans and receivables
Accounts receivable 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
(see below) unless the effect of discounting would be immaterial, in which case they are stated
at cost less allowance for doubtful debts.
Impairment of financial assets (before application of IFRS 9 on 1 January 2018)
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 or issuer;
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.
194
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(k) Financial instruments (continued)
Financial assets (continued)
Impairment of financial assets (before application of IFRS 9 on 1 January 2018) (continued)
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.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the
asset expire, or when it transfers the financial asset and substantially all the risks and rewards of
ownership of the asset to another entity.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s
carrying amount and the sum of the consideration received and receivable is recognised in profit or
loss.
On derecognition of an investment in equity instrument which the Group has elected on initial
recognition/initial application to measure at FVTOCI upon application of IFRS 9, the cumulative gain
or loss previously accumulated in other reserves is not reclassified to profit or loss, but is transferred
to retained earnings.
On derecognition of an AFS financial asset, the cumulative gain or loss previously accumulated in
other reserves is reclassified to profit or loss.
China Telecom Corporation Limited Annual Report 2018 195
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(k) Financial instruments (continued)
Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with
the substance of the contractual arrangements and the definitions of a financial liability and an equity
instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after
deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds
received, net of direct issue costs.
Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest
method.
Financial liabilities including short-term and long-term debt, accounts payable and financial liabilities
included in accrued expenses and other payables are subsequently measured at amortised cost, using
the effective interest method.
Offsetting a financial asset and a financial liability
A financial asset and a financial liability are offset and the net amount presented in the statement of
financial position when, and only when, the Group 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 asset and settle
the liability simultaneously.
(l) 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.
196
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(m) Revenue from contract with customers (upon application of IFRS 15 in accordance
with transitions in note 2.1)
Under IFRS 15, the Group recognises revenue when (or as) a performance obligation is satisfied. i.e.
when “control” of the goods or services underlying the particular performance obligation is
transferred to the customer.
A performance obligation represents a good or service (or a bundle of goods or services) that is
distinct or a series of distinct goods or services that are substantially the same.
Control is transferred over time and revenue is recognised over time by reference to the progress
towards complete satisfaction of the relevant performance obligation if one of the following criteria is
met:
•
•
•
the customer simultaneously receives and consumes the benefits provided by the Group’s
performance as the Group performs;
the Group’s performance creates and enhances an asset that the customer controls as the
Groups performs; or
the Group’s performance does not create an asset with an alternative use to the Group and the
Group has an enforceable right to payment for performance completed to date.
As such, revenues from contracts with customers of telecommunications services, including voice,
Internet, information and application and telecommunications network resource and equipment
services, resale of mobile services (MVNO) and repair and maintenance of equipment are generally
recognised over time during which the services are provided to customers.
Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct
good or service. As such, revenues from sales of equipment are recognise at a point in time when the
equipment is delivered to the customers and when the control over the equipment have been
transferred to the customers.
A contract asset represents the Group’s right to consideration in exchange for goods or services that
the Group has transferred to a customer but the right is conditioned on the Group’s future
performance. A contract asset is transferred to accounts receivable when the right becomes
unconditional. A contract asset is assessed for impairment in accordance with IFRS 9. In contrast, a
receivable represents the Group’s unconditional right to consideration, i.e. only the passage of time is
required before payment of that consideration is due.
A contract liability represents the Group’s obligation to transfer goods or services to a customer for
which the Group has received consideration (or an amount of consideration is due) from the
customer. When the Group receives an advance payment before the performance obligation is
satisfied, this will give rise to a contract liability, until the operating revenues recognised on the
relevant contract exceed the amount of the advance payment.
A contract asset and a contract liability relating to the same contract are accounted for and presented
on a net basis.
China Telecom Corporation Limited Annual Report 2018 197
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(m) Revenue from contract with customers (upon application of IFRS 15 in accordance
with transitions in note 2.1) (continued)
Contracts with multiple performance obligations (including allocation of transaction price)
For contracts that contain more than one performance obligations, such as the Group’s direct sales of
promotional packages bundling terminal equipment, e.g. mobile handsets, and the
telecommunications services, the Group allocates the transaction price to each performance obligation
on a relative stand-alone selling price basis.
The stand-alone selling price of the distinct good or service underlying each performance obligation is
determined at contract inception. It represents the price at which the Group would sell a promised
good or service separately to a customer. If a stand-alone selling price is not directly observable, the
Group estimates it using appropriate techniques such that the transaction price ultimately allocated to
any performance obligation reflects the amount of consideration to which the Group expects to be
entitled in exchange for transferring the promised goods or services to the customer.
Over time revenue recognition: measurement of progress towards complete satisfaction of a
performance obligation
The progress towards complete satisfaction of a performance obligation is generally measured based
on output method, which is to recognise revenue on the basis of direct measurements of the value of
the goods or services transferred to the customer to date relative to the remaining goods or services
promised under the contract.
Principal versus agent
When another party is involved in providing goods or services to a customer, the Group determines
whether the nature of its promise is a performance obligation to provide the specified goods or
services itself (i.e. the Group is a principal) or to arrange for those goods or services to be provided by
the other party (i.e. the Group is an agent).
The Group is a principal if it controls the specified good or service before that good or service is
transferred to a customer.
The Group is an agent if its performance obligation is to arrange for the provision of the specified
good or service by another party. In this case, the Group does not control the specified good or
service provided by another party before that good or service is transferred to the customer. When
the Group acts as an agent, it recognises revenue in the amount of any fee or commission to which it
expects to be entitled in exchange for arranging for the specified goods or services to be provided by
the other party.
198
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(m) Revenue from contract with customers (upon application of IFRS 15 in accordance
with transitions in note 2.1) (continued)
Consideration payable to a customer
Consideration payable to a customer includes cash amounts that the Group pays, or expects to pay,
to the customer, and also includes credit or other items that can be applied against amounts owed to
the Group. The Group accounted for such consideration payable to a customer as a reduction of the
transaction price and, therefore, of revenue unless the payment to the customer is in exchange for a
distinct good or service that the customer transfers to the Group and the fair value of the good or
service received from the customer can be reasonably estimated.
Certain subsidies payable to third party agent incurred by the Group in respect of customer contracts,
which will be ultimately enjoyed by end customers, and other subsidies incurred by the Group directly
payable to its customers, are qualified as consideration payable to a customer and accounted for as a
reduction of operating revenues.
Incremental costs of obtaining a contract
Incremental costs of obtaining a contract are those costs that the Group incurs to obtain a contract
with a customer that it would not have incurred if the contract had not been obtained.
Certain commissions incurred by the Group paid or payable to third party agents, whose selling
activities resulted in customers entering into sale agreements for the Group’s telecommunications
service, are qualified as incremental costs. The Group recognises such costs as an asset, included in
other assets, if it expects to recover these costs. The asset so recognised is subsequently amortised to
profit or loss on a systematic basis that is consistent with the transfer to the customer of the goods or
services to which the assets relate.
The Group applies the practical expedient of expensing all incremental costs to obtain a contract if
these costs would otherwise have been fully amortised to profit or loss within one year.
Costs to fulfil a contract
When the Group incurs costs to fulfil a contract, it first assesses whether these costs qualify for
recognition as an asset in terms of other relevant standards, failing which it recognises an asset for
these costs only if they meet all of the following criteria:
•
•
the costs relate directly to a contract or to an anticipated contract that the Group can specifically
identify;
the costs generate or enhance resources of the Group that will be used in satisfying (or in
continuing to satisfy) performance obligations in the future; and
•
the costs are expected to be recovered.
The asset so recognised is subsequently amortised to profit or loss on a systematic basis that is
consistent with the transfer to the customer of the goods or services to which the assets relate.
China Telecom Corporation Limited Annual Report 2018 199
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(n) Revenue recognition (prior to 1 January 2018)
Before the application of IFRS 15, the revenue recognition methods of the Group are as follows:
•
Revenues from telecommunications services, including voice, Internet, information and
application and telecommunications network resource and equipment services, resale of mobile
services (MVNO) and repair and maintenance of equipment are recognised over time during
which the services are provided to customers.
Revenue from information and application services in which no third party service providers are
involved, such as caller display and Internet data centre services, are presented on a gross basis.
Revenues from all other information and application 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:
—
—
—
The Group is primarily 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;
—
The Group has latitude in establishing selling prices with customers;
—
The Group can modify the applications or perform part of the services;
—
The Group has discretion in selecting suppliers used to fulfill an order; and
—
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.
200
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(n) Revenue recognition (prior to 1 January 2018) (continued)
•
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.
The Group offers promotional packages, which involve the bundled sales of terminal equipment, i.e.
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.
(o) Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The Group as lessor
Lease income from operating leases is recognised over the term of the lease.
The Group as lessee
Assets acquired 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.
Where the Group has the right to use the assets 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 2018 201
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(p) 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.
(q) Research and development expense
Research and development expenditure is expensed as incurred. For the year ended 31 December
2018, research and development expense was RMB1,341 million (2017: RMB1,088 million).
(r) 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 44.
Compensation expense in respect of the share 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 share 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 share appreciation rights scheme are set out in Note
45.
(s) Government grants
The Group’s government grants are mainly related to the government loans with below-market rate
of interest.
Government grants shall only be recognised until there is reasonable assurance that:
•
•
the Group will comply with all the conditions attaching to them; and
the grants will be received.
Government grants that compensate expenses incurred are recognised in the consolidated statement
of comprehensive income in the same periods in which the expenses are incurred.
Government grants relating to assets are recognised in deferred revenue and are credited to the
consolidated statement of comprehensive income on a straight-line basis over the expected lives of
the related assets.
202
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(t) 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, it is probable that an outflow of economic
benefits will be required to settle the obligation and a reliable estimate can be made of the amount
of 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.
(u) Value-added tax
Output VAT rate for basic telecommunications services (including voice communication, lease or sale
of network resources) is 10%, or 11% before 1 May 2018, while the output 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 the
output VAT for sales of telecommunications terminals and equipment is 16%, or 17% before 1 May,
2018. Input VAT rate depends on the type of services received and the assets purchased as well as the
VAT rate applicable to a specific industry, and ranges from 3% to 16%, or 3% to 17% before 1 May
2018.
Output VAT is excluded from operating revenues while input VAT is excluded from operating expenses
or the original cost of equipment purchased and can be netted against the output VAT, arriving at the
net amount of VAT recoverable or payable. As the VAT obligations are borne by branches and
subsidiaries of the Company, input and output VAT are set off at branches and subsidiaries levels
which are not offset at the consolidation level. Such net amount of VAT recoverable or payable is
recorded in the line items of prepayments and other current assets and accrued expenses and other
payables, respectively, on the face of consolidated statement of financial position.
China Telecom Corporation Limited Annual Report 2018 203
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(v)
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.
(w) Dividends
Dividends are recognised as a liability in the period in which they are declared.
(x) 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.
204
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
3. Significant Accounting Policies (continued)
(x) 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.
(y) 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
resources 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% or more of the Group’s
operating revenues.
