UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM20-F

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2018~~2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from to

Commission file number1-31517

中国电信股份有限公司

(Exact Name of Registrant as Specified in Its Charter)

China Telecom Corporation Limited

(Translation of Registrant’s Name into English)

People’s Republic of China

(Jurisdiction of Incorporation or Organization)

31 Jinrong Street, Xicheng District

Beijing, People’s Republic of China 100033

(Address of Principal Executive Offices)

Ms. Wong Yuk Har, Rebecca

China Telecom Corporation Limited

28/F, Everbright Centre

108 Gloucester Road

Wanchai, Hong Kong

Email:rebecca.wong@chinatelecom-h.com

Telephone: (+852) 2582 5819

Fax: (+852) 2157 0010

(Name, Telephone,E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange On Which Registered

American depositary shares

H shares, par value RMB1.00 per share

CHA

New York Stock Exchange, Inc.

New York Stock Exchange, Inc.*

*	Not for trading, but only in connection with the listing on the New York Stock Exchange, Inc. of American depositary shares, each representing 100 H shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of December 31, ~~2018,~~2020, 67,054,958,321 domestic shares and 13,877,410,000 H shares, par value RMB1.00 per share, were issued and outstanding. H shares are ordinary shares of the Company listed on The Stock Exchange of Hong Kong Limited.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” inRule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒ AcceleratedFiler ☐ Non-Accelerated Filer ☐ Emerging Growth Company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards^† provided pursuant to Section 13(a) of the Exchange Act. ☐

^†	The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification After April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.

U.S. GAAP ☐

International Financial Reporting Standards as issued by the International Accounting Standards Board ☒

Other ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No ☒

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

CHINA TELECOM CORPORATION LIMITED

TABLE OF CONTENTS


			Page
PART I				- 2 -

	Item 1.	Identity of Directors, Senior Management and Advisers		- 2 -
	Item 2.	Offer Statistics and Expected Timetable		- 2 -
	Item 3.	Key Information		- 2 -
	Item 4.	Information on the Company		- 1821 -
	Item 4A.	Unresolved Staff Comments		- 4544 -
	Item 5.	Operating and Financial Review and Prospects		- 45 -
	Item 6.	Directors, Senior Management and Employees		- 5954 -
	Item 7.	Major Shareholders and Related Party Transactions		- 7062 -
	Item 8.	Financial Information		- 7970 -
	Item 9.	The Offer and Listing		- 8071 -
	Item 10.	Additional Information		- 8072 -
	Item 11.	Quantitative and Qualitative Disclosures about Market Risk		- 9182 -
	Item 12.	Description of Securities Other than Equity Securities		- 9484 -

PART III I				- 9485 -

	Item 13.	Defaults, Dividend Arrearages and Delinquencies		- 9485 -
	Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds		- 9485 -
	Item 15.	Controls and Procedures		- 9586 -
	Item 16A.	Audit Committee Financial Expert		- 9787 -
	Item 16B.	Code of Ethics		- 9787 -
	Item 16C.	Principal Accountant Fees and Services		- 9788 -
	Item 16D.	Exemptions from the Listing Standards for Audit Committees		- 9788 -
	Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		- 9788 -
	Item 16F.	Change in Registrant’s Certifying Accountant		- 9888 -
	Item 16G.	Corporate Governance		- 9889 -
	Item 16H.	Mine Safety Disclosure		- 9990 -
	Item 17.	Financial Statements		- 9990 -
	Item 18.	Financial Statements		- 9990 -
	Item 19.	Exhibits		- ~~100~~90 -

FORWARD-LOOKING STATEMENTS

This annual report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements are, by their nature, subject to significant risks and uncertainties, and include, without limitation, statements relating to:

our business and operating strategies and our ability to successfully execute these strategies;

our network expansion and capital expenditure plans;

our operations and business prospects;

the expected benefit of any acquisitions or other strategic transactions;

our financial condition and results of operations;

the expected impact of new services on our business, financial condition and results of operations;

the future prospects of and our ability to integrate acquired businesses and assets;

the industry regulatory environment as well as the industry outlook generally; and

future developments in the telecommunications industry in the People’s Republic of China, or the PRC.

The words ~~“anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “seek,” “will,”~~“anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “seek”, “will”, “would” and similar expressions, as they relate to us, are intended to identify a number of these forward-looking statements.

These forward-looking statements are subject to risks, uncertainties and assumptions, some of which are beyond our control. In addition, these forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. We are under no obligation to update these forward-looking statements and do not intend to do so. Actual results may differ materially from the information contained in the forward-looking statements as a result of a number of factors, including, without limitation, the following:

any changes in the regulations or policies of the Ministry of Industry and Information Technology of the PRC (prior to March 2008, the Ministry of Information Industry, or the MII), or the MIIT, and other relevant government authorities relating to, among other matters:

the granting and approval of licenses;

tariff or network speed policies;

interconnection and settlement arrangements;

capital investment priorities;

the provision of telephone and other telecommunications services to rural areas in the PRC;

~~the convergence of television broadcast, telecommunications and Internet access networks, or three-network convergence;~~ and

spectrum and numbering resources allocation;

the effects of competition on the demand for and price of our services;

any potential further restructuring or consolidation of the PRC telecommunications industry;

~~changes in the PRC telecommunications industry resulting from the issuance of licenses for telecommunications services by the MIIT;~~

changes in telecommunications and related technologies including the fifth generation mobile telecommunications, or 5G, and future generations of mobile technologies, and applications based on such technologies, including testing and monetization of 5G and future generations of mobile technologies;

the development of new technologies and applications or services affecting the PRC telecommunications industry and our current and future business;

the potential impact of restrictions, sanctions or other legal or regulatory actions under relevant laws and regulations in various jurisdictions on our ~~telecommunications equipment~~ suppliers and other business partners;

~~- 1 -~~the impact of the COVID-19 pandemic on our operations and financial performance, the PRC economy and world economy, including disruptions to the demand for certain of our services and products such as international roaming services and services provided to corporate clients, a decline in network service quality due to the increased volume of online utilization, temporary closures of our sales outlets and a decline in new subscriber registration due to such closures, disruptions to the delivery of services or supplies, delay in network construction progress and fluctuation of labor supply and demand due to travel and other restrictions, and increased bad debts risk due to the deteriorating financial condition of certain corporate customers;

-1-

the impact of Executive Order 13959 signed by the then President of the United States (as subsequently amended on January 13, 2021, the “Executive Order”), and any rules or regulations adopted, guidance issued or actions taken by U.S. regulators to implement or comply with the Executive Order, including the ongoing delisting proceedings of our ADSs;

the impact of the Holding Foreign Companies Accountable Act and any rules or regulations adopted by U.S. regulators to implement such legislation;

the completion of our proposed A share offering;

changes in political, economic, legal and social conditions in the PRC, including changes in the PRC government’s specific policies with respect to foreign investment in and entry by foreign companies into the PRC telecommunications industry, economic growth, inflation, foreign exchange and the availability of credit;

results and effects of any inspections by the relevant PRC regulatory authorities; and

the development of our mobile business is dependent on the Tower Company.

Please also see ~~“D.~~“Item 3. Key Information—D. Risk Factors” ~~under Item 3.~~.

CERTAIN DEFINITIONS AND CONVENTIONS

As used in this annual report, references to ~~“us,” “we,”~~“us”, “we”, the ~~“Company,”~~“Company”, “our Company” and “China Telecom” are to China Telecom Corporation Limited and its consolidated subsidiaries except where we make clear that the term means China Telecom Corporation Limited or a particular subsidiary or business group only. References to matters relating to our H shares or American depositary shares, or ADSs, or matters of corporate governance are to the H shares, ADSs and corporate governance of China Telecom Corporation Limited. All references to “China Telecom Group” are to China Telecommunications Corporation, our controlling shareholder. Unless the context otherwise requires, these references include all of its subsidiaries, including us and our subsidiaries. Unless otherwise indicated, references to and statements regarding China and the PRC in this annual report do not apply to Hong Kong Special Administrative Region, Macau Special Administrative Region or Taiwan, while references to and statements regarding “international” in this annual report apply to Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan.

PART I

Item 1.

Identity of Directors, Senior Management and Advisers.

Not applicable.

Item 2.

Offer Statistics and Expected Timetable.

Not applicable.

Item 3.

Key Information.

A.	Selected Financial Data

The following table presents our selected financial data. The selected consolidated statements of financial position data as of December 31, 2017 and 2018, and the selected consolidated statements of comprehensive income (except for earnings per ADS) and consolidated cash flow data for the years ended December 31, 2016, 2017 and 2018, are derived from our audited consolidated financial statements included elsewhere in this annual report, and should be read in conjunction with those consolidated financial statements. The selected consolidated statements of financial position data as of December 31, 2014, 2015 and 2016 and the selected consolidated statements of comprehensive income (except for earnings per ADS) and consolidated cash flow data for the years ended December 31, 2014 and 2015 are derived from our consolidated financial statements which are not included in this annual report. Our consolidated financial statements are prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board.

~~The selected financial data reflect the establishment of new subsidiaries in 2014, the tower assets disposal in 2015, the disposal of ChengduE-store~~ ~~Technology Co., Ltd., orE-Store,~~ the establishment of Tianyi Capital Holding Co., Ltd., or Tianyi Capital, and the acquisitions of the satellite communications business and Shaanxi Zhonghe Hengtai Insurance Agent Limited, or Zhonghe Hengtai, in 2017 and the establishment of new subsidiaries in 2018 described under “Item 4. Information on the Company—A. History and Development of the Company—Changes in Our Corporate Organization in 2014”, “—Establishment of the Tower Company and the Disposal and Lease of the Telecommunications Towers”, “—Disposal of~~E-store~~ ~~and Establishment of Tianyi Capital” and “—Establishment of China Telecom Leasing Corporation Limited” and “Item 5. Operating and Financial Review and Prospects”.~~

~~- 2 -~~

   As of or for the year ended December 31,
   2014 RMB 2015 RMB 2016 RMB 2017 RMB 2018 RMB 2018 US$
   (in millions, except share numbers and per share and per ADS data)
Consolidated Statements of Comprehensive Income Data:

Operating revenues
   324,755 331,517 352,534 366,229 377,124 54,850
Operating expenses
   (296,239 ) (305,070 ) (325,314 ) (339,009 ) (348,410 ) (50,674 )
Operating income
   28,516 26,447 27,220 27,220 28,714 4,176
Earnings before income tax
   23,265 26,698 24,116 24,953 28,148 4,094
Income tax
   (5,498 ) (6,552 ) (5,993 ) (6,192 ) (6,810 ) (990 )
Profit attributable to equity holders of the Company
   17,688 20,058 18,018 18,617 21,210 3,085
Basic earnings per share⁽¹⁾
   0.22 0.25 0.22 0.23 0.26 0.04
Basic earnings per ADS⁽¹⁾
   21.86 24.78 22.26 23.00 26.21 3.81
Cash dividends declared per share
   0.08 0.08 0.09 0.09 0.11 0.02

   As of or for the year ended December 31,
   2014 RMB 2015 RMB 2016 RMB 2017 RMB 2018 RMB 2018 US$
   (in millions, except share numbers and per share and per ADS data)
Consolidated Statements of Financial Position Data:

Cash and cash equivalents
   20,436 31,869 24,617 19,410 16,666 2,424
Accounts receivable, net
   21,756 21,190 21,465 22,096 20,475 2,978
Total current assets
   59,782 78,267 74,134 71,550 73,005 10,618
Property, plant and equipment, net
   372,898 374,004 389,671 406,257 407,795 59,311
Total assets
   561,537 629,747 652,558 661,194 663,382 96,485
Short-term debt
   43,976 51,636 40,780 54,558 49,537 7,205
Current portion of long-term debt and payable
   82 84 62,276 1,146 1,139 166
Accounts payable
   88,587 118,128 122,493 119,321 107,887 15,692
Total current liabilities
   206,553 256,074 319,133 275,408 258,920 37,658
Long-term debt and payable
   62,494 64,830 9,370 48,596 44,852 6,523
Deferred revenues (including current portion)
   1,858 2,482 3,558 3,061 1,829 266
Total liabilities
   271,394 324,957 336,210 334,497 319,283 46,438
Equity attributable to equity holders of the Company
   289,218 303,823 315,377 325,867 343,069 49,897
Consolidated Cash Flow Data:

Net cash generated from operating activities
   96,412 108,755 101,135 96,502 99,298 14,442
Net cash used in investing activities⁽²⁾
   (81,715 ) (102,255 ) (99,043 ) (85,263 ) (85,954 ) (12,501 )
Capital expenditures⁽²⁾
   (80,280 ) (101,903 ) (96,678 ) (87,334 ) (83,835 ) (12,193 )
Net cash (used in) / generated from financing activities
   (10,327 ) 4,809 (9,555 ) (16,147 ) (16,283 ) (2,368 )

~~(1)~~

The basic earnings per share have been calculated based on the respective net profit attributable to equity holders of the Company in 2014, 2015, 2016, 2017 and 2018 and the weighted average number of shares in issue during each of the relevant years of 80,932,368,321 shares. Basic earnings per ADS have been computed as if all of our issued and outstanding shares, including domestic shares and H shares, are represented by ADSs during each of the years presented. Each ADS represents 100 H shares.

~~(2)~~

~~Capital expenditures are part of and not an addition to net cash used in investing activities.~~

~~Pursuant to the shareholders’ approval at the annual general meeting held on May 28, 2018, a final dividend of RMB7,568 million (RMB0.093512 per share equivalent to HK$0.115 per share,pre-tax)~~ for the year ended December 31, 2017 was declared, all of which has been fully paid. Pursuant to a resolution passed at the Directors’ meeting on March 19, 2019, a final dividend of approximately RMB8,629 million (RMB0.106621 per share equivalent to HK$0.125 per share,~~pre-tax)~~ ~~for the year ended December 31, 2018 was proposed for shareholders’ approval at the forthcoming annual general meeting.~~

~~- 3 -~~

~~Exchange Rate Information~~

Our business is primarily conducted in China and substantially all of our revenues are denominated in Renminbi. We present our historical consolidated financial statements in Renminbi. In addition, solely for the convenience of the reader, this annual report contains translations of certain Renminbi and Hong Kong dollar amounts into U.S. dollars at specific rates. For any date and period, the exchange rate refers to the exchange rate as set forth in the H.10 statistical release of the Federal Reserve Board. Unless otherwise indicated, conversions of Renminbi or Hong Kong dollars into U.S. dollars in this annual report are based on the exchange rate on December 31, 2018 (RMB6.8755 to US$1.00 and HK$7.8305 to US$1.00). We make no representation that any Renminbi or Hong Kong dollar amounts could have been, or could be, converted into U.S. dollars or vice versa, as the case may be, at any particular rate, or at all. For a detailed explanation of the risk of currency rate fluctuations, please see “D. Risk Factors—Risks Relating to the People’s Republic of China— Fluctuation of the Renminbi could materially affect our financial condition, results of operations and cash flows” under this Item. The PRC government imposes controls over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange. Examples of such government regulations and restrictions are set forth in “D. Risk Factors—Risks Relating to the People’s Republic of China—Government restriction on currency conversion may adversely affect our financial condition”.Not Applicable.

B.	Capitalization and Indebtedness

Not applicable.

C.	Reasons for the Offer and Use of Proceeds

Not applicable.

-2-

D.	Risk Factors

Risks Relating to Our Business

We face increasing competition, which may materially and adversely affect our business, financial condition and results of operations.

~~The~~We operate in a highly competitive industry, and primarily compete against the other two full-service telecommunications ~~industry~~providers in the PRC, ~~is rapidly evolving.~~

After the industry restructuring in 2008, China Unicom (Hong Kong) Limited (formerly known as China Unicom Limited), or China Unicom, and our Company have full-service capabilities and compete with each other in both wireline and wireless telecommunications services.namely, China Mobile Limited, or China Mobile, ~~continues to be the leading provider~~and China Unicom (Hong Kong) Limited, or China Unicom.

In mobile telecommunications services, China Mobile, China Unicom and China Broadcasting Network Corporation Ltd, or China Broadcasting Network, are our top three competitors. As of ~~mobile telecommunications~~April 2021, each of China Unicom, China Mobile and us provides 4G services nationwide and has officially launched 5G commercial services in the PRC for more than one year. In June 2019, China Broadcasting Network was granted the 5G permit by the MIIT. In May 2020, China Broadcasting Network entered into a collaborative framework agreement in relation to 5G co-constructionand ~~competes~~sharing with ~~us in mobile telecommunications services and other telecommunications services.~~

~~In December 2013, each of~~ China Mobile Communications Group Co., Ltd. (formerly known as China Mobile Communications Corporation)~~, or~~ (“China Mobile Group”). In September 2020, China Broadcasting Network together with partners which include, among others, State Grid Information & Telecommunication Technology Group Co., Ltd. (国网信息通信产业集团有限公司) and Hangzhou Alibaba Venture Capital Management Co., Ltd. (杭州阿里巴巴创业投资管理有限公司) established China ~~Telecom Group~~Broadcasting Network Co., Ltd to provide 5G services in partnership with China Mobile and it is also expected to offer 4G services in the future. Furthermore, in January 2021, China Mobile Communication Co., Ltd., a wholly-owned subsidiary of China Mobile, on behalf of its 31 provincial subsidiaries, entered into a series of specific collaboration agreements with China Broadcasting Network, including (i) the 5G network co-construction and sharing collaboration agreement; (ii) the 5G network maintenance collaboration agreement; (iii) the market collaboration agreement; and (iv) the network usage fee settlement agreement. Our competitors and we have been rolling out 5G tariff plans to attract customers, and some of the plans offered by our competitors may be more attractive to customers than ours. In fixed-line voice and broadband services, we primarily compete against China Unicom, China Mobile and China ~~United Network Communications Group Company Limited, or Unicom Group, was granted the permit~~Broadcasting Network. While we strive to provide 4Gcompetitive mobile and fixed-line telecommunications services ~~based on LTE/Time Division Duplex standard, orTD-LTE,~~ ~~technologies nationwide. In February 2015, China Telecom Group and Unicom Group were granted the permit~~ to provide 4G services based on Frequency Division Long Term Evolution standard, or LTE FDD, technologies nationwide. In April 2018, China Mobile Group was granted the permit to provide 4G services based on LTE FDD technologies pursuant to which China Mobile can develop mobile IoT and Industrial Internet services nationwide and LTE FDD services only in rural areas. In December 2018, China Telecom Group, China Mobile Group and Unicom Group were granted the approval from MIIT to utilize certain spectrum to conduct the fifth generation mobile communication pilot programs. We have been authorized by China Telecom Group to operate 4G business nationwide based on both~~TD-LTE~~ ~~technologies and LTE FDD technologies and to conduct 5G system scale trial in 17 cities. We~~meet our subscribers’ evolving needs, we cannot assure you that: (i) our 4Gmobile and 5Gfixed-line telecommunications services will deliver the quality and levels of services currently anticipated; (ii) we will be able to provide all planned ~~4G and 5G~~ services or we will be able to provide such services on schedule; (iii) there will be sufficient demand for 4Gour mobile and 5Gfixed-line telecommunications services for us to deliver ~~these~~such services profitably; (iv) our competitors’ ~~4G, 5G or newer technology based,~~ services will not be more popular among potential subscribers; or (v) we will not encounter unexpected technological difficulties in ~~providing 4G~~developing our Industrial Digitalization business and 5Gfuture generations of mobile and fixed-line services. ~~The failure of any of~~Any adverse developments in these ~~possible developments to occur~~respects could impede our growth, which ~~could~~might have a material adverse effect on our business, financial condition and results of operations. We expect that the market competition will be further intensified as a result of our competitors obtaining permits and expanding their 4G and 5G services, which could materially and adversely affect our business and prospect.

~~- 4 -~~

Prior to December 2013, China Unicom, China Tietong Telecommunications Corporation, or China Railcom, which is a wholly-owned subsidiary of China Mobile Group, CITIC NETWORKS Co., Ltd., and our Company were the only operators licensed by the MIIT to provide fixed-line telecommunications services in China. In December 2013, China Mobile Group received permission from the MIIT to authorize China Mobile to operate fixed-line telecommunications businesses. In December 2015, China Mobile completed its acquisition from China Mobile Group of the fixed-line telecommunications businesses operated by China Railcom. In May 2016, China Radio and Television Network Co. Ltd. received license from the MIIT to operate fixed-line broadband business. The entry of China Mobile and China Radio and Television Network Co. Ltd. has intensified and may further intensify the competition in this sector, which could have a material adverse effect on our business.

We also face increasing competition from other competitors outside the telecommunications industry, in particular, from Internet services providers and mobile software and application developers, such asOver-the-Top messaging or voice services providers who offer contents and services on the Internet without their proprietary telecommunications network infrastructure. These competitors are competing with us in information and application or voice services. During the past few years, some of our traditional revenue ~~contributors~~streams, such as our voice services or short message services, or SMS have experienced ~~a slowdown in the growth rate or~~ negative growth, primarily due to the alternative means of communication offered by ~~these~~Over-the-Top messaging ~~or voice services~~ becoming increasingly popular among the ~~consumers.~~subscribers. Though the increasing popularity of ~~these~~Over-the-Top messaging ~~or voice services~~ has generally contributed to the increase in our Internet data traffic and Internet services revenues, ~~during the past few years,~~ we cannot assure you that our Internet data traffic and Internet services revenue will continue to increase in the future or such increase could fully offset the negative effect of theseOver-the-Top services on our voice services or ~~short message services, or~~ SMS. In addition, in the field of Industrial Digitalization, we compete with telecommunications operators, Internet companies, software companies, equipment manufacturers, etc. Our cloud services and Internet data center (the “IDC”) business compete with domestic and international cloud service providers and IDC operators, respectively. Some of our competitors may adopt aggressive pricing policies. As a result, we may suffer from pricing pressure that would adversely affect our ability to generate revenues. Some of these competitors may also provide our target customers with additional benefits, including bundled services, and may do so in a manner that is more attractive to our potential customers. We expect that competition from competitors outside the telecommunications industry will intensify and the strategic cooperation between these competitors and telecommunications operators may ~~even~~ reshape the competitive landscape of the telecommunications industry in which we operate. Though we strive to ~~maintain~~strengthen our competitiveness through comprehensively implementing our ~~comprehensive transformation~~“Cloudification and ~~upgrades~~Digital Transformation” strategy, we may encounter difficulties and challenges in addressing changing consumer needs and responding to the evolving competitive landscape.

In addition, the PRC government has taken various initiatives to encourage competition in the telecommunications industry, such as the ~~three-network convergence policy and the~~ policy encouraging private capital to enter the industry. For more details of the three-network convergence policy, please see “Item 4. Information on the Company – B. Business Overview – Regulatory and Related Matters – Three-Network Convergence Policy”. For a series of government measures to encourage private capital to invest in telecommunications services that could compete with our services, see “Item 4. Information on the ~~Company –~~ Company—B. Business ~~Overview –~~ Overview—Competition”. In 2018, MIIT further opened up broadband access markets to private capital in 17 provinces on a province-wide basis and an additional 39 pilot cities. In April 2018, the MIIT approved the commercialization of mobile telecommunication resale business, effective from May 2018. As of January 31, 2019, among the 42 mobile virtual network operators who had been approvedFurthermore, by the ~~MIIT to conduct resale business on a pilot basis, 32~~end of which had been granted commercial operation licenses; and among the 25 companies who signed resale agreements with us, 12 companies had been granted commercial operation licenses and the other companies are all in the process of applying for such licenses. As of December 31, 2018, there were a total of approximately 77.0 million users of mobile virtual network. Additionally, the PRC government had started mobile number portability pilot programs in five direct-controlled municipalities and provinces, and on March 5,November 2019, ~~the Government Work Report presented in the second plenary session of the 13th National People’s Congress of the PRC specified that~~ the mobile number portability services ~~will be~~have been implemented nationwide, following pilot programs in certain municipalities and provinces. On November 11, 2019, the MIIT promulgated the Regulations on the Management of Mobile Number Portability Service, which became effective on December 1, 2019. As a result, the competitive landscape in the PRC telecommunications industry may further diversify, causing more intensified competition.

-3-

Increasing competition from other existing telecommunications services providers, including China Mobile and China Unicom, as well as competition from new competitors, among other factors, might force us to lower our tariffs, reduce or reverse the growth of our customer base and reduce usage of our services, which could materially and adversely affect our business and ~~prospect by, among other factors, forcing us to lower our tariffs, reducing or reversing the growth of our customer base and reducing usage of our services.~~prospects. Any of these developments could materially and adversely affect our revenues and profitability. We cannot assure you that the increasingly competitive environment and any change in the competitive landscape of the telecommunications industry in the PRC would not have a material adverse effect on our business, financial condition or results of operations.

We face uncertainties in the development and operation of our 5G business, and if we fail to address such uncertainties, our business, prospects and results of operations may be materially and adversely affected.

~~- 5 -~~

In June 2019, the MIIT granted the 5G permit to China Telecom Group, China Mobile Group, China United Network Communications Group Company Limited (formerly known as China United Telecommunications Corporation) (“Unicom Group”) and China Broadcasting Network. The MIIT has allocated the 3400MHz-3500MHz frequency bands to China Telecom Group, the 2515MHz-2675MHz and 4800MHz-4900MHz frequency bands to China Mobile Group, the 3500MHz-3600MHz frequency bands to Unicom Group, respectively, for nationwide 5G programs, and the 4900MHz-5000MHz to China Broadcasting Network for 5G trials. In February 2020, the MIIT approved China Telecom Group, Unicom Group and China Broadcasting Network to share the 3300MHz-3400MHz spectrum to build indoor 5G. In March 2020, the MIIT repurposed the use plan for 700MHz frequency bands to mobile communications. We have been authorized by China Telecom Group to develop 5G business nationwide.

In September 2019, in order to build a 5G network on an efficient basis and to rapidly create our 5G service capabilities, we entered into a 5G Network Co-Build and Co-Share Framework Cooperation Agreement with China United Network Communications Corporation Limited (“CUCL”) (the “5G Cooperation Agreement”). For more details, see “Item 4. Information on the Company—B. Business Overview—Network System—Co-building and co-sharing with China Unicom”. Pursuant to the 5G Cooperation Agreement, both parties will delineate and designate districts, jointly co-build one 5G access network nationwide. We will rely on China Unicom’s network to provide our 5G services in the regions for which they are responsible. If the 5G network co-building and co-sharing construction progress falls behind the mutually agreed plan or our subscribers are unsatisfied with the network quality in such regions and turn to our competitors, our business and results of operations might be adversely impacted.

