About China Telecom
About China TelecomChina Telecom Corporation Limited (“China Telecom” or the“Company”, a joint stock limited company incorporated inthe People’s Republic of China with limited liability, togetherwith its subsidiaries, collectively the “Group”) is a largescale and leading integrated information services operator inthe world, providing wireline & mobile telecommunicationsservices, Internet access services, information services andother value-added telecommunications services primarily inthe PRC. As at the end of 2018, the Company had mobilesubscribers of about 303 million, wireline broadbandsubscribers of about 146 million and access lines in serviceof about 116 million. The Company’s H shares and AmericanDepositary Shares (“ADSs”) are listed on The Stock Exchangeof Hong Kong Limited (the “Hong Kong Stock Exchange”)and the New York Stock Exchange respectively.
Forward-Looking StatementsCertain statements contained in this report may be viewed as “forward-lookingstatements” within the meaning of Section 27A of the U.S. Securities Act of 1933 (asamended) 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, uncertaintiesand other factors, which may cause the actual performance, financial condition or resultsof operations of China Telecom Corporation Limited (the “Company”) to be materiallydifferent from any future performance, financial condition or results of operations impliedby such forward-looking statements. In addition, we do not intend to update theseforward-looking statements. Further information regarding these risks, uncertainties andother factors is included in the Company’s most recent Annual Report on Form 20-F filedwith the U.S. Securities and Exchange Commission (the “SEC”) and in the Company’sother filings with the SEC.Contents003Contents0042018 Milestones005Corporate Information006Financial Highlights010Statement from the Board020Biographical Details of Directors,Supervisors and SeniorManagement032082Environmental, Social andGovernance Report084 Corporate SocialResponsibility Report106 Human ResourcesDevelopment Report116 Table of the ESGIndicators122 Independent AssuranceReportManagement’s Discussion andAnalysis123 Appendix – ESGReporting Guide Index032 Business Review127 Corporate Governance044 Financial ReviewReport054Report of the Directors158Independent Auditor’s Report076Report of the SupervisoryCommittee163Consolidated Statement ofFinancial Position080Recognition and Awards165Consolidated Statement ofComprehensive Income166Consolidated Statement ofChanges in Equity167Consolidated Statement ofCash Flows169Notes to the ConsolidatedFinancial Statements262Financial Summary264Shareholder InformationCorporate CultureChina Telecom Corporation LimitedAnnual Report 2018003
2018 MilestonesAprMayJunJulAugDec004 Completed the nation’s first 5G network-based remotecontrolled driving trial in Xiongan Published the White Paper of Artificial Intelligence Terminal,specified and defined AI smartphone from AI calculation, AIcapability and AI application aspects, promoting theconvergence of multi-mode terminal value chain and ChinaTelecom’s AI capabilities in network security, Big Data andcloud computing etc., to bring more intelligent AI experiencesand services for users Published the China Telecom’s 5G Technology White Paper,which was the first time to fully elaborate 5G technologyperspectives and the overall strategy as a global operator;from the view points of business development, networkevolution and user perception, comprehensively elaboratedthe “Three Clouds” characterised 5G target networkstructure initiated by China Telecom namely control cloud,access cloud and transfer cloud Implemented “Speed Upgrade and Tariff Reduction” andceased charging domestic mobile data roaming tariff The number of e-Surfing HD (IPTV) subscribers achieved abreakthrough of 100 million Being granted the approval to utilise the 3,400-3,500MHzspectrum nationwide for 5G system trial The total number of mobile subscribers exceeded 300 millionwith a net addition of 53.04 million, reaching a new recordhigh for the Company Restructuring the R&D system by launching China TelecomResearch Institutes and 5G Innovation Centre; achievinginnovative breakthroughs in career advancement andemployee incentive mechanism for technical talents andmastering key technologies in key informationcommunications areas Fully promoting “cloudification” and comprehensivelyupgrading services and network to cloud in terms ofinfrastructure, products service capabilities and sales modesurrounding cloud computing so as to finally achieveone-stop service covering cloud, network, terminal,application and service aiming at meeting the diversifiedcloud and network demand for users