China Telecom Corporation Limited Annual Report 2018 205
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
4. Property, Plant and Equipment, Net
Buildings and
improvements
RMB millions
Telecommunications
network plant
and equipment
RMB millions
Furniture, fixture,
motor vehicles and
other equipment
RMB millions
Total
RMB millions
99,509
583
1,967
(709)
–
(18)
101,332
712
1,454
(860)
(97)
102,541
823,836
532
87,129
(68,719)
(33)
(272)
842,473
512
71,704
(59,822)
(485)
854,382
30,114
410
1,707
(1,936)
–
290
30,585
306
1,721
(1,636)
582
31,558
953,459
1,525
90,803
(71,364)
(33)
–
974,390
1,530
74,879
(62,318)
–
988,481
(51,018)
(490,917)
(21,853)
(563,788)
(4,326)
620
–
18
(54,706)
(4,370)
750
26
(58,300)
44,241
46,626
(63,903)
63,553
17
184
(491,066)
(63,878)
55,519
439
(498,986)
355,396
351,407
(2,145)
1,839
–
(202)
(22,361)
(2,135)
1,561
(465)
(23,400)
8,158
8,224
(70,374)
66,012
17
–
(568,133)
(70,383)
57,830
–
(580,686)
407,795
406,257
Cost/Deemed cost:
Balance at 1 January 2017
Additions
Transferred from construction in progress
Retirement and disposal
Disposal of a subsidiary
Reclassification
Balance at 31 December 2017
Additions
Transferred from construction
in progress
Retirement and disposal
Reclassification
Balance at 31 December 2018
Accumulated depreciation and
impairment:
Balance at 1 January 2017
Depreciation and impairment
charge for the year
Written back on retirement and disposal
Disposal of a subsidiary
Reclassification
Balance at 31 December 2017
Depreciation charge for the year
Written back on retirement and disposal
Reclassification
Balance at 31 December 2018
Net book value at 31 December 2018
Net book value at 31 December 2017
206
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
5. Construction in Progress
Balance at 1 January 2017
Additions
Transferred to property, plant and equipment
Transferred to intangible assets
Balance at 31 December 2017
Additions
Transferred to property, plant and equipment
Transferred to intangible assets
Balance at 31 December 2018
6. Goodwill
Cost:
Goodwill arising from acquisition of CDMA business
RMB millions
80,386
88,359
(90,803)
(4,836)
73,106
74,457
(74,879)
(6,040)
66,644
31 December
2018
RMB millions
2017
RMB millions
29,922
29,920
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 2018 207
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
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 9.4% (2017: 9.8%). 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 at the end of the reporting period 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.
208
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
7. Intangible Assets
Cost:
Balance at 1 January 2017
Additions
Transferred from construction in progress
Disposals
Disposal of a subsidiary
Balance at 31 December 2017
Additions
Transferred from construction in progress
Disposals
Balance at 31 December 2018
Accumulated amortisation and impairment:
Balance at 1 January 2017
Amortisation charge for the year
Written back on disposals
Disposal of a subsidiary
Balance at 31 December 2017
Amortisation charge for the year
Written back on disposals
Balance at 31 December 2018
Net book value at 31 December 2018
Net book value at 31 December 2017
Software
RMB millions
29,818
175
4,836
(268)
(11)
34,550
269
6,040
(3,545)
37,314
(18,574)
(3,843)
250
8
(22,159)
(4,366)
3,372
(23,153)
14,161
12,391
China Telecom Corporation Limited Annual Report 2018 209
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
8. Investments in Subsidiaries
Details of the Company’s subsidiaries which principally affected the results, assets and liabilities of the
Group at 31 December 2018 are as follows:
Name of company
Type of
legal entity
Date of
incorporation
Place of
incorporation
and operation
China Telecom System
Limited Company
Integration Co., Limited
13 September
2001
PRC
Registered/
issued capital
(in RMB millions
unless otherwise
stated)
Principal activity
542
Provision of system
integration and
consulting services
China Telecom Global
Limited
Limited Company
25 February
2000
Hong Kong Special
Administrative
Region of the PRC
HK$168 million
Provision of
telecommunications
services
China Telecom (Americas)
Corporation
Limited Company
22 November
2001
The United States
of America
China Telecom Best Tone
Information Service
Co., Limited
Limited Company
15 August
2007
PRC
China Telecom (Macau)
Company Limited
Limited Company
15 October
2004
Macau Special
Administrative
Region of the PRC
Tianyi Telecom Terminals
Company Limited
Limited Company
1 July
2005
PRC
US$43 million
Provision of
telecommunications
services
350
Provision of Best Tone
information services
MOP60 million
Provision of
telecommunications
services
500
Sales of
telecommunications
terminals
China Telecom (Singapore)
Pte. Limited
Limited Company
5 October
2006
Singapore
S$1,000,001
Provision of international
value-added network
services
E-surfing Pay Co., Ltd
Limited Company
Shenzhen Shekou
Telecommunications
Company Limited
Limited Company
3 March
2011
5 May
1984
PRC
PRC
500
Provision of e-commerce
services
91
Provision of
telecommunications
services
China Telecom (Australia)
Pty Limited
Limited Company
10 January
2011
Australia
AUD1 million
Provision of international
value-added network
services
210
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
8. Investments in Subsidiaries (continued)
Type of
legal entity
Date of
incorporation
Place of
incorporation
and operation
Registered/
issued capital
(in RMB millions
unless otherwise
stated)
Name of company
China Telecom Korea
Co., Ltd
Limited Company
China Telecom (Malaysia)
SDN BHD
Limited Company
China Telecom Information
Technology (Vietnam)
Co., Ltd
Limited Company
iMUSIC Culture &
Technology Co., Ltd.
Limited Company
16 May
2012
26 June
2012
9 July
2012
9 June
2013
South Korea
KRW500 million
Malaysia
MYR3,723,500
Vietnam
VND10,500 million
PRC
Principal activity
Provision of international
value-added network
services
Provision of international
value-added network
services
Provision of international
value-added network
services
China Telecom (Europe)
Limited
Limited Company
2 March
2006
The United Kingdom
of Great Britain and
Northern Ireland
Zhejiang Yixin Technology
Co., Ltd.
Limited Company
19 August
2013
Tianyi Capital Holding
Co., Ltd.
Limited Company
30 November
2017
PRC
PRC
China Telecom Leasing
Corporation Limited
Limited Company
30 November
2018
PRC
250
Provision of music
production and related
information services
GBP16.15 million
Provision of
telecommunications
services
11
Provision of instant
messenger service
5,000 Capital investment and
provision of consulting
services
5,000
Provision of finance
lease service
Except for Shenzhen Shekou Telecommunications Company Limited which is 51% owned by the Company,
Zhejiang Yixin Technology Co., Ltd. which is 65% owned by the Company and E-surfing Pay Co., Ltd,
which is 78.74% 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 2018 211
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
9. Interests in Associates
Cost of investment in associates
Share of post-acquisition changes in net assets
Fair value of listed investments
31 December
2018
RMB millions
2017
RMB millions
36,933
1,118
38,051
46,797
36,648
(922)
35,726
N/A
The Group’s interests in associates are accounted for under the equity method. Details of the Group’s
principal associates are as follows:
Name of company
Attributable
equity interest
Principal activities
China Tower Corporation Limited
(Note (i))
20.5%
(2017: 27.9%)
Construction, maintenance and operation of
telecommunications towers as well as
Shanghai Information Investment
24.0%
Incorporation (Note (ii))
ancillary facilities
Provision of information technology
consultancy services
Notes:
(i)
China Tower Corporation Limited (“China Tower”) is established and operated in the PRC, and listed on the Main Board of The
Stock Exchange of Hong Kong Limited on 8 August 2018. Income from investments in associates for the year ended 31 December
2018 includes: (a) a one-off gain amounting to RMB1,170 million arising from the dilution of the Company’s share in China Tower
in respect of China Tower’s listing, including those released from the deferred gain from the Tower Assets Disposal; and (b) share
of profits of associates.
(ii)
Shanghai Information Investment Incorporation (“Shanghai Info-investment”) is established and operated in the PRC and is not
traded on any stock exchange.
212
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
9. Interests in Associates (continued)
Summarised financial information of the Group’s principal associates and reconciled to the carrying
amounts of interests in associates in the Group’s consolidated financial statements are disclosed below:
China Tower
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
Reconcile to the Group’s interests in the associate:
Net assets of the associate
Non-controlling interests of the associate
The Group’s effective interest in the associate
The Group’s share of net assets of the associate
Adjustment for the remaining balance of the deferred gain
31 December
2018
RMB millions
2017
RMB millions
31,799
283,565
114,759
20,103
30,517
292,126
150,438
44,710
2018
RMB millions
2017
RMB millions
71,819
2,650
–
2,650
68,665
1,943
–
1,943
–
–
31 December
2018
RMB millions
2017
RMB millions
180,502
–
20.5%
37,003
127,495
–
27.9%
35,571
from the Tower Assets Disposal
(1,013)
(1,580)
Carrying amount of the interest in the associate in the
consolidated financial statements of the Group
35,990
33,991
China Telecom Corporation Limited Annual Report 2018 213
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
9. Interests in Associates (continued)
Shanghai Info-investment
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
Reconcile to the Group’s interests in the associate:
Net assets of the associate
Non-controlling interests of the associate
The Group’s effective interest in the associate
The Group’s share of net assets of the associate
Carrying amount of the interest in the associate in the
consolidated financial statements of the Group
31 December
2018
RMB millions
2017
RMB millions
7,181
8,592
6,615
1,985
7,146
8,049
5,835
2,673
2018
RMB millions
2017
RMB millions
4,337
586
(29)
557
9
4,313
563
22
585
9
31 December
2018
RMB millions
2017
RMB millions
7,173
(2,180)
24.0%
1,198
6,687
(2,004)
24.0%
1,124
1,198
1,124
214
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
9. Interests in Associates (continued)
Aggregate financial information of the Group’s associates that are not individually material is disclosed
below:
The Group’s share of profit of these associates
The Group’s share of other comprehensive income of these associates
The Group’s share of total comprehensive income of these associates
14
–
14
36
2
38
2018
RMB millions
2017
RMB millions
Aggregate carrying amount of interests in these associates
in the consolidated financial statements of the Group
863
611
10. Investments
31 December
2018
RMB millions
2017
RMB millions
Available-for-sale listed equity securities
Other unlisted equity investments
31 December
2017
RMB millions
969
185
1,154
Other unlisted equity investments mainly represent the Group’s various interests in private enterprises
which are mainly engaged in the provision of telecommunications infrastructures construction services,
information technology services and Internet contents.
China Telecom Corporation Limited Annual Report 2018 215
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
11. Equity Instruments at Fair Value through Other Comprehensive Income
Equity securities listed in the mainland China
Unlisted equity securities
Notes
(i)
(ii)
31 December
2018
RMB millions
638
214
852
Notes:
(i)
The above listed equity instruments represent ordinary shares of entities listed in the mainland China. These investments are not
held for trading, instead, they are held for long-term strategic purposes. The directors of the Company have elected to designate
these investments in equity instruments as at FVTOCI as they believe that recognising short-term fluctuations in these investments’
fair value in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes
and realising their performance potential in the long run.
(ii)
The above unlisted equity securities represent the Group’s equity interests in various private entities established in the PRC. The
directors of the Company have elected to designate these investments in equity instruments as at FVTOCI as they believe that the
Group will hold these investments for long-term strategic purposes.