On October 31, 2019, we officially launched 5G commercial services in 50 cities nationwide. In 2020, leveraging “5G + e-Surfing Cloud”, we provided our subscribers with an excellent network experience as well as differentiated applications and services. As of December 31, 2020, the number of our 5G base stations in use exceeded 380,000, primarily achieving contiguous coverage in outdoor areas of all prefecture-level or above cities and some developed counties nationwide and indoor coverage of key buildings; the total number of our mobile subscribers reached 351 million, representing a net addition of 15.45 million and expanding our market share to 22.0%; the number of 5G package subscribers reached 86.50 million with a penetration rate of 24.6%. As of March 31, 2021, the number of 5G package subscribers further increased to approximately 111.23 million. For more details of our 5G operations, see “Item 4. Information on the Company—B. Business Overview”.

The network deployment, construction of infrastructure and commercialization of 5G require us to devote significant financial resources and operational efforts, and we have been exploring optimal business models for our 5G business. However, there are uncertainties in the prospects of 5G developments and operations, including the competitiveness of 5G products and services, supplies and pricing of 5G terminals, the development of 5G Standalone, or 5G SA industry chain, capital expenditures in constructing 5G base stations, our suppliers’ ability to provide 5G equipment as well as future 5G technology application scenarios. If we are unable to appropriately address such uncertainties, it may adversely impact future benefits of our 5G business, which may materially and adversely affect our business, prospects and results of operations.

Our operations and further development of our mobile business is dependent on the Tower Company.

In July 2014, the Company, ~~China United Network Communications Corporation Limited (“CUCL”)~~CUCL and China Mobile Communication Company Limited (“CMCL”) made the decision to jointly establish China Communications Facilities Services Corporation Limited (currently known as China Tower Corporation Limited, the “Tower Company”), and carried out the establishment of Tower Company and the transfer of certain tower assets. Upon completion of the transfer of tower assets by the Company to the Tower Company, the Company and the Tower Company entered into the Lease Agreement on July 8, 2016 that sets forth the pricing and related arrangements in relation to the lease of telecommunications towers and related assets (including both acquired towers and new towers). On February 1, 2018, the Company and the Tower Company entered into a supplemental agreement, effective from January 1, 2018, on the basis of the original Lease Agreement mainly to adjust the relevant pricing arrangement of tower products under the Lease Agreement. See “Item 4. Information on the Company—A. History and Development of the Company—Establishment of the Tower Company and the Disposal and Lease of the Telecommunications Towers”.

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The Tower Company has been and will continue to be of significant importance to the operations and further development of our mobile business and our results of operations. Construction of new tower assets has been carried out by the Tower Company since the completion of the transfer of tower assets and, in principle, we expect the Tower Company will continue to carry out the construction of new tower assets in the future. Therefore, our mobile business has depended on and will continue to depend on the lease arrangement between us and the Tower Company. However, since we do not control the Tower Company, we cannot assure you that it will act in the best interests of us or the services of the Tower Company can sufficiently support our business needs and future plans.

The Lease Agreement, as may be further supplemented and amended from time to time, provides for pricing adjustment mechanism under which the fees may be further negotiated or agreed upon after considering effects of inflation, significant fluctuations in the real estate market or the steel price, many of which are beyond our control, and such pricing adjustment mechanism may result in a further adjustment of the fees charged to us by the Tower Company in the future. Furthermore, prior to the expiration of lease periods of individual towers, we have to negotiate with the Tower Company new leases of such tower, we cannot assure you that we will be able to enter into new leases at all or on favorable terms with the Tower Company. Due to our reliance on Tower Company for tower assets, if we fail to use the relevant tower assets at our desired locations and on terms and conditions that are favorable to us to maintain or expand our mobile network coverage, or if we cannot receive quality and stable services in a timely and economically viable manner from the Tower Company, the operations and further growth of our mobile business as well as our financial condition and results of operations may be materially and adversely affected.

We will continue to be controlled by China Telecom Group, which could cause us to take actions that may conflict with the best interests of our other shareholders.

China Telecom Group, a state-owned enterprise owned ~~by the State-owned Assets Supervision and Administration Commission of the State Council, or the SASAC, owned~~ approximately 70.89% of our ~~outstanding~~issued shares as of April 23, ~~2019.~~2021. Accordingly, subject to our Articles of Association and applicable laws and regulations, China Telecom Group, as our controlling shareholder, will continue to be able to exercise significant influence over our management and policies by:

controlling the election of our Directors and, in turn, indirectly controlling the selection of our senior management;

determining the timing and amount of our dividend payments;

approving our annual budgets;

deciding on increases or decreases in our share capital;

determining issuance of new securities;

approving mergers and acquisitions; and

amending our Articles of Association.

The interests of China Telecom Group as our controlling shareholder could conflict with our interests or the interests of our other shareholders. As a result, China Telecom Group may take actions with respect to our business that may not be in our or our other shareholders’ best interests.

~~- 6 -~~

We depend on China Telecom Group and its other subsidiaries to provide certain services and facilities for which we currently have limited alternative sources of supply.

In addition to being our controlling shareholder, China Telecom Group, by itself and through its other subsidiaries, also provides us with services and facilities necessary for our business activities, including, but not limited to:

use of international gateway facilities;

provision of services in areas outside our service regions necessary to enable us to provideend-to-end services to our customers;

use of certain inter-provincial optic fibers; and

lease of properties and assets.

The interests of China Telecom Group and its other subsidiaries as providers of these services and facilities may conflict with our interests. We currently have limited alternative sources of supply for these services and facilities. Therefore, we have limited leverage in negotiating with China Telecom Group and its other subsidiaries over the terms for the provision of these services and facilities. Termination or adverse changes of the terms for the provisions of these services and facilities could materially and adversely affect our business, results of operations and financial condition. See “Item 4. Information on the Company—A. History and Development of the Company—Industry Restructuring and Our Acquisition of the CDMA Business in 2008” and “—Our Acquisition from China Telecom Group of the CDMA Network Assets and Associated Liabilities” and “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions” for a description of the services and facilities provided by China Telecom Group and its other subsidiaries.

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Since our services require interconnection with networks of other operators, disruption in interconnections with those networks could have a material adverse effect on our business and results of operations.

Under the relevant telecommunications regulations, telecommunications operators are required to interconnect with networks of other operators. China Telecom Group entered into interconnection settlement agreements with other telecommunications operators, including Unicom Group and China Mobile Group. We entered into an interconnection settlement agreement, as amended, with China Telecom Group, which allows our networks to interconnect with China Telecom Group’s networks as well as networks of the other telecommunications operators, with whom China Telecom Group had interconnection arrangements. The effective provision of our voice, Internet and other services requires interconnection between our networks and those of China Telecom Group, Unicom Group, China Mobile Group and other domestic and international telecommunications operators. Any interruption in our interconnection with the networks of those ~~operators~~domestic or ~~other~~ international telecommunications carriers with which we interconnect due to technical or competitive reasons may affect our operations, service quality and customer satisfaction, and, in turn, our business and results of operations. In addition, any obstacles in existing interconnection arrangements and leased line agreements or any change in their terms, as a result of natural events, accidents, or for regulatory, technological, competitive or other reasons, could lead to temporary service disruptions and increased costs that may seriously jeopardize our operations and adversely affect our profitability and growth.

We may be unable to obtain sufficient financing to fund our capital requirements, which could limit our growth potential and prospects.

We believe that cash from operations, together with any necessary borrowings, will provide sufficient financial resources to meet our projected capital and other expenditure requirements. However, we may require additional funds to the extent we have underestimated our capital requirements or overestimated our future cash from operations. In addition, a significant feature of our business strategy is to transform our Company into a leading integrated intelligent information services ~~provider,~~operator, which may require additional capital resources. The cost of implementing new technologies, upgrading our networks or expanding bandwidth capacity ~~or acquisitions of businesses or assets~~ may be significant. Furthermore, in order for us to effectively respond to technological changes and more intensive competition, we may need to make substantial investments in the future.

Financing may not be available to us on acceptable terms or at all. In addition, any future issuance of equity securities, including securities convertible or exchangeable into or that represent the right to receive equity securities, may require approval from the relevant government authorities. Our ability to obtain additional financing will depend on a number of factors, including:

our future financial condition, results of operations and cash flows;

general market conditions for financing activities by telecommunications companies; and

economic, political and other conditions in the markets where we operate or plan to operate.

~~- 7 -~~

We cannot assure you that we can obtain sufficient financing at commercially reasonable terms or at all. If adequate capital is not available on commercially reasonable terms, our growth potential and prospects could be materially and adversely affected. ~~Furthermore, additional issuances of equity securities will result in dilution to our shareholders. Incurrence~~On the other hand, incurrence of debt would result in increased interest expense and could require us to agree to restrictive operating and financial covenants.

The proposed A share offering, if completed, will result in dilution of the ownership interest of our existing shareholders, and we may not be able to realize the intended benefits of the offering proceeds and there are risks relating to listing on multiple stock exchanges. There is no assurance that the proposed A share offering will proceed and complete successfully.

We currently plan to raise additional equity capital by publicly offering A shares, the number of which will be no more than 12,093,342,392 shares (namely no more than 13% of our total issued share capital upon the A share offering, without taking into account the exercise of the over-allotment option). Please see “Item 4. Information on the Company—A. History and Development of the Company—Proposed A Share Offering” for more information. Such offering, like any other issuance of equity securities, will result in dilution to our shareholders and may cause the market price of our securities to decline. In addition, if we successfully complete the A share offering and list our A shares on the Shanghai Stock Exchange, all of our shareholders (including the holders of newly issued A shares) would be entitled pro rata to our undistributed profits accumulated before the completion of our A share listing, which will dilute the interest of our existing shareholders.

We plan to apply most of the proceeds from the proposed A share offering to projects including the 5G industrial Internet construction project, the cloud-network integration new information infrastructure project, and the research and development project of sci-tech innovation. Our research and analysis on the necessity and feasibility of these projects are mainly based on current industry, technology, market and other factors, many of which are not within our control. If there are major changes in subsequent industry standards, technology trends, and market demand, the ultimate benefits generated from these projects may not meet our expectations, which will adversely affect our operating results.

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Upon the completion of the proposed A share offering, our shares will be listed on multiple stock exchanges at the same time. Due to the differences in domestic and overseas regulatory rules, we need to comply with different sets of laws and regulations with respect to governance structure, compliant operation, information disclosure, internal control, investor protection, etc. In particular, we need to comply with the listing rules of all relevant regulatory authorities. This poses greater challenges to our compliant operation and investor relations management. In addition, we may incur additional costs and resources in continuously complying with all sets of securities regulatory regimes in multiple jurisdictions. Upon the listing of our A shares, holders of our A shares and H shares (including our ADSs) will be treated as different classes of shareholders for the purpose of voting on certain specific matters (such as increase or decrease of the number of class shares, cancellation or reduction of the rights of class shares, etc.). The convening and voting results of A share class shareholders meetings may have impact on our H share class shareholders (including our ADS holders). Furthermore, domestic and overseas investors may have different views on the valuation of us, and the factors that affect stock prices and their sensitivity to influencing factors may also be different among markets. These may result in significant differences in our stock prices in different stock exchanges. Systematic risks in domestic capital markets and fluctuations in domestic stock prices may adversely affect our ADS and H share investors.

The proposed A share offering is subject to approvals from China Securities Regulatory Commission, or CSRC, and other relevant regulatory authorities and may or may not proceed. The completion of such offering is also subject to market condition. Therefore, there is no assurance that the offering will complete as currently planned or at all.

If we are not able to respond successfully and cost-efficiently to technological or industry developments, our business may be materially and adversely affected.

The telecommunications market is characterized by rapid advancements in technology, evolving industry standards and changes in customer needs. We cannot assure you that we will be successful in responding to these developments. In addition, new services or technologies, such as ~~mobile Internet, the three-network convergence,~~ cloud computing, ~~and~~ Internet of Things, ~~may render~~Big Data, artificial intelligence, blockchain and quantum information, present new challenges to our existing services ~~or technologies less competitive.~~and technologies. In the event we do take measures to respond to technological developments and changes in industry standards, the integration of new technology or industry standards or the upgrading of our networks may require substantial time, effort and capital investment. Moreover, the successful ~~deployment~~development and application of such cutting edge technologies depend on a number of factors, including the integration of legacy networks and cloud security related challenges. We cannot assure you that we will succeed in integrating these new technologies and industry standards or adapting our network ~~and~~ systems in a timely and cost-effective manner, or at all. Our inability to respond successfully and cost-efficiently to technological or industry developments may materially and adversely affect our business, results of operations and competitiveness.

Our ability to respond to technological developments in a cost-efficient manner may also be adversely affected by external factors, some of which are beyond our control. For example, the development in 5G technology is expected to have a major impact on our services. See “—We ~~have been engaged~~face uncertainties in ~~standards formulation, network technology trial runs as well as planning~~the development and operation of ~~the application~~our 5G business, and if we fail to address such uncertainties, our business, prospects and results of 5G services towards commercialization. In December 2018, China Telecom Group was granted the approval from the MIIT to utilize the 3400-3500MHz spectrum nationwide for 5G system trial until June 30, 2020.operations may be materially and adversely affected” under this Item. In addition, we have been taking the initiatives to explore the feasibility of collaborative development of 5G and 4G. ~~We have devoted,~~If our efforts turn out to be unsuccessful, our ability to attract and ~~will continue~~retain subscribers could be adversely affected.

Transactions in and holdings of our ADSs and H shares by U.S. persons beyond specified dates are prohibited, and the continued listing of and trading in our ADSs are subject to ~~devote, substantial resources~~significant uncertainty.

On November 12, 2020, the then President of the United States signed Executive Order 13959 (as subsequently amended on January 13, 2021, the “Executive Order”) to (i) prohibit (the “Prohibitions”) any transaction by any U.S. person, subject to certain divestiture and other exemptions, in publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of certain Chinese companies (each, a “Restricted Company”), (ii) prohibit possession of the ~~development~~foregoing securities by a U.S. person after November 11, 2021 and (iii) authorize the United States Secretary of ~~5G technology. However, various details concerning 5G services are still uncertain,~~the Treasury to publicly list an entity as a Restricted Company, with respect to which the Prohibitions shall take effect on the date that is 60 days after such listing. The United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) maintains a list of companies identified as a Restricted Company (the “Restricted List”) and, on January 8, 2021, added the Company to the “Issuer Name” column of the Restricted List. According to guidance issued by OFAC (available at https://home.treasury.gov/system/files/126/ccmc_gl1a_01272021_1.pdf), the Prohibitions with respect to the Company took effect on March 9, 2021, 60 days after the Company was added to the “Issuer Name” column of the Restricted List.

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On December 31, 2020, the New York Stock Exchange, or the NYSE, announced that it had determined to commence proceedings to delist our ADSs on the basis that we were no longer suitable for listing in light of the Executive Order. On January 4, 2021, the NYSE announced that, in light of further consultation with relevant regulatory authorities, the NYSE no longer intended to move forward with the delisting action in relation to our ADSs. On January 6, 2021, the NYSE announced that it had determined (the “Determination”) to re-commence proceedings to delist our ADSs to comply with the Executive Order and suspended trading in our ADSs on January 11, 2021.

Separately, the Depository Trust & Clearing Corporation’s National Securities Clearing Corporation (“NSCC”) suspended trade capture activities through its Universal Trade Capture (“UTC”) and Continuous Net Settlement (“CNS”) systems for our ADSs after trading ended on January 8, 2021. As a result, our ADSs can no longer be traded in any U.S. market that relies on NSCC’s UTC and CNS systems, including the ~~timing~~over-the-counter (“OTC”) markets. On January 20, 2021, we filed with the NYSE a written request for a review of the ~~issuance~~Determination by a Committee of ~~5G permits,~~ the ~~frequency bands allocated to 5G services~~Board of Directors of the NYSE (the “Committee”). The Company requested that the Committee reverse the Determination and ~~relevant regulations. In addition,~~stay the trading suspension of the ADSs pending review of the Determination. However, there is no assurance that wesuch request will be ~~able~~successful and that the Committee will reverse its Determination.

If our ADSs were delisted from the NYSE, in light of the evolving situation described above, the organizers of OTC markets in the U.S. would also likely prohibit, or be directed to ~~roll out 5G services~~prohibit, the trading of our ADSs on such markets. Subject to the terms of the deposit agreement entered into among the Company, the Bank of New York Mellon, and holders and beneficial owners of ADSs from time to time, holders of our ADSs may convert the ADSs into our H shares listed on the Hong Kong Stock Exchange but will incur costs in ~~an economically viable manner~~order to ~~gain favorable market share based on reasonable commercial terms with~~do so. See “Item 12. Description of Securities Other than Equity Securities” for further information. More importantly, pursuant to the Executive Order and the latest OFAC guidance, U.S. persons are prohibited from purchasing or selling our ADSs or H shares (subject to certain divestiture and other exemptions) beyond March 9, 2021 and holding our ADSs or H shares beyond January 8, 2022, 365 days after the Company was added to the “Issuer Name” column of the Restricted List. Furthermore, the foregoing events or any further development thereof may adversely affect investor sentiment towards our Company, regardless of our actual operating performance. As a result, the value and liquidity of our ADSs and H shares may significantly decrease.

Restrictions, sanctions and other legal or regulatory actions in various jurisdictions could adversely affect us, our suppliers, business partners ~~without undue delay. Furthermore,~~and other stakeholders in the 5Gsupply chain of semiconductor and telecommunications industry, chain is still under development, and we continue to explore 5G services’ business model and commercial applications. If we are unable to respond to these uncertainties, the expected benefits from our investment in development of 5G technology would not be fully realized or at all and such inability to respond to these uncertainties maywhich could materially and adversely affect our business ~~in the future.~~

~~We are subject to risks associated with our telecommunications equipment suppliers~~operations directly and other business partners which could be adversely affected by restrictions, sanctions or other legal or regulatory actions under relevant laws and regulations in various jurisdictions which in turn could adversely affect the supply chain and our business operations.indirectly.

We procure our telecommunications network equipment, ~~and~~ related maintenance and technical support and other equipment and services from certain PRC and overseas ~~telecommunications equipment~~ suppliers. See “Item 4. Information on the Company—B. Business Overview—Network System”. We also transact ~~business~~ with our overseas branches, as well as our business partners who ~~may~~ operate globally. ~~As these parties operate globally~~Therefore, both we and our business partners are ~~therefore~~ subject to the laws and regulations inof various jurisdictions ~~any restrictions, sanctions or other legal or regulatory actions could cause disruptions or other material difficulties in their business activities to the extent any government of the~~and international organizations. The relevant jurisdictions ~~imposes any restrictions on their import and export activities,~~ or ~~sanctions or other legal or regulatory actions against the suppliers and other business partners in connection with their business activities. The relevant jurisdictions~~international organizations include, among others, the United States, the European Union (“EU”) and the United Nations. ~~Furthermore,~~Any restrictions, sanctions or other legal or regulatory actions in the relevant jurisdictions, such as restrictions on import and export activities, could cause disruptions or other material difficulties on the ~~supply~~business activities of our ~~telecommunications equipment relies on a global supply chain, which is vulnerable to significant disruptions in the supply of parts~~suppliers, business partners and ~~other items that are necessary for the relevant manufacturing activities.~~us. Such disruptions could prevent ~~those affected~~our suppliers from delivering equipment and services to us in accordance with the agreed terms of supply, which in turn could negatively affect our business operations. ~~For example, we~~We may not be able to find suitable alternative suppliers for the affected equipment or services in a timely manner. Even if we are able to find alternative suppliers, the commercial terms may not be comparable, and we could therefore be subject to a higher procuring cost. Furthermore, if any of our suppliers raises their prices due to an increase in international trade tariffs, we could be subject to a higher cost in procuring the relevant products. We may experience a significant delay in implementing the part of our business plans that relies on delivery of the affected ~~network~~ equipment and services and difficulties in timely improving our services that rely on those suppliers for upgrading our networks and related software and applications.

Furthermore, the significant disruptions in the supply chain of semiconductor and telecommunications industry may indirectly impact the growth of our Internet services and information and application services. For example, the sanctions against certain mobile phone manufacturers may adversely affect the availability of quality 5G smart phones for users who may wish to upgrade their handsets, which could indirectly adversely affect our 5G business as such users potentially could have been our 5G package subscribers.

Any of ~~these~~the above and other consequences could materially adversely affect our business, results of operations, financial condition and ~~prospect~~prospects and cause a significant volatility in and a decline in our share price.

Our business may be materially and adversely affected by the COVID-19 pandemic or future health epidemics, pandemics or outbreaks.

The World Health Organization declared the outbreak of the COVID-19 pandemic on March 13, 2020. Since then, confirmed and death cases of the COVID-19 pandemic have continued to grow globally. The COVID-19 pandemic has caused significant economic and financial impact around the world. While various COVID-19 vaccine products have been developed and distributed, at this time, we are still not able to estimate the longer-term effects that the COVID-19 pandemic could have on our business. The extent to which the COVID-19 pandemic impacts our business, financial condition, results of operations will depend on future developments which are still uncertain, including the potential resurgence of the COVID-19 pandemic from time to time, the implementation of the vaccination plans by the government, the efficacy and safety of vaccine products, and other actions taken or to be taken to restrain or resolve its impact. We are continuing to monitor the spread of the COVID-19 and related risks.

~~- 8 -~~

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Due to the outbreak of the COVID-19, the Chinese government implemented domestic temporary control measures in late January 2020. Since March 2020, while the Chinese government has been gradually easing such control measures on a nationwide basis, stringent control measures have been maintained in provinces or cities where COVID-19 resurged. Although the COVID-19 pandemic has been primarily controlled in China and China’s economy has gradually recovered, China’s economy still experienced a slowdown and may continue to face new difficulties and challenges due to the increasing risk of imported cases, temporary impossibility of total elimination of the pandemic domestically, and heightened volatility and uncertainties in the global economy.

In addition, the COVID-19 pandemic has been rapidly evolving globally and many countries have implemented vaccination plans, quarantine, social distancing and other mitigation measures to slow down the spread. The COVID-19 pandemic has severely impacted global economic activities and caused significant volatility and negative pressure in the financial markets.

The COVID-19 pandemic and other adverse public health developments could materially and adversely affect our business, financial condition and results of operations. The adverse impacts likely include disruptions to the demand of certain services and products such as international roaming services and services provided to corporate clients, a decline in network service quality due to the increased volume of online utilization, temporary closures of our sales outlets and a decline in new subscriber registration due to such closures, disruptions to the delivery of services or supplies, delay in network construction progress and fluctuation of labor supply and demand due to travel and other restrictions, increased bad debts risk due to the deteriorating financial condition of certain corporate customers. In addition, we have transitioned a subset of our employees to a remote work environment and allowed certain suppliers to remotely provide services in an effort to mitigate the spread of COVID-19, which may increase certain costs and risks to our business and operations, including an increased demand for information technology resources.

We may be adversely affected by future health epidemics, pandemics or outbreaks which are beyond our control. These events are impossible to forecast and difficult to mitigate. Any of these events might have a material adverse effect on our results of operations and financial condition. See “—Risks Relating to the People’s Republic of China—The PRC’s economic, political and social conditions, as well as government policies, could affect our business” under this Item.

Cyber security breaches could have a material adverse effect on our operations.

We rely on information technology systems to process, transmit, store, and protect electronic information. As a telecommunications operator, we are considered a critical information infrastructure operator under the relevant PRC law and therefore are subject to the regulations designed to protect critical information infrastructure and therefore may be more likely to be targeted by cyber attack activities. Our information technology systems may be vulnerable to a variety of interruptions due to events beyond our control, including, but not limited to, cyber attacks, computer viruses, hackers, telecommunications failures, natural disasters, terrorist attacks, and other security issues. We have technology and information security processes and disaster recovery plans in place to mitigate our risks to these vulnerabilities. However, these measures may not be adequate to ensure that our operations will not be disrupted, should such an event occur.

Increasing regulatory focus on personal information protection could impact our business and expose us to increased liability.

Regulators in various jurisdictions are increasingly scrutinizing how companies collect, process, use, store, share and transmit personal data. ~~This increased scrutiny may result in new interpretations of existing laws, thereby further impacting our business. Recent regulations, such as~~For example, the General Data Protection Regulation (“GDPR”), which went into effect in the ~~European Union (“EU”)~~EU on May 25, 2018, applies to the collection, use, retention, security, processing, and transfer of personally identifiable information of residents of EU countries. The GDPR created a range of new compliance obligations, and ~~imposes~~imposed significant fines and sanctions for violations. Although we have not been subject to any GDPR sanctions ,and have subscriber privacy policy in place, it is possible that the GDPR or other emerging regulations may be interpreted or applied in a manner that is adverse to us. Any failure, or perceived failure, by us to comply with any applicable regulatory requirements or orders, including but not limited to privacy, data protection, information security, or consumer protection-related privacy laws and regulations, could result in proceedings or actions against us by governmental entities or individuals, subject us to fines, penalties, and/or judgments, or otherwise adversely affect our business, as our reputation could be negatively impacted.

We face a number of risks relating to our Internet-related services.

We currently provide a range of Internet-related services, includingdial-up and broadband Internet access, and Internet-related applications. We face a number of risks in providing these services.

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Our network may be vulnerable to cyber attacks, including, among others, unauthorized access, denial of service attack and ~~use of~~ malicious ~~software.~~software attack. In addition, cyber attacks may cause equipment failures, loss of information, including confidential or otherwise protected information stored in our customers’ computer systems and mobile phone systems, failure or perceived failure to comply with applicable privacy, security, or data protection laws or regulations, as well as disruptions to our operations or our customers’ operations. We have devoted significant resources to network security, data security and other security measures to protect our systems and data, but we cannot assure you that the security measures we have implemented will not be circumvented or otherwise fail to protect the integrity of our network, including our mobile network. Furthermore, it is difficult to estimate or calculate the economic costs caused by potential cyber security incidents and maintain sufficient insurance coverage relating to them at commercially reasonable rates and terms, as the costs may differ based on the identity and motive of the programmer or hacker, which are often difficult to identify. Thus, the economic costs to us to eliminate or alleviate cyber attacks could be significant. Eliminating computer viruses and other security problems may also require interruptions, delays or suspension of our services, reduce our customer satisfaction and cause us to incur costs. Cyber attacks may also subject us to litigations, liabilities for information loss, breach of confidentiality of private information, and/or reputational damage. While, to date, we have not been subject to cyber attacks which, individually or in the aggregate, have been material to our operations or financial condition,we cannot assure you that we will not experience them in the future. Due to the evolving nature of cyber security threats, the scope and impact of any future incident cannot be predicted. While we continually work to safeguard our systems and mitigate potential risks, there is no assurance that such actions will be sufficient to prevent cyber attacks or security breaches that manipulate or improperly use our systems or networks, compromise confidential or otherwise protected information, destroy or corrupt data, or otherwise disrupt our operations. The occurrence of such events could have a material adverse effect on our financial condition and results of operations.