Corporate InformationBoard of DirectorsSupervisory CommitteeExecutive DirectorsSui Yixun (Chairman)Zhang Jianbin (Employee Representative)Yang Jianqing (Employee Representative)Xu ShiguangYe ZhongKe Ruiwen (Exercising the powers ofChairman & Chief Executive Officer;President & Chief Operating Officer)Gao TongqingChen ZhongyueZhu Min (Chief Financial Officer &Secretary of the Board)Company SecretaryWong Yuk HarNon-Executive DirectorInternational AuditorChen ShengguangDeloitte Touche TohmatsuIndependent Non-ExecutiveDirectorsLegal AdvisersTse Hau Yin, AloysiusXu ErmingWang HsuehmingYeung Chi Wai, JasonAudit CommitteeTse Hau Yin, Aloysius (Chairman)Xu ErmingWang HsuehmingYeung Chi Wai, JasonHaiwen & PartnersFreshfields Bruckhaus DeringerSullivan & Cromwell LLPStock CodeHKEx: 728NYSE: CHACompany Websitewww.chinatelecom-h.comRemuneration CommitteeXu Erming (Chairman)Tse Hau Yin, AloysiusWang HsuehmingNomination CommitteeWang Hsuehming (Chairlady)Tse Hau Yin, AloysiusXu ErmingChina Telecom Corporation LimitedAnnual Report 2018005
Financial Highlights201620172018352,534366,229377,124EBITDA (RMB millions)95,162102,171104,207EBITDA margin30.7%30.9%29.7%Operating revenues (RMB millions)12Net profit (RMB millions)18,01818,61721,210Capital expenditure (RMB millions)96,81788,71274,940Free cash flow 4 (RMB millions)(7,648)7,26722,457Total debt/Equity35.7%32.0%27.9%Earnings per share (RMB)0.22260.23000.2621Dividend per share (HK )0.1050.1150.125315EBITDA was calculated based on operating revenues minus operating expenses plus depreciation andamortisation.2EBITDA margin was calculated based on EBITDA divided by service revenues.3Net profit represented profit attributable to equity holders of the Company.4Free cash flow was calculated from EBITDA minus capital expenditure and income tax.5Equity represented equity attributable to equity holders of the Company.For further information,please browse our website atwww.chinatelecom-h.com006
Financial HighlightsOperatingRevenues(RMB MB millions)201820172016104,207102,17195,162Net Profit(RMB millions)20182017201621,21018,61718,018Dividend PerShare(HK )2018201720160.1250.1150.105China Telecom Corporation LimitedAnnual Report 2018007
Co-building Intelligent NetworksLeading to New Emerging Areas
Statement from the BoardAs an ancientChinese philosopherwrote, a tree hasto strike a firmroot before itcan flourish.Facing exceptionally fierce competition in the pastyear, we focused on customer demands withprecision insights, and brought edges of ecosphereconvergence into full play to forge ahead againstheadwinds. As a result, we broke the record in manyaspects including subscriber net addition andrevenue scale, exuberating vigorous growthmomentum. 5G is just around the corner and willbring profound changes to our life. We have beenproactively promoting the technology upgrades,while forcefully cementing our network foundation,in the hope of bringing a fresh experience to ourcustomers through the convergence of innovativeservices. We will leverage our deep-rootedintegrated information services capabilities as wellas ecosphere edges to enthusiastically embrace newopportunities. We firmly believe that China Telecom,which is full of vibrancy, will soar to a new heightand achieve greater success!010
Statement from the BoardDear shareholders,Operating ResultsIn 2018, the Company firmly grasped theopportunities arising from thedevelopment of digital economy, and rodeon the tide by leveraging the precisioninsights into market trends and customerdemands. We adhered to the newdevelopment principles and carried outsupply-side structural reforms. Weresponded effectively to the complicatedand challenging external environment, aswell as increasingly fierce competition,achieving new breakthroughs inexpanding our business scale while firmlyelevating our corporate value, therebyreaching a new high in terms of overallcompetitiveness and market position. Overthe past year, the Company deepened itsimplementation of step-up transformationwhile promoting reform and innovationon all fronts. We also proactivelyprospected the landscape for 5Gdevelopment and built all-roundedcompetitive advantages. We acceleratedthe development of new impetus, deeplyincentivised corporate vitality, strove tobreak new ground in terms of high-qualitydevelopment, and remained committed tocreating new value for shareholders.In 2018, operating revenues of theCompany amounted to RMB377.1 billion,of which, service revenues 1 amounted toRMB350.4 billion, representing anincrease of 5.9% compared to last year (ifexcluding the impact of the application ofInternational Financial Reporting Standard15 for the current year, it represented anincrease of 7.2% over last year), withrevenue growth having surpassed theindustry average for many consecutiveyears. Revenues from emergingbusinesses 2 accounted for 51.9% ofservice revenues, representing an increaseof nearly 6 percentage points comparedto last year following a continualoptimisation of the revenue structure.EBITDA 3 reached RMB104.2 billion,representing an increase of 2.0% over thesame period last year. Net profitamounted to RMB21.2 billion,representing an increase of 13.9%compared to last year, while basicearnings per