12. Deferred Tax Assets and Liabilities
The components of deferred tax assets and deferred tax liabilities recognised in the consolidated statement
of financial position and the movements are as follows:
Assets
Liabilities
Net Balance
31 December
2018
RMB millions
31 December
2017
31 December
2018
RMB millions RMB millions
31 December
2017
31 December
2018
RMB millions RMB millions
31 December
2017
RMB millions
Provisions and impairment losses,
primarily for credit losses
Property, plant and equipment
and others
Deferred revenues and
installation costs
Available-for-sale equity securities
Equity instruments at fair value
through other comprehensive
income
Deferred tax assets/(liabilities)
1,925
4,580
39
–
–
6,544
1,626
–
–
1,925
1,626
3,782
(13,022)
(7,789)
(8,442)
(4,007)
71
–
–
(29)
–
(87)
(52)
(169)
–
5,479
(13,138)
(8,010)
10
–
19
(169)
(87)
(6,594)
–
(2,531)
216
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
12. Deferred Tax Assets and Liabilities (continued)
Balance at
31 December
2017
RMB millions
Changes in
accounting
policies
RMB millions
Recognised in
consolidated
statement of
comprehensive
income
RMB millions
Balance at
31 December
2018
RMB millions
Provisions and impairment losses,
primarily for credit losses
Property, plant and equipment and others
Deferred revenues and installation costs
Available-for-sale equity securities
Equity instruments at fair value through
other comprehensive income
Net deferred tax liabilities
1,626
(4,007)
19
(169)
–
(2,531)
203
(1,066)
–
169
(169)
(863)
96
(3,369)
(9)
–
82
(3,200)
1,925
(8,442)
10
–
(87)
(6,594)
Provisions and impairment losses,
primarily for doubtful debts
Property, plant and equipment and others
Deferred revenues and installation costs
Available-for-sale equity securities
Net deferred tax assets/(liabilities)
Recognised in
consolidated
statement of
comprehensive
income
RMB millions
Balance at
1 January
2017
RMB millions
Balance at
31 December
2017
RMB millions
1,531
(1,006)
35
(269)
291
95
(3,001)
(16)
100
(2,822)
1,626
(4,007)
19
(169)
(2,531)
China Telecom Corporation Limited Annual Report 2018 217
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
13. Other Assets
Contract costs
Installation fees
Other long-term prepaid expenses
Note
(i)
31 December
2018
RMB millions
2017
RMB millions
1,287
124
3,429
4,840
–
228
3,121
3,349
Note:
(i)
Contract costs capitalised as at 31 December 2018 mainly relate to the incremental sales commissions paid to third party agents
whose selling activities resulted in subscribers entering into telecommunications service agreements with the Group. The amount
of capitalised costs recognised in profit or loss during the year was RMB1,744 million. There was no impairment in relation to the
opening balance of capitalised costs or the costs capitalised during the year.
14. Inventories
Materials and supplies
Goods for resale
31 December
2018
RMB millions
2017
RMB millions
1,012
3,820
4,832
1,071
3,052
4,123
218
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
15. Accounts Receivable, Net
Accounts receivable, net, are analysed as follows:
Third parties
China Telecom Group
China Tower
Other telecommunications operators in the PRC
Less: Allowance for credit losses
Note
(i)
31 December
2018
RMB millions
2017
RMB millions
23,308
1,327
10
510
25,155
(4,680)
20,475
23,762
1,502
5
669
25,938
(3,842)
22,096
Note:
(i)
China Telecommunications Corporation together with its subsidiaries other than the Group are referred to as “China Telecom
Group”.
As at 31 December 2018 and 1 January 2018, the gross carrying amount of accounts receivable from
contracts with customers amounted to RMB25,155 million and RMB25,342 million, respectively.
Ageing analysis of accounts receivable from telephone and Internet subscribers based on the billing dates
is as follows:
Current, within 1 month
1 to 3 months
4 to 12 months
More than 12 months
Less: Allowance for credit losses
31 December
2018
RMB millions
2017
RMB millions
8,376
2,117
1,932
943
13,368
(2,898)
10,470
9,323
2,607
1,780
878
14,588
(2,603)
11,985
China Telecom Corporation Limited Annual Report 2018 219
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
15. Accounts Receivable, Net (continued)
Ageing analysis of accounts receivable from other telecommunications operators and enterprise customers
based on dates of rendering of services is as follows:
Current, within 1 month
1 to 3 months
4 to 12 months
More than 12 months
Less: Allowance for credit losses
31 December
2018
RMB millions
2017
RMB millions
3,318
2,300
3,994
2,175
11,787
(1,782)
10,005
4,421
1,973
2,644
2,312
11,350
(1,239)
10,111
As at 31 December 2018, included in the net balance of the Group’s accounts receivable are debtors with
aggregate carrying amount of RMB2,503 million which are past due as at the reporting date.
Ageing analysis of accounts receivable that are not impaired at 31 December 2017 is as follows:
Not past due
Less than 1 month past due
1 to 3 months past due
Amounts past due
The following table summarises the changes in allowance for doubtful debts in 2017:
At beginning of year
Impairment losses for doubtful debts
Accounts receivable written off
At end of year
31 December
2017
RMB millions
19,623
1,518
955
2,473
22,096
2017
RMB millions
3,402
1,962
(1,522)
3,842
Details of impairment assessment of accounts receivable for the year ended 31 December 2018 are set out
in note 39.
220
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
16. Contract Assets
Third parties
China Telecom Group
31 December
2018
1 January
2018*
RMB millions RMB millions
454
24
478
480
176
656
*
The amounts in this column are after the adjustments from the application of IFRS 9 and 15.
The Group’s contracts for information and application services include payment schedules which require
stage payments over the service period once certain specified milestones are reached. The Group classifies
these contract assets as current because the Group expects to realise them in its normal operating cycle.
17. Prepayments and Other Current Assets
31 December
2018
RMB millions
2017
RMB millions
Note
Amounts due from China Telecom Group
Amounts due from China Tower
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
(i)
1,035
293
333
2,752
3,628
8,618
6,960
774
2,152
369
2,542
3,486
7,186
5,619
23,619
22,128
Note:
(i)
Other receivables as at 31 December 2018 includes the unpaid remaining consideration of the contribution from non-controlling
interest of a subsidiary of the Group amounting to RMB90 million, which was received in January 2019.
China Telecom Corporation Limited Annual Report 2018 221
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
18. Cash and Cash Equivalents
Cash at bank and in hand
Time deposits with original maturity within three months
19. Short-Term and Long-Term Debt
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
31 December
2018
RMB millions
2017
RMB millions
14,937
1,729
16,666
17,763
1,647
19,410
31 December
2018
RMB millions
2017
RMB millions
12,881
27,992
80
8,584
49,537
16,565
18,745
150
19,098
54,558
The weighted average interest rate of the Group’s total short-term debt as at 31 December 2018 was 3.2%
(31 December 2017: 4.0%) per annum. As at 31 December 2018, the Group’s loans from banks and other
loans bear interest at rates ranging from 3.5% to 4.6% (31 December 2017: 3.5% to 7.3%) per annum,
and are repayable within one year; super short-term commercial papers bear interest at rates ranging from
2.1% to 3.3% (31 December 2017: 4.1% to 4.2%) per annum, and are repayable by 26 July 2019; the
loans from China Telecom Group bear interest at rate of 3.5% (31 December 2017: 3.5%) per annum and
are repayable within one year.
222
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
19. Short-Term and Long-Term Debt (continued)
Long-term debt comprises:
Interest rates and final maturity
31 December
2018
RMB millions
2017
RMB millions
Bank loans — unsecured
Renminbi denominated (Note (i))
Interest rates ranging from 1.08%
8,455
9,148
to 7.04% per annum with
maturities through 2036
US Dollars denominated
Interest rates ranging from 1.00%
336
370
to 8.30% per annum with
maturities through 2048
Euro denominated
Interest rate of 2.30% per annum
with maturities through 2032
Other loans — unsecured
Renminbi denominated
Loans from China Telecom
Group — unsecured
Renminbi denominated (Note (ii))
Total long-term debt
Less: current portion
Non-current portion
199
223
8,990
9,741
1
1
37,000
45,991
(1,139)
44,852
40,000
49,742
(1,146)
48,596
Notes:
(i)
The Group obtained long-term RMB denominated government loans with below-market interest rates ranging from 1.08% to 1.20%
per annum through banks (the “Low-interest Loans”). The Group recognised the Low-interest Loans at their fair value on initial
recognition, and accreted the discount to profit or loss using the effective interest rate method. The difference between the fair
value and face value of the Low-interest Loans was recognised as government grants in deferred revenue (Note 23).
(ii)
The Group obtained long-term RMB denominated loans with the interest rate of 3.8% per annum from China Telecommunications
Corporation on 25 December 2017, which are repayable within 3 to 5 years. The Group partially repaid these loans amounting to
RMB3,000 million in 2018.
China Telecom Corporation Limited Annual Report 2018 223
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
19. Short-Term and Long-Term Debt (continued)
The aggregate maturities of the Group’s long-term debt subsequent to 31 December 2018 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
31 December
2018
RMB millions
2017
RMB millions
1,139
18,091
1,029
20,992
923
3,817
45,991
1,146
1,088
21,044
983
20,944
4,537
49,742
The Group’s short-term and long-term debt do not contain any financial covenants. As at 31 December
2018, the Group had unutilised committed credit facilities amounting to RMB150,693 million (31 December
2017: RMB154,793 million).
20. Accounts Payable
Accounts payable are analysed as follows:
Third parties
China Telecom Group
China Tower
Other telecommunications operators in the PRC
31 December
2018
RMB millions
2017
RMB millions
83,418
20,983
2,850
636
93,324
22,682
2,611
704
107,887
119,321
Amounts due to China Telecom Group and China Tower are payable in accordance with contractual terms
which are similar to those terms offered by third parties.
224
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
20. Accounts Payable (continued)
Ageing analysis of accounts payable based on the due dates 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
21. Accrued Expenses and Other Payables
31 December
2018
RMB millions
2017
RMB millions
20,619
14,568
36,067
36,633
27,502
17,257
26,603
47,959
107,887
119,321
31 December
Notes
2018
RMB millions
2017
RMB millions
Amounts due to China Telecom Group
Amounts due to China Tower
Amounts due to other telecommunications operators in the PRC
Accrued expenses
Value-added tax payable
Customer deposits and receipts in advance
(i)
(ii)
2,171
1,246
46
33,811
484
5,739
43,497
1,838
1,374
59
24,864
645
69,915
98,695
Notes:
(i)
(ii)
Amounts due to China Telecom Group as at 31 December 2017 includes the consideration of the Eighth Acquisition amounting to
RMB87 million, which has been fully settled by 30 June 2018.
Accrued expenses as at 31 December 2017 includes the unpaid portion of consideration of the acquisition of non-controlling
interest of a subsidiary of the Group amounting to RMB119 million, which has been fully settled on 23 January 2018.
China Telecom Corporation Limited Annual Report 2018 225
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
22. Contract Liabilities
Third parties
China Telecom Group
31 December
2018
1 January
2018*
RMB millions RMB millions
55,638
145
55,783
62,001
174
62,175
*
The amounts in this column are after the adjustments from the application of IFRS 15.
Majority of contract liabilities as at 1 January 2018 was recognised as operating revenues for the year
ended 31 December 2018.
23. Deferred Revenues
Deferred revenues as at 31 December 2017 mainly represent the unearned portion of installation fees for
wireline services received from customers, the unused portion of calling cards, and the unamortised portion
of government grants (Note 19). On 1 January 2018, upon application of IFRS 15, the unused portion of
calling cards was reclassified into contract liabilities.