In addition, because we provide connections to the Internet and host websites for customers and develop Internet information and applications, we may be perceived as being associated with the content carried over our network or displayed on websites that we host. We are not able to screen all of this content and may face litigation claims due to a perceived association with this content. These types of claims have been brought against other providers of online services in the past. Regardless of the merits of the lawsuits, these types of claims can be costly to defend, divert management resources and attention, and may damage our reputation.

Furthermore, we rely on proper operation and maintenance of our equipment. Any malfunction, capacity constraint or operation interruption of our equipment may have an adverse impact on our business.

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Any failure to achieve and maintain effective internal controls could have a material adverse effect on our reputation, business, results of operations and the market prices of our ~~shares and ADSs.~~securities.

Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports and to prevent fraud. We are required to comply with various PRC, U.S. and Hong Kong laws, rules and regulations on internal controls, including the Sarbanes-Oxley Act of 2002. In particular, Section 404 of the Sarbanes-Oxley Act of 2002 requires that we include a report of management on our internal control over financial reporting in our annual reports on Form20-F that contains an assessment by our management of the effectiveness of our internal control over financial reporting. In addition, our independent registered public accounting firm must issue an auditor’s report on the effectiveness of our internal control over financial reporting.

Internal controls may not prevent or detect misstatements because of their inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. As a result, even effective internal controls are able to provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. Any of the possible failure in maintaining the effective internal control over financial reporting could result in a decline of investor confidence in the reliability of our consolidated financial statements, which could cause the market prices of our ~~ordinary shares and ADSs~~securities to fluctuate.

Revenues derived from our voice services may continue to decline, which may adversely affect our results of operations, financial condition and prospects.

Revenues from our voice services continued to decline during the past several years. Our revenues from voice services decreased by ~~12.1%~~11.1% from ~~RMB70,185~~RMB50,811 million in ~~2016~~2018 to ~~RMB61,678~~RMB45,146 million in ~~2017~~2019 and further decreased by ~~17.6%~~9.5% to ~~RMB50,811~~RMB40,866 million in ~~2018.~~2020. Percentage of revenues derived from our voice services out of our total operating revenues also continued to decrease, from ~~19.9% in 2016 to 16.8% in 2017 and~~ 13.5% in ~~2018.~~2018 to 12.0% in 2019 and 10.4% in 2020.

Of revenues from our voice services, revenues from wireline voice services decreased by ~~14.3%~~6.6% in ~~2017~~2019 compared to ~~2016~~2018 and further decreased by ~~11.4%~~13.0% in ~~2018~~2020 and the percentage of revenues derived from our wireline voice services out of our total operating revenues also continued to decrease, from ~~7.4% in 2016 to 6.1% in 2017 and~~ 5.2% in ~~2018.~~2018 to 4.9% in 2019 and 4.1% in 2020. This is primarily due to the fact that we continued to lose wireline telephone subscribers resulting from the increasing popularity of mobile ~~voice~~ services and other alternative means of communication, such asOver-the-Top messaging services. The number of our wireline telephone subscribers decreased by ~~4.0%~~4.8% at the end of ~~2017~~2019 compared to that at the end of ~~2016~~2018 and further decreased by ~~4.4%~~2.7% at the end of ~~2018.~~2020.

Revenues from our mobile voice services decreased by ~~10.8%~~14.0% in ~~2017~~2019 compared to ~~2016~~2018 and further decreased by ~~21.1%~~7.1% in ~~2018~~2020 and the percentage of revenues derived from our mobile voice services out of our total operating revenues also continued to decrease, from ~~12.5% in 2016 to 10.7% in 2017 and~~ 8.3% in ~~2018.~~2018 to 7.1% in 2019 and 6.3% in 2020. In recent years, while the number of subscribers of our mobile services ~~and mobile voice usage have~~has continued to grow, due to the increasing popularity of alternative means of communication and the continued decrease in our tariffs for mobile voice services, revenues from our mobile voice services still continued to decrease.

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We cannot assure you that we will be successful in slowing down the decline of our revenues generated from voice services. Migration from voice services to other alternative means of communication may further intensify and tariffs for voice services may further decrease in the future, which may affect the financial performance of our voice services and thus adversely affect our results of operations, financial condition and prospects as a whole.

Revenues derived from our wireline broadband services may decline, which may adversely affect our results of operations, financial condition and prospects.

Our revenues from wireline broadband services decreased by 7.9% to RMB68,413 million in 2019. Such revenues increased by 5.1% to RMB71,872 million in 2020. However, due to increasing broadband penetration rates and fierce market competition, tariffs for wireline broadband may further decrease in the future. As such, we cannot assure you that we will be successful in maintaining the growth in our revenues generated from wireline broadband services, which may adversely affect our results of operations, financial condition and prospects.

We may suffer damage to our reputation due to communications fraud carried out on our network.

Communications fraud, in which a person defrauds another by means of telecommunications technologies including SMS, telephone, and Internet, poses a risk to us. If communications fraud is committed over our network, we may incur liability as a result of the inadequacy in our measures to prevent such fraud. On September 23, 2016, six departments including the Supreme People’s Court of the People’s Republic of China (the “Supreme People’s Court”), the Supreme People’s Procuratorate of the People’s Republic of China (the “Supreme People’s Procuratorate”), the Ministry of Public Security of the People’s Republic of China (the “Ministry of Public Security”), the MIIT, the People’s Bank of China and the China Banking Regulatory Commission (now known as China Banking and Insurance Regulatory Commission) jointly released the Announcement on Preventing and Cracking Down on Telecom and Internet ~~Frauds(关~~Frauds (关于防范和打击电信网络诈骗犯罪的通告),~~and~~ on December 19, 2016, the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security jointly issued the Opinions on Several Issues concerning the Application of Law to the Handling of Criminal Cases Involving Telecom and Internet Frauds (关于办理电信网络诈骗等刑事案件适用法律若干问题的意见), and on October 25, 2019, the Supreme People’s Court and the Supreme People’s Procuratorate released the Interpretation on Several Issues concerning the Application of Law in Handling Criminal Cases Involving Crimes of Illegally Using an Information Network or Providing Aid for Criminal Activities in Relation to Information Network (最高人民法院丶最高人民检察院关于办理非法利用信息网络丶帮助信息网络犯罪活动等刑事案件适用法律若干问题的解释).

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We have implemented various measures ~~including, strictly demanding real name registration and strengthening business management, among others,~~ to prevent and crack down on communications fraud. For example, we have strengthened the real identity registration of telephone users by strengthening the staff’s authentication for the real-name login system, user ID verification, portrait comparison and living body authentication. We have also adopted measures such as standardized caller transmission, abnormal traffic monitoring and interception, phishing website identification, verification of user reporting and shutdown of the numbers involved in communications fraud cases. However, there is no assurance that such measures will prevent communications fraud effectively. Communications fraud as a result of our failure in implementing the real name registration measure may result in claims being brought against us and may damage our reputation and could have an adverse effect on our business and results of operations.

Our authorizations to provide telecommunications services in the United States are subject to actions by the relevant authorities in the United States and we cannot assure you we will be able to maintain those authorizations in the future.

Our wholly owned subsidiary, China Telecom (Americas) Corporation, or CTA, provides international common carrier communications services between the United States and foreign countries pursuant to the authorizations previously issued to it by the United States Federal Communications Commission, or the FCC, under Section 214 of the Communications Act of 1934 and provides domestic interstate common carrier communications services in the United States based on the FCC’s blanket authority (collectively, the “214 Authorizations”). On April 4, 2020, the then President of the United States issued an executive order for the establishment of a committee to review foreign participation in the telecommunications services in the United States. On April 9, 2020, the U.S. Justice Department and other federal agencies recommended the FCC to revoke and terminate CTA’s international section 214 authorizations. On April 24, 2020, the FCC issued a Show Cause Order to CTA directing CTA to file a response demonstrating why the FCC should not initiate proceedings to revoke and terminate its 214 Authorizations. On June 8, 2020, CTA filed its response. On December 10, 2020, the FCC adopted an order (the “FCC Order”) that instituted proceedings to determine whether to revoke and/or terminate our 214 Authorizations.

CTA has appealed the FCC Order in accordance with relevant laws, regulations and regulatory requirements to safeguard its legitimate rights. We are cooperating with the regulators and providing additional details to support our position and address any concerns, and to defend our legitimate rights through legal proceedings. However, we cannot assure you that our 214 Authorizations will not be revoked or terminated. Despite that the revenues from the telecommunications services we provide in the United States in recent years have not been significant to our overall operations and financial results, losing our 214 Authorizations would have an adverse effect on our operations in North America and may also harm our reputation.

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Our success depends on the continued services of our senior management team and other qualified employees.

Our continued success and growth depends on our ability to identify, hire, train and retain suitably skilled and qualified employees, including management personnel, with relevant professional skills. The services of our ~~directors~~Directors and members of senior management are essential to our success and future growth. As we have to compete for a limited supply of qualified employees, such as managerial, sales, administration, research and development and operating personnel with adequate skills and experience, in China, we may not be able to successfully attract, assimilate or retain all of the personnel we need. We may also need to offer superior compensation and other benefits to attract and retain key personnel and therefore cannot assure you that we will have the resources to fully achieve our staffing need. Due to the intense competition for management and other personnel and qualified employees in the telecommunications industry in mainland China, any failure to recruit and retain the necessary management personnel and other qualified ~~employee~~employees could have a material adverse effect on our business and prospects.

We may not be able to effectively detect or prevent misconduct of our executives and other employees, which could adversely harm our reputation and negatively impact our financial conditions and results of operations as well as the trading price of our securities.

We are exposed to the risk of misconduct by executives and other employees and we have experienced incidents of executive misconduct in the past. In May 2017, Mr. Chang Xiaobing, the former Chairman of China Telecom Group was sentenced to six years of imprisonment over corruption charges. Mr. Chang was appointed as the chief executive officer of the Company on September 1, 2015 and the director and chairman of the Company on October 23, 2015. On December 30, 2015, Mr. Chang resigned from his positions as the executive director, chairman and chief executive officer of the Company with effect from the same date. Prior to his resignation, Mr. Chang had worked at the Company for four months. In September 2017, Mr. Zhen Caiji, the former Executive Vice President of the Company was expelled from the Communist Party of China and dismissed from public service for serious disciplinary violations and was under investigation of suspected criminal violations. Mr. Zhen was appointed as an executive vice president of the Company on November 4, 2016 and resigned from the position of executive vice president of the Company on May 22, 2017. Prior to his resignation, Mr. Zhen had worked at the Company for seven months. In response to executive misconducts, we have taken various measures to identify and deter employee misconduct and have adopted a code of conducts and ethics of employees. However, we cannot assure you that these measures will be effective in detecting or preventing all employee misconduct. The publicity of the investigation and/or prosecution against our employees or former employees may harm our reputation and adversely affect our financial condition and results of operations as well as the trading price of our securities.

We enjoy certain preferential tax policies in China; any adverse change of such tax policies in the future may have an adverse effect on our cash flows and results of operations.

According to the Announcement of the Ministry of Finance, the State Administration of Taxation and the General Administration of Customs on Deepening the Value-added Tax Reform Policy (Announcement No. 39 of the Ministry of Finance, the State Administration of Taxation and the General Administration of Customs in 2019), from April 1, 2019 to December 31, 2021, taxpayers in the producer and consumer services sectors, including us, are allowed to deduct tax payable by adding 10% to the current deductible input tax. However, this policy may be cancelled when it expires on December 31, 2021, and in that case we will cease to benefit from this preferential tax treatment.

Applicable preferential tax policies including the above have had a positive effect on our development and business performance. Any adverse change of such tax policies in the future may have an adverse effect on our cash flows and results of operations.

Risks Relating to the Telecommunications Industry in the PRC

The current and future government regulations and policies that extensively govern the telecommunications industry may limit our flexibility in responding to market conditions as well as competition, and may have a material adverse effect on our profitability and results of operation.

Our business is subject to extensive government regulation. The MIIT, which is the primary telecommunications industry regulator under the PRC’s State Council, regulates, among other things:

industry policies and regulations;

licensing;

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competition;

telecommunications resource allocation;

service standards;

technical standards;

tariff policies;

interconnection and settlement arrangements;

enforcement of industry regulations;

universal service obligations;

network information security;

network access license approval for telecom equipment and terminals; and

network construction plans.

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Other PRC governmental authorities also take part in regulating tariff policies, capital investment and foreign investment in the telecommunications industry. The regulatory framework within which we operate may constrain our ability to implement our business strategies and limit our flexibility to respond to market conditions. For example, the PRC governmental authorities have promulgated various regulations, rules, guidance opinions and other directives regarding network speed upgrade and tariff reduction. On May 20, 2015, the office of the State Council promulgated the Guidance Opinions Regarding Expediting the Development of the High-Speed Broadband Network and Promoting the Speed Upgrade and Tariff Reduction, calling for the telecommunications operators to reduce the data tariffs. As a result, we carried out a series of measures, including launching the upgrade service in October 2015 which allowed handset data subscribers who subscribe to our monthly data packages to rollover the unused data remaining in the monthly packages to the next month. In addition, we ceased to charge handset subscribers domestic long distance and roaming fees on and from September 1, 2017. Meanwhile, we have significantly reduced the fees of international ~~Hong Kong, Macau and Taiwan~~ long distance calls since May 1, 2017 and also have reduced the tariff of Internet dedicated line access for small and medium enterprises.

On March 5, 2018, the Government Work Report presented in the first plenary session of the 13th National People’s Congress of the PRC included certain policy requirements regarding network speed upgrade and tariff reduction, including requirements to: (i) increase efforts in implementing network speed upgrade and tariff reduction measures; (ii) achieve full coverage of high-speed broadband in cities and rural areas; (iii) expand the coverage of free ~~Wifi~~WiFi Internet access in public areas; (iv) substantially reduce the tariffs of household broadband, corporate broadband and dedicated leased line; (v) cancel data roaming fee; and (vi) reduce mobile data tariff by at least 30% in 2018. In 2018, we implemented corresponding measures in due course to meet such policy requirements, ~~including~~including: (i) starting July 1, 2018, we cancelled data roaming fee within mainland China; (ii) we launched “large data traffic packages” to reduce the unit price of data traffic products; (iii) we further reduced the tariff for international roaming charges in various countries and regions; (iv) we carried out broadband upgrade by promoting Hundred-Mbps broadband; and (v) we reduced the tariff of Internet dedicated line access and commercial dedicated line access for small and medium enterprises.

On March 5, 2019, the Government Work Report presented in the second plenary session of the 13th National People’s Congress of the PRC included policy requirements regarding further promotion of network speed upgrade and tariff reduction. Such requirements include a 15% further reduction in the average broadband tariff for small and medium enterprises and a more than 20% reduction in the average tariff of mobile network in 2019. WeIn 2019, we implemented corresponding measures in due course to meet such policy requirements, including: (i) starting January 1, 2019, we reduced out-of-package data tariff; (ii) we enhanced the promotion of large data traffic packages, enabling more subscribers to enjoy data traffic with lower unit tariff; (iii) we launched discounted traffic packages to serve the needs for specific subscribers; and (iv) starting May 1, 2019, we further reduced the tariff of Internet dedicated line access, and carried out free speed upgrade programs for qualified small and medium enterprise subscribers.

On May 22, 2020, the Government Work Report presented in the third plenary session of the 13th National People’s Congress of the PRC further required a 15% reduction in the average tariff of broadband and dedicated line. In 2020, we likewise implemented corresponding measures in due course to meet such policy requirements, including (i) carrying out optical fiber transformation and tariff discounts for our broadband subscribers that are small and medium enterprises, manufacturing enterprises and dedicated line subscribers, and (ii) implementing free speed upgrade for our qualified subscribers.

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On March 5, 2021, the Government Work Report presented in the fourth plenary session of the 13th National People’s Congress of the PRC further required a 10% reduction in the average tariff of broadband and dedicated line for small and medium enterprises. In 2021, we will take ~~appropriate~~corresponding measures to meet such policy requirements, including: (i) carrying out speed upgrade and favorable initiatives for small and medium enterprises subscribers of broadband and dedicated line access to launch speed upgrades, integration upgrades and service upgrades, and upgrading speed free of charge for qualified small and medium enterprises subscribers of broadband and dedicated line access; (ii) providing cloud product discount packages for small and medium enterprises subscribers; (iii) increasing policy awareness for small and medium enterprises subscribers, especially in ~~due course.~~areas where they are concentrated, such as buildings and parks.

Though we strive to sustain our competitive advantages through various initiatives, our revenues and profitability may be affected by these requirements on network speed upgrade and tariff reduction. We may also have to devote substantial resources, incur significant expenses and make strategic adjustment of business and operation strategies in order to meet these requirements and maintain our competitive advantages. Failure to effectively respond to such evolving standards in a timely and cost-efficient manner may materially and adversely affect our business, financial condition and results of operations. In addition, we may face further policy requirements imposed by the PRC government on network speed upgrade and ~~price adjustment~~tariff reduction in the future. Any such requirements could materially and adversely affect our revenues, profitability and results of operations.

In China, the regulatory framework governing the collection, processing, storage and use of business information and personal data is rapidly evolving. For example, the Cyber Security Law of the ~~PRC~~People’s Republic of China (“Cyber Security Law”) came into force on June 1, 2017, which sets forth the general framework regulating network products, equipment and services, as well as the operation and maintenance of information networks, the protection of personal data, and the supervision and administration of cyber security in China. ~~In 2018,~~On October 1, 2020, the ~~PRC Government also published~~revised Information Security ~~Technology —~~ Technology—Personal Information Security Specification (信息安全技术个人信息安全规范) which superseded the previous specification published in 2018 was formally implemented, adding provisions with respect to “autonomous selection of multiple business functions”, ~~setting forth detailed guidelines on~~“convergence and integration of personal information collected for different business purposes”, “usage restrictions of user portraits”, “third-party access management”, “personal information security project”, and “personal information processing activity records”, etc. It also revised “exceptions for authorization and consent”, “personal information subject cancellation accounts”, etc., which provides more privacy protection with respect to the collection, utilization and retention of personal ~~information and privacy protection.~~information. If we are unable to respond to changing laws, regulations, policies and guidelines related to privacy or cyber security, our business, financial condition, results of operations and prospects may be materially and adversely affected.

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Moreover, on January 6, 2016, the MIIT issued the Guidance on the Wholesale Price Adjustments of Mobile Telecommunication Resale Business (关于移动通信转售业务批发价格调整的指导意见), pursuant to which the MIIT required that the wholesale price for resale of mobile telecommunications services should be lower than the per unit price (or package price) for similar services of the mobile networks operators. On December 1, 2016, the amended PRC Regulations on the Management of Radio Operation (中华人民共和国无线电管理条例)came into effect. The amended provision provided that a permit is required for using certain radio frequencies, which may be obtained through a bidding process or auctions. As such, we may incur additional costs in the future when we need to obtain the permit to use certain radio ~~frequencies, such as the frequency bands for 5G.~~frequencies. In addition, the PRC government has taken various initiatives and promulgated a number of regulations to encourage private capital to invest in the telecommunications industry, all of which have intensified, and are expected to continue to intensify, the competition in the telecommunications industry in the PRC. See ~~“ – D. Risk Factors –~~ “—Risks Relating to our ~~Business –~~ Business—We face increasing competition, which may materially and adversely affect our business, financial condition and results of operations” under this Item.

Furthermore, PRC telecommunications services providers operating in other jurisdictions are also subject to the licensing and other regulatory requirements and supervision of the relevant foreign government agencies. See “—Risks Relating to our Business—Our authorizations to provide telecommunications services in the United States are subject to actions by the relevant authorities in the United States and we cannot assure you we will be able to maintain those authorizations in the future” under this Item.

The regulations and policies that govern the telecommunications industry in the PRC have experienced continuous changes in the past several years. Any significant future changes in regulations or policies that govern the telecommunications industry may have a material adverse effect on our business and operations.

The PRC government may require us, along with other providers in the PRC, to provide universal services with specified obligations, and we may not be compensated adequately for providing such services.

Under the Telecommunications Regulations promulgated by the State Council, telecommunications service providers in the PRC are required to fulfill universal service obligations in accordance with relevant regulations to be promulgated by the PRC government. The MIIT has the authority to delineate the scope of universal service obligations. The MIIT, together with other governmental authorities, is also responsible for formulating administrative rules relating to the establishment of a universal service fund and compensation schemes for universal services. The PRC government currently uses financial resources to compensate for the expenses incurred in the ~~“Coverage to All Villages” and the “Broadband China”~~universal services related projects before the establishment of a universal service fund. See “Item 4. Information on the ~~Company –~~ Company—B. Business ~~Overview –~~ Overview—Regulatory and Related ~~Matters –~~ Matters—Universal Services”. However, the compensation from the PRC government may not be sufficient to cover all of our expenses for providing the telecommunications ~~services under the “Coverage to All Villages” and the “Broadband China” projects.~~universal services.

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Under the Telecommunications Regulations, all PRC telecommunications operators shall provide universal services, and we expect to perform our duties thereunder accordingly. We may not be able to realize adequate return on investments for expanding networks to, and providing telecommunications services in, those economically less developed areas due to potentially higher capital expenditure requirements, lower usage by customers and lack of flexibility in setting our tariffs. If we are required to provide universal services with specified obligations without proper compensation by the government, our business and profitability may be adversely affected.

We have experienced incidents of executive misconduct in the past, which could adversely impact our reputation, our financial condition and results of operations as well as the trading price of our securities.

According to the information disclosed on the website of Communist Party of China Central Commission for Discipline Inspection, or the CCDI, and Ministry of Supervision of the PRC, or the MOS, on December 27, 2015, Mr. Chang Xiaobing, the former Chairman of Unicom Group and the then Chairman of China Telecom Group was under investigation by such authorities for suspected serious disciplinary violations. Mr. Chang was appointed as the chief executive officer of the Company on September 1, 2015 and the director and chairman of the Company on October 23, 2015. On December 30, 2015, Mr. Chang resigned from his positions as the executive director, chairman and chief executive officer of the Company with effect from the same date. Prior to his resignation, Mr. Chang had worked at the Company for four months. Mr. Chang was sentenced to six years of imprisonment over corruption charges in May 2017. According to the information disclosed on the website of the CCDI and the MOS on September 29, 2017, Mr. Zhen Caiji, the former Party Secretary and President of China Academy of Telecommunications Technology was expelled from the Communist Party of China and dismissed from public service for serious disciplinary violations and was under investigation of suspected criminal violations. Mr. Zhen was appointed as an executive vice president of the Company on November 4, 2016 and resigned from the position of executive vice president of the Company on May 22, 2017. Prior to his resignation, Mr. Zhen had worked at the Company for seven months. The investigation and trial conducted by the PRC authorities on Mr. Chang and Mr. Zhen may harm our reputation and adversely affect our financial condition and results of operations as well as the trading price of our securities.

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Actual or perceived health risks associated with the use of mobile devices could impair our ability to retain and attract customers of our mobile services, reduce mobile service usage or result in litigation.

Concerns have been expressed in some countries that the electromagnetic signals emitted by wireless telephone handsets and base stations may pose health risks at exposure levels below existing guideline levels, and interfere with the operation of electronic equipment. While we comply with applicable standards for radio frequency emissions and we are not aware that such health risks have been substantiated, there can be no assurance that the actual, or perceived, risks associated with the transmission of electromagnetic signals will not impair our ability to retain customers and attract new customers, significantly reduce mobile service and wireless communications usage or result in litigation.

Risks Relating to the People’s Republic of China

Substantially all of our assets are located in the PRC and substantially all of our revenues are derived from our operations in the PRC. Accordingly, our results of operations and prospects are subject, to a significant extent, to the economic, political and legal developments in the PRC.

The PRC’s economic, political and social conditions, as well as government policies, could affect our business.

Substantially all of our business, assets and operations are located in the PRC. The PRC’s economy differs from the economies of most developed countries in many respects, including without limitation:

government involvement;

level of development;

growth rate;

control of foreign exchange; and

allocation of resources.

While the PRC’s economy has experienced significant growth in the past 40 years, growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall economy of the PRC, but may also have a negative effect on us.

Economic developments in the PRC have a significant effect on our financial condition and results of operations. Although the PRC has been one of the world’s fastest growing economies in terms of GDP growth in the past 40 years, the economic growth of the PRC has experienced a marked slowdown in the past few years and may continue to slow down. For example, the GDP growth rate of the PRC decreased from ~~11.4%~~10.6% in ~~2007~~2010 to ~~6.6%~~2.3% in ~~2018. There~~2020. Although the PRC’s GDP growth rate still outpaced other major economies in 2020, there is no assurance that the ~~GDP growth rate~~PRC’s economy will continue to outperform other countries.

In addition, the COVID-19 pandemic and its impact might continue to cause a decline of global economy and an evident slowdown in the economic development in many countries and China might not be able to avoid being affected by such development. As the PRC is increasingly connected with the rest of the ~~PRC will not further decline. A~~world, any slowdown ~~in economic growth could reduce business activities and demand for our services. The~~or decline of global economy ~~may continue to deteriorate in the future and continue to have an adverse~~might adversely impact on the PRC ~~economy.~~economy in various respects, including reduction in exports, decreased consumer spending, higher unemployment levels, declined business confidence and continued volatility in financial markets. Any significant slowdown or decline in the PRC economy ~~could~~might have a material adverse ~~effect~~impact on the PRC telecommunications industry as well as our business and ~~operations.~~operations, including decreased demand for, or delayed purchase of, our services and products, especially with regard to non-essential items, such as value-added or premium services.

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We are subject to reviews and inspections by governmental authorities and regulatory agencies.