share were RMB0.262,achieving rapid growth. Capitalexpenditure was RMB74.9 billion,representing a decrease of 15.5%compared to last year, the thirdconsecutive annual decline. Free cashflow 4 reached RMB22.5 billion,representing a remarkable increasecompared to last year.Net Profit13.9%DPS8.7%1Service revenues were calculated based on operating revenues minus sales of mobile terminals, sales ofwireline equipment and other non-service revenues.2Revenues from emerging businesses included revenues from data traffic, Internet applications and ICTservices.3EBITDA was calculated based on operating revenues minus operating expenses plus depreciation andamortisation.4Free cash flow was calculated from EBITDA minus capital expenditure and income tax.China Telecom Corporation LimitedAnnual Report 2018011
Statement from the BoardTaking shareholder returns intoconsideration, alongside the Company’sprofitability, cash flow level and capitalrequirement for future development, theBoard of Directors has decided torecommend at the forthcomingshareholders’ meeting that a final dividendequivalent to HK 0.125 per share for theyear 2018 to be declared, representing an8.7% increase over the year 2017. Goingforward, the Company will continue tocreate shareholder value, while fullybalancing the cash flow required for thelong-term development of the Companywith returns to shareholders.Taking Business Operation andDevelopment to the Next LevelIn 2018, the Company seized the preciousopportunities arising from the benefitsreleased from data traffic, while activelycapitalising on increasing demand fromcorporates subscribing for cloud services.The Company expedited productsinnovation, promoted overall upgrade ofits services convergence, strengthened itsnetwork edges, and improved itsoperational capability. As a result, theCompany rapidly improved itscompetitiveness, achieved a record highpace in terms of market expansion, andrapidly magnified its growth momentum.New breakthroughs in businessscaleThe Company’s mobile service revenuesamounted to RMB167.7 billion,representing an increase of 9.1%compared to last year. The total numberof mobile subscribers reached 303 million,a net addition of 53.04 millionsubscribers, which hit a record high. Themarket share of mobile subscribers netaddition reached 44%, while overallmarket share increased to 19.6%. Out ofthis, the number of 4G subscribers was242 million, a net addition of 60.39million, maintaining an all-time high paceof growth. 4G penetration rate reached80%, making the Company an industryleader. Aggregate handset data trafficalso grew strongly by nearly 3 times, with4G DOU reaching 5.5GB. Handset Internetaccess revenue grew by 22.4% comparedto last year. Wireline service revenuesTotal Number ofMobile Subscribers Exceeded300MilNet AdditionHit Historical High012
Statement from the Boardamounted to RMB182.7 billion,representing an increase of 3.1%compared to last year. The number ofwireline broadband subscribers reached146 million, a net addition of 12.26million, achieving a 6-year high. Out ofthis, the proportion of wireline broadbandsubscribers of 100Mbps or aboveaccounted for 66%.Fostering new impetusThe growth of revenues from theCompany’s Intelligent Applicationsecospheres 5 accelerated further andcontributed over 50% to incrementalservice revenues. With “cloudification” 6on all fronts, the development of theCompany’s DICT and Internet of ThingsIntelligentApplications EcospheresRevenues50%of IncrementalService Revenues(IoT) businesses was accelerated by theuptake of cloud-network integration andIoT-cloud integration. Revenues from IDCand cloud services increased by 22.4%and 85.9% respectively compared to lastyear, contributing nearly 2 percentagepoints to service revenues growth. TheCompany made further breakthroughs inaccelerating the growth of IoT services,with IoT revenue and the scale ofconnected devices doubled yet again.With the overall upgrade of servicesconvergence, the Company rapidlyexpanded the market through thebundling of “large data traffic, 100Mbpsbroadband, and Smart Family” products.The number of e-Surfing HD (IPTV)subscribers reached a new high of above100 million, enabling Smart Familyapplication to achieve a meaningful scale.The Company also built an integratedplatform for Internet Finance, resulting insynergies with the mobile business topromote mutual scale development. Thenumber of average monthly active usersof BestPay exceeded 43 million, and theaggregate gross merchandise value for theyear exceeded RMB1.6 trillion.Taking a New Step in CorporateTransformationTaking advantage of the historicalopportunities brought about by industrialintegration, consumption upgrade andnew technological breakthroughs, theCompany built on its current achievementsand forged ahead. Focusing on our threemajor goals of “building Cyberpower,building first-class enterprise, and buildingbetter lives”, we expedited step-up5Intelligent Applications ecospheres include ecospheres of Smart Family, DICT, IoT and Internet Finance. DICTis the converged smart application service integrating three technologies, namely communicationstechnology, information technology and cloud & Big Data technology.6Cloudification refers to the comprehensive upgrade of services and network to cloud in terms ofinfrastructure, products service capabilities and sales mode, with a focus on cloud computing.China Telecom Corporation LimitedAnnual Report 2018013