Balance at end of last year
Change in accounting policy (Note 2)
Balance at beginning of the year, as restated
Additions for the year:
Calling cards
Reductions for the year:
Amortisation of installation fees
Usage of calling cards
Amortisation of government grants
Balance at end of year
Representing:
Current portion
Non-current portion
2018
RMB millions
2017
RMB millions
3,061
(787)
2,274
–
(138)
–
(307)
1,829
375
1,454
1,829
3,558
–
3,558
390
(208)
(384)
(295)
3,061
1,233
1,828
3,061
226
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
24. 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
31 December
2018
RMB millions
2017
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.
25. Reserves
The Group
Capital
reserve
RMB
millions
(Note (i))
Share
premium
RMB
millions
Surplus
reserves
RMB
millions
(Note (iii))
Other
reserves
RMB
millions
(Note (ii))
Exchange
reserves
RMB
millions
Retained
earnings
RMB
millions
Total
RMB
millions
17,160
10,746
72,611
711
(622)
133,839
234,445
–
(80)
46
–
–
–
–
–
–
–
–
–
–
–
–
–
1,686
–
(293)
(259)
18,617
18,065
–
–
–
–
(4)
–
–
–
–
–
(7)
(87)
–
(7,530)
(1,686)
–
46
(7,530)
–
(4)
Balance as at 1 January 2017
Total comprehensive income
for the year
Acquisition of the Eighth
Acquired Group (Note 1)
Acquisition of non-controlling
interests
Dividends (Note 36)
Appropriations (Note (iii))
Others
Balance as at 31 December 2017
17,126
10,746
74,297
414
(881)
143,233
244,935
Changes in accounting policies
(Note 2)
–
–
302
–
–
2,673
2,975
Balance as at 1 January 2018,
as restated
Total comprehensive income
for the year
Disposal of investments in
equity instruments at
fair value through other
comprehensive income
Contribution from
non-controlling interests
Dividends (Note 36)
Appropriations (Note (iii))
17,126
10,746
74,599
414
(881)
145,906
247,910
–
–
680
–
–
–
–
–
–
–
–
–
–
–
1,875
(249)
154
21,210
21,115
(5)
–
–
–
–
–
–
–
5
–
–
(7,568)
(1,875)
680
(7,568)
–
Balance as at 31 December 2018
17,806
10,746
76,474
160
(727)
157,678
262,137
China Telecom Corporation Limited Annual Report 2018 227
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
25. Reserves (continued)
The Company
Balance as at 1 January 2017
Total comprehensive income
for the year
Dividends (Note 36)
Appropriations (Note (iii))
Others
Capital
reserve
RMB
millions
(Note (i))
Share
premium
RMB
millions
Surplus
reserves
RMB
millions
(Note (iii))
Other
reserves
RMB
millions
(Note (ii))
Retained
earnings
RMB
millions
(Note (iv))
Total
RMB
millions
29,148
10,746
72,611
536
112,631
225,672
–
–
–
(4)
–
–
–
–
–
–
1,686
–
(287)
–
–
(4)
16,855
(7,530)
(1,686)
–
16,568
(7,530)
–
(8)
Balance as at 31 December 2017
29,144
10,746
74,297
245
120,270
234,702
Changes in accounting policies
–
–
302
–
2,717
3,019
Balance as at 1 January 2018,
as restated
Total comprehensive income
for the year
Dividends (Note 36)
Appropriations (Note (iii))
29,144
10,746
74,599
245
122,987
237,721
–
–
–
–
–
–
–
–
1,875
(257)
–
–
19,532
(7,568)
(1,875)
19,275
(7,568)
–
Balance as at 31 December 2018
29,144
10,746
76,474
(12)
133,076
249,428
Notes:
(i)
Capital reserve of the Group mainly 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; (b) the difference between the consideration paid by
the Group for the entities acquired, other than the Fifth Acquired Group, from China Telecommunications Corporation, which were
accounted for as equity transactions as disclosed in Note 1, and the historical carrying amount of the net assets of these acquired
entities; and (c) the difference between the consideration paid by the Group for the acquisition of non-controlling interests and the
historical carrying amount of the non-controlling interests acquired.
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 and the Company represent primarily the change in the fair value of investment in equity instruments
and the deferred tax liabilities recognised due to the change in fair value of investment in equity instruments.
228
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
25. Reserves (continued)
Notes: (continued)
(iii)
The surplus 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 IFRSs, 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
2018, the Company transferred RMB1,875 million, being 10% of the year’s net profit determined in accordance with the PRC
Accounting Standards for Business Enterprises, to this reserve. For the years ended 31 December 2017, the net profit of the
Company determined in accordance with the PRC Accounting Standards for Business Enterprises and IFRS are the same. For the
year ended 31 December 2017, the Company transferred RMB1,686 million, being 10% of the year’s net profit, to this reserve. As
at 31 December 2018, the amount of statutory surplus reserve was RMB30,395 million (1 January 2018: RMB28,520 million; 31
December 2017: RMB28,218 million).
The Company did not transfer any discretionary surplus reserve for the years ended 31 December 2018 and 2017. As at 31
December 2018 and 2017, the amount of discretionary surplus reserve was RMB46,079 million.
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 statutory surplus 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’s retained earnings determined in accordance with the PRC Accounting
Standards for Business Enterprises and the amount determined in accordance with IFRSs. As at 31 December 2018, the amount of
retained earnings available for distribution was RMB133,076 million (1 January 2018: RMB122,987 million; 31 December 2017:
RMB120,270 million), being the amount determined in accordance with IFRSs. Final dividend of approximately RMB8,629 million in
respect of the financial year 2018 proposed after the end of the reporting period has not been recognised as a liability in the
consolidated financial statements at the end of the reporting period (Note 36).
China Telecom Corporation Limited Annual Report 2018 229
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
26. Operating Revenues
For the year ended 31 December 2018
Disaggregation of revenues
Type of goods or services
Revenue from contracts with customers
Voice
Internet
Information and application services
Telecommunications network resource and equipment services
Sales of goods and others
Subtotal
Revenue from other sources
Total operating revenues
Timing of revenue recognition
A point in time
Over time
Total operating revenues
Notes:
Notes
2018
RMB millions
(i)
(ii)
(iii)
(iv)
(v)
(vi)
50,811
190,871
83,478
20,211
27,450
372,821
4,303
377,124
24,496
352,628
377,124
(i)
Represent the aggregate amount of voice usage fees, installation fees and interconnections fees charged to customers for the
provision of telephony services.
(ii)
Represent amounts charged to customers for the provision of Internet access services.
(iii)
Represent primarily the aggregate amount of fees charged to customers for the provision of Internet data centre service, system
integration services, e-Surfing HD service, caller ID service and short messaging service and etc.
(iv)
Represent amounts charged to other domestic telecommunications operators and enterprise customers for the provision of
telecommunications network resource and equipment services.
(v)
Represent primarily revenues from sales, and repair and maintenance of telecommunications equipment as well as the resale of
mobile services (MVNO).
(vi)
Represent primarily revenue from property rental and other revenues.
As at 31 December 2018, the aggregated amount of the transaction price allocated to the remaining
performance obligations under the Group’s existing contracts represents revenue expected to be recognised
in the future when service is provided over the contract terms over the next 1 year to 3 years.
230
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
26. Operating Revenues (continued)
For the year ended 31 December 2017
The components of the Group’s operating revenues are as follows:
Voice
Internet
Information and application services
Telecommunications network resource and equipment services
Others
Total operating revenues
27. Network Operations and Support Expenses
Operating and maintenance
Utility
Property rental and management fee
Others
2017
RMB millions
61,678
172,554
73,044
19,125
39,828
366,229
2018
RMB millions
2017
RMB millions
Note
(i)
64,056
13,477
29,434
9,095
55,360
12,522
26,926
9,161
116,062
103,969
Note:
(i)
Property rental and management fee includes the fee in relation to the lease of telecommunications towers and related assets
(hereinafter referred to as the “tower assets lease and related fee”).
28. Personnel Expenses
Personnel expenses are attributable to the following functions:
Network operations and support
Selling, general and administrative
2018
RMB millions
2017
RMB millions
40,388
19,348
59,736
38,574
17,469
56,043
China Telecom Corporation Limited Annual Report 2018 231
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
29. Other Operating Expenses
Interconnection charges
Cost of goods sold
Donations
Others
Notes:
Notes
2018
RMB millions
2017
RMB millions
(i)
(ii)
(iii)
12,878
23,185
20
1,614
37,697
12,223
31,712
23
1,654
45,612
(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 tax and surcharges other than value-added tax and income tax.
30. Total Operating Expenses
Total operating expenses for the year ended 31 December 2018 were RMB348,410 million (2017:
RMB339,009 million) which include auditor’s remuneration in relation to audit and non-audit services
(excluding value-added tax) of RMB72 million and RMB3 million respectively (2017: RMB75 million and
RMB2 million).
31. Net Finance Costs
Interest expense incurred
Less: Interest expense capitalised*
Net interest expense
Interest income
Foreign exchange losses
Foreign exchange gains
2018
RMB millions
2017
RMB millions
3,278
(185)
3,093
(306)
423
(502)
2,708
3,913
(327)
3,586
(429)
664
(530)
3,291
* Interest expense was capitalised in construction in progress
at the following rates per annum
3.8%–4.4%
3.9%–4.9%
232
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
32. 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
2018
RMB millions
2017
RMB millions
3,408
120
3,282
6,810
3,147
123
2,922
6,192
A reconciliation of the expected tax expense with the actual tax expense is as follows:
Notes
2018
RMB millions
2017
RMB millions
Profit before taxation
Expected income tax expense at statutory tax rate of 25%
Differential tax rate on PRC subsidiaries’ and
branches’ income
Differential tax rate on other subsidiaries’ income
Non-deductible expenses
Non-taxable income
Others
(i)
(i)
(ii)
(iii)
(iv)
(v)
28,148
7,037
24,953
6,238
(291)
(58)
537
(319)
(96)
(108)
(82)
380
(112)
(124)
Actual income tax expense
6,810
6,192
Notes:
(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 8% 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)
Amounts primarily represent settlement of tax filing differences of prior year annual tax return and other tax benefits.
China Telecom Corporation Limited Annual Report 2018 233
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
33. Directors’ and Supervisors’ Remuneration
The following table sets out the remuneration of the Company’s directors and supervisors:
2018
Executive directors
Yang Jie1
Liu Aili2
Ke Ruiwen
Sun Kangmin3
Gao Tongqing
Chen Zhongyue
Zhu Min4
Non-executive director
Chen Shengguang
Independent non-executive directors9
Tse Hau Yin, Aloysius
Cha May Lung, Laura5
Xu Erming
Wang Hsuehming
Yeung Chi Wai, Jason6
Supervisors
Sui Yixun
Zhang Jianbin
Yang Jianqing
Hu Jing7
Xu Shiguang8
Ye Zhong
Directors’/
supervisors’
fees
RMB
thousands
Salaries,
allowances
and benefits
in kind
RMB
thousands
Discretionary
bonuses10
RMB
thousands
Retirement
scheme
contributions
RMB
thousands
Share-based
payments
RMB
thousands
Total
RMB
thousands
–
–
–
–
–
–
–
–
471
108
250
257
44
–
–
–
–
–
–
207
121
197
–
192
192
37
–
–
–
–
–
–
216
209
268
15
18
–
536
178
497
–
489
489
53
–
–
–
–
–
–
485
485
494
83
40
–
1,130
1,672
3,829
89
52
85
–
84
82
14
–
–
–
–
–
–
84
84
86
12
13
–
685
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
832
351
779
–
765
763
104
–
471
108
250
257
44
785
778
848
110
71
–
7,316
1
2
3
4
5
6
7
8
9
10
11
Mr Yang Jie resigned as an executive director of the Company on 4 March 2019.