Certain Chinese regulatory authorities may conduct compliance checks on us in accordance with relevant laws and regulations. These reviews and inspections could cover a broad range of aspects in relation to our business and operations. We cannot predict the impact of any findings of these reviews and inspections, and we cannot assure you that the outcome of any such reviews and inspections would not have a material adverse effect on our business, financial condition, results of operations and prospects.

In 2018, the National Audit Office of the People’s Republic of China, or the NAO, conducted an audit on the financial revenues and expenditures of China Telecommunications Corporation, the controlling shareholder of our Company, and its certain subsidiaries (including us) for the year of 2016. We published an announcement on The Stock Exchange of Hong Kong Limited and filed a Form~~6-K~~ with the SEC on June 20, 2018 in relation to such audit and believe that the issues identified in the audit have no material impact on our overall operating results, financial statements and internal control of the Company.

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Government restriction on currency conversion may adversely affect our financial condition.

We receive substantially all of our revenues in Renminbi, which currently is not a freely convertible currency. A portion of these revenues must be converted into other currencies to meet our foreign currency obligations. These foreign currency-denominated obligations include:

payment of interest and principal on foreign currency-denominated debt;

payment for equipment and materials purchased offshore; and

payment of dividends declared, if any, in respect of our H shares.

Under the PRC’s existing foreign exchange regulations, we will be able to pay dividends in foreign currencies without prior approval from the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, the PRC government may take measures at its discretion in the future to restrict access to foreign currencies for both current account transactions and capital account transactions. We may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs, if the PRC government restricts access to foreign currencies for current account transactions.

Foreign exchange transactions under our capital account, including but not limited to foreign currency-denominated borrowings from foreign banks, issuance of foreign currency-denominated debt securities, if any, and principal payments in respect of foreign currency-denominated obligations, continue to be subject to significant foreign exchange controls and require the approval of or registration with SAFE or certain banks designated by SAFE, as applicable. These limitations could affect our ability to obtain foreign exchange through debt or equity financing, or to obtain foreign exchange to meet our payment obligations under the debt securities, if any, or to obtain foreign exchange for capital expenditures.

Fluctuation of the Renminbi could materially affect our financial condition, results of operations and cash flows.

We receive substantially all of our revenues, and our financial statements are presented, in Renminbi. The value of the Renminbi against U.S. dollar and other currencies fluctuates and is affected by, among other things, the policies of the PRC government and changes in the PRC’s and international political and economic ~~conditions.~~conditions, as well as supply and demand in the local market. For example, the COVID-19 pandemic has led to disruption and volatility in the global financial markets, which has increased uncertainties in the foreign exchange markets and also fluctuations in the value of the Renminbi. On July 21, 2005, the People’s Bank of China introduced a managed floating exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. In April 2012, the People’s Bank of China expanded the daily floating band of Renminbi trading prices against the U.S. dollar in the inter-bank spot foreign currency exchange market from 0.5% to 1.0%, which was further expanded to 2.0% in March 2014. On August 11, 2015, the People’s Bank of China announced that themid-point exchange rate for the floating range of Renminbi against the U.S. dollar will be determined based on market maker submissions that take into account theRenminbi-U.S. dollar exchange rate at the previous day’s closing of the inter-bank spot foreign exchange market, the supply and demand dynamics and the movements of other major currencies. With the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi internationalization, we cannot assure you that the People’s Bank of China ~~may in the future~~will not announce further changes to the exchange rate system and there is no guarantee that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. There is uncertainty in the exchange rate of the Renminbi against the U.S. dollar in the future.

Fluctuations in exchange rates may adversely affect the value, translated or converted into U.S. dollars or Hong Kong dollars, of our net assets, earnings and any declared dividends payable on our H shares in foreign currency terms. Our financial condition and results of operations may also be affected by changes in the value of certain currencies other than the Renminbi, in which our obligations are denominated. For further information on our foreign exchange risks and certain exchange rates, see “Item ~~3. Key Information—A. Selected Financial Data—Exchange Rate Information” and “Item~~ 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Exchange Rate Risk”. We cannot assure you that any future movements in the exchange rate of the Renminbi against the U.S. dollar or other foreign currencies will not adversely affect our results of operations and financial condition. We do not currently engage in any foreign currency hedging activities.

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The PRC legal system has inherent uncertainties that could limit the legal protections available to you.

We were incorporated under the PRC ~~laws~~Company Law and are governed by our Articles of Association. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. ~~Since 1979,~~With the continuous development of the Chinese economy, the PRC government has promulgated laws and regulations dealing with economic matters, such as issuance and trading of securities, foreign investment, corporate organization and governance, commerce, taxation and ~~trade.~~trade, with the aim of forming a comprehensive business legal system. However, because ~~these~~many related laws and regulations are relatively new, and because of the ~~limited number of published cases and theirnon-binding~~ ~~nature, interpretation and enforcement~~rapid development in the PRC telecommunications industry, the impact of these laws and regulations ~~involve~~on the rights and obligations of relevant persons involves uncertainties.

~~- 15 -~~

The ability of our shareholders to enforce their rights in respect of violations of corporate governance procedures may be limited. In this regard, our Articles of Association provide that most disputes between holders of H shares and our Company, ~~directors, supervisors,~~Directors, Supervisors, officers or holders of domestic shares, arising out of our Articles of Association or the PRC Company Law and related regulations concerning the affairs of our Company, are to be resolved through arbitration by an arbitration tribunal in Hong Kong or the PRC, rather than by a court of law. Awards that are made by PRC arbitral authorities recognized under the Arbitration Ordinance of Hong Kong can be enforced in Hong Kong. Hong Kong arbitration awards are also enforceable in the PRC. However, to our knowledge, no action has been brought in the PRC by any holder of H shares to enforce an arbitral award, and we are uncertain as to the outcome of any action, if brought in the PRC to enforce an arbitral award made in favor of holders of H shares. See “Item 10. Additional Information—B. Memorandum and Articles of Association”.

To our knowledge, there has not been any published report of judicial enforcement in the PRC by holders of H shares of their rights under the Articles of Association of a PRC company or the PRC Company Law.

Unlike in the United States, the applicable PRC laws did not specifically allow shareholders to sue the directors, supervisors, senior management or other shareholders on behalf of the corporation to enforce a claim against such party or parties that the corporation has failed to enforce itself until January 1, 2006, when the amendments to the PRC Company Law passed on October 27, 2005 became effective. The amended PRC Company Law provides that shareholders, under certain circumstances, may sue the directors, supervisors and senior management on behalf of the corporation. Furthermore, the Supreme People’s Court issued judicial interpretations on the aforementioned provisions in the PRC Company Law, i.e., Provisions of the Supreme People’s Court on Issues Concerning the Application of the PRC Company Law (I) and (IV) (最高人民法院关于适用《中华人民共和国公司法》若干问题的规定(一)和(四)) in April 2006 and August 2017, respectively. However, our minority shareholders may not be able to enjoy protections to the same extent as to shareholders of companies incorporated under the state laws of the United States.

Although we are subject to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and the Hong ~~Kong’s Codes~~Kong Code on Takeovers and Mergers and ShareBuy-backs (the “Takeovers ~~Codes”~~Code”), the holders of H shares are not able to bring actions solely on the basis of violations of the Listing Rules or the Takeovers Codes, and must rely on ~~the~~The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock ~~Exchange~~Exchange” or “HKSE”) and the Securities and Futures Commission of Hong Kong to enforce the Listing Rules or the Takeovers Codes, as the case may be.

You may experience difficulties in effecting service of legal process and enforcing judgments against us and our ~~management.~~management, and the ability of U.S. authorities to bring action in China may also be limited.

We are a company incorporated under the PRC ~~laws,~~Company Law, and substantially all of our assets and our subsidiaries are located in the PRC. In addition, most of our ~~directors~~Directors and officers reside within the PRC, and substantially all of the assets of our ~~directors~~Directors and officers are located within the PRC. As a result, it may not be possible to effect service of process within the United States or elsewhere outside the PRC upon most of our ~~directors~~Directors or officers, including with respect to matters arising under applicable laws and regulations. Moreover, our PRC counsel has advised us that the PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States, the United Kingdom or most other Western countries. Our Hong Kong counsel has also advised us that Hong Kong has no arrangement for the reciprocal enforcement of judgments with the United States.

As a result, ~~recognition~~you may not have the ability to seek certain legal remedies in U.S. courts as private plaintiffs. Even if you sue successfully in a U.S. court or any of the other jurisdictions mentioned above, you may not be able to collect on such judgment against the Company or our Directors and officers. You may have to rely on domestic legal remedies that are available in the PRC. Recognition and enforcement in the PRC of judgments of a court in the United States and any of the other jurisdictions mentioned above in relation to any matter not subject to a binding arbitration provision may be difficult or impossible. In addition, according to Article 177 of the amended PRC Securities Law, which became effective in March 2020, no overseas securities regulator can directly conduct investigations or evidence collection activities within the PRC and no entity or individual in China may provide documents and information relating to securities business activities to overseas regulators without Chinese government approval. Therefore, the SEC, the U.S. Department of Justice and other U.S. authorities may have difficulties in conducting investigations, or bringing and enforcing actions against us or our Directors and officers in China.

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Holders of H shares may be subject to PRC taxation.

Under the Enterprise Income Tax Law of the PRC, or the EIT Law, and its implementing regulations, holders of our H shares or ADSs which are“non-resident enterprises” for the EIT Law’s purpose are subject to enterprise income tax at the rate of 10.0% with respect to dividends paid by us and income derived from sale of our H shares or ADSs, unless reduced under an applicable tax treaty. In addition, a resident enterprise, including a foreign enterprise whose “de facto management body” is located in the PRC, is not subject to any PRC income tax with respect to dividends paid to it by us. The capital gains realized by such resident enterprise are subject to the PRC enterprise income tax. Specifically, according to the Notice of the PRC State Administration of Taxation Concerning the Withholding Enterprise Income Tax on Dividend Distributed by PRC Resident Enterprises to OverseasNon-Resident Enterprise Holders of H shares issued in November 2008 and the Approval of the PRC State Administration of Taxation Concerning the Collection of Enterprise Income Tax on Dividend fromB-shares Received byNon-Resident Enterprise issued in July 2009, when PRC resident enterprises distribute dividend to overseasnon-resident enterprise holders of H shares for the year 2008 and the years thereafter, the 10.0% enterprise income tax will be ~~withhold.~~withheld. The Company will withhold the 10.0% enterprise income tax when it pays ~~dividend~~dividends to holders of H shares or ADSs who arenon-resident enterprises. See “Item 10. Additional Information—E. Taxation—People’s Republic of China”.

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Furthermore, dividends paid by us to holders of our H shares or ADSs who are individuals outside the PRC are subject to a withholding tax of 20.0% unless reduced by an applicable tax treaty. For example, Hong Kong and Macau individual residents are subject to a withholding tax of 10.0% on dividends paid to them. In addition, gains realized by individuals upon the sale or other disposition of our H shares or ADSs are temporarily exempted from PRC capital gains tax. If the exemptions are withdrawn in the future, holders of our H shares or ADSs who are individuals may be required to pay PRC capital gains tax upon the sale or other disposition of our H shares. See “Item 10. Additional Information—E. Taxation—People’s Republic of China”.

Natural disasters and health hazards in the PRC may severely disrupt our business and operations and may have a material adverse effect on our financial condition and results of operations.

Several natural disasters and health hazards have struck mainland China in recent years. See “—Risks Relating to Our Business—Our business may be materially and adversely affected by the COVID-19 pandemic or future health epidemics, pandemics or outbreaks” under this Item. In ~~2014, three major earthquakes registering 6.1, 6.5~~2020, certain areas of mainland China suffered from natural disasters, including floods in Yangtze River and ~~6.6, respectively, on the Richter scale struck Yunan~~Huai River basins affecting large areas, super typhoon “Hagupit” sweeping across many provinces and cities in south China, multiple landslides in Longnan of Gansu Province and another major earthquake registering 6.3 on the Richter scale struck Sichuan Province, causing severe damages to telecommunications equipment as well as disruptions to telecommunications services in the affected areas. In July 2016, southern China suffered severe rainstorms and flooding,Wuxi of Chongqing Municipality, which resulted in significant ~~damages~~damage to the telecommunications equipment in the affected areas. ~~In 2017, several natural~~We have suffered damage from similar nature disasters struck mainland China, including the heaviest rainfall ever recorded hitting Hunan Province, a major earthquake registering 7.0 on the Richter scale struck Jiuzhaigou County, Sichuan Province and typhoons “Heavenly Pigeon” and “Paka” successively hit Guangdong and Guangxi Provinces, causing severe damages to the telecommunications equipment in the ~~affected areas.~~past years. We are unable to predict the effect, if any, that any future natural disasters and health hazards may have on our business. Any future natural disasters and health hazards may, among other things, significantly disrupt our ability to adequately staff our business, and may generally disrupt our operations. Furthermore, such natural disasters and health hazards may severely restrict the level of economic activity in affected areas, which may in turn materially and adversely affect our business and prospects. As a result, any severe natural disasters or health hazards may have a material adverse effect on our financial condition and results of operations.

The audit reports included in this annual report have been prepared by our independent registered public accounting firm whose work may not be inspected fully by the Public Company Accounting Oversight Board and, as such, you may be deprived of the benefits of such inspection. In addition, legislative and regulatory developments related to U.S.-listed China-based companies due to lack of PCAOB inspection and other developments may have a material adverse impact on our listing and trading in the U.S.

Our independent registered public accounting firm, or our auditor, that issues the audit reports included in our annual reports filed with the U.S. Securities and Exchange Commission, as ~~auditors of companies that are traded publicly in the United States and~~ a firm registered with the Public Company Accounting Oversight Board (United States), or the PCAOB, is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards.

Because we have substantial operations within the PRC and the PCAOB is currently unable to conduct inspections of the work of our ~~independent registered public accounting firm~~auditor as it relates to those operations without the approval of the Chinese authorities, our ~~independent registered public accounting firm~~auditor is not currently inspected fully by the PCAOB. This lack of PCAOB inspections in the PRC prevents the PCAOB from regularly evaluating our ~~independent registered public accounting firm’s~~auditor’s audits and its quality control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections.

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On December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in their oversight of financial statement audits of U.S.-listed companies with significant operations in China. ~~However, it remains unclear what further actions~~On November 4, 2019, the SEC announced that SEC and PCAOB had dialog with the “Big Four” accounting firms, which emphasized the need for effective and consistent global firm oversight of member firms, including those operating in China. On February 19, 2020, the SEC and ~~PCAOB will take to address the problem.~~

~~Inspections of other firms that~~ the PCAOB ~~has conducted outside~~further issued a joint statement on continued dialog with “Big Four” accounting firms on audit quality in China, highlighting that PCAOB continues to be prevented from inspecting the ~~PRC have identified deficiencies~~audit work and practices of PCAOB-registered audit firms in China on a comparable basis to other non-U.S. jurisdictions. On April 21, 2020, the SEC and the PCAOB issued another joint statement reiterating the greater risks of insufficient disclosures from companies in many emerging markets, including China, compared to those ~~firms’~~from U.S. domestic companies. In discussing the specific issues related to these risks, the statement again highlighted the PCAOB’s inability to inspect audit ~~procedures~~work and ~~quality control procedures, which may be addressed as part~~practices of ~~the inspection process~~accounting firms in China with respect to ~~improve future audit quality.~~U.S. reporting companies. The inability of the PCAOB to conduct full inspections of auditors in the PRC makes it more difficult to evaluate the effectiveness of our ~~independent registered public accounting firm’s~~auditor’s audit procedures or quality control procedures as compared to auditors outside the PRC that are subject to PCAOB inspections. Investors may lose confidence in our reported financial information and procedures and the quality of our financial statements.

As part of a continued regulatory focus in the United States on access to audit and other information currently protected by national law, in particular PRC laws, on June 4, 2020, the then U.S. President issued a memorandum ordering the President’s Working Group on Financial Markets, or the PWG, to submit a report to the President within 60 days of the memorandum that includes recommendations for actions that can be taken by the executive branch and by the SEC or the PCAOB on Chinese companies listed on U.S. stock exchanges and their audit firms. On August 6, 2020, the PWG released the report. In particular, with respect to non-compliant jurisdictions that do not grant the PCAOB sufficient access to fulfill its statutory mandate, or NCJs, the PWG recommended that enhanced listing standards be applied to companies from NCJs for seeking initial listing and remaining listed on U.S. stock exchanges. Under the enhanced listing standards, if the PCAOB does not have access to work papers of the principal audit firm located in a NCJ for the audit of a U.S.-listed company as a result of governmental restrictions, the U.S.-listed company may satisfy this standard by providing a co-audit from an audit firm with comparable resources and experience where the PCAOB determines that it has sufficient access to the firm’s audit work papers and practices to inspect the co-audit. The report recommended a transition period until January 1, 2022 before the new listing standards apply to companies already listed on U.S. stock exchanges. On August 10, 2020, the SEC announced that the SEC chairman had directed the SEC staff to prepare proposals in response to the PWG report, and that the SEC was soliciting public comment and information with respect to the development of these proposals. Furthermore, the Division of Corporation Finance of the SEC issued staff guidance on Disclosure Considerations for China-Based Issuers on November 23, 2020. Any resulting actions, proceedings or new rules from these recommendations could adversely affect the listing and compliance status of China-based issuers listed in the United States, including us, and may have a material and adverse impact on the trading of the securities of such issuers, including our ADSs.

~~- 17 -~~Furthermore, on December 18, 2020, the United States enacted the Holding Foreign Companies Accountable Act, or the HFCA Act. The HFCA Act includes requirements for the SEC to identify issuers whose audit reports are prepared by auditors that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the auditor’s local jurisdiction. The HFCA Act also requires public companies on this SEC list to certify that they are not owned or controlled by a foreign government (the “Submission Requirement”) and make certain additional disclosure in their SEC filings (the “Disclosure Requirement”). In addition, if the auditor of a U.S.-listed company is not subject to PCAOB inspections for three consecutive “non-inspection” years after December 18, 2020, the SEC is required to prohibit the securities of these issuers from being traded on a U.S. national securities exchange, such as the NYSE, on OTC markets in the U.S. or through any other method within the SEC’s jurisdiction to regulate. The HFCA Act requires the SEC to issue new rules within 90 days of the enactment to implement the HFCA Act. On December 18, 2020, the SEC then-Chairman stated that prior to enactment of the HFCA Act, the SEC staff were finalizing recommendations for proposed rules regarding enhanced listing standards for U.S. securities exchanges and auditor qualifications for the SEC’s consideration and directed the SEC staff to consider providing a single consolidated proposal for the SEC’s consideration on issues related to the PCAOB’s access to audit work papers, exchange listing standards and trading prohibitions due to the substantial overlap between the SEC staff’s proposal in response to the PWG Report’s recommendations and the HFCA Act. On March 24, 2021, the SEC issued the Interim Final Rule on HFCA Act Disclosure dated March 18, 2021 and requested for comments until May 5, 2021 when the Interim Final Rule would become effective. The Interim Final Rule would add Item 16I (Disclosure Regarding Foreign Jurisdictions that Prevent Inspections) in Form 20-F to reflect the Disclosure Requirement, which requires disclosure in a foreign issuer’s annual report regarding the audit arrangements of, and governmental influence on, such foreign issuer. The Interim Final Rule clarified that a foreign issuer that is owned or controlled by a foreign governmental entity is not required to comply with the Submission Requirement. In addition, a foreign issuer will not be required to comply with Item 16I in Form 20-F until the SEC has identified it as having a non-inspection year under a process to be subsequently established by the SEC with appropriate notice. Once identified, a foreign issuer will be required to comply with Item 16I in Form 20-F in its annual report for each fiscal year in which it is identified. The SEC plans to separately address implementation of the trading prohibitions in the HFCA Act in a future notice and comment process. While we understand that there has been dialogue among the CSRC, the SEC and the PCAOB regarding the inspection of PCAOB-registered accounting firms in China, there can be no assurance that our auditor or we will be able to comply with requirements imposed by U.S. regulators.

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As of the date of this annual report, we have not been identified by the SEC as having a non-inspection year. However, we cannot assure you that we will not be identified as such in the future. In addition, as a result of the enactment of the HFCA Act, trading of our ADSs in the United States may be effectively terminated if our auditor is not inspected by the PCAOB for three consecutive years. This could also result in our ADSs being delisted from the NYSE. Subject to the terms of the deposit agreement entered into among the Company, the Bank of New York Mellon, and holders and beneficial owners of ADSs from time to time, holders of our ADSs may convert the ADSs into our H shares listed on the Hong Kong Stock Exchange but will incur costs in order to do so. See “Item 12. Description of Securities Other than Equity Securities” for further information. The value and liquidity of our ADSs may therefore be materially and adversely affected.

If the settlement reached between the SEC and the Big FourPRC-based accounting firms (including the Chinese affiliate of our independent registered public accounting firm), concerning the manner in which the SEC may seek access to audit working papers from audits in China of U.S.-listed companies, is not or cannot be ~~performed~~carried out in a manner acceptable to authorities in China and the U.S., we could be unable to timely file future financial statements in compliance with the requirements of the Exchange Act.

In late 2012, the SEC commenced administrative proceedings under Rule 102(e) of its Rules of Practice and also under the Sarbanes-Oxley Act of 2002 against the mainland Chinese affiliates of the “Big Four” accounting firms (including the mainland Chinese affiliate of our independent registered public accounting firm). A first instance trial of the proceedings in July 2013 in the SEC’s internal administrative court resulted in an adverse judgment against the firms. The administrative law judge proposed penalties on the Chinese accounting firms including a temporary suspension of their right to practice before the SEC, although that proposed penalty did not take effect pending review by the Commissioners of the SEC. On February 6, 2015, before a review by the Commissioner had taken place, the Chinese accounting firms reached a settlement with the SEC whereby the proceedings were stayed. Under the settlement, the SEC accepts that future requests by the SEC for the production of documents will normally be made to the CSRC. The Chinese accounting firms will receive requests matching those under Section 106 of the Sarbanes-Oxley Act of 2002, and are required to abide by a detailed set of procedures with respect to such requests, which in substance require them to facilitate production via the CSRC. If they fail to meet specified criteria, the SEC retains authority to impose a variety of additional remedial measures on the Chinese accounting firms depending on the nature of the failure. Remedies for any future noncompliance could include, as appropriate, an automaticsix-month bar on a single firm’s performance of certain audit work, commencement of a new proceeding against a firm, or in extreme cases the resumption of the recently-stayed proceeding against all four firms. The SEC also reserves the right to resume those proceedings in circumstances where, notwithstanding the accounting firms’ compliance with the procedures in the settlement agreement, the SEC does not receive a production of documents which it considers satisfactory (for example because of action or inaction by the Chinese authorities). Under the terms of the settlement, the underlying proceeding against the fourPRC-based accounting firms was deemed dismissed with prejudice at the end of four years starting from the settlement date, which was February 6, 2019. We cannot predict if the SEC will further challenge the fourPRC-based accounting firms’ compliance with U.S. law in connection with U.S. regulatory requests for audit work papers or if the results of such a challenge would result in the SEC imposing penalties such as suspensions. If additional challenges are imposed on the Chinese affiliates of the ~~“big four”~~“Big Four” accounting firms, we could be unable to timely file future financial statements in compliance with the requirements of the Exchange Act.

In the event that the SEC restarts the administrative proceedings, depending upon the final outcome listed companies in the United States with major PRC operations may find it difficult or impossible to retain auditors in respect of their operations in the PRC, which could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act. In addition, if the Chinese affiliate of our independent registered public accounting firm were denied, even temporarily, the ability to practice before the SEC and we were unable to timely find another registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined not to be in compliance with the requirements of the Exchange Act. These could lead to possible delisting of our ~~ordinary shares~~ADSs from the NYSE or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the United States, and adversely affect the value and liquidity of our ADSs in the United States. Moreover, any negative news about any such future proceedings against these accounting firms may cause investor uncertainty regarding China-based, United States-listed companies and the market price of our ~~ADSs~~securities may be adversely affected.

Risks Relating to Our ADSs

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.

Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities laws and regulations in the United States that are applicable to U.S. domestic issuers, including:

the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;

the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;

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the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time;

the selective disclosure rules by issuers of material nonpublic information under Regulation FD; and

certain audit committee independence requirements in Rule 10A-3 of the Exchange Act.

We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, our announcements relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.

Item 4.

Information on the Company.

A.	A. History and Development of the Company

Our Restructuring and Initial Public Offering in 2002

We were incorporated under the PRC ~~laws~~Company Law on September 10, 2002 as a joint stock company with limited liability under the name “China Telecom Corporation Limited”. As part of our initial restructuring, China Telecom Group’s telecommunications operations in Shanghai Municipality, Guangdong Province, Jiangsu Province and Zhejiang Province, together with the related assets and liabilities, were transferred to us in consideration of 68,317,270,803 of our shares.

Following our restructuring, China Telecom Group continues to be the holder of the licenses required for operating our telecommunications business. In accordance with the approval of the MIIT, we derive our exclusive rights to operate basic telecommunications business and the rights to operate related value-added telecommunications business from our status as a subsidiary controlled by China Telecom Group, and China Telecom Group must hold and maintain all licenses received from the MIIT in connection with our business for our benefits. The government currently does not charge license fees for the telecommunications licenses held by China Telecom Group.

~~- 18 -~~

In 2002, we successfully completed our initial public offering of H shares and raised approximately RMB10,659 million in aggregate net proceeds for us. Upon completion of our initial public offering, our H shares have been listed for trading on the Hong Kong Stock Exchange, and ADSs representing our H shares have been listed for trading on the NYSE.

~~Industry Restructuring and Our Acquisition of the CDMA Business in 2008~~

~~Industry Restructuring in 2008~~

In 2008, pursuant to a joint announcement relating to the further reform of the telecommunications industry in the PRC issued by the MIIT, the NDRC and the MOF, the following restructuring transactions took place in the telecommunications industry: (a) the acquisition by China Telecom Group of the assets of the CDMA network and the acquisition by us of the subscriber base of the CDMA network then owned by China Unicom; (b) the acquisition by China Telecom Group of the basic telecommunications service business operated by China Satellite Communications Corporation, or China Satellite; (c) the merger between China Unicom and China Netcom; and (d) the acquisition of China Railcom by China Mobile.