Statement from the Boardtransformation on all fronts, and furtherpromoted reform and innovation. Wecontinued to strengthen our capabilities atall levels, while planning futuredevelopment from all angles.Propelling intelligent upgrade ofnetwork in response to customerneedsFocusing on user experience, businessscale expansion and value management,the Company pushed forward theconstruction and intelligent upgrade of itsnetwork to build up comprehensivenetwork advantages. Leveraging Big Dataanalysis, we deployed dynamic capacityexpansion of 4G network with precision,and further optimised in-depth coverageat key locations. The number of 4G basestations reached 1.38 million, effectivelysupporting the upgrade to VoLTE highdefinition voice, as well as the continuousgrowth of large data traffic business. Ourfibre network now fully covers all citiesand towns in the service area of theCompany, enabling a leading customerexperience. By leading the deployment ofGigabit fibre broadband, we established anew edge in broadband network. Wecontinued to enhance our NB-IoT network,and built a whole-range speed rate IoTstructure, which combines high, mediumand low speeds, supporting furtherexpansion in vertical industries. By pushingforward cloud-network integration at fullthrottle, we continued to optimise ournationwide deployment of cloud resourcesand backbone network coverage, resultingin the establishment of a cloud-lednetwork. By introducing new technologiessuch as Software-Defined Networking(SDN) and Network FunctionsVirtualisation (NFV), the Companyaccelerated the re-constitution of itsnetworks, and rolled out scale promotion014of intelligent self-selecting bandwidthnetwork products for government andenterprise customers as well as homegateway products based on SDNtechnology, which allows our networkproducts to be activated within minutes.We also launched a VoLTE virtual IPMultimedia Subsystem (vIMS) corenetwork with software and hardwaredecoupling, facilitating the progress ofcloudification and virtualisation. Thissignificantly strengthened ourcompetitiveness and differentiation in thecloud market, while laying a foundationfor 5G network cloudification in thefuture. The Company proactivelycontributed to the formulation ofinternational standards for 5Gtechnologies and conducted large-scalenetwork trial runs in a number oflocations. We achieved some preliminaryprogress in areas such as voice call, 4G/5Ginteroperability, and interoperabilitybetween equipment, among others. Bysupporting the Ultra HD live broadcast forCCTV’s 2019 Spring Festival Evening Galawith “5G 4K” and “5G VR” solutions,we took an important step towards thesuccessful accomplishment of enhancedmobile broadband (eMBB) applicationscenarios. The Company also activelyexplored applications for other verticalindustries, such as 5G autonomous drivingbus, smart water treatment and mobileremote medical service.Integration and mutualdevelopment: supporting the swiftexpansion of service ecologyThe Company accurately grasped changingmarket demand and expanded the marketby leveraging its data traffic and cloudproducts, cultivating convergenceoperation, and effectively bundling itsservices. As a result, the overall
Statement from the Boardcompetitiveness of our bundled productswas significantly strengthened, whichfacilitated rapid breakthroughs inexpanding market scale, thereby creatingnew avenues for value growth. Thesynergies that resulted from theintegration and mutual development ofour five ecospheres enabled us to explorenew paths towards future sustainabledevelopment.In the field of Intelligent Connections,insisting on customers’ valuemanagement, we upgraded convergenceto expand in the incremental market spaceand extend our reach to the fields ofcontent, applications and services. Wealso broadened sales channels andpromoted products value, laying afoundation for Intelligent Applicationssuch as e-Surfing HD, DICT, and IoT togrow rapidly. In the field of Smart Family,by leveraging e-Surfing HD service as aportal, we developed a number ofdifferentiated core applications includingSmart Home Networking services andfamily cloud products. We expanded ourextensive range of smart home productsand implemented strategic planning inUltra HD video market ahead of time, inorder to grab the opportunities fromconsumption upgrade of smart homeproducts. In the field of DICT, westrengthened the
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 subsidiari
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