Mr Liu Aili resigned as an executive director of the Company on 19 July 2018.
Mr Sun Kangmin retired as an executive director of the Company on 29 January 2018.
Madam Zhu Min was appointed as an executive director of the Company on 26 October 2018.
Madam Cha May Lung, Laura resigned as an independent non-executive director of the Company on 28 May 2018.
Mr Yeung Chi Wai, Jason was appointed as an independent non-executive director of the Company on 26 October 2018.
Mr Hu Jing resigned as a supervisor of the Company on 27 February 2018.
Mr Xu Shiguang was appointed as a supervisor of the Company on 26 October 2018.
The independent non-executive directors’ remuneration were for their services as directors of the Company.
The discretionary bonuses of the executive directors and supervisors were determined based on the Group’s performance for the
year. In addition, according to the respective provision of the State-owned Assets Supervision and Administration Commission of
the State Council, certain directors were also entitled to deferred bonuses in relation to 2013 and 2015. The deferred bonuses paid
to Mr Yang Jie, Mr Ke Ruiwen, Mr Gao Tongqing and Mr Chen Zhongyue in the current year were RMB189 thousand, RMB167
thousand, RMB167 thousand and RMB167 thousand, respectively.
The remuneration of all directors and supervisors were calculated based on their respective actual terms of office within this year.
None of the directors or supervisors received any inducements for joining the Company or compensation for loss of office, or
waived or agreed to waive any emoluments during this year.
234
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
33. Directors’ and Supervisors’ Remuneration (continued)
2017
Executive directors
Yang Jie
Liu Aili1
Yang Xiaowei2
Ke Ruiwen
Sun Kangmin
Gao Tongqing3
Chen Zhongyue4
Non-executive director
Chen Shengguang5
Independent non-executive directors8
Tse Hau Yin, Aloysius
Cha May Lung, Laura
Xu Erming
Wang Hsuehming
Supervisors
Sui Yixun
Zhang Jianbin
Yang Jianqing6
Tang Qi7
Hu Jing
Ye Zhong
Directors’/
supervisors’
fees
RMB
thousands
Salaries,
allowances
and benefits
in kind
RMB
thousands
Discretionary
bonuses9
RMB
thousands
Retirement
scheme
contributions
RMB
thousands
Share-based
payments
RMB
thousands
Total
RMB
thousands
–
–
–
–
–
–
–
–
459
243
230
243
–
–
–
–
–
–
207
16
110
184
184
99
99
–
–
–
–
–
196
189
150
83
113
–
558
25
420
503
503
127
127
–
–
–
–
–
483
495
202
98
346
–
1,175
1,630
3,887
89
8
39
85
85
51
45
–
–
–
–
–
78
78
47
41
69
–
715
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
854
49
569
772
772
277
271
–
459
243
230
243
757
762
399
222
528
–
7,407
1
2
3
4
5
6
7
8
9
Mr Liu Aili was appointed as an executive director of the Company on 28 November 2017.
Mr Yang Xiaowei resigned as an executive director of the Company on 7 June 2017.
Mr Gao Tongqing was appointed as an executive director of the Company on 23 May 2017.
Mr Chen Zhongyue was appointed as an executive director of the Company on 23 May 2017.
Mr Chen Shengguang was appointed as a non-executive director of the Company on 23 May 2017.
Mr Yang Jianqing was appointed as a supervisor of the Company on 23 May 2017.
Mr Tang Qi retired as a supervisor of the Company on 23 May 2017.
The independent non-executive directors’ remuneration were for their services as directors of the Company.
The discretionary bonuses of the executive directors and supervisors were determined based on the Group’s performance for the
year.
10
The remuneration of all directors and supervisors were calculated based on their respective actual terms of office within this year.
None of the directors or supervisors received any inducements for joining the Company or compensation for loss of office, or
waived or agreed to waive any emoluments during this year.
China Telecom Corporation Limited Annual Report 2018 235
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
34. 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 years ended 31 December 2018 and
2017 were directors of the Company.
The aggregate of the emoluments in respect of the five (2017: five) individuals (non-directors) are as
follows:
Salaries, allowances and benefits in kind
Discretionary bonuses
Retirement scheme contributions
2018
RMB thousands
2017
RMB thousands
5,850
2,382
45
8,277
5,583
2,767
78
8,428
The emoluments of the five (2017: five) individuals (non-directors) with the highest emoluments are
within the following bands:
RMB0–RMB1,000,000
RMB1,000,001–RMB1,500,000
RMB1,500,001–RMB2,000,000
RMB2,000,001–RMB2,500,000
2018
Number of
individuals
2017
Number of
individuals
–
2
2
1
–
1
3
1
None of these employees received any inducements or compensation for loss of office, or waived any
emoluments during the periods presented.
236
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
34. 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
35. Profit Attributable to Equity Holders of the Company
2018
Number of
individuals
2017
Number of
individuals
20
1
19
–
For the year ended 31 December 2018, the consolidated profit attributable to equity holders of the
Company includes a profit of RMB19,532 million which has been dealt with in the stand-alone financial
statements of the Company.
For the year ended 31 December 2017, the consolidated profit attributable to equity holders of the
Company includes a profit of RMB16,855 million which has been dealt with in the stand-alone financial
statements of the Company.
36. Dividends
Pursuant to a resolution passed at the Board of Directors’ meeting on 19 March 2019, a final dividend of
equivalent to HK$0.125 per share totaling approximately RMB8,629 million for the year ended 31
December 2018 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 2018.
Pursuant to the shareholders’ approval at the Annual General Meeting held on 28 May 2018, a final
dividend of RMB0.093512 (equivalent to HK$0.115) per share totaling RMB7,568 million in respect of the
year ended 31 December 2017 was declared, and paid on 27 July 2018.
Pursuant to the shareholders’ approval at the Annual General Meeting held on 23 May 2017, a final
dividend of RMB0.093043 (equivalent to HK$0.105) per share totaling RMB7,530 million in respect of the
year ended 31 December 2016 was declared and paid on 21 July 2017.
37. Basic Earnings per Share
The calculation of basic earnings per share for the years ended 31 December 2018 and 2017 is based on
the profit attributable to equity holders of the Company of RMB21,210 million and RMB18,617 million
respectively, divided by 80,932,368,321 shares.
The amount of diluted earnings per share is not presented as there were no potential ordinary shares in
existence for the periods presented.
China Telecom Corporation Limited Annual Report 2018 237
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
38. Commitments and Contingencies
Operating lease commitments
The Group leases business premises and equipment through non-cancellable operating leases. 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 2018 and 2017, the Group’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
31 December
2018
RMB millions
2017
RMB millions
15,658
14,466
13,440
12,682
3,461
6,098
65,805
20,680
19,563
16,730
6,631
3,376
2,786
69,766
Operating lease commitment as set out above includes the lease commitment to China Tower for the tower
assets lease fee. The amount was calculated based on the current lease condition and did not take into
consideration the contingent adjustment to the lease charges resulting from the change in sharing of
certain towers amongst the telecommunications operators.
Total rental expense in respect of operating leases charged to profit or loss for the year ended 31
December 2018 was RMB27,810 million (2017: RMB25,493 million).
Capital commitments
As at 31 December 2018 and 2017, the Group had capital commitments as follows:
Contracted for but not provided
Property
Telecommunications network plant and equipment
31 December
2018
RMB millions
2017
RMB millions
1,103
14,200
15,303
346
10,900
11,246
238
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
38. Commitments and Contingencies (continued)
Contingent liabilities
(a)
The Group was advised by their PRC lawyers that no material contingent liabilities were assumed by
the Group.
(b) As at 31 December 2018 and 2017, 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.
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.
39. Financial Instruments
Financial assets of the Group include cash and cash equivalents, bank deposits, equity instruments,
accounts receivable and financial assets included in prepayments and other current assets. Financial
liabilities of the Group include short-term and long-term debt, accounts payable and financial liabilities
included in accrued expenses and other payables. The Group does 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’s financial instruments (other than long-term debt and equity instruments
measured at fair value) approximate their carrying amounts due to the short-term maturity of these
instruments.
China Telecom Corporation Limited Annual Report 2018 239
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
39. Financial Instruments (continued)
(a) Fair Value Measurements (continued)
The listed equity securities investment included in Group’s equity instruments at fair value through
other comprehensive income (2017: available-for-sale listed equity securities) are categorised as level
1 financial instruments. As at 31 December 2018, the fair value of the Group’s listed equity securities
investment are RMB638 million (31 December 2017: RMB969 million) based on quoted market price
on PRC stock exchanges.
The fair value of long-term debt is estimated by discounting future cash flows using current market
interest rates offered to the Group for debt with substantially the same characteristics and maturities.
The fair value measurement of long-term debt is categorised as level 2. The interest rates used by the
Group in estimating the fair values of long-term debt, having considered the foreign currency
denomination of the debt, ranged from 1.0% to 4.9% (31 December 2017: 1.0% to 4.9%). As at 31
December 2018 and 2017, the carrying amounts and fair value of the Group’s long-term debt were as
follows:
31 December 2018
31 December 2017
Carrying
amount
Fair
value
RMB millions RMB millions
Carrying
amount
RMB millions
Fair
value
RMB millions
Long-term debt
45,991
44,968
49,742
48,256
During the year, there were no transfers among instruments in level 1, level 2 or level 3.
(b) Risks
The Group’s financial instruments are exposed to three main types of risks, namely, credit risk,
liquidity risk and market risk (which mainly comprises of interest rate risk and foreign currency
exchange rate risk). The Group’s overall risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential adverse effects on the Group’s financial
performance. Risk management is carried out under policies approved by the Board of Directors. The
Board provides principles for overall risk management, as well as policies covering specific areas, such
as liquidity risk, credit risk, and market risk. The Board regularly reviews these policies and authorises
changes if necessary based on operating and market conditions and other relevant risks. The following
summarises the qualitative and quantitative disclosures for each of the three main types of risks:
(i) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations
resulting in a financial loss to the Group. For the Group, this arises mainly from deposits it
maintains at financial institutions and credit it provides to customers for the provision of
telecommunications services.
Cash and cash equivalents and short-term bank deposits
To limit exposure to credit risk relating to deposits, the Group primarily places cash deposits only
with large state-owned financial institutions in the PRC with acceptable credit ratings. The credit
risks on bank balances are limited because the counterparties are banks with high credit ratings.
240
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
39. Financial Instruments (continued)
(b) Risks (continued)
(i) Credit risk (continued)
Accounts receivable and contract assets arising from contracts with customers
For accounts receivable and contract assets, management performs ongoing credit evaluations of
its customers’ financial condition and generally does not require collateral on accounts receivable
and contract assets. These evaluations focus on the customer’s past history of making payments
when due and current ability to pay, and take into account information specific to the customer
as well as pertaining to the economic environment in which the customer operates. In addition,
the Group performs impairment assessment under ECL model upon application of IFRS 9 (2017:
incurred loss model) on trade balances individually or based on provision matrix. Furthermore,
the Group has a diversified base of customers with no single customer contributing more than
10% of revenues for the periods presented.