~~Our Acquisition of the CDMA Business~~

On July 27, 2008, we, China Unicom and China Unicom Corporation Limited entered into an acquisition agreement, or the CDMA Acquisition Agreement, pursuant to which we agreed to acquire from China Unicom Corporation Limited the CDMA Business and related assets and liabilities (including the entire equity interest in China Unicom (Macau) Company Limited and 99.5% of the equity interest in Unicom Huasheng Telecommunications Technology Co. Ltd., or Unicom Huasheng) for a total consideration of RMB43,800 million. The cost of the acquisition had been fully paid by us by February, 2010.

~~Related Transactions~~

~~Lease of capacity on the CDMA Network by our Company from China Telecom Group~~

On July 27, 2008, China Telecom Group, Unicom Group, and Unicom New Horizon Mobile Telecommunications Company Limited, or Unicom New Horizon, a wholly-owned subsidiary of Unicom Group, entered into a CDMA network disposal agreement, pursuant to which Unicom Group and Unicom New Horizon sold the CDMA cellular telecommunications network constructed by Unicom New Horizon, or the CDMA Network, to China Telecom Group for a consideration of RMB66,200 million, or the CDMA Network Acquisition. On October 1, 2008, China Telecom Group completed the acquisition of the CDMA Network. On July 27, 2008, we entered into a CDMA network capacity lease agreement with China Telecom Group to lease the capacity on the CDMA Network from China Telecom Group. As we acquired from China Telecom Group certain assets and associated liabilities relating to the CDMA network in 2012, we did not renew the CDMA network capacity lease agreement with China Telecom Group after it expired on December 31, 2012.

~~Our Acquisition from China Telecom Group of the CDMA Network Assets and Associated Liabilities~~

On August 22, 2012, we and China Telecom Group entered into an acquisition agreement, or CDMA Network Acquisition Agreement, pursuant to which we agreed to purchase from China Telecom Group certain assets and associated liabilities relating to the CDMA network located in 30 provinces, municipalities and autonomous regions in the PRC for an initial consideration of RMB84,595.41 million, subject to an adjustment based on the change in the value of such assets and associated liabilities from March 31, 2012 to the completion date, or the Mobile Network Acquisition. The Mobile Network Acquisition was completed on December 31, 2012, or the Completion Date, and the final consideration of the Mobile Network Acquisition was agreed to be RMB87,210.35 million, or the Final Consideration.

~~- 19 -~~

Pursuant to the CDMA Network Acquisition Agreement, (i) RMB25,500 million of the Final Consideration was paid in January 2013 and (ii) the balance of the Final Consideration, or the Deferred Payment, will be payable at any time on or before the fifth anniversary of the Completion Date. Payment of the Final Consideration was and will be funded from our internal resources and relevant debt financing sources. The Company may, from time to time, prepay all or part of the Deferred Payment at any time after the Completion Date without any penalty until the fifth anniversary of the Completion Date. The Company will pay interest on the outstanding amount of the Deferred Payment to China Telecom Group at half-yearly intervals and the interest will accrue from the day following the Completion Date. The interest rate will be set at a five basis points premium to the yield of the five-year super AAA rated Medium Term Notes most recently published by the National Association of Financial Market Institutional Investors before the Completion Date and will be adjusted once a year in accordance with the last yield of the five-year super AAA rated Medium Term Notes published by the National Association of Financial Market Institutional Investors at the end of each year. The interest rates for the first year, the second year, the third year, the fourth year and the fifth year after the Completion Date are 4.83%, 6.25%, 5.11%, 4.00% and 4.11%, respectively. In the event any amount payable by the Company under the CDMA Network Acquisition Agreement is not paid when due, the Company will be subject to liquidated damages on such amount at a daily rate of 0.03% of the arrears from the date following the applicable due date to the date when such amount has been paid in full. As of December 31, 2017, the Deferred Payment had been paid off and the last payment was made on December 26, 2017.

~~Changes in Our Corporate Organization in 2013~~

~~On April 26, 2013, the Company entered into a disposal agreement with China Telecom Group, pursuant to which the Company agreed to sell to China Telecom Group an 80% equity interest inE-surfing~~ ~~Media Co., Ltd., orE-surfing~~ Media, a subsidiary of the Company primarily engaging in providing platform operating services for mobile Internet video and Internet video and offering video services for subscribers through cooperation with content providers, for an initial consideration of RMB1,195 million. The initial consideration was subject to an adjustment based on 80% of the change in the book value of the net assets of~~E-surfing~~ ~~Media during the period from December 31, 2012 to the completion date of the disposal. The risks and rewards of the ownership of the equity interest inE-surfing~~ ~~Media were transferred to China Telecom Group on June 30, 2013. The final consideration was arrived at RMB1,248 million and received by the Company by December 31, 2013.~~

On June 9, 2013, we set up a wholly-owned subsidiary, iMUSIC Culture & Technology Co., Ltd., or iMUSIC, which engages in the provision of music production and related information services. The registered capital of iMUSIC is RMB250 million.

On August 19, 2013, we set up a subsidiary, Zhejiang Yixin Technology Co., Ltd., or Zhejiang Yixin, with Netease, Inc., a leading Internet technology company in China, to launch “YiChat”, a mobile Internet multimedia instant messaging application for smartphones. As of December 31, 2018, Zhejiang Yixin had a registered capital of RMB11.23 million, of which 65% is owned by us and the remaining 35% is owned by Netease, Inc.

On December 16, 2013, China Telecom Global Limited, or China Telecom Global, a wholly-owned subsidiary of the Company primarily engaged in the provision of international value-added network services, entered into an acquisition agreement with China Telecom Group, pursuant to which China Telecom Global agreed to purchase from China Telecom Group 100% of the equity interest in China Telecom (Europe) Limited, or China Telecom Europe, for an initial consideration of RMB261 million. The consideration was subject to an adjustment based on the change in the net asset value of China Telecom Europe from June 30, 2013 to the completion date. The initial consideration was paid within 15 business days upon the completion of the acquisition. The acquisition was completed on December 31, 2013, and the final consideration was RMB278 million, which was paid by June 30, 2014.

~~Changes in Our Corporate Organization in 2014~~

~~On June 17, 2014, we set up a wholly-owned subsidiary,E-Store,~~ ~~which engages in software technology development. The registered capital ofE-store~~ ~~is RMB45 million.~~

Establishment of the Tower Company and the Disposal and Lease of the Telecommunications Towers

On July 11, 2014, the Company, CUCL and CMCL entered into a Promoters’ Agreement for China Communications Facilities Services Corporation Limited to jointly establish the Tower Company. The registered capital of the Tower Company was RMB10 billion. The Company, CUCL and CMCL subscribed for 2.99 billion shares, 3.01 billion shares and 4.00 billion shares, respectively, of the Tower Company in cash at a par value of RMB1.00 per share, representing a shareholding percentage of 29.9%, 30.1% and 40.0%, respectively. The Tower Company was registered on July 15, 2014 and was renamed as China Tower Corporation Limited on September 2, 2014. We had paid in our subscription of the registered capital of the Tower Company by December 31, 2014.

~~- 20 -~~

On October 14, 2015, the Company entered into ~~the Transfer Agreement~~a transfer agreement with (i) CMCL and related subsidiaries (together, “Mobile”), (ii) CUCL and Unicom New Horizon Telecommunications Company Limited (“New Horizon”, together with CUCL, “Unicom”), (iii) China Reform Holding Company Limited (“CRHC”) and (iv) the Tower ~~Company.~~Company (the “Transfer Agreement”). Pursuant to the Transfer Agreement, the Company agreed to sell certain telecommunications towers and related assets in an aggregate amount of RMB30,131 million and inject cash in the amount of RMB2,966 million to the Tower Company in exchange for 33,097 million new shares, with a par value of RMB1.00 per share, issued by the Tower Company. The cash injected by the Company into the Tower Company under the Transfer Agreement was funded by the Company using its internal cash resources. All conditions precedent to the completion of the transactions contemplated under this agreement were fulfilled and completion of the transactions contemplated under this agreement occurred on October 31, 2015. As a result, the Company, Mobile, Unicom and CRHC own 27.9%, 38.0%, 28.1% and 6.0%, respectively, of the share capital of the Tower Company. On January 29, 2016, the Company and the Tower Company entered into a Share Subscription Agreement to acknowledge the number and price of the shares issued by the Tower Company to the Company.

The Company realized a gain (subject to deduction of relevant expenses and taxes) from the tower assets disposal described above, which was calculated based on the surplus of the final consideration for the tower assets disposal over the book value of such assets as of the completion date. The total gain from the tower assets disposal was RMB7,231 million. As the Company holds 27.9% of the share capital of Tower Company following the completion of such tower assets disposal, 72.1% of the aforesaid gain has been recognized at the completion date of such tower assets disposal in the Company’s consolidated statement of comprehensive income for 2015 and the remaining 27.9% of the aforesaid gain is deferred over the remaining useful life of the tower assets. Upon completion of the disposal of tower assets by the Company to the Tower Company, the Company and Tower Company entered into the Lease Agreement on July 8, 2016 that sets forth the pricing and related arrangements in relation to the lease of telecommunications towers and related assets (including both acquired towers and new towers). On February 1, 2018, the Company and Tower Company entered into a supplemental agreement on the basis of the original Lease Agreement mainly to adjust the relevant pricing arrangement of tower products under the Lease Agreement and such adjustment was effective from January 1, 2018 and expiring on December 31, 2022. ~~Our telecommunications towers and related assets lease and related fee increased from RMB15,389 million in 2017 to RMB16,063 million in 2018, representing an increase of 4.4%.~~

-21-

In August 2018, the Tower Company completed its H shares global offering and was listed on the Main Board of The Stock Exchange of Hong Kong Limited. As a result, our equity interest in the Tower Company is diluted from 27.9% to 20.5%.

The Tower Company is primarily engaged in the construction, maintenance and operation of telecommunications towers as well as ancillary facilities. The Tower Company will have a significant effect on the growth of our mobile business and our results of operations, please see “Item 3. Key ~~Information –~~ Information—D. Risk ~~Factors - Risk~~Factors—Risks Relating to Our ~~Business –~~ Business—Our operations and further development of our mobile business is dependent on the Tower Company”. We have leveraged the rich towers resources of the Tower Company to promptly and effectively expand our 4G network coverage and density, and improve our network competitive strength; in the long term, we would benefit from the operations of the Tower Company in the following aspects: (i) we would enhance our long-term profitability by leveraging on the existing tower assets as well as the cooperation made possible by the Tower Company; and (ii) as one of the major shareholders of the Tower Company, we would benefit from its future earnings and value enhancement.

Disposal of Chengdu E-store Technology Co., Ltd. and Establishment of Tianyi Capital Holding Co., Ltd.

On September 25, 2017, the Company entered into a disposal agreement with Besttone Holding Co., Ltd., or Besttone Holding, a subsidiary of China Telecom Group, pursuant to which the Company agreed to sell to Besttone Holding the 100% equity interest in Chengdu E-store Technology Co., Ltd., or E-store for an initial consideration of RMB249 million, which was concluded based on the valuation of the equity interest inE-store as of March 31, 2017. In addition, an adjustment was made to the initial consideration to arrive at the final consideration based on the change in the book value of the net assets ofE-store during the period from March 31, 2017 to the completion date of the disposal. The control of the equity interest inE-store was transferred to Besttone Holding on October 31, 2017. The final consideration was arrived at RMB251 million, among which the initial consideration amounting to RMB249 million was received by us on November 16, 2017.

On November 30, 2017, we set up a wholly-owned subsidiary, Tianyi Capital Holding Co., Ltd., or Tianyi Capital, which engages in capital investment activities and provision of consulting services. The registered capital of Tianyi Capital is RMB5,000 million.

~~- 21 -~~

Establishment of China Telecom Leasing Corporation Limited

On November 30, 2018, we and China Telecom Global Limited jointly established China Telecom Leasing Corporation Limited, which engages in telecommunications equipment procurement, financial leasing and related fund raising operations. The registered capital of China Telecom Leasing Corporation Limited is RMB5,000 million with 75% and 25% equity interest held by us and China Telecom Global Limited, respectively.

Establishment of China Telecom Group Finance Co., Ltd.

On June 22, 2018, we, China Telecommunications Corporation and China Communications Services Corporation Limited (“CCS”, a subsidiary of China Telecommunications Corporation) entered into a capital contribution agreement to jointly establish China Telecom Group Finance Co., Ltd. (“, or China Telecom ~~Finance”).~~Finance. China Telecom Finance, anon-banking financial institution legally established with the approval of China Banking and Insurance Regulatory Commission, is a limited liability company incorporated in the PRC on January 8, 2019 with 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. Upon its establishment, China Telecom Finance ~~becomes~~became anon-wholly owned subsidiary of the Company.

On February 1, 2019, China Telecom Finance entered into financial services framework agreements with the Company, China Telecommunications Corporation and CCS, respectively, pursuant to such agreements China Telecom Finance agreed to provide financial services, including deposit services, loan services and other financial services to the Company and its subsidiaries, ~~(the “Group”),~~ China Telecommunications Corporation, its associates and its commonly held entity held with the ~~Group, excluding~~Company and/or its subsidiaries (not including the ~~Group~~Company, CCS and ~~the CCS Group (the “China Telecom Group”)~~their subsidiaries themselves), and CCS and its ~~subsidiaries (the “CCS Group”). Copies of the English summary of such financial services framework agreements are filed as exhibits to this annual report.~~subsidiaries.

-22-

Establishment ofE-surfing Smart Home Technology Co., Ltd.

On February 1, 2019, we set up a wholly–owned subsidiary,E-surfing Smart Home Technology Co., Ltd. (“, or Smart Home ~~Company”),~~Company, which engages in~~e-surfing~~e-Surfing HD, smart home, home gateway and ~~intelligent WiFi networking~~Smart Home Networking services targeting the Smart Family Ecosphere. The registered capital of Smart Home Company is RMB1,000 million.

Establishment ofE-surfing Internet of Things Technology Co., Ltd.

On February 2, 2019, we set up a wholly–owned subsidiary,E-surfing Internet of Things Technology Co., Ltd. (“, or IoT ~~Company”),~~Company, which engages in the ~~IoT~~Internet of Things (“IoT”) and Internet of Vehicles services targeting IoT Ecosphere. The registered capital of IoT Company is RMB1,000 million.

Delisting Proceedings of our ADSs

~~- 22 -~~

On January 6, 2021, the NYSE, following the reversal of a similar decision announced on December 31, 2020, announced that it had determined to commence delisting proceedings of our ADSs to comply with Executive Order signed by the then President of the United States. On January 20, 2021, we filed a written request with the NYSE for a review of its determination. See “Item 3. Key Information – Risk Factors – Risks Relating to Our Business – Transactions in and holdings of our ADSs and H shares by U.S. persons beyond specified dates are prohibited, and the continued listing of and trading in our ADSs are subject to significant uncertainty”.
Proposed A Share Offering
On March 9, 2021, the Board approved the proposal to apply for the offering and listing of our A shares on the Main Board of the Shanghai Stock Exchange, and a circular dated March 17, 2021 was sent to our shareholders. Subsequently, the proposal was proposed to and was approved by our respective shareholders at the extraordinary general meeting, the domestic shareholders’ class meeting and the H shareholders’ class meeting of the Company held on April 9, 2021, respectively. Subject to approvals from the CSRC and other relevant regulatory authorities, and compliance with the regulatory requirements of the place of listing including the minimum proportion of the issuance, the number of A shares to be publicly issued by the Company will be no more than 12,093,342,392 shares (namely no more than 13% of the total issued share capital of the Company upon the A share offering, and prior to the exercise of the over-allotment option) with a par value of RMB1.00.
Disposals of E-surfing Pay Co., Ltd and China Telecom Leasing Corporation Limited
On March 26, 2021, we entered into agreements with China Telecommunications Corporation, pursuant to which we agreed to sell, and China Telecommunications Corporation agreed to purchase all the share capital in E-surfing Pay Co., Ltd with an investment amount of RMB500,000,000 held by us for a consideration of RMB3,897 million. On the same date, we and our wholly owned subsidiary, China Telecom Global Limited, entered into agreements with China Telecommunications Corporation and its subsidiary, Guang Hua Properties Limited, pursuant to which, we and China Telecom Global Limited respectively agreed to sell, and China Telecommunications Corporation and Guang Hua Properties Limited agreed to purchase, 75% and 25% of the share capital in China Telecom Leasing Corporation Limited from us and China Telecom Global Limited for a consideration of RMB 131 million and RMB44 million, respectively. Please refer to Exhibits 4.88 and 4.89 to this annual report for more information.
Organizational Structure
Set out below is a chart illustrating our corporate structure and significant subsidiaries as of April 23, ~~2019:~~2021:

-23-

(1)
Formerly known as China Telecom (Hong Kong) International Limited
(2)
Formerly known as China Unicom (Macau) Company Limited.
(3)
Formerly known as Unicom Huasheng Telecommunications Technology ~~Co., Ltd.~~Company Limited
(4)
Formerly known as Bestpay Co., Ltd.
~~- 23 -~~
In addition, our Company has a branch in each of 22 provinces, five autonomous regions and four centrally administered municipalities in the PRC.
-24-
General Information
Our principal executive offices are located at 31 Jinrong Street, Xicheng District, Beijing, PRC 100033 and our telephone number is(+86-10) ~~5850-1800.~~5850-1508. Our website address iswww.chinatelecom-h.com. The information on our website is not a part of this annual report. We have appointed CT Corporation System at 28 Liberty St., New York, New York 10005 as our agent for service of process in the United States.
Our U.S. public filings are available at the website maintained by the SEC at www.sec.gov, which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
B.
B. Business Overview
We are an integrated intelligent information service provider in the PRC with full-service capabilities. ~~Following our acquisition of the CDMA Business in 2008, we began to~~We offer a comprehensive range of telecommunications services, including Internet services, information and application services, voice services, telecommunications network resource and equipment service and other related services. ~~See “—A. History and Development of the Company—Industry Restructuring and Our Acquisition of the CDMA Business in 2008” under this Item.~~
Since 2005, we have started to implement our business strategy of transformation from a traditional basic telecommunications service provider to a leading integrated intelligent information services operator. Specifically, we have enhanced our efforts in developing our~~non-voice~~ ~~services, such as Internet services, and information and application services, in achieving optimization of business structure and enhanced competitive strength.~~ We aim to provide differentiated and innovative services to create value for customers by leveraging on our integrated resources.
In January 2009, the MIIT issued to China Telecom Group, our controlling shareholder, a license to operate 3G business nationwide based on CDMA2000 technology. We have been authorized by China Telecom Group to operate CDMA2000 3G mobile business in the PRC. We launched our CDMA2000 3G mobile services in March 2009.
In December 2013 and February 2015, the MIIT issued to China Telecom Group, our controlling shareholder, ~~a license~~the permit to operate 4G business nationwide based onTD-LTE technology and LTE FDD technology, respectively. We have been authorized by China Telecom Group to operate 4G mobile business in the PRC.
In December 2018, China Telecom Group, our controlling shareholder, was granted the approval from the MIIT to permit China Telecom Group to utilize the ~~3400-3500MHz~~3400MHz-3500MHz spectrum nationwide to conduct fifth generation (5G) mobile communication pilot programs. We have been authorized by China Telecom Group to conduct 5G system scale trial in the PRC.
In June 2019, China Telecom Group, our controlling shareholder, was granted the permit from the MIIT to operate 5G digital cellular mobile service nationwide and we have been authorized by China Telecom Group to develop 5G business nationwide. In October 2019, we officially launched the 5G commercial services in 50 cities nationwide offering 5G services to individuals, households and government and enterprise customers.
In 2020, technologies such as 5G, cloud and artificial intelligence (AI) integrated to bring about fusion with robust development in digital economy. We built up new information infrastructure with 5G and cloud as the core, and stimulated increasing and diversified customer demand for integrated intelligent information services. In particular, we pioneered 5G standalone (SA) scale commercialization and rolled out customized 5G network to meet the differentiated demands from vertical industries for low latency, wide-area connectivity and network security, among others.
Our Operation Strategy
In ~~2018, taking advantage~~2020, we comprehensively implemented the “Cloudification and Digital Transformation” strategy, the essence of ~~the historical opportunities brought about by industrial integration, consumption~~which is to be customer oriented while promoting cloud and network convergence based digital upgrade, and innovating digital products and services offering, in order to provide integrated intelligent information service for customers. We established the new ~~technological breakthroughs, we advanced our transformation~~development pattern from an all-round perspective and ~~upgrades strategy. By focusing on our three major goals of “construction of Cyberpower, building a first-class enterprise, co-establishing better living”, we expeditedstep-up~~ ~~transformation on all fronts of, and further promoted reform and innovation of our business. We~~ strived to ~~strengthen our capabilities at all levels, while planning future developments from all angles envisioned.~~enhance its market competitiveness and corporate vitality. In particular:

~~Propelling intelligent upgrade~~Strengthening the landscape of cloud-network capabilities and building new infrastructure based on cloud-network integration: adhering to the strategic direction of “Cloud central, Network around, Network adaptive to cloud, Cloud and network ~~in response~~as one”, we sped up the construction of new infrastructure based on cloud-network integration. We continued to ~~customer needs. Focusing on user experience, business scale expansion~~promote 5G network co-building and ~~value management,~~co-sharing and conducted 4G network co-sharing at the same time. In line with the overall “2+4+31+X+O” deployment, we accelerated the construction of e-Surfing Cloud and IDC, and commenced the development of multi-access edge computing (MEC) and forged capabilities of cloud-edge coordination by leveraging our massive amount of exchange buildings at the edge.
Building a digitalized platform to empower digital transformation: we strengthened the development of our digitalized platform to empower the internal and external digital transformation. Internally, we pushed forward the digitalization of our operation. We explored the potential demand for 5G and Smart Family by leveraging AI and Big Data, accelerated the construction of our new-generation cloud-network operating system to support the scale commercialization of 5G SA and enhance the efficiency of service activation and product loading, while optimizing our network quality and user experience. Externally, we propelled cloud migration, the use of data and intelligence injection for our customers, and built the technological foundation for digitalized platform. Supported by our digitalized platform, we aggregated our internal fundamental capabilities including communications, security, AI, Big Data and IoT, among others, while combining external digital ecology, to inject intelligence powered by data and provide endowment for products and services, so as to propel Industrial Digitalization and intelligent ~~upgrade of our network to build up comprehensive network advantages.~~transformation.

~~- 24 -~~-25-
~~Integration~~Promoting sci-tech innovation to accelerate the shift towards a sci-tech company: we pushed forward our research and ~~mutual development: Supporting~~development system reforms and stimulated vitality for sci-tech innovation. Focusing on the ~~swift expansion~~technological development objectives, we increased our investment in R&D, elevated the input and output efficiency of ~~service ecology. We accurately grasped changing market demand~~R&D resources, and ~~expanded the market by leveraging~~strengthened our data traffic and cloud products, cultivating convergence operation, and effectively bundling our services. The overall competitiveness of our bundled products was significantly strengthened, which facilitated rapid breakthroughsR&D teams in ~~expanding market scale, thereby creating new avenues for value growth. The synergies that resulted from the~~key areas such as cloud-network integration and ~~mutual development of our five ecospheres enabled us to explore new paths towards future sustainable development.~~security.

~~Higher efficiency from intelligent~~Deepening reforms on all fronts to inspire corporate vitality and ~~data-driven operation. Following~~expanding cooperation to forge ecological competitiveness: we pushed forward deepened reforms on all fronts, sped up the ~~consolidation~~establishment of ~~our IT infrastructure~~a new customer-oriented institutional system and built a vertically integrated business group serving government and enterprise customers. We strengthened the ~~greater adoption~~planning of new technologies such as Big Data and artificial intelligence, we injected more intelligent elements into operation, leading to efficiency improvement and productivity enhancement. Our data operational capability was also enhanced considerably.
In 2018, we sought to implement reform and foster innovation in all parts of our operation, constantly enhancing the vitality of corporate development and operational capability. We continued deepening the three-dimensional inter-driven reform and mixed ownership reform and stimulated the development vitality. We also intensified the reform of~~“Sub-dividing~~ ~~Performance Evaluation Units, Professional Operation, andTop-Down~~ ~~Service Support System”, through which we built up a mechanism focusing on market-oriented recruitment, incentivisation and resource allocation.~~
~~In 2018, we focused on developing our 4G business by leveragingterminal-driven~~ ~~and large data traffic strategies to rapidly expand our 4G users base and increase the consumption of 4G data traffic. We~~ecosystem, continued to expand our ~~optic fiber broadband services to promote intelligent upgrade in broadband. We reinforced~~corporate boundaries and deepened cooperation of the whole industry chain. Leveraging our ~~efforts in developing~~core capabilities and ~~promoting information~~platform, we enriched the ecology for industries such as family informatization and ~~application services to attract more~~vertical industries for government and enterprise customers. We ~~accelerated the transformation of marketing channels, promoted the synergy among different channels~~also strengthened cooperation and ~~improved marketing capabilities~~eco-aggregation with capital financing, expanded innovative cooperation in emerging areas, and ~~efficiency. With “multi-mode” handsets became the international standard in 2017~~gradually created an industry chain ecology with a larger scope and its continuous popularization, the sales channels of our terminals and services were further expanded. We focused on improving service quality to enhance customer experience through various measures such as the commitment of~~“same-day~~ ~~installation,same-day~~ ~~maintenance service guarantee, compensation for service delay” for broadband service.~~at a higher level.
Subscribers and Service Usage
Our operating revenues depend largely on the size of our customer base, usage volume and the ~~level~~structure and ~~structure~~level of our tariffs. The following table shows our selected operating data as of the dates and for the periods indicated.

   As of or for the year
ended December 31,
   2016    2017    2018
Mobile subscribers (in millions)
   215.0    250.0    303.0
of which: 4G users (in millions)
   121.9    182.0    242.4
Mobile voice usage (in billion minutes)
   720.6    769.2    827.7
Handset data traffic (in kTB)
   1,277.0    3,597.0    14,073.0
4G users DOU (in megabyte)
   1,029    2,012    5,680
Wireline broadband subscribers (in millions)
   123.1    133.5    145.8
of which:Fiber-to-the-Home (FTTH) subscribers (in millions)
   106.0    126.2    140.7
Access lines in service (in millions)
   126.9    121.8    116.5
Wireline local voice usage (in billion pulses)
   93.4    75.1    60.2
e-Surfing HD subscribers (in millions)
   61.3    85.8    105.3
BestPay average monthly active users (in millions)
   16.2    33.0    43.4
Internet of Things connected devices (in millions)
   14.2    44.3    106.9
   As of or for the year
ended December 31,
   2018    2019    2020
Mobile subscribers (in millions)
   303.0    335.6    351.0
Mobile voice usage (in billion minutes)
   827.7    820.3    784.5
Handset data traffic (in kTB)
   14,073.0    24,370.0    34,690.0
Wireline broadband subscribers (in millions)
   145.8    153.1    158.5
Wireline telephone subscribers (in millions)
   116.5    110.9    107.9
e-Surfing HD subscribers (in millions)
   105.3    112.6    115.9
IoT connected devices (in millions)
   106.9    157.4    237.6
Our Products and Services
In 2020, we accelerated the progress of cloudification and actively deployed digital transformation of our business, aiming at building a new information infrastructure embedded cloud-network integration.
Internet Services
Our Internet services consist of wireline Internet access services, includingdial-up and broadband services, and mobile Internet ~~access~~ services. Internet services have become increasingly important in our revenue structure. We offer Internet services through integrated and customizable service plans along with other various ~~other~~ business models, which ~~create~~creates the synergy that ~~mutually~~ benefits our Internet, mobile and other services.
In 2020, we adhered to proactive marketing strategy and strengthened precision marketing capabilities empowered by data capabilities. We strengthened terminal operation by fully leveraging our sales channels and sales points to meet consumers’ demand for upgrading to 5G devices and to foster popularity of 5G terminals. As of December 31, 2020, the total number of our mobile subscribers was approximately 351.0 million with a net addition of almost 15.5 million for the full year, expanding our market share to 22.0%.
~~- 25 -~~In addition, we created a new development mode of “5G + Privileges + Applications” to forge new edges in the area of individual informatization services. Leveraging “5G + e-Surfing Cloud” capabilities, we provided users with high-quality network experience and differentiated applications and services. We optimized our unique 5G member privilege system, cooperated with top application partners to launch eco-privileges and rolled out a number of applications featuring 5G, including e-Surfing Cloud Drive, e-Surfing Ultra HD, Color Ringback Tone with Video, e-Surfing Cloud VR and e-Surfing Cloud Game. Furthermore, we took the lead in the industry by launching the 5G cloud mobile phone, namely “e-Surfing One”, which leveraged the capabilities of cloud-network integration to break through performance bottlenecks for devices and facilitated the accelerating popularization of 5G devices. As of March 31, 2021, the number of 5G package subscribers was approximately 111.23 million, empowering the future growth of our mobile Internet services.
-26-
~~In 2018,~~We focused on meeting the demand for digitalization and intelligentization from family customers and comprehensively upgraded family informatization services. With the “Triple-Gigabit” access service comprising 5G + Fiber Broadband + WiFi6, we enhanced the customer experience of family services by ~~insisting on~~promoting convergence of 5G and family services and accelerating the ~~positioning~~speed upgrades of ~~Gbps service~~family broadband and WiFi services. Furthermore, we developed the DICT products and services portfolio for Smart Family and enriched the portfolio of terminals and applications in functional use cases such as ~~our top broadband product~~home security surveillance, living space coziness, education and ~~a convergence-driven development approach, we fulfilled~~entertainment to meet the needs of ~~individual~~family life scenes. See “—Information and ~~family consumers with convergence packages that feature high-speed premium broadband, large data traffic,e-Surfing~~ ~~HD, and Smart Family applications. We also maintained our leading edge in broadband services, sped up~~Application Services” below for further details. As of December 31, 2020, 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 honoring our“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. The~~ number of our wireline broadband subscribers reached ~~145.8~~158.5 million, representing a net addition of 5.4 million from 153.1 million as of December 31, ~~2018, representing~~2019.
In September 2019, in order to build a 5G network on an ~~increase~~efficient basis and to rapidly create our 5G service capabilities, we entered into the 5G Cooperation Agreement with CUCL to leverage the mutually complementary advantages in network and spectrum resources and rolled out 5G network co-building and co-sharing, effectively saving costs on network construction, operation and maintenance while enhancing the market competitiveness of ~~9.2% from 133.5 million as~~5G network and business. For more details, see “Item 4. Information on the Company—B. Business Overview—Network System—Co-building and co-sharing with China Unicom”. In 2020, we continued to promote 5G network co-building and co-sharing. By the end of ~~December 31, 2017. The net increase of our wireline broadband subscribers in 2018 recorded a six year high. Among these subscribers,Fiber-to-the-Home~~ ~~subscribers, or FTTH subscribers, reached 140.7 million, accounting for approximately 96.5% of~~2020, the total ~~wireline broadband subscribers as of December 31, 2018, representing an increase of 11.5% over the~~ number of ~~FTTH subscribers~~5G base stations in use exceeded 380,000. In June 2020, 5G Implementation Guidelines: SA Option 2, or the SA Guidelines, was released by GSMA which represents the interests of mobile operators worldwide, including handset and equipment manufacturers, software companies, equipment suppliers and Internet companies, as well as organizations in adjacent industry sectors. The SA Guidelines which we have been taking the lead in drafting is the world’s first systematic guidance for large-scale 5G standalone (SA) deployment. We also took a global lead in achieving scale commercialization of ~~December 31, 2017.~~
~~Moreover,~~5G SA network, and launched customized 5G networks including “Wide-area”, “Adjacent” and “Wingspan” to meet the differentiated demand of vertical industry customers for features such as low latency, massive number of connections, network security and cloud-edge coordination. Meanwhile, we ~~further enhanced the coverage~~conducted 4G network co-sharing and ~~access capabilities of our wireless broadband network by focusing on developing our 4G services. In 2018, we continuously optimizedin-depth~~ coverage of 4G networks for key scenes including high-speed rail and high-density business districts and applied dynamic bandwidth expansion in accordance with the increase of users and data traffic. We builtactivated approximately ~~210,000 new~~170,000 co-shared 4G base stations ~~reaching a total of 1.38 million 4G base stations as of December 31, 2018. We insisted on~~throughout the multi-mode handset strategy, promoted industry chain development, and published the industry’s first white paper on multi-mode artificial intelligence handsets. In 2018, the number of our self-registered multi-mode handsets reached 160 million, representing an increase of 23% over the previous year. While maintaining the strategy to position large data traffic packages as the key products, we optimized our package portfolio and reduced the quantity of package plans. Focusing on cooperation with leading video and consumption typed Internet companies, we promoted the convergence of large data traffic, content, applications and user rights. Leveraging on differentiated advantages of our innovative products, such as BestPay red packet and Orange Instalment Payment Service, we strengthened the coordination among channels and enhanced user experience to drive the enhancement of data traffic value and the consumption of data traffic. As of December 31, 2018, the number of our 4G users reached 242.4 million, up by 33.2% from 182.0 million as of December 31, 2017 and accounting for 80.0% of our mobile subscribers. In 2018, our total handset Internet data traffic reached 14,073.0 kTB, representing a significant increase of 291.2% over 2017, and the monthly average mobile data traffic per 4G user reached 5,680 MB, representing an increase of 182.3% over 2017 and significantly contributing to the volume and revenue of our data services.
Furthermore, in 2018, the Company started 5G system scale trial in 17 cities and built 1,000 5G base stations to commence the system development of 5G ecosystem and promote business model innovations with 5G technology, such as autonomous driving bus, smart water treatment and mobile remote medical service.
Information and Application Services
Our information and application services include ~~several core applications namely~~ Internet protocol TV, or IPTV (e-Surfing HD), ~~or IPTV~~Whole-home WiFi, Family Cloud, (e-Surfing ~~HD), intelligent WiFi networking, family~~Webcam, IDC, cloud ~~and smart home appliances as well as Internet data center, or IDC, services, cloud~~ computing, ~~services and~~ content delivery networks, or CDN, Big Data, digital platform and system integration related services, ~~which are based on Internet related services. In addition, we have~~as well as caller display, ~~which is based on wireline voice related services,~~ SMS, multimedia messaging services, or MMS, ~~and~~ email services and music related content ~~based~~ and applications services.
In 2020, we persisted to promote household informatization services, ~~such as content services relating to music,~~ and industry applications services for government and enterprises, such as government administration and supervision, transport and logistics, digital hospital, Global Eye, which is a video surveillance solutionpromoted the “Triple-Gigabit” access service comprising 5G + Fiber Broadband + WiFi6 based on ~~IP technology, and integratede-SurfingPush-To-Talk~~ ~~services.~~
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~~We strengthened~~ our ~~research and development capability in relation to the emerging businesses with prominent results. In developing~~five-in-one Smart Family ~~products, we leveraged~~product and service portfolio, combining Smart Broadband, Smart Home Platform, Smart Applications, Smart Security and Smart Services, continuing to upgrade our ~~resources advantage to implement centralized and efficient operations on a full-scale to form and operate the~~ Smart Family ~~alliance,~~product and ~~developed four core applications, namelye-Surfing~~ ~~HD, intelligent WiFi networking, family cloud and smart home appliances, achieving stable expansion in the subscriber base. In 2018, we scaled up the introduction~~service portfolio. The number of ~~Smart Family applications, built a nationwide centralized platform for value-added services, and unified previously separate accounts for broadband ande-Surfing~~ ~~HD services. We also firmly followed popular contents to create members-only packages ofe-Surfing~~ ~~HD with movies and TV shows, education and sports. By the end of 2018, the number of~~our e-Surfing HD subscribers reached ~~approximately 105.3~~115.9 million ~~representing~~as of December 31, 2020 from 112.6 million as of December 31, 2019. The Smart Family applications are becoming more enriched and delivering an increasing value contribution.
Capturing opportunities emerging from the digital transformation of the economy and society, we integrated emerging information technologies such as 5G and cloud, established a ~~net increase~~digitalized platform, re-packaged our fundamental capabilities to form new services, and accelerated our technological endowment. We pioneered 5G SA scale commercialization and rolled out customized 5G network to meet the differentiated demands from vertical industries for low latency, wide-area connectivity and network security, among others. Leveraging the technical features of ~~19.5~~5G “Super Uplink” (UL Tx switching), edge cloud and the IoT, we built a series of benchmark projects for various vertical industries such as industrial Internet, smart energy, smart healthcare and smart parks, and gradually launched 5G innovative applications such as remote control, machine vision, and Automated Guided Vehicles (AGV). As of December 31, 2020, we had signed contracts with a total of nearly 1,900 customers for our 5G industry applications, with more than 1,100 use cases being launched. Furthermore, focusing on the scenario-based demands from enterprises’ cloud migration, we continued to optimize our resource deployment for IDC and cloud. Our IoT open platform supported mainstream IoT access protocols, enabling the rapid launch of partners’ application products, and the number of IoT connected devices reached 237.6 million ~~over last year. The proportion~~as of ~~our broadband subscribers who also subscribed our mobile ande-Surfing~~ ~~HD services at the same time reached 65%,~~December 31, 2020, representing an increase of ~~13 percentage points~~50.9% over ~~last year. Following such increase, the penetration rate~~that of~~e-Surfing~~ HD subscribers over our broadband subscribers reached 72%. With respect to the development of internet finance, we leveraged the advantages offered by offline traditional channels to widely expand consumption scenarios, while our innovative integration of payment channels provided~~one-for-all~~ receipt and payment solution. The number of average monthly active users of “BestPay” reached 43.4 million in 2018, representing an increase of 31.5% over last year and the number of “BestPay” active participating merchants more than doubled. In addition, we developed red packet and instalment payment platforms, which significantly boosted the loyalty of mobile subscribers and drove strong subscriber growth, while also effectively promoted the expansion of new retail and integrated retail channel. Furthermore, we promoted our New ICT Applications, or DICT services, which are the converged intelligent application services integrating communications technology, information technology and cloud & Big Data technology. With respect of the development of DICT, we strengthened our cloud-network integration advantages, and continued to drive the development of dedicated line, DICT and IoT services through “cloudification”. With respect to the development of Internet of Things (“IoT”), leveraging on our first-mover advantages on~~NarrowBand-IoT(“NB-IoT”)~~ network, our IoT business has entered high-speed phase of development. Based on the framework of “Cloud – Pipes – Devices – Applications”, we continued to focus on developing our 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.~~ December 31, 2019.
In 2018, with accelerated promotion of enhanced Machine-Type Communications (“eMTC”) pilot launch, we basically accomplished the whole-range speed rate IoT structure combining high, medium and low speed of 4G, eMTC and~~NB-IoT,~~ respectively and offered differentiated services capabilities on demand. We accelerated cloud-network integration, and carried out coordinated deployment of IDC and cloud resources to persistently enhance its service capability. The Company connected cloud resource pools with the carrying network, enabling a~~cloud-led~~ ~~network. Furthermore, by introducing new technologies such as Software-Defined Networking (“SDN”) and Network Functions Virtualisation (“NFV”), we accelerated there-constitution~~ of our 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 to facilitate the progress of cloudification and virtualisation.
We experienced rapid growth in our IDC services in 2018. Revenue from IDC services was RMB23,380 million, representing an increase of 22.4% over last year, while revenue from cloud service was RMB4,480 million, representing an increase of 85.9% over last year. Revenue from Big Data services was RMB865 million, representing an increase of 12.5% over last year. IDC serves as important network foundation to cloud and Big Data services. We have leveraged on the advantage of convergence of cloud and network and optimized our cloud and IDC resource layout by constructing the “2+31+X” framework in China. In 2018, based on a new generation of IoT with nationwide coverage as foundation, we successfully constructed Connectivity Management Platform and enriched terminals products, endeavoring to expand connection scale.-27-
Voice Services
Our voice services include mobile voice services and wireline voice services.
Prior to September 1, 2017, our mobile voice services included local calls, domestic long distance calls, international long distance calls, intra-provincial roaming, inter-provincial roaming and international roaming. We ceased to charge mobile voice services subscribers the domestic long distance and intra-provincial and inter-provincial roaming fees on and from September 1, 2017. In 2018, we insisted on the multi-mode handset strategy, promoted industry chain development, and published the industry’s first white paper on multi-mode ~~artificial intelligence~~AI handsets.
Amid the intense market competition in ~~2018,~~2020, the number of ~~subscribers of~~ our mobile ~~services~~subscribers grew ~~by 21.2%~~ from ~~250.0~~335.6 million as of December 31, ~~2017~~2019 to ~~303.0~~351.0 million as of December 31, ~~2018.~~2020. The mobile voice usage ~~increased~~decreased to ~~827.7~~784.5 billion minutes in ~~2018~~2020 from ~~769.2~~820.3 billion minutes in ~~2017.~~2019.
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Our wireline voice services include local wireline services, domestic long distance wireline services and international ~~Hong Kong, Macau and Taiwan~~ long distance wireline services. The total number of wireline telephone subscribers decreased to ~~116.5~~107.9 million as of December 31, ~~2018~~2020 from ~~121.8~~110.9 million as of December 31, ~~2017. The total wireline local voice usage decreased by approximately 19.9% from 75.1 billion pulses in 2017 to 60.2 billion pulses in 2018.~~2019.
The decrease in the number of wireline telephone subscribers and wireline voice service usage was primarily attributable to the increasing penetration of ~~mobile voice and other~~ alternative communication means, such asOver-the-Top messaging services and the migration of ~~some of our~~certain wireline telephone subscribers to our mobile services.
In addition, we continued to enhance the scale development of industry applications to attract government and enterprise subscribers.
Telecommunications Network Resource and Equipment Services
Our telecommunications network resource and equipment services primarily include services relating to our optic fiber and circuits, such as the use of optic fiber and circuit; virtual private network, or VPN, and use of bandwidth. We offer telecommunications network resource and equipment services as certain of our overall telecommunications solutions to large enterprise customers, including government authorities, large corporations and institutions. Many of these customers choose to use our circuits to form VPNs based on various technologies, and links their local area networks at different locations. We also collaborate with a number of international telecommunications service providers to provide global communications services for multinational corporations. In addition, we provide network equipment to large enterprise customers.
In ~~2018,~~2020, we continued to focus on government, financial and large enterprise customers. Our marketing efforts focused on providing globalone-stop services, tailored services and ~~comprehensive~~total solutions to these customers. These customers can enjoy a full range of consulting and technical support ~~and~~ services by contacting any of our designated account managers.
Others
Our other services primarily include sales and repairs and maintenance of equipment, resale of mobile services and property rental.
Please see “Item 5. Operating and Financial Review and Prospects” for more discussion of the revenues from our products and services.
Our Customers and Brand Management
In ~~2018,~~2020, we continued to promote our full-service brand names under the brand “China Telecom”, and further enhanced the brand image of “China Telecom” as an integrated intelligent information service operator through, among others, promoting ~~oure-Surfing~~ ~~4G,~~ China Telecom broadband,e-Surfing ~~cloud, multi-mode artificial intelligence handsets, IPTV as well as intelligent Wifi networking~~Smart Family (including Whole-home WiFi, e-Surfing Webcam, Family Cloud and other products), Hello 5G and e-Surfing Cloud services and products. Through providing contents to our services on a multi-dimensional level and our coordinated marketing efforts, we continue to strengthen and enhance the brand recognition and market influence for “China Telecom”.
Tariffs
Prior to May 2014, the levels and categorization of most of our current tariffs were subject to regulation by various government authorities. As a result of the governmental effort to gradually ease the regulations on the tariffs, the MIIT and the ~~NDRC~~National Development and Reform Commission of the People’s Republic of China (the “NDRC”) issued the Notice on Implementing the Market Based Tariffs for Telecommunications Services, pursuant to which, effective from May 10, 2014, telecommunications operators are permitted to set the tariffs of all telecommunications services based on the cost, customers’ demand and market conditions. See “—Regulatory and Related Matters—Tariff Setting” included elsewhere under this Item.
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Wireline Voice Services
For our local wireline telephone services, we charge usage fees based on call usage.
Currently, all domestic long distance wireline services using public switched telephone network ~~or PSTN,~~(the “PSTN”), are charged at the unified rate with a discount rate duringoff-peak hours.
We offer international ~~Hong Kong, Macau and Taiwan~~ long distance wireline services through the international gateways of China Telecom Group. China Telecom Group negotiates bilateral settlement arrangements and rates based on the international settlement standards in the telecommunications industry, and we follow those settlement arrangements and rates.
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Mobile Voice Services
Generally we charge subscribers of our mobile voice services the following categories of tariffs: local usage charges, long-distance call charges and roaming charges. However, in 2016, we waived domestic long distance call charges and roaming charges for voice services in our new 4G subscription plans. By the end of 2016, we stopped offering subscription plans with separate billing for long distance call charges and roaming charges, and all new plans had nationally uniform prices for voice services domestically. In addition, we ceased to charge handset subscribers domestic long distance and roaming fees on and from September 1, 2017.
With respect to international ~~Hong Kong, Macau and Taiwan~~ roaming of our mobile voice services, we provide roaming services to our customers and determine the roaming charges in accordance with roaming agreements between China Telecom Group and the international ~~Hong Kong, Macau and Taiwan~~ operators.
Internet Services and Information and Application Services
We determine tariffs for these services according to market conditions. In addition, pursuant to the policy requirements of the PRC government regarding network speed upgrade and tariff reduction, in ~~2018,~~2019, we rolled out corresponding measures in due course to meet the policy requirements, ~~including~~including: (i) starting ~~July~~January 1, ~~2018,~~2019, we ~~cancelled mobile~~reduced out-of-package data ~~roaming charges within mainland China;~~tariff; (ii) we ~~reduced~~enhanced the ~~tariff~~promotion of large data traffic packages, enabling more subscribers to enjoy data traffic with lower unit tariff; (iii) we launched discounted traffic packages to serve the needs for ~~international roaming charges in various countries~~specific subscribers; and ~~regions; and (iii)~~(iv) starting May 1, 2019, we further reduced the tariff of Internet dedicated line access, and ~~commercial dedicated line access~~carried out free speed upgrade programs for qualified small and medium ~~enterprises.~~enterprise subscribers. In 2020, we likewise implemented corresponding measures in due course to meet such policy requirements, including (i) carrying out optical fiber transformation and tariff discounts for our broadband subscribers that are small and medium enterprises, manufacturing enterprises and dedicated line subscribers, and (ii) implementing free speed upgrade actions for our qualified subscribers.
Telecommunications Network Resource and Equipment Services
We determine the tariffs for our telecommunications network resource and equipment services according to market conditions. We generally charge a fee for installation of our telecommunications network resource services and a fixed monthly fee. We offer various promotion discounts for our customers who wish to upgrade to higher bandwidth services. These promotion discounts have stimulated demand for our telecommunications network resource services in recent years. Besides, ~~we generally charge monthly fees for our network equipment service on a discount basis and~~ the tariff for network equipment service have generally decreased in recent years. We provide different discounts and free experience services to our customers on a ~~case by case~~case-by-case basis.
Interconnection and Roaming Arrangements
Interconnection
Interconnection refers to various arrangements that permit the connection of our networks to other mobile, ~~fixed-line~~wireline networks or Internet backbone networks. These arrangements provide for the sharing and settlement of revenues from the base usage charges and, if applicable, roaming charges and domestic and international long distance charges as well as the interconnection arrangement and settlement of Internet backbone networks.
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China Telecom Group entered into interconnection settlement agreements with other telecommunications operators, including Unicom Group, China Mobile Group and China Transport Telecommunication Information ~~Center.~~Group Co., Ltd. We entered into an interconnection settlement agreement, as amended, with China Telecom Group, which allows our networks to interconnect with China Telecom Group’s networks as well as networks of the other telecommunications operators, with whom China Telecom Group had interconnection arrangements. Our interconnection arrangements with China Telecom Group and other telecommunications operators enable our subscribers to communicate with the subscribers of those operators and to make and receive local, domestic and international long distance calls and to access the Internet backbone networks. All interconnection and settlement arrangements among public wireline telephone, mobile, and Internet networks in the PRC are governed by the Telecommunications Regulations promulgated by the State Council and the Telecommunications Regulations and the Administrative Rules on Interconnection between the Public Telecommunications Networks promulgated by the MIIT. See “—Regulatory and Related Matters—Interconnection” included elsewhere under this Item.
International Roaming
~~As for voice and data services, we~~We provide international roaming services to our subscribers, which allow them to access mobile telecommunications services and use voice, SMS and data services while they are physically outside of their registered service area but in the coverage areas of other mobile telecommunications networks in other countries and regions with which we or our roaming ~~sponsor~~provider have roaming arrangements.
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As of December 31, ~~2018,~~2020, subscribers of our mobile services can roam on mobile networks in more than 200 countries and regions based on international roaming agreements between China Telecom Group and the local operators or roaming service providers. A mobile service subscriber using international roaming services is charged at our roaming usage rates for both incoming and outgoing calls, plus applicable long distance tariffs. ~~With respect to international roaming, we~~We settle roaming revenues and expenses with international telecommunications operators in accordance with roaming agreements between China Telecom Group and the international operators. China Telecom Group has also agreed to ~~arrange for us to participate~~our participation in the negotiation of its future international roaming ~~arrangements.~~agreements.
Marketing, Sales, Distribution and Customer Services
Marketing, Sales and Distribution
Our marketing strategy is to establish our image as an intelligent full-service telecommunications service provider and utilize our comprehensive services platform and nationwide marketing and distribution network. We have devoted substantial efforts in advertisements to promote recognition of and loyalty to our products and services. ~~In order~~Fully leveraging the advantages arising from corporate informatization, we expedited digital transformation, leading to respond to market competition as well as attract and motivate customers to use our services, we have also combined certain voice and data products into one integrated service plan to targeted customers to address their telecommunications needs.
We continue 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”. In termscontinual improvement of the ~~construction~~quality and efficiency of ~~an ecosphere products system,~~operations and management.
By pursuing the digital transformation of customer operations, we ~~accelerated~~built customer operation teams comprising relevant talents, strengthened data modelling for different business scenarios, improved data-driven insight capabilities and utilized artificial intelligence for sales and marketing activities to match customer needs with high precision. By pursuing the ~~consolidation~~digital transformation of ~~our resources~~sale channel operation, we took advantage of online and mechanism innovation, formed capability development centers for cloud, DICT applications, Smart Family and IoT. We also fostered high-quality products and enhanced its supply-side capability. In terms ofoffline integration, accelerated the construction of a ~~customer lifecycle management~~marketing service system ~~we focused on user experience~~that embedded full integration of all channels, covering all use cases and ~~value management, injected intelligent elements to and provided ecological endowment for our channels through precision marketing leveraging Big Data. We propelled~~engaging the ~~process~~full cooperation of ~~existing customers upgrading to multi-featured convergence packages as well as large data traffic packages, and commenced ongoing uplift of our customer service quality.~~ all ecologies.
In terms of the construction of an integrated sales channel system, we built channels comprising “self-owned + third-party”, “online + offline” and “platform + sales reach”, in order to adapt to the trend of sales channels’~~step-up~~ transformation in the new retail era, and to bolster efficiency and effectiveness. 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.
~~Furthermore,~~particular, we have adopted various sales and marketing approaches and initiatives, such as customer experience, customer relationship management, SMS, telesales, sales plans and joint promotion with our business partners such as Internet portal companies and software development companies, to promote our products and services, in particular, our information and application services.
Customer Service
~~We provide~~In 2020, we continued to transform our physical outlet network to operate with chain store-like and experience-oriented approach, providing a continuously improving customer service perception on scenario-based experience. By pursuing the digital transformation of customer services, ~~through all channels on our integrated sales~~we established a cloud-based platform for customer service staff to provide service at home, promoted remote video service counters and ~~distribution channel network.~~ fully utilized intelligent voice navigation and online service contact points to assure service quality throughout the COVID-19 pandemic.
Our customer services typically include service inquiries, service applications, customers’ complaints, product and service promotions, service initiation and termination, payment reminder services and emergency services. Through establishing and implementing our customer full-service standard, we have significantly improved our basic customer services capability, such as service processing time, request responding time and providing service related and other information to customers through text messages.
~~In 2018, we made the following enhancements to our customer service:~~

Making efforts to improve the service capabilities on Internet access, cloud computing and IoT business of government and enterprise customers by shortening installation, transfer and repair time of broadband and dedicated lines, improving the punctuality of group network line access and improving the punctual repair rate of~~IoT-related~~ ~~malfunction.~~
~~Carrying out video quality monitoring and analysis ofe-Surfing~~ ~~HD service to improve the experience and quality of video streaming.~~
~~Leveraging artificial intelligence and Big Data technology to develop smart hotline 10000 and promote its operational artificial intelligence.~~
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~~Developing internet-based self-service model and procedures~~Insisting on the customer-oriented principle, we continued to ~~offer more convenience for our users.~~
~~Improving~~enhance service quality. In 2020, the ~~customer~~evaluation system of “whether service ~~ability through new media to solve problems for customers in a direct and vivid way,~~is good or not, subscribers have the final say” was established. We applied indicators such as ~~introducing~~subscribers satisfaction, product recommendation net score and contact service satisfaction rate, and regarded customer reputation as a service ~~robots~~evaluation criterion to ~~internet-based~~promote the improvement of service quality. We established a sound customer perception experience and ~~promoting live video chat.~~evaluation mechanism to recognize problems in network, products and services from the perspective of subscribers. In respect of broadband network, we have closely tracked and analyzed the problems identified in customer satisfaction surveys, customer complaints, malfunction and complaints throughout the year, and implemented policies and promoted the rectification of problems in different provinces. In respect of mobile network, we have carried out improvement and upgrading actions for the benchmarking experience of critical scenes in key areas and neighborhoods with weak communication quality to enhance user perception and experience. In respect of cloud-network key perception, we have promoted standard optimization, perception evaluation and targeted improvement of service capabilities. Adhering to the principle of “wherever the subscriber is, the service is”, we continued to promote the digital transformation of services and improve the smart service capabilities. During the year of 2020, we deployed and promoted the “home customer service” mode to ensure that customers could process services easily and without leaving home.
In ~~2018,~~2020, we continued to maintain leading position in the industry in terms of ~~comprehensive customer~~overall user satisfaction ~~and customer satisfaction in mobile voice as well as mobile and wireline Internet access services~~ according to the assessment conducted by the MIIT.
Information Technology System
We employ our information technology, or IT, system to support our voice services and other services. In recent years, through continuous upgrading, our IT system has the capability to offer full service support to our wireline, mobile and other services on an integrated basis and to support other services related operations such as account opening, billing and customer services.
Network System
Our network has extensive coverage and scale and employs a variety of advanced technologies and suitable architecture. It offers comprehensive functions and operates in a stable and reliable ~~operation.~~manner. In addition, it supports a comprehensive range ofend-to-end telecommunications services and enables customized products to be delivered for a variety of telecommunications needs. Our network system is managed and operated by our experienced network management and maintenance teams and is supported by our strong research and development capabilities. ~~And in~~In light of future advances in technology, we have formulated viable plans to migrate our network system efficiently to the next generation. Furthermore, we procure our network equipment and related maintenance and technical support mainly from a number of PRC and overseas telecommunications network equipment manufacturers and suppliers including Huawei Technologies, Ericsson, Nokia and ZTE Corporation, among others.
~~On December 31, 2012, we completed the acquisition from China Telecom Group of certain assets and associated liabilities relating~~In addition, adhering to the ~~CDMA~~strategic direction of “Cloud central, Network around, Network adaptive to cloud, Cloud and network ~~located~~as one”, we sped up the construction of new infrastructure based on cloud-network integration. In line with the overall “2+4+31+X+O” deployment plan (meaning two super-large data center parks and public cloud nodes in 30Inner Mongolia and Guizhou serving our global business; data center clusters and cloud resource pools in four key regions including Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong-Hong Kong-Macau, Shaanxi-Sichuan-Chongqing; provincial data centers and cloud nodes deployed in 31 provinces; edge data centers and cloud nodes widely distributed and deployed at the level closest to users; and overseas data centers and cloud nodes) we accelerated the construction of e-Surfing Cloud and IDC. Endeavoring to build a wide-coverage, low-latency and intelligent carrying network with cloud/IDC, we promoted the upgrade of gigabit fiber broadband networks in 280 cities, built five major regional reconfigurable optical add-drop multiplexer (ROADM) transmission backbone networks covering 31 provinces ~~municipalities~~across China, and ~~autonomous regions in~~expanded the ~~PRC. In addition, we lease certain CDMA~~coverage of our superior optical transport network ~~facilities in Xizang Autonomous Region from China Telecom Group~~for government and have the exclusive right to use and operate such CDMA network to provide our CDMA mobile services. See “Item 4. Information on the Company—A. History and Development of the Company—Our Acquisition from China Telecom Group of the CDMA Network Assets and Associated Liabilities” and “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions” for details.enterprise customers.
Network Architecture
Our network system consists of access networks, data networks, core networks, transport networks, service networks and support networks.

Access networks: Access networks include wireline access network based on ~~copper cables and~~ optic fibers and wireless access network, ~~based on CDMA,TD-LTE~~ ~~and LTE FDD,~~ which are directly connected to customers to provide wireline and wireless data and voice services.

Data networks: Data networks include Internet network and basic data network, and provide network support for all telecommunications services based on IP.

Core networks: Core networks include our wireline telephone network, mobile core network, and support our basic telecommunications services.

Transport networks: Transport networks provide electronic transmission of various service signals for access networks, data networks and core networks.

Service networks: The service networks provide the platform and ancillary systems for a variety of value-added services and application products.

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Support networks: Support networks include signaling networks, digital synchronous networks and various network management systems, in order to support the safe, stable and effective operation of our networks and services at all levels.
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~~Low frequency refarming~~Co-building and co-sharing with China Unicom
In September 2019, following market principles, we entered into the 5G Cooperation Agreement with CUCL. Pursuant to the 5G Cooperation Agreement, we will cooperate with CUCL to jointly co-build one 5G access network nationwide and co-share 5G spectrum and network resources. Each party will continue to operate its business and branding independently. In respect of settlement under the 5G Cooperation Agreement, based on the principle that parties shall not make a profit from such settlement, we and CUCL will formulate a reasonable and precise settlement arrangement, following fair and equitable market practices, to maximize the benefits of cooperation for both parties and maintain a sustainable cooperation. In 2020, we continued to promote 5G network co-building and co-sharing.We ~~obtained permits from MIIT~~believe that the cooperation is beneficial to ~~refarm~~ the ~~800MHz frequency~~efficient construction of 5G network and the reduction of network construction investment as well as operation and maintenance costs while enhancing efficiency in network and assets operation, which enables us to rapidly create 5G service capability and strengthen network quality and business experience so as to achieve a win-win situation for both parties. As of December 31, 2020, the number of 5G base stations in use exceeded 380,000.
In addition, in 2020, we carried out resources and make use of the unoccupied frequency resources for 4G network construction. We have utilized the advantage in the coverage reach of the low frequency of 800MHz by rapidly finishing the constructionco-sharing with China Unicom of 4G network ~~in rural areas at a low cost, achieving nationwide full~~and collectively activated approximately 170,000 co-shared 4G base stations throughout the year, which further optimized the 4G network coverage, ~~of 4G,~~ as well as ~~deepening~~achieved savings in investment and operations and maintenance costs. At the ~~coverage and supplementing the volume of 4G data in urban areas.~~
~~With the support of our nationwide 4G network,~~same time, working with industry partners, we have ~~established a~~been actively exploring ~~NB-IoT~~co-building, co-sharing and co-maintenance cooperation in various projects including transmission network, ~~with broad coverage~~communication equipment rooms, emergency response and ~~high quality nationwide to support development of the ecosystems around our business and our Voice over LTE (“VoLTE”) network has begun commercialization.~~international submarine cables.
Equipment procurement
We purchase most of our network equipment from leading international and domestic suppliers. We purchase a variety of network equipment from domestic suppliers, such as ~~transport~~transmission equipment and local switches. We make most of our purchases through competitive tenders negotiation primarily based on product and service quality, system compatibility and ~~price.~~price of the suppliers.
Purchases from our five largest suppliers of telecommunications equipment accounted for approximately ~~29.7%~~29.2% of our total amount of annual purchases in ~~2018.~~2020. Purchases from our single largest supplier of telecommunications equipment accounted for approximately ~~13.5%~~15.7% of our total amount of annual purchases in ~~2018.~~2020.
Competition
Following the industry restructuring in 2008, China Unicom and our Company have full-service capabilities and compete with each other in both wireline and wireless telecommunications services. China Mobile continues to be the leading provider of mobile telecommunications services in the PRC and competes with us in mobile telecommunications services and other telecommunications services. In June 2019, the MIIT granted the 5G permit to China Telecom Group, China Mobile Group, Unicom Group and China Broadcasting Network. In December 2013 and May 2016, China Mobile and China ~~Radio and Television~~Broadcasting Network, respectively, received a license from the MIIT to operate fixed-line businesses, leading to intensified competition in this sector. Currently, we compete against China Unicom, China Mobile and China Broadcasting Network in terms of fixed-line voice and broadband services.
Since the PRC’s accession to ~~the WTO,~~The World Trade Organization (the “WTO”), foreign operators have been permitted to gradually increase their investments in the telecommunications industry in the PRC. Like domestic service providers, foreign operators are subject to the licensing requirements of the MIIT. In addition, investments by foreign operators may not exceed limits set forth in the relevant laws and regulations with respect to the amount of investment and percentage of total ownership interests that foreign operators are permitted to make in telecommunications enterprises in the PRC. For example, the foreign ownership in basic telecommunications services ~~will~~shall be ~~subject to a limit of~~no more than 49.0%, and the foreign ownership in value-added telecommunications services ~~other~~(other thane-commerce services, ~~will~~domestic multi-party communication services, storage and forwarding services, and call center services) shall be ~~subject to a limit of~~no more than 50.0% except in the pilot free trade zones in China. See “—Regulatory and Related Matters—Licensing” included elsewhere under this Item.
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We also face increasing competition from other competitors outside the telecommunications industry, in particular, from Internet services providers and mobile software and application developers, such asOver-the-Top messaging or voice services providers who offer contents and services on the Internet without their proprietary telecommunications network infrastructure. These competitors are competing with us in information and application or voice services. In recent years, the PRC Government has taken various initiatives to encourage competition in the telecommunications industry, such as the ~~three-network convergence policy and the~~ policy encouraging private capital to enter the industry, in addition to a series of guidance to such effect. Specifically, in May 2010, the PRC State Council issued Certain Opinion on Encouraging and Guiding the Sound Development of Private Investment, encouraging private investment in industry sectors that are mainly ~~state-controlled,~~state-owned, such as basic telecommunications services. In June 2012, the MIIT issued Opinions on Encouraging and Guiding Private Investment in the Telecommunications Industry, encouraging private-sector investment in the telecommunications industry. On May 17, 2013, the MIIT issued the Trial Plan of Resale of Mobile Telecommunications Services, pursuant to which the MIIT would grant qualified companies mobile telecommunications resale business approvals on a pilot basis which would allow them to purchase mobile telecommunications services in bulk from mobile networks operators or resell such services to customers. On January 6, 2016, the MIIT issued the Guidance on the Wholesale Price Adjustments of Mobile Telecommunications Resale Business (关于移动通信转售业务批发价格调整的指导意见), pursuant to which the MIIT required that the wholesale price for resale of mobile telecommunications services should be lower than the per unit price (or package price) for similar services of the mobile networks operators. On April 28, 2018, the MIIT issued the Circular on Commercialization of Mobile Telecommunications Resale Business, ~~(关于移动通信转售业务正式商用的通告),~~ pursuant to which the MIIT granted commercial operation approval to the mobile ~~communication~~communications resale business, effective from May 1, 2018. As of December 31, 2020, among the 26 mobile virtual network operators who signed pilot agreements with us, 25 of them had been granted commercial resale licenses, and there were a total of approximately 19 million users of mobile virtual network through resale business in cooperation with us. In December 2019, the Opinions of the Central Committee of the Communist Party of China and the State Council on Creating a Better Development Environment to Support the Reform and Development of Private Enterprises proposed to liberalize competitive businesses in key industries and fields such as telecommunications, further introduce market competition mechanisms, and support private enterprises to carry out basic telecommunications operations in the form of equity participation.
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On November 11, 2019, the MIIT promulgated the Notice of the Ministry of Industry and Information Technology on Printing and Publishing the Regulations on the Management of Mobile Number Portability Service. The Regulations on the Management of Mobile Number Portability Service (the “Portability Provisions”) became effective on December 1, 2019. The Portability Provisions specify that cellular mobile communication users (excluding the IoT users) within the same local network may apply to change the contracted fundamental service operator by keeping the same mobile numbers and users switched to the network have equal rights under the same conditions. By the end of 2020, we had net inflow of subscribers since the implementation of mobile number portability service in China. In an effort to further encourage private-sector investment in the broadband network construction and business operation, as well as encourage private capital to enter into the telecommunications market through equity investment, the State Council issued the Notice on the “Broadband China” Policy and the Implementation Plan on August 1, 2013 and Certain Opinion on Promoting Information Consumption and Stimulating Domestic Demand on August 8, 2013, and the MIIT also issued the Informatization Development Plan on September 29, 2013, the Notice on Opening the Broadband Access Market to Private Capital on December 25, 2014 and three more Notices on Further Broadening the Scope of Trial Opening of the Broadband Access Business on September 23, 2015, October 13, 2016 and September 27, 2017, respectively. By the end of ~~2018,~~2020, the broadband access market opened up to private capital in ~~all the cities in 17~~a majority of provinces in China on a province-wide basis and ~~additional 39~~also in many pilot ~~cities in other provinces.~~ cities.
In addition, our cloud services and IDC business compete with domestic and international cloud service providers and IDC operators, respectively. In the field of Industrial Digitalization, we compete with telecommunications operators, Internet companies, software companies, equipment manufacturers, etc.
As a result, the competitive landscape in the PRC telecommunications industry may further diversify, causing more intensified competition. In April 2018, MIIT approved the commercialization of mobile telecommunication resale business, effective from May 2018. As of January 31, 2019, among the 42 mobile virtual network operators who had been approved by the MIIT to conduct resale business on a pilot basis, 32 of which had been granted commercial operation licenses; and among the 25 companies who signed resale agreements with us, 12 companies had been granted commercial licenses and the other companies are all in the process of applying for such licenses.
Trademarks
We conduct our business under the “China Telecom” brand name and logo. Currently, China Telecom Group owns certain trademarks in the PRC, some of which have been registered with the former Trademark Office of the PRC State Administration for Industry and Commerce, or the Trademark Office, and some of which are in the process of being registered with the Trademark Office. China Telecom Group has executed a trademark license agreement with us. Under this agreement, China Telecom Group agreed to grant to us and our subsidiaries the right to use these trademarks upon the completion of the registration on a royalty-free basis until December 31, 2021, which is automatically renewable for three more years as the parties may agree. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ongoing Related Party Transactions between Us and China Telecom Group and ~~its affiliated companies—~~Its Affiliated Companies—Trademark License Agreement”.
Regulatory and Related Matters
Overview
The PRC’s telecommunications industry is subject to extensive government regulation. A number of central government authorities have regulatory responsibilities for various aspects of the telecommunications industry. These authorities primarily include:

The MIIT, which is responsible for, among other things:

formulating and enforcing industry policies and regulations as well as technical standards;

granting telecommunications service licenses;

supervising the operations and quality of service of telecommunications service providers;

allocating and administering telecommunications resources such as spectrum and numbers;

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together with other relevant regulatory authorities, including the NDRC, regulating tariff charging mechanisms for telecommunications services;

formulating interconnection and settlement arrangements between telecommunications networks; and

maintaining fair and orderly market competition among service providers.

Provincial communications administrations under the MIIT, which oversee the implementation of the Ministry’s regulations and exercise regulatory authorities delegated by the Ministry within their respective provinces, autonomous regions and centrally administered municipalities.

The NDRC approves investment and finance projects exceeding certain capital expenditure amounts as well as foreign investment projects exceeding certain investment amounts.
In order to provide a uniform regulatory framework to encourage the orderly development of the telecommunications industry, the PRC government is in the process of drafting a telecommunications law. We expect that, if and when the telecommunications law is adopted by the National People’s Congress or its Standing Committee, the highest state legislative body in the PRC, it will become the basic telecommunications statute and provide a regulatory framework for the telecommunications industry in the PRC.
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In addition, the Counterterrorism Law of the People’s Republic of China has come into force on January 1, 2016. It requires telecommunications operators and Internet service providers to provide technical support and assistance such as technical interface and decryption to the public security authorities and national security authorities for their lawful prevention and investigation of terrorist activities; it requires telecommunications operators and Internet service providers to put into practice the network security, information content supervision system and technical measures for security protection in accordance with the laws and administrative regulations, in order to prevent the dissemination of information relating to terrorism and extremism; it requires telecommunications operators and Internet service providers to, where any information in relation to terrorism or extremism is detected, immediately cease the relevant transmission, keep the relevant records, delete the relevant information and report to the public security divisions or the relevant departments; it also requires telecommunications operators and Internet service providers to examine the identity of the users and not to provide services to any person of unknown identity or to persons who refuse to have their identity examined. Violation of the above provisions may result in fines and the relevant responsible persons may also be fined or detained.
On September 23, 2016, six departments including the Supreme People’s Court, the Supreme People’s Procuratorate, Ministry of Public Security, the MIIT, the People’s Bank of China and China Banking Regulatory Commission jointly released the Announcement on Preventing and Cracking Down on Telecom and Internet Frauds. The Announcement requires telecom operators to strictly implement the real-name registration system of telephone subscribers. Services to those entities or individuals who have not registered in real names and could not complete the true identity information registration within the stipulated time will be terminated. It also requires telecommunications operators to immediately carry out measures to clean up user accounts that have registered multiple phone cards, and to block Internet publication, search, dissemination and sales channels of software that changes the number displayed by caller IDs. It also strictly prohibits the operation and any business that provides illegal services of changing phone numbers via Internet; strictly regulates the transmission of caller IDs of the Administration of International Communication Accesses; fully implements the regulation and cleaning up of private voice lines and caller authentication; strengthens the detection and interception of fake caller IDs within and between networks; and immediately bans and regulates telephone services such as~~“one-number~~ service”, through which the user can combine his/her various communication numbers into one new phone number, business switchboard and 400 telephone switchboard. Furthermore, on November 7, 2016, the MIIT issued the Implementation Opinions on the Work of Further Prevention and Crack Down on Communications Fraud, which requires telecommunications operators to fully implement the real-name registration for telephone subscribers, rectify and standardize the key telecommunications services, rectify the issue of “changing number via internet” services and strengthen the protection of telephone subscribers’ personal data.
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On June 1, 2017, the Cyber Security Law ~~of the People’s Republic of China~~ came into force. It stipulates relevant rules for personal data security protection, new types of cybercrime and network real name system; it specifies the principle of cyberspace sovereignty, the security obligations of network products and services providers as well as the security obligations of network operators; and it further enhances the protection of personal data, establishes the framework for the protection of critical information infrastructure facilities, and establishes rules regulating cross-border transmission of key data via critical information infrastructure facilities. In addition, it provides for the punishment for foreign organizations and individuals that attack and destroy China’s critical information infrastructure facilities and establishes a system for monitoring, early warning and emergency response. Telecom operators shall comply with the requirements under the Cyber Security Law ~~of the People’s Republic of China~~ in respect of network operating security and network information security. In addition, the ~~Measures for the~~Cyber Security Review ~~of Network Products and Services (Provisional)~~Measures became effective on June 1, ~~2017.~~ 2020. It repealed the Interim Security Review Measures for Network Products and Services and further refined the relevant provisions therein, requiring critical information infrastructure operators to make declaration when procuring network products and services that affect or may affect national security. It further clarifies the standards and procedures of review and stipulates that if the reviewers fail to be objective and fair, or are unable to undertake the obligation to retain the confidentiality of the information received during the review, the operators or network product and service providers may report this to the Cyber Security Review Office or other relevant departments.
The Cyber Security Law ~~of the People’s Republic of China~~ and the ~~Measures for the~~Cyber Security Review ~~of Network Products and Services (Provisional)~~Measures require procurement of network products and services by operators in key industries ~~or of~~and critical information infrastructure facilities that may have national security concerns to go through a cyber security review. Relevant government authorities responsible for the protection of critical information infrastructure facilities will decide on whether such procurement would threat national security pursuant to the review. The security review of telecommunications industry would be organized and conducted by the MIIT. The security review may be initiated by the enterprises or by the relevant government authorities. The security review would focus on the security and controllability of network products and services. Operators of critical information infrastructure facilities use network products or services that have not ~~conducted~~been subject to the security review or have not passed the security review, would ~~face~~be subject to a fine of no less than one but no more than ten times of the amount of purchase. According to the Cyber Security Law, ~~the Cyberspace Administration of China, or~~ the CAC has a central role in planning, coordination, supervision, and management of network security measures while the MIIT, the Ministry of Public Security and other relevant authorities are in charge of network security protection, supervision and management within the scope of their respective responsibilities. ~~While several~~Several related regulations, including the Measures for the Security Review of Network Products and Services (for Trial Implementation) and the Provisions for the Administration of Internet News Information Services, published by the CAC came into effect on the same day as the Cyber Security ~~Law, the implementation of the Cyber Security Law is still at an early stage.~~Law. The PRC government may amend the relevant regulations or promulgate new regulations to clarify and further implement the Cyber Security Law. Although we expect that the Cyber Security Law will have a positive effect on the overall development of the telecommunications industry and enhance information protection in ~~Mainland China,~~the PRC, we currently cannot predict the scope of any specific requirements that may be imposed on us and their implications for our operations under the Cyber Security Law and relevant regulations.
On January 1, 2018, the Measures for Monitoring and Management of Public Internet Cyber Security Threat issued by the MIIT came into force. It provided for the definition of public Internet cyber security threats, the relevant governing authorities, working principles and remedial measures in connection with the monitoring and management of public ~~internet~~Internet cyber security threats. Telecom operators are required to strengthen the monitoring and management of public Internet cyber security threats, notify the governing authorities in a timely manner after discovery of cyber security threats, and provide technical assistance to governing authorities in relation to inquiries into IP address attribution and domain name registration.
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On May 1, 2018, the national standard on personal information protection, Information Security ~~Technology –~~ Technology—Personal Information Security Specification GB/T 35273-2017, ~~(《信息安全技术-个人信息安全规范》(GB/T 35273-2017)),~~ came into force. It provides specific examples on the scope and types of personal information and sensitive personal information; stipulates the basic principles on personal information security and regulates the collection, retention, use, sharing, transfer and public disclosure of personal information. It puts forward specific requirements on the methods and measures to handle personal information security incidents by personal information controllers, as well as the organization and management of personal information controllers. In addition, it provides implementation methods and privacy policy forms for the right of informed consent to be exercised. On October 1, 2020, the revised Information Security Technology—Personal Information Security Specification (信息安全技术个人信息安全规范) which superseded the previous specification published in 2018 was formally implemented, adding provisions with respect to “autonomous selection of multiple business functions”, “convergence and integration of personal information collected for different business purposes”, “usage restrictions of user portraits”, “third-party access management”, “personal information security project”, “personal information processing activity records”, etc. It also revised “exceptions for authorization and consent”, “personal information subject cancellation accounts”, etc., which provides more privacy protection with respect to the collection, utilization and retention of personal information.
Telecommunications Regulations
The PRC’s State Council promulgated the Telecommunications Regulations, which became effective as of September 25, 2000 and were amended on July 29, 2014 and February 6, 2016, respectively, by the Decision of the State Council on Amending Certain Administrative Regulations. The Telecommunications Regulations are substantially consistent with, and are primarily intended to streamline and clarify, the then existing rules and policies for the telecommunications industry. The Telecommunications Regulations provide the primary regulatory framework for the PRC’s telecommunications industry in the interim period prior to the adoption of the telecommunications law.
The Telecommunications Regulations are intended to develop a transparent and fair regulatory environment to encourage fair and orderly competition and development in the telecommunications industry. The Telecommunications Regulations address all key aspects of telecommunications operations, including, among others, entry into the telecommunications industry, network interconnection, telecommunications resource allocation, tariffs and service standards.
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Licensing
The Telecommunications Regulations adopt the existing regulatory distinction between basic and value-added telecommunications services, which are subject to different licensing requirements. On December 28, 2015, the MIIT promulgated the Telecommunications Service ~~Catalogue~~Catalog (2015 edition) which took effect on March 1, ~~2016.~~2016 and was amended on June 6, 2019. Basic telecommunications services include, among others, wireline communications services, cellular mobile communications services, satellite communications services, data communications services, IP telephone services, trunking communications services, wireless paging services, network access facilities services, domestic communications facilities services and network hosting services. Value-added telecommunications services include, among others, ~~internet data center~~IDC services, content distribution network services, domestic Internet virtual private network services, Internet access services, online data processing and transaction processing services, domestic multi-communication services, storage and forwarding services, call center services, information services and coding and procedures conversion services.
Providers of any basic telecommunications services as well as providers of value-added services in two or more provinces, autonomous regions and centrally administered municipalities in the PRC must apply for licenses from the MIIT. In accordance with the approval of the MIIT, we derive our exclusive rights to operate basic telecommunications business from our status as a subsidiary controlled by China Telecom Group, which holds the licenses required for operating ~~our~~the relevant telecommunications business. In January 2009, China Telecom Group received a license from the MIIT to operate 3G services nationwide, which permits China Telecom Group to provide 3G services based on CDMA2000 technology. We have been authorized by China Telecom Group to operate 3G services nationwide based on CDMA2000 technology. In December 2013, China Telecom Group, Unicom Group and China Mobile Group received ~~licenses~~permits from the MIIT to operate 4G services nationwide based onTD-LTE technology. We have been authorized by China Telecom Group to operate 4G services nationwide based onTD-LTE technology. On February 27, 2015, China Telecom Group was granted by the MIIT the permit, and authorized us, to provide 4G services based on LTE FDD technologies nationwide. In June 2019, China Telecom Group, our controlling shareholder, was granted the permit from MIIT to operate 5G digital cellular mobile service nationwide, and we have been authorized by China Telecom Group to develop 5G business nationwide.
After its accession to the WTO in December 2001, the PRC promulgated the Administrative Regulations on Telecommunications Companies with Foreign Investment, which became effective on January 1, 2002 and were subsequently amended in 2008 and 2016, implementing its commitments to the WTO. Those commitments include the gradual reduction of foreign ownership restrictions in the telecommunications industry and thestep-by-step opening of the telecommunications market in the PRC to foreign operators. According to those regulations, enterprises with foreign investment may operate basic and value-added telecommunications services subject to the approval of the MIIT and the Ministry of Commerce of the People’s Republic of China (formerly the Ministry of Foreign Trade and Economic ~~Cooperation)~~Cooperation of the People’s Republic of China). Certain limitations have been placed on the total registered capital of, and maximum foreign shareholdings in, such enterprises. However, the presence or absence of foreign investments in an applicant for telecommunications licenses will presumably bear no direct relation to the decision on whether to issue licenses, inasmuch as the issuance of new licenses is governed by a separate set of rules and regulations. In recent years, the PRC gradually fulfilled the market-opening commitments it made to the WTO and lifted many restrictions for foreign investors and service providers in respect of telecommunications services.
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The remaining restrictions regarding mobile services, value-added telecommunications services and ~~fixed line~~fixed-line services are as follows:

For mobile voice and data services:

there is no longer any geographic restriction and the foreign ownership shall be no more than 49.0%.

For value-added telecommunications ~~services:~~services (other than e-commerce services, domestic multi-party communication services, storage and forwarding services, and call center services):

there is no longer any geographic restriction and the foreign ownership generally shall be no more than 50.0%.

For ~~fixed line~~fixed-line services:

there is no longer any geographic restriction and the foreign ownership shall be no more than 49.0%.
The MIIT has promulgated the Administrative Measures for the Licensing of Telecommunications Business, which aims to strengthen the administration of licensing of telecommunications operations permits and became effective on September 1, 2017. It provides for the establishment of an integrated management platform for telecommunications business, the promotion of online application, approval and management of business license as well as publication, queries andco-sharing of related information, and enhancement of credit management by including credit conditions as a precondition to being granted a business license. The annual business license inspection system would be adjusted to a system of publication of annual reports and announcements. An illegal operations and dishonesty list for telecommunications operators would be established and maintained and the operators on such list would be subject to enhanced supervision from relevant telecommunications regulatory bodies. If a telecommunications business operator is requested by relevant telecommunications regulatory body to suspend operations, its business license is revoked or there are certain other circumstances as stipulated by the MIIT, such operator would be included in the dishonesty list and may not apply for telecommunications business license.
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Pursuant to the Circular on the Framework Plan for the China (Shanghai) Pilot Free Trade Zone issued by the State Council on September 18, 2013, qualified foreign investment enterprises will be permitted to provide ~~specific~~certain value-added telecommunications services in specific form in the China (Shanghai) Pilot Free Trade Zone, subject to protections on Internet information security and approval by the State Council is required in case of a breakthrough in the limitations provided for under the administrative regulations. In April 2014, to further promote the pilot program of the value-added telecommunications business in the China (Shanghai) Pilot Free Trade Zone, the MIIT issued the Administrative Measures for the Pilot Operation of the Value-added Telecommunications Business by Foreign Investors in China (Shanghai) Pilot Free Trade Zone.
Tariff Setting
Prior to May 10, 2014, under the Telecommunications Regulations, telecommunications tariffs ~~are~~were categorized into government fixed tariffs, government guidance tariffs and market based tariffs. The telecommunications providers ~~are~~were permitted to set tariffs for certain services provided the tariff levels ~~are~~were below the tariff ceilings set by the MIIT and the NDRC.
As a result of the governmental effort to gradually ease the regulations on the tariffs, on May 5, 2014, the MIIT and the NDRC issued the Notice on Implementing the Market Based Tariffs for Telecommunications Services. Pursuant to this Notice, effective from May 10, 2014, the government fixed tariffs and the government guidance tariffs ~~are~~were abolished and telecommunications operators are permitted to set the tariffs of all telecommunications services based on the cost and market conditions. The Telecommunications Regulations were subsequently amended on July 29, 2014 by the Decision of the State Council on Amending Certain Administrative Regulations to reflect this policy change as well as other amendments.
On May 20, 2015, the office of the State Council promulgated the Guidance Opinions Regarding Expediting the Development of the High-Speed Broadband Network and Promoting the Speed Upgrade and Tariff Reduction, calling for the telecommunications operators to reduce the data tariffs. In addition, the ~~Report on~~Government Work ~~of Government~~Report in 2017 calls for the deepening of speed upgrade and tariff reduction, the cancellation of domestic long distance and roaming fee for handsets users, the reduction of the tariff of Internet dedicated line access for small and medium enterprises and international long distance calls. Furthermore, the ~~Report on~~Government Work ~~of Government~~Report in 2018 calls for a further promotion of network speed upgrade and tariff ~~reduction~~reduction. We were encouraged to further reduce the average tariff of broadband ~~tariff~~ for small and medium ~~enterprises~~enterprise subscribers and the average data tariff of mobile network to a greater extent in 2019.
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On August 23, 2018, the MIIT promulgated the Notice of ~~the~~ Ministry of Industry and Information Technology on Further Regulating ~~the~~ Marketing ~~Behavior of~~Activities for Telecommunications Tariff Schemes which became effective from August 23, 2018. ~~This~~The Notice encourages ~~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 packages. In formulating and implementing the tariff plans of bundled packages, the tariff plans for each respective service should also be provided, and the tariff rates disclosure policy should be improved. When promoting the tariff plans, the telecommunications enterprises shall fulfill their obligation to remind the users with respect to matters they shall pay attention to, including the restrictive conditions, the validity period and the charging principles. The same type of users with the same transaction conditions should be guaranteed with equal rights to select the tariff plans.
On May 9, 2020, the MIIT and the NDRC promulgated the Notice on Cancelling the Notification Mechanism of Telecommunication Services Tariff. Since the promulgation date of such notice, the notification requirements before the implementation of the tariff plan in the Notice on Implementing the Market Based Tariffs for Telecommunications Services will be cancelled. Telecommunications operators are no longer required to ~~offer tiered~~notify the MIIT and NDRC of tariff plans across the country or across provinces, autonomous regions and municipalities, or to notify the telecommunications administrations in provinces, autonomous regions and municipalities level and the corresponding pricing ~~scheme plans based on usage. Pursuant to this Notice, fundamental~~authorities of other tariff plans. In addition, telecommunications operators should ~~strive~~further improve the telecommunications service tariff publicity system, and publicize all tariff plans available in the public market in the form of a list through manuals or electronic display screens at business premises. The publicity and promotion of tariff plans should be comprehensive, accurate and easy to ~~simplify their pricing structures, offer corresponding service~~understand, and the content of the promotion should be consistent with the tariff publicity plan. When formulating a package sales tariff plan, separate tariff plans for ~~each fee item if package plans are offered, specify~~different services that involve basic telecommunication needs should be provided at the ~~structure of fees, fee items and fee standards, and fulfill operators’ obligations~~same time for users to ~~remind its customers of the restrictive conditions, validity periods, charging principle of the plans, among other noteworthy matters, when promoting such plans. In addition, the~~choose independently. For new users converted from our mobile number portability services, telecommunications operators shall ensure ~~customers with~~these users can independently choose the ~~same trading conditions afforded identical rights to choose their~~ tariff ~~plan.~~plan available for sale in the public market.
Interconnection
Under the Telecommunications Regulations and the Administrative Rules on Interconnection between the Public Telecommunications Networks promulgated by the MII in May 2001, as amended in September 2014, major telecommunications operators in the PRC cannot refuse requests for interconnection and must enter into interconnection agreements upon request by other service providers. ~~Interconnection agreements must be reported to the MIIT.~~ Telecommunications operators must ensure the smooth interconnection pursuant to the interconnection agreements as well as the applicable regulations and may not unilaterally terminate the interconnection.
The Telecommunications Regulations further provide that the technical standards and settlement methods for network interconnections be formulated by the MIIT. In accordance with these regulations, China Telecom Group has entered into various interconnection agreements with other telecommunications service providers, including China Mobile and China Unicom.
On December 30, 2013, the MIIT issued the Guidance Opinions on Building New National Internet Backbone Interconnection Points, pursuant to which seven new backbone interconnection points altogether have been built in Chengdu, Wuhan, Xi’an, Shenyang, Nanjing, Chongqing and Zhengzhou, in addition to the three existing backbone interconnection points in Beijing, Shanghai and Guangzhou. The operations of these new backbone interconnection points have significantly improved the quality and speed of interconnection between the telecommunications networks. On November 9, 2016, the MIIT approved the addition of new national Internet backbone interconnection points in Hangzhou, Fuzhou and Gui’an of Guiyang, achieving 13 Internet backbone interconnection points upon completion of such three new additions in June 2017. On December 30, 2019, the MIIT approved the addition of new Internet backbone interconnection point in Hohhot and as of December 2020, its construction had been completed.
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The MIIT issued the Notice on Public Telecommunications Network Interconnection Settlement and Relay Fees Allocation in October 2003 and two Notices on Adjustment to Settlement Standards for Interconnection Fees of Wireline Local Telephone Networks in October 2006 and April 2009, respectively, which provided for interconnection settlement arrangement standards for local inter-district calls between wireline local telephone operators as well as public telecommunications network. In November 2009, the MIIT issued the Notice on Adjustment to Settlement Standards for Interconnection Fees of Public Telecommunications Network and the Notice on the Settlement Standards for Interconnection Fees ofTD-SCDMA, which provided for adjustments to certain interconnections settlement standards between telecommunications operators. Effective from January 1, 2010, when a China Mobile’s TD-SCDMA 157 and 188 prefix numbers user initiated a call to a user of our Company or China Unicom within the scope of local network, China Mobile would pay a settlement charge of RMB0.012 per minute to our Company or China Unicom. Effective from June 1, 2010, when a wireline user of a basic telecommunications operator initiated a call to a mobile user of another basic telecommunications operator, the settlement charge was set uniformly at a rate of RMB0.001 per minute payable by the basic telecommunications operator originating the call to the basic telecommunications operator receiving the call. Effective from January 1, 2014, some of the settlement standards have been further adjusted pursuant to the Notice on Adjustment to Settlement Standards for Interconnection Fees of Public Telecommunications Network issued by the MIIT on December 17, 2013. Prior to January 1, 2014, when a mobile user of a basic telecommunications operator (excluding China Mobile’sTD-SCDMA 157 and 188 prefix numbers users) ~~initiates~~initiated a call to a mobile user of another basic telecommunications operator, the settlement charge iswas set uniformly at a rate of RMB0.06 per minute payable by the basic telecommunications operator originating the call to the basic telecommunications operator receiving the call. ~~In the event a China Mobile’sTD-SCDMA~~ 157 and 188 prefix numbers user initiates a call to a user of our Company or China Unicom within the scope of local network, China Mobile will pay a settlement charge of RMB0.012 per minute to our Company or China Unicom. With effect from January 1, 2014, when a mobile users of our Company or China Unicom initiates a call to a mobile user of China Mobile (not includingTD-SCDMA 157 and 188 prefix numbers users), the interconnection settlement charges payable by our Company or China Unicom to China Mobile is adjusted from then prevailing rate of RMB0.06 per minute to RMB0.04 per minute. Other existing voice interconnection settlement standards remain unchanged. Meanwhile, the SMS interconnection settlement standard is adjusted from RMB0.03 per message to RMB0.01 per message, and the MMS interconnection settlement standard is adjusted from RMB0.10 per message to RMB0.05 per message. In June 2020, the MIIT promulgated the Notice on Adjusting the TD-SCDMA Voice Inter-Network Settlement Policy, pursuant to which effective from July 1, 2020, when a China Mobile’s TD-SCDMA 157 and 188 prefix numbers user initiated a call to a user of our Company or China Unicom within the scope of local network, China Mobile would pay a settlement charge of RMB0.06 per minute to our Company or China Unicom.
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The following table sets forth selected interconnection revenues sharing and settlement arrangements for local calls and domestic long distance calls:

Network from Which Calls Originated

Network at Which Calls Terminated

Current Main Settlement Arrangement
Mobile operator    Wireline local operator or transferred through mobile operator’s long distance network to wireline local operator
(1) Mobile operator collects the cellular usage charge from its subscribers

(2) Mobile operator pays RMB0.06 per minute to wireline operator

(3) ~~Starting~~Between January 1, 2010 and June 30, 2020, mobile operator (China Mobile) pays RMB0.012 per minute to wireline operator for calls originated from~~TD-SCDMA“157”~~TD-SCDMA “157” or “188” prefix phone numbers in local areas. Starting July 1, 2020, mobile operator (China Mobile) pays RMB0.06 per minute to wireline operator for calls originated from TD-SCDMA “157” or “188” prefix phone numbers in local areas
Wireline local operator    Mobile local operator
(1) Wireline operator collects the usage charge from its subscribers

(2) No ~~revenues~~revenue sharing or settlement prior to June 1, 2010. Wireline operator pays RMB0.001 per minute to mobile operator after June 1, 2010
Wireline operator    Transferred through wireline operator’s long distance network to mobile operator
(1) Wireline operator collects the usage charge from its subscribers

(2) Wireline operator pays RMB0.06 per minute to mobile operator

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Network from Which Calls Originated

Network at Which Calls Terminated

Current Main Settlement Arrangement
Wireline local operator A    Wireline local operator B
(1) Operator A collects the usage charge from its subscribers

(2) In the case of local calls from operator A not using operator B’s local inter-district trunk circuit, operator A pays 50.0% of usage charge to operator B

(3) In the case of local inter-district calls from operator A using operator B’s local inter-district trunk circuit, operator A pays no more than RMB0.06 per minute to operator B
Mobile operator A    Mobile local operator B or transferred through mobile operator A’s long distance network to mobile operator B
(1) Mobile operator A collects the cellular usage charge from its subscribers

(2) ~~Prior to January 1, 2014, mobile~~Mobile operator A pays RMB0.06 per minute to mobile operator B.
(3) Starting ~~from January 1, 2010, mobile operator A (China Mobile) pays RMB0.012 per minute to mobile operator B for calls originated fromTD-SCDMA~~ ~~“157” or “188” prefix phone numbers users in local areas. Starting from~~ January 1, 2014, mobile operator A (China Telecom or China Unicom) pays RMB0.04 per minute to mobile operator B (China Mobile) for calls originated from a mobile user of operator A (China Telecom or China Unicom) to a mobile user of operator B (China Mobile) (not includingTD-SCDMA 157 and 188 prefix numbers)
(4) Between January 1, 2010 and June 30, 2020, mobile operator A (China Mobile) pays RMB0.012 per minute to mobile operator B for calls originated from TD-SCDMA “157” or “188” prefix phone numbers users in local areas. Starting July 1, 2020, mobile operator A (China Mobile) pays RMB0.06 per minute to mobile operator B for calls originated from TD-SCDMA “157�� or “188” prefix phone numbers users in local areas
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The following table sets forth selected current main interconnection revenues sharing and settlement arrangements for PSTN international long distance calls, including calls originated from and terminated in ~~Hong Kong, Macau and Taiwan:~~any international region:

Network from Which Calls Originated

Network at Which Calls Terminated

Current Main Settlement Arrangement
Domestic wireline local or mobile
operator A
   Without using the carrier identity code of operator B, through the domestic and international long distance network of operator B
(1) Operator A collects the tariff from the subscribers

(2) Operator A retains RMB0.06 per minute, and operator B gets the rest of the international long distance tariff.
   Using the carrier identity code of operator B, through the domestic and international long distance network of operator B
(1) Operator B collects the tariff from the subscribers

(2) Operator B pays operator A RMB0.06 per minute
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Network from Which Calls Originated
Network at Which Calls Terminated
Current Main Settlement Arrangement
International long distance operator    Operator B through domestic long distance network of operator C and international gateway of domestic operator A    (1) Operator A pays not more than RMB0.54 per minute to operator C, operator C pays not more than RMB0.06 per minute to operator B, where operator A and operator C, or operator B and operator C can be the same operator
The following table sets forth selected current main interconnection revenues sharing and settlement arrangements for SMS:

Network from Which SMS Originated

Network at Which SMS Terminated

Current Main Settlement Arrangement
Wireline or mobile operator A    Wireline or mobile operator B
(1) Operator A collects the tariff from its subscribers

(2) Starting January 1, 2014, operator A pays RMB0.01 per SMS to operator B
The following table sets forth selected current main interconnection revenues sharing and settlement arrangements for MMS:

Network from Which MMS Originated

Network at Which MMS Terminated

Current Main Settlement Arrangement
Mobile operator A    Mobile operator B
(1) Operator A collects the tariff from its subscribers

(2) Starting January 1, 2014, operator A pays RMB0.05 per MMS to operator B
The interconnection settlement arrangement for the Internet backbone networks in China is the interconnection settlement through the network access points, or the NAPs, and backbone interconnection points. The price of NAP settlement is determined by the MIIT, and the price of backbone interconnection points is decided by the Internet backbone networks participants with reference to the NAP settlement standards. Since 2013, the MIIT reduced the interconnection settlement charges for the Internet backbone networks each year and the interconnection settlement charges for the NAPs was reduced by the MIIT to RMB80,000 per gigabyte per month starting from November 1, 2018. The one-way payment of interconnection settlement charges for the Internet backbone networks between China Mobile Group and China Telecom Group or Unicom Group will be ceased and replaced by a peer-to-peer interconnection arrangement without settlement charges from July 1, 2020.
The MII promulgated the Measures on the Supervision and Administration of Quality of Service of the Public Telecommunications Networks, or the Measures on Quality of Service, effective August 1, 2005. The Measures on Quality of Service provide the supervision and administration of services of public telecommunications networks, including, among others, wireline local telephone networks, domestic long distance telephone networks, international telephone networks, IP telephone networks, land cellular mobile communication networks, satellite mobile communication networks, Internet backbone networks (access) and other telecommunications networks regulated by the MII. Under the Measures on Quality of Service, telecommunications operators are required to set up interconnection-related working units to be responsible for the management of quality of services of the public telecommunications networks.
Technical Standards
The MIIT sets industry technical standards for telecommunications terminal and interconnection related equipment used in the public telecommunications networks. A network access license from the MIIT and other relevant regulatory authorities is required for all such equipment. Most of the standards set by the MIIT conform to standards recommended by the International Telecommunications Union and other international telecommunications standards organizations.
~~- 40 -~~
Telecommunications Resources
The MIIT is responsible for the administration and allocation of telecommunications resources in the PRC, including radio frequencies and telecommunications network numbers. The use of these resources by telecommunications service providers is subject to the approval of the MIIT or the relevant provincial communications administrations and a usage fee for telecommunications resources payable to the PRC government.
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In ~~2018,~~2020, we paid approximately ~~RMB98~~RMB109 million of usage fees for the telecommunications network numbers and approximately ~~RMB1,797~~RMB1,513 million of frequency usage fees, respectively.
Quality of Service
Under the Telecommunications Regulations, the MIIT and the relevant provincial communications administration have the responsibility of supervising and monitoring the quality of services provided by telecommunications service providers in the PRC. Under the Telecommunications Regulations, customers of telecommunications service providers have the right to submit complaints to the MIIT and the relevant provincial communications administration or other relevant government authorities.
On March 13, 2005, the MII promulgated the Telecommunications Services Standards which were amended in September 2014. The Telecommunications Services Standards aim to protect the rights of the customers of telecommunications services and sets forth minimum quality requirements for telecommunications services provided by telecommunications operators.
The MII promulgated the Measures on the Supervision and Administration of Quality of Service of the Public Telecommunications Networks, or the Measures on Quality of Service, effective August 1, 2005. The Measures on Quality of Service provide the supervision and administration of services of public telecommunications networks, including, among others, wireline local telephone networks, domestic long distance telephone networks, international telephone networks, and IP telephone networks. Under the Measures on Quality of Service, telecommunications operators are required to set up a unit which is responsible for solving the problems with respect to the public telecommunications network services.
Under the PRC Consumer Protection Law, Consumers’ Associations can participate in the inspection and examination of goods and services by relevant governmental authorities; and customers can lodge their complaints with Consumers’ Associations, which can investigate the goods or services involved in the complaints, and mediate the complaints.
On December 28, 2016, the MIIT promulgated the Notice on Matters Relating to the Regulating of Telecommunications Services Agreements, effective on February 1, 2017, which specifies the standard of signing and record-keeping of telecommunication services agreements and emphasizes that the ~~telecom~~telecommunications operators should inform the ~~telephone~~ subscribers and carry out remedial work when some or all of the terms under the telecommunications services agreements could not be observed due to force majeure or adjustment of national policies.
~~- 41 -~~
Universal Services
Under the Telecommunications Regulations, telecommunications service providers in the PRC are required to fulfill universal service obligations in accordance with relevant regulations promulgated by the PRC government, and the MIIT has been given authority by the PRC government to delineate the scope of its universal service obligations. The MIIT, together with other regulatory authorities, is also responsible for formulating administrative rules relating to the establishment of a universal service fund and compensation schemes for universal services. The State Council issued the Notice on the “Broadband China” Policy and the Implementation Plan on August 1, 2013, which included the provision of broadband services to ~~remote~~ villages as part of the universal service obligations of telecommunications service providers and mentioned improving the compensation scheme for the expenses incurred in the “Broadband China” projects undertaken by telecommunications service providers in the villages. In addition, the Ministry of Finance of the People’s Republic of China, or the MOF and the MIIT jointly issued the Notice of Implementation of Telecommunications Universal Services Pilot Work in December 2015, which provided that the telecommunications universal services should take a market-oriented approach and that the telecommunications universal services providers should be selected through a public bidding process. This notice sets up certain goals for the telecommunications operators, including broadband coverage in 98% of the administrative villages and over 12Mbps broadband access capacity in rural villages, by 2020. Pursuant to the notice, the central government subsidies will be granted to the pilot areas determined by the MOF and the MIIT and the universal services providers will be selected through an open bidding process.
The PRC government used financial resources to compensate the expenses incurred in the ~~“Coverage to All Villages” and the “Broadband China”~~universal services related projects before the implementation of universal services pilot projects in 2016. We, together with other telecommunications operators, have undertaken the “Coverage to All Villages” project since 2004. Since 2016, we have undertaken universal services pilot projects in accordance with the requirements of the Chinese government and initially in aggregate won the bids to undertake ~~the construction of broadband network facilities in approximately 50,000 administrative villages in 19 provinces~~ and ~~autonomous regions. By the end of 2018, we had~~ completed the construction of broadband networks in approximately 50,000 administrative villages. Since 2018, the PRC government included 4G network coverage into the scope of pilot projects for universal services. By the end of 2019, we had won the bids to undertake 4G base stations constructions in approximately 12,000 administrative villages in remote rural areas. We have continuously promoted the construction of communication networks in rural areas and remote rural villages and ~~strives~~strive to improve the fixed-line and wireless broadband Internet access ~~coverage~~capacities in rural areas. In addition, we have set up local service points for rural villages, actively promoted the development ofe-commerce in rural areas, and strived to contribute to the informatization upgrade and revitalization of rural areas in various regions. The compensation from the PRC government may not be sufficient to cover all of our expenses for providing the telecommunications universal services. However, we believe the expenses for such operation and maintenance will not have a material effect on our financial condition.
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State-Owned Assets Supervision
Under the PRC Company Law, PRC Enterprise State-Owned Assets Law, Interim Measures for the Supervision and Administration of State-Owned Assets of the Enterprises, and other administrative regulations, the State-owned Assets Supervision and Administration Commission of the State Council, or the SASAC, among others, supervises the preservation of the value of state-owned assets, guides the reform and restructuring of state-owned enterprises, and evaluates the performance of management executives of state-owned enterprises through legal procedures. Our controlling shareholder, China Telecom Group, is a state-owned enterprise owned by the SASAC and subject to the SASAC’s supervision.
As part of the PRC government’s efforts to reform state-owned enterprises and increase their competitiveness, the PRC government has selected certain enterprises of designated industries, including the telecommunications industry, as the first group of state-owned enterprises for a pilot program on state-owned enterprise mixed ownership reform. Unicom Group was selected among the operators of the telecommunications industry to join such mixed ownership reform.
Three-Network Convergence Policy
In January 2010, the PRC government announced its decision to accelerate the advancement of convergence of telecommunications, television broadcast and Internet access networks to realize interconnection and resource co-sharing among the three networks and further develop the provision of voice, data, television and other services. Specifically, the three-network convergence policy ~~will~~would be initially carried out on a trial basis in selective geographic locations during the period from 2010 to 2012 and further implementedacross-the-board in the following three years. In June 2010, the State Council issued the Trial Plan for Three-Network Convergence and called for 12 ~~volunteer~~ regions (cities) and enterprises for the first trial. Following the completion of the first trial in December 2011, the State Council announced 42 additional regions (cities) for the second phase of the trial. In September 2012, we received the Information Network Communicated Audio-Video Program License from the State Administration of Press, Publication, Radio, Film and Television (the “SARFT”, formerly, the State Administration of Radio, Film and Television). In August 2015, the General Office of the State Council issued the Notice of Plan of Furthering the Three-Network Convergence, which marked the completion of the trial plan of the three-network convergence and called for ~~furthering~~further promotion of the three-network convergence nationwide.
~~- 42 -~~
~~“Broadband China” Policy~~
In August 2013, the State Council issued the Notice on the “Broadband China” Policy and the Implementation Plan, which treats broadband as a strategic national infrastructure, strengthens the overall~~top-level~~ design and planning, coordinates the research and development of the key technologies, formulation of the standard, the safety of the information technology and the construction of the emergency communication system, strengthens the synergy effect of website construction, application, innovative service and industry support, comprehensively utilizes the cable technology and the wireless technology to accelerate the convergence of telecommunications, television broadcast and Internet access networks, and accelerates the construction of the next generation national information infrastructures. In September 2013, the MIIT promulgated an Information-Based Development Plan to further elaborate the “Broadband China” Policy and to encourage private capital to enter into the telecommunications market through equity investment.
Mobile Telecommunications Resale Business
On May 17, 2013, the MIIT issued the Trial Plan of Resale of Mobile Telecommunications Services, pursuant to which the MIIT would grant qualified companies mobile telecommunications resale business approvals on a pilot basis which would allow them to purchase mobile telecommunications services in bulk from mobile networks operators or resell such services to customers. On January 6, 2016, the MIIT issued the Guidance on the Wholesale Price Adjustments of Mobile Telecommunications Resale Business (关于移动通信转售业务批发价格调整的指导意见), pursuant to which the MIIT required that the wholesale price for resale of mobile telecommunications services should be lower than the per unit price (or package price) for similar services of the mobile networks operators. On April 28, 2018, the MIIT issued the Circular on Commercialization of Mobile Telecommunications Resale Business, pursuant to which the MIIT granted commercial operation approval to mobile communication resale business, effective from May 1, 2018. For a series of government measures to encourage private capital to invest in telecommunications services that could compete with our services, see “Item 4. Information on the ~~Company –~~ Company—B. Business ~~Overview –~~ Overview—Competition”.
VAT Reform Applicable to the Telecommunications Industry
On November 16, 2011, the ~~Ministry~~MOF and the State Administration of ~~Finance,