The Group measures loss allowances for accounts receivable and contract assets at an amount
equal to lifetime ECL, which is calculated using a provision matrix. As different loss patterns
were indicated during the analysis of the Group’s historical credit loss experience between
telephone and Internet subscribers and enterprise customers, the following tables provide
information about the Group’s exposure to credit risk and ECL for accounts receivable from
telephone and Internet subscribers and enterprise customers and contract assets, respectively, as
at 31 December 2018:
Accounts receivable from telephone and Internet subscribers:
Current, within 1 month
1 to 3 months
4 to 6 months
7 to 12 months
Over 12 months
31 December 2018
Expected Gross carrying
amount
loss rate
% RMB millions
Loss
allowance
RMB millions
2%
20%
60%
80%
100%
8,376
2,117
839
1,093
943
158
420
502
875
943
13,368
2,898
China Telecom Corporation Limited Annual Report 2018 241
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
39. Financial Instruments (continued)
(b) Risks (continued)
(i) Credit risk (continued)
Accounts receivable and contract assets arising from contracts with customers (continued)
Accounts receivable from enterprise customers and contract assets:
1–6 months
7–12 months
1–2 years
2–3 years
Over 3 years
31 December 2018
Expected Gross carrying
amount
loss rate
% RMB millions
Loss
allowance
RMB millions
2%
20%
60%
90%
100%
4,478
800
479
225
298
6,280
109
157
290
202
298
1,056
As at 31 December 2018, the loss allowance for accounts receivable and contract assets was
RMB4,680 million and RMB8 million, respectively. Loss allowance of RMB734 million as at 31
December 2018, which was not calculated collectively in the above tables, was made individually
on debtors with significant balances and credit impaired debtors.
Expected loss rates are based on actual loss experience over the past 1 to 3 years. These rates
are adjusted to reflect differences between economic conditions during the period over which
the historical data has been collected, current conditions and the Group’s view of economic
conditions over the expected lives of the receivables.
Movement in the loss allowance account in respect of accounts receivable during the year is as
follows:
Balance at 31 December 2017 under IAS 39
Impact on initial application of IFRS 9 (note 2.2)
Balance at 1 January 2018
Impairment losses for ECL
Amounts written off
Balance at 31 December 2018
RMB millions
3,842
919
4,761
2,008
(2,089)
4,680
242
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
39. Financial Instruments (continued)
(b) Risks (continued)
(ii) Liquidity risk
Liquidity risk refers to the risk that funds will not be available to meet liabilities as they fall due,
and results from timing and amount mismatches of cash inflow and outflow. The Group
manages liquidity risk by maintaining sufficient cash balances and adequate amount of
committed banking facilities to meet its funding needs, including working capital, principal and
interest payments on debts, dividend payments, capital expenditures and new investments for a
set minimum period of between 3 to 6 months.
The following table sets out the remaining contractual maturities at the end of the reporting
period of the Group’s financial liabilities, which are based on contractual undiscounted cash
flows (including interest payments computed using contractual rates or, if floating, based on
prevailing rates at the end of the reporting period) and the earliest date the Group would be
required to repay:
31 December 2018
Total
contractual
undiscounted
cash flow
RMB millions
Within
1 year or
on demand
RMB millions
More than
1 year but
less than
2 years
RMB millions
More than
2 years but
less than
5 years
RMB millions
Carrying
amount
RMB millions
More than
5 years
RMB millions
Short-term debt
Long-term debt
Accounts payable
Accrued expenses and
other payables
Finance lease obligations
49,537
45,991
107,887
43,497
216
51,091
52,625
107,887
43,497
241
51,091
2,602
107,887
43,497
112
–
19,604
–
–
40
–
25,061
–
–
82
–
5,358
–
–
7
247,128
255,341
205,189
19,644
25,143
5,365
China Telecom Corporation Limited Annual Report 2018 243
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
39. Financial Instruments (continued)
(b) Risks (continued)
(ii) Liquidity risk (continued)
31 December 2017
Total
contractual
undiscounted
cash flow
RMB millions
Within
1 year or
on demand
RMB millions
More than
1 year but
less than
2 years
RMB millions
More than
2 years but
less than
5 years
RMB millions
More than
5 years
RMB millions
55,682
58,543
119,321
98,695
85
55,682
2,725
119,321
98,695
56
–
2,716
–
–
14
–
46,612
–
–
13
–
6,490
–
–
2
Carrying
amount
RMB millions
54,558
49,742
119,321
98,695
77
322,393
332,326
276,479
2,730
46,625
6,492
Short-term debt
Long-term debt
Accounts payable
Accrued expenses and
other payables
Finance lease obligations
Management believes that the Group’s current cash on hand, expected cash flows from
operations and available credit facilities from banks (Note 19) will be sufficient to meet the
Group’s working capital requirements and repay its borrowings and obligations when they
become due.
244
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
39. Financial Instruments (continued)
(b) Risks (continued)
(iii) Interest rate risk
The Group’s interest rate risk exposure arises primarily from its short-term debt and long-term
debt. Debts carrying interest at variable rates and at fixed rates expose the Group to cash flow
interest rate risk and fair value interest rate risk, respectively. The Group manages its exposure
to interest rate risk by closely monitoring the change in the market interest rate.
The following table sets out the interest rate profile of the Group’s debt at the end of the
reporting period:
31 December 2018
31 December 2017
Fixed rate debt:
Short-term debt
Long-term debt
Variable rate debt:
Short-term debt
Total debt
Fixed rate debt as a
percentage of total debt
Effective
interest
rate %
RMB
millions
Effective
interest
rate %
4.0
3.3
4.1
3.2
3.3
4.2
49,347
45,991
95,338
190
190
95,528
99.8%
RMB
millions
54,042
49,742
103,784
516
516
104,300
99.5%
Management does not expect the increase or decrease in interest rate will materially affect the
Group’s financial position and result of operations because the interest rates of 99.8% (2017:
99.5%) of the Group’s short-term and long-term debt as at 31 December 2018 are fixed as set
out above.
(iv) Foreign currency exchange rate risk
Foreign currency exchange rate risk arises on financial instruments that are denominated in a
currency other than the functional currency in which they are measured. The Group’s foreign
currency risk exposure relates to bank deposits and borrowings denominated primarily in US
dollars, Euros and Hong Kong dollars.
Management does not expect the appreciation or depreciation of the Renminbi against foreign
currencies will materially affect the Group’s financial position and result of operations because
64.0% (2017: 81.6%) of the Group’s cash and cash equivalents and 99.4% (2017: 99.4%) of
the Group’s short-term and long-term debt as at 31 December 2018 are denominated in
Renminbi. Details of bank loans denominated in other currencies are set out in Note 19.
China Telecom Corporation Limited Annual Report 2018 245
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
40. 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 finance lease obligations.
As at 31 December 2018, the Group’s total debt-to-total assets ratio was 14.4% (31 December 2017:
15.8%), which is within the range of management’s expectation.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
246
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
41. Reconciliation of Liabilities Arising from Financing Activities
The table below details changes in the Group’s liabilities arising from financing activities, including both
cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were,
or future cash flows will be, classified in the Group’s consolidated statement of cash flows as cash flows
from financing activities.
Other
payables
in respect
of the
Consideration
payable
in respect
reduction of
Consideration
of the
capital by
payables in
acquisition
Long-term
Finance
non-
respect of
of non-
Short-term
debt and
lease
controlling
the Eighth
controlling
debt
payable
obligations
interests
Acquisition
interests
Dividend
payable
Total
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
RMB millions
(Note 21)
(Note 21)
Balance as at 1 January 2017
Financing cash flows
New finance leases
Interest expenses
Foreign exchange gain
Acquisition of the Eighth
Acquired Group
Acquisition of non-controlling
interests
Distribution to non-controlling
interests
Dividends declared
Others
Balance as at 31 December 2017
Financing cash flows
New finance leases
Interest expenses
Foreign exchange loss
Reduction of capital by
non-controlling interests
Distribution to non-controlling
interests
Dividends declared
40,780
13,778
–
–
–
–
–
–
–
–
54,558
(5,021)
–
–
–
–
–
–
71,646
(22,191)
–
295
(8)
–
–
–
–
–
49,742
(4,073)
–
304
18
–
–
–
102
(84)
55
9
–
–
–
–
–
(5)
77
(73)
200
12
–
–
–
–
Balance as at 31 December 2018
49,537
45,991
216
–
–
–
–
–
–
–
–
–
–
–
(20)
–
–
–
20
–
–
–
–
–
–
–
–
87
–
–
–
–
87
(87)
–
–
–
–
–
–
–
–
(31)
–
–
–
–
150
–
–
–
119
(119)
–
–
–
–
–
–
–
–
(7,619)
112,528
(16,147)
–
–
–
–
–
55
304
(8)
87
150
89
7,530
–
–
89
7,530
(5)
104,583
(7,745)
(17,138)
–
–
–
–
177
7,568
200
316
18
20
177
7,568
–
95,744
Other than net financing cash outflows for the year ended 31 December 2018 totalling RMB17,138 million
as presented above, E-surfing Pay, a subsidiary of the Company, received RMB855 million in the current
year as part of the consideration amounting to RMB945 million in respect of contribution from non-
controlling interests. The remaining balance of RMB90 million as at 31 December 2018 was included in
prepayments and other current assets (Note 17).
China Telecom Corporation Limited Annual Report 2018 247
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
42. 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 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 “Continuing Connected
Transactions” in the Report of Directors.
Notes
2018
RMB millions
2017
RMB millions
Construction and engineering services
Receiving ancillary services
Interconnection revenues
Interconnection charges
Receiving community services
Net transaction amount of centralised services
Property lease income
Property lease expenses
Provision of IT services
Receiving IT services
Purchases of telecommunications equipment and materials
Sales of telecommunications equipment and materials
Internet applications channel services
Interest on amounts due to and loans from
China Telecom Group*
Others*
(i)
(ii)
(iii)
(iii)
(iv)
(v)
(vi)
(vi)
(vii)
(vii)
(viii)
(viii)
(ix)
(x)
(xi)
16,396
16,744
80
204
3,296
519
48
713
531
1,895
3,760
2,760
298
2,099
186
18,672
16,072
48
193
3,028
727
53
654
642
1,812
4,248
3,291
344
2,720
190
*
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 under Rules 14A.76 or 14A.90 of
the Listing Rules.
Notes:
(i)
Represent construction and engineering as well as design and supervisory services provided by China Telecom Group.
(ii)
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.
(iii)
Represent amounts received and receivable from/paid and payable to China Telecom Group for interconnection of local and
domestic long distance calls.
(iv)
Represent amounts paid and payable to China Telecom Group in respect of cultural, educational, health care and other
community services.
248
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
42. Related Party Transactions (continued)
(a) Transactions with China Telecom Group (continued)
Notes: (continued)
(v)
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.
(vi)
Represent amounts of property lease fee received and receivable from/paid and payable to China Telecom Group for mutual
leasing of properties.
(vii)
Represent IT services provided to and received from China Telecom Group.
(viii) 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.
(ix)
(x)
(xi)
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 19).
Represent amounts paid and payable to China Telecom Group primarily for leases of CDMA mobile telecommunications
network (“CDMA network”) facilities located in Xizang Autonomous Region, certain inter-provincial transmission optic fibres
within its service regions and land use rights.
Amounts due from/to China Telecom Group are summarised as follows:
Accounts receivable
Contract assets
Prepayments and other current assets
Total amounts due from China Telecom Group
Accounts payable
Accrued expenses and other payables
Contract liabilities
Short-term debt
Long-term debt
Total amounts due to China Telecom Group
31 December
2018
RMB millions
2017
RMB millions
1,327
24
1,035
2,386
20,983
2,171
145
8,584
37,000
68,883
1,502
–
774
2,276
22,682
1,838
–
19,098
40,000
83,618
Amounts due from/to China Telecom Group, other than short-term debt and long-term debt, bear no
interest, are unsecured and are repayable in accordance with contractual terms which are similar to
those terms offered by third parties. The terms and conditions associated with short-term debt and
long-term debt due to China Telecom Group are set out in Note 19.
As at 31 December 2018 and 2017, no material loss allowance was recognised in respect of amounts
due from China Telecom Group.
China Telecom Corporation Limited Annual Report 2018 249
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
42. Related Party Transactions (continued)
(b) Transactions with China Tower
The principal transactions with China Tower are as follows. These transactions do not constitute
connected transactions under the Listing Rules.
Tower assets lease and related fee
Provision of IT services
Notes
(i)
(ii)
2018
RMB millions
2017
RMB millions
16,063
32
15,389
49
Notes:
(i)
Represent tower assets lease and related fee paid and payable to China Tower. The Company and China Tower entered into
an agreement on 8 July 2016 and a supplemental agreement on 1 February 2018 to confirm the pricing and related
arrangements in relation to the leases of the telecommunications towers and related assets.
(ii)
Represent IT and other ancillary services provided to China Tower.
Amounts due from/to China Tower are summarised as follows:
Accounts receivable
Prepayments and other current assets
Total amounts due from China Tower
Accounts payable
Accrued expenses and other payables
Total amounts due to China Tower
31 December
2018
RMB millions
2017
RMB millions
10
293
303
2,850
1,246
4,096
5
2,152
2,157
2,611
1,374
3,985
Amounts due from/to China Tower bear no interest, are unsecured and are repayable in accordance
with contractual terms which are similar to those terms offered by third parties.
As at 31 December 2018 and 2017, no material loss allowance was recognised in respect of amounts
due from China Tower.
250
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
42. Related Party Transactions (continued)
(c) Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the Group, directly or indirectly, including directors and
supervisors of the Group.
Key management personnel compensation of the Group is summarised as follows:
Short-term employee benefits
Post-employment benefits
The above remuneration is included in personnel expenses.
(d) Contributions to post-employment benefit plans
2018
RMB thousands
2017
RMB thousands
7,942
799
8,741
7,804
816
8,620
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 44.
China Telecom Corporation Limited Annual Report 2018 251
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
42. Related Party Transactions (continued)
(e) 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 42(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 of the Company believe the above information provides appropriate disclosure of related
party transactions.
252
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
43. Information About the Statement of Financial Position of the Company
ASSETS
Non-current assets
Property, plant and equipment, net
Construction in progress
Lease prepayments
Goodwill
Intangible assets
Investments in subsidiaries
Interests in associates
Investments
Equity instruments at fair value through other
comprehensive income
Deferred tax assets
Other assets
Total non-current assets
Current assets
Inventories
Income tax recoverable
Accounts receivable, net
Contract assets
Prepayments and other current assets
Short-term bank deposits
Cash and cash equivalents
Total current assets
Total assets
31 December
2018
RMB millions
2017
RMB millions
Note
8
404,622
65,701
21,554
29,877
12,851
11,377
37,927
–
665
6,087
7,928
403,228
72,157
22,249
29,877
11,220
6,424
35,546
996
–
5,050
3,205
598,589
589,952
1,562
39
18,758
367
16,556
2,526
6,183
45,991
1,508
644
21,219
–
15,996
1,054
8,199
48,620
644,580
638,572
China Telecom Corporation Limited Annual Report 2018 253
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
43. Information About the Statement of Financial Position of the Company (continued)
LIABILITIES AND EQUITY
Current liabilities
Short-term debt
Current portion of long-term debt
Accounts payable
Accrued expenses and other payables
Contract liabilities
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
Finance lease obligations
Deferred revenues
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Equity
Share capital
Reserves
Total equity
Total liabilities and equity
31 December
2018
RMB millions
2017
RMB millions
Note
60,532
1,139
105,124
34,456
52,039
471
101
375
254,237
57,482
1,146
116,035
88,304
–
21
51
1,061
264,100
(208,246)
(215,480)
390,343
374,472
44,852
101
1,454
12,908
668
59,983
48,596
26
1,828
7,781
607
58,838
314,220
322,938
80,932
249,428
330,360
644,580
80,932
234,702
315,634
638,572
25
254
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
44. 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 13%
to 20% of the salaries, bonuses and certain allowances of the employees. A member of the plan is entitled
to a pension equal to a fixed proportion of the salary prevailing at the member’s retirement date. Other
than the above, the Group also participates in supplementary defined contribution retirement plans
managed by independent external parties whereby the Group is required to make contributions to the
retirement plans at fixed rates of the employees’ salaries, bonuses and certain allowances. The Group has
no other material obligation for the payment of pension benefits associated with these plans beyond the
annual contributions described above.
The Group’s contributions for the above plans for the year ended 31 December 2018 were RMB7,256
million (2017: RMB6,884 million).
The amount payable for contributions to the above defined contribution retirement plans as at 31
December 2018 was RMB675 million (31 December 2017: RMB569 million).
45. Share Appreciation Rights
The Group implemented a share appreciation rights plan for members of its management to provide
incentives to these employees. Under this plan, share appreciation rights are granted in units with each
unit representing one H share. No shares will be issued under the share appreciation rights plan. Upon
exercise of the share 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 share 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, where the highest proportion of the earnings from exercise
of the share appreciation rights to the total remuneration at the grant of the share appreciation rights shall
be 40%. The Company recognises compensation expense of the share appreciation rights over the
applicable period.
In November 2018, the Company approved the granting of 2,394 million share appreciation right units to
eligible employees. Under the terms of this grant, all share appreciation rights had a contractual life of five
years from date of grant and an exercise price of HK$3.81 per unit. A recipient of share appreciation rights
may exercise the rights in stages commencing November 2020. As at each of the third, fourth and fifth
anniversary of the date of grant, the total number of share appreciation rights exercisable may not in
aggregate exceed 33.3%, 66.7% and 100.0%, respectively, of the total share appreciation rights granted
to such person.
During the years ended 31 December 2018 and 2017, no share appreciation right units were exercised. For
the year ended 31 December 2018, compensation expense of RMB30 million was recognised by the Group
in respect of share appreciation rights (2017: Nil).
As at 31 December 2018, the carrying amount of the liability arising from share appreciation rights was
RMB30 million. As at 31 December 2017, no liability arising from share appreciation rights was assumed by
the Group.
China Telecom Corporation Limited Annual Report 2018 255
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
46. Accounting Estimates and Judgments
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 judgments 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 judgments 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 3. Management believes the following significant accounting policies involve
the most significant judgments and estimates used in the preparation of the consolidated financial
statements.
Provision of ECL for accounts receivable
The Group uses provision matrix to calculate ECL for the accounts receivable. The provision rates are based
on customer’s past history of making payments when due and current ability to pay by groupings of various
debtors that have similar loss patterns. The provision matrix is based on the Group’s historical default rates
taking into consideration reasonable and supportable forward-looking information that is available without
undue cost or effort. The historical observed default rates are reassessed annually, and changes in the
forward-looking information are considered. In addition, accounts receivable with significant balances and
credit-impaired are assessed for ECL individually.
The provision of ECL is sensitive to changes in estimates. The information about the ECL and the Group’s
accounts receivable are disclosed in notes 39 and 15.
256
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
46. Accounting Estimates and Judgments (continued)
Impairment of goodwill and 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 3(i). The carrying amounts of the Group’s
long-lived assets, including property, plant and equipment, intangible assets with finite useful lives,
construction in progress and contract costs 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 judgment 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 2018, no provision for impairment losses were made against the carrying
value of long-lived assets (2017: RMB10 million). 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.
China Telecom Corporation Limited Annual Report 2018 257
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
46. Accounting Estimates and Judgments (continued)
Depreciation and amortisation
Property, plant and equipment and intangible assets with finite useful lives are depreciated and amortised
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.
Classification of lease arrangement with China Tower
The Company and China Tower entered into a lease arrangement regarding the leases of Tower Assets on
8 July 2016 and a supplemental agreement on 1 February 2018. Management evaluated the detailed
clauses of the leases agreement and determined such lease arrangements as operating leases according to
the accounting policies disclosed in Note 3(o) and based on the following judgments: (i) the Company does
not expect any transfer of ownership of Tower Assets from China Tower by the end of the lease term; (ii)
the Company considered the current lease term of 5 years does not account for the major part of the
economic lives of Tower Assets; (iii) the present value of minimum lease payment at the inception of the
lease does not substantially account for all of the fair value of the Tower Assets; and (iv) Tower Assets are
compatible with all telecommunications operators, and therefore are not of specialised nature that only the
Company can use them without major modifications.
258
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
47. Possible Impact of Amendments to Standards, New Standards and Interpretation
Issued but not yet Effective for the Annual Accounting Period Ended 31
December 2018
Up to the date of issue of the consolidated financial statements, the IASB has issued the following
amendments to standards, new standards and interpretation which are not yet effective and not early
adopted by the Group for the annual accounting period ended 31 December 2018:
IFRS 16, “Leases”
IFRIC 23, “Uncertainty over Income Tax Treatments”
Amendments to IFRS 9, “Prepayment Features with Negative Compensation”
Amendments to IAS 28, “Long-term Interests in Associates and Joint Ventures”
Amendments to IFRSs, “Annual Improvements to IFRS Standards 2015–2017 Cycle”
Amendments to IAS 19, “Plan Amendment, Curtailment or Settlement”
Amendments to IFRS 3, “Definition of a Business”
Amendments to IAS 1 and IAS 8, “Definition of Material”
IFRS 17, “Insurance Contracts”
Amendments to IFRS 10 and IAS 28, “Sale or Contribution of Assets between
an Investor and its Associate or Joint Venture”
Effective for
accounting period
beginning
on or after
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2020
1 January 2020
1 January 2021
Postponed
The Group is in the process of making an assessment of the impact that will result from adopting the
amendments to standards, new standards and interpretation issued by the IASB which are not yet effective
for the accounting period ended on 31 December 2018. Except for IFRS 16, “Leases”, so far the Group
believes that the adoption of these amendments to standards, new standards and interpretation is unlikely
to have a significant impact on its financial position and the results of operations.
China Telecom Corporation Limited Annual Report 2018 259
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
47. Possible Impact of Amendments to Standards, New Standards and Interpretation
Issued but not yet Effective for the Annual Accounting Period Ended 31
December 2018 (continued)
IFRS 16, “Leases”
IFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting
treatments for both lessors and lessees. IFRS 16 will supersede IAS 17, “Leases” and the related
interpretations when it becomes effective.
IFRS 16 distinguishes lease and service contracts on the basis of whether an identified asset is controlled by
a customer. Distinctions of operating leases and finance leases are removed for lessee accounting, and is
replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for all
leases by lessees, except for short-term leases and leases of low value assets.
The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain
exceptions) less accumulated depreciation and impairment losses, adjusted for any remeasurement of the
lease liability. The lease liability is initially measured at the present value of the lease payments that are not
paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as
the impact of lease modifications, amongst others. For the classification of cash flows, the Group currently
presents upfront prepaid lease payments as investing cash flows in relation to land use rights while other
operating lease payments are presented as operating cash flows. Upon application of IFRS 16, lease
payments in relation to lease liability will be allocated into a principal and an interest portion which will be
presented as financing and operating cash flows respectively by the Group, upfront prepaid lease payments
will continue to be presented as investing or operating cash flows in accordance to the nature, as
appropriate.
Under IAS 17, the Group has already recognised an asset and a related finance lease liability for finance
lease arrangement and prepaid lease payments for land use rights where the Group is a lessee. The
application of IFRS 16 may result in potential changes in classification of these assets depending on
whether the Group presents right-of-use assets separately or within the same line item at which the
corresponding underlying assets would be presented if they were owned.
Other than certain requirements which are also applicable to lessor, IFRS 16 substantially carries forward
the lessor accounting requirements in IAS 17, and continues to require a lessor to classify a lease either as
an operating lease or a finance lease.
Furthermore, extensive disclosures are required by IFRS 16.
As at 31 December 2018, the Group has non-cancellable operating lease commitments of RMB65,805
million as disclosed in Note 38. A preliminary assessment indicates that majority of these arrangements will
meet the definition of a lease. Upon application of IFRS 16, the Group will recognise a right-of-use asset
and a corresponding liability in respect of these leases unless they qualify for low value or short-term
leases.
The application of new requirements may result in changes in measurement, presentation and disclosure as
indicated above. The Group intends to elect the modified retrospective approach for the application of IFRS
16 as lessee and will recognise the cumulative effect of initial application to opening reserves without
restating comparative information.
260
Notes to the Consolidated Financial Statements
for the year ended 31 December 2018
48. Event after the Reporting Period
The Company, China Telecommunications Corporation and China Communications Services Corporation
Limited (“CCS”, a subsidiary of China Telecommunications Corporation) entered into an agreement
(“Capital Contribution Agreement”) on 22 June 2018 and jointly established China Telecom Group Finance
Co., Ltd. (“China Telecom Finance”), a non-banking financial institution legally established with the
approval of China Banking and Insurance Regulatory Commission providing capital and financial
management services to the member units of China Telecommunications Corporation, on 8 January 2019.
Pursuant to the Capital Contribution Agreement, the registered share capital of China Telecom Finance is
RMB5,000 million. The Company, China Telecommunications Corporation and CCS respectively contributed
RMB3,500 million, RMB750 million and RMB750 million, which respectively represented 70%, 15% and
15% of the total registered capital of China Telecom Finance. As the Company holds 70% of the issued
share capital of China Telecom Finance, China Telecom Finance is a subsidiary of the Company.
49. Parent and Ultimate Holding Company
The parent and ultimate holding company of the Company as at 31 December 2018 is China
Telecommunications Corporation, a state-owned enterprise established in the PRC.
China Telecom Corporation Limited Annual Report 2018 261
Financial Summary
(Amounts in millions, except per share data)
Results of operation
Operating revenues
Depreciation and amortisation
Network operations and support
Selling, general and administrative
Personnel expenses
Other operating expenses
Operating expenses
Operating profit
Gain from Tower Assets Disposal
Net finance costs
Investment income
Income from investments in associates
Profit before taxation
Income tax
Profit for the year
Other comprehensive income for the year
Items that will not be reclassified subsequently to
profit or loss:
Change in fair value of investments in equity instruments
at fair value through other comprehensive income
Deferred tax on change in fair value of investments
in equity instruments at fair value through other
comprehensive income
Items that may be reclassified subsequently to profit or loss:
Change in fair value of available-for-sale equity securities
Deferred tax on change in fair value of available-for-sale
equity securities
Exchange difference on translation of financial statements
of subsidiaries outside mainland China
Share of other comprehensive income of associates
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit attributable to
Equity holders of the Company
Non-controlling interests
Profit for the year
Total comprehensive income attributable to
Equity holders of the Company
Non-controlling interests
Total comprehensive income for the year
Basic earnings per share
Year ended 31 December
2018
RMB
2017
RMB
2016
RMB
2015
RMB
2014
RMB
377,124
366,229
352,534
331,517
324,755
75,493
116,062
59,422
59,736
37,697
348,410
28,714
–
(2,708)
38
2,104
28,148
(6,810)
21,338
74,951
103,969
58,434
56,043
45,612
339,009
27,220
–
(3,291)
147
877
24,953
(6,192)
18,761
67,942
94,156
56,426
54,504
52,286
67,666
81,433
54,480
52,586
48,905
66,348
68,885
62,753
50,698
47,555
325,314
305,070
296,239
27,220
–
(3,235)
40
91
24,116
(5,993)
18,123
26,447
5,214
(4,273)
8
(698)
26,698
(6,552)
20,146
28,516
–
(5,291)
6
34
23,265
(5,498)
17,767
(324)
82
–
–
154
(7)
(95)
–
–
(400)
100
(259)
7
(552)
–
–
(228)
57
190
6
25
–
–
652
(163)
129
3
621
–
–
(54)
14
3
(3)
(40)
21,243
18,209
18,148
20,767
17,727
21,210
128
21,338
21,115
128
21,243
0.26
18,617
144
18,761
18,065
144
18,209
0.23
18,018
105
18,123
18,043
105
18,148
0.22
20,058
88
20,146
20,679
88
20,767
0.25
17,688
79
17,767
17,648
79
17,727
0.22
348,410
2,104
21,338
(95)
21,338
21,243
262
Financial Summary
(Amounts in millions, except per share data)
As at 31 December of the year
2018
RMB
2017
RMB
2016
RMB
2015
RMB
2014
RMB
407,795
66,644
115,938
23,480
49,525
663,382
406,257
73,106
110,281
22,510
49,040
389,671
80,386
108,367
27,948
46,186
374,004
69,107
108,369
34,388
43,879
372,898
53,183
75,674
21,815
37,967
663,382
661,194
652,558
629,747
561,537
258,920
60,363
275,408
59,089
319,133
17,077
256,074
68,883
206,553
64,841
319,283
334,497
336,210
324,957
271,394
Financial condition
Property, plant and equipment, net
Construction in progress
Other non-current assets
Cash and bank deposits
Other current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Total equity attributable to equity holders of the Company
Non-controlling interests
343,069
1,030
325,867
830
315,377
971
303,823
967
289,218
925
Total equity
Total liabilities and equity
344,099
326,697
316,348
304,790
290,143
663,382
661,194
652,558
629,747
561,537
China Telecom Corporation Limited Annual Report 2018 263
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
2018 Share Price
HK$ per H Share
US$ per ADS
High
4.30
Low
3.24
Close
High
Low
Close
4.00
54.10
41.28
50.73
Number of issued shares: (as at 31 December 2018)
Market capitalisation: (as at 31 December 2018)
80,932,368,321
HK$323.7 billion
Share price performance of China Telecom on The Stock Exchange of Hong Kong Limited versus Hang Seng
Index (HSI) and MSCI World Telecom Service Sector Index (MSCI) from IPO on 15 November 2002 to 31
December 2018.
600
500
400
300
200
100
0
China Telecom (+176%)
HSI (+162%)
MSCI (+43%)
11/2002
11/2003
11/2004
11/2005
11/2006
11/2007
11/2008
11/2009
11/2010
11/2011
11/2012
11/2013
11/2014
11/2015
11/2016
11/2017
11/2018
264
Shareholder Information
Distribution of Shares and Shareholdings
The share capital of the Company as at 31 December 2018 was RMB80,932,368,321, divided into
80,932,368,321 shares of RMB1.00 each. As at 31 December 2018, the share capital of the Company
comprised:
Total Number of Domestic Shares:
Domestic shares held by:
China Telecommunications Corporation
Guangdong Rising Assets Management Co., Ltd.
Zhejiang Financial Development Company
Fujian Investment & Development Group Co., Ltd.
Jiangsu Guoxin Group Limited
Total Number of H Shares (including ADSs):
Total
Major Shareholders of H Shares
Percentage of
the Total Number
of Shares
(%)
82.85
70.89
6.94
2.64
1.20
1.18
17.15
100.00
Number of Shares
67,054,958,321
57,377,053,317
5,614,082,653
2,137,473,626
969,317,182
957,031,543
13,877,410,000
80,932,368,321
The following table shows the major shareholders that exercised or controlled the exercise of 5% or above of H
shares as at 31 December 2018:
Name of Shareholder
JPMorgan Chase & Co.
Citigroup Inc.
The Bank of New York Mellon Corporation
BlackRock, Inc.
Templeton Global Advisors Limited
Percentage of
the Total Number
of H Shares
in Issue
(%)
Number of Shares
1,659,402,128
11.96
1,245,294,634
1,190,211,519
1,132,947,753
1,087,529,062
8.97
8.58
8.16
7.84
China Telecom Corporation Limited Annual Report 2018 265
Shareholder Information
Dividend History
Financial Year
Ex-Dividend Date
Shareholder
Approval Date
Payment Date
Dividend
per Share
(HK$)
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
2015 Final
2016 Final
2017 Final
2018 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
30 May 2016
26 May 2017
31 May 2018
3 June 2019
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
25 May 2016
23 May 2017
28 May 2018
29 May 2019
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
15 July 2016
21 July 2017
27 July 2018
26 July 2019
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
0.095
0.105
0.115
0.125**
*
On the basis of HK$0.065 per share, pro-rated based on the number of days the Company’s shares have been listed during the year of
2002.
**
The dividend proposal is subject to shareholders’ approval at the Annual General Meeting to be held on 29 May 2019.
Annual Reports
Our annual reports in both English and Chinese are now available through the Internet at
https://www.chinatelecom-h.com. The Company will file an annual report in Form 20-F for the year 2018 with
the United States Securities and Exchange Commission by 30 April 2019.
2018 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 2017”. 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 contribute HK$50 to a charitable
organisation for each questionnaire received. In this regard, we have given a sum of HK$10,000 to the charitable
organisation, WWF, in 2018. 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.
266
Shareholder Information
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 2018”, 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.
Annual General Meeting
To be held at 11:00 a.m. on 29 May 2019 in Island Shangri-La Hong Kong.
Registered office
Address:
Tel:
Fax:
31 Jinrong Street
Xicheng District
Beijing
PRC 100033
86 10 5850 1800
86 10 6601 0728
Any enquiries relating to the strategic development or operations of China Telecom Corporation Limited, please
contact the Investor Relations Department:
Investor Relations Department
Tel:
IR Enquiry:
Fax:
Email:
852 2877 9777
852 2582 0388
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
Shops 1712–1716, 17th Floor
Address:
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 2018 267
Shareholder Information
Any enquiries relating to ADSs, please contact the depositary:
ADS depositary
The Bank of New York Mellon
Address:
BNY Mellon Shareowner Services
P.O. Box 505000
Louisville
KY 40233-5000
1-888-269-2377 (toll free in USA)
1-201-680-6825 (international)
shrrelations@bnymellon.com
Tel:
Email:
268
Corporate Culture
Corporate Mission
Let the customers fully enjoy a new information life
Strategic Goal
Be a leading integrated intelligent information
services operator
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
China Telecom Corporation Limited
31 Jinrong Street, Xicheng District, Beijing, PRC, 100033
FSC
LOGO
Design, Printing & Production: REF Financial Press Limited
www.ref.com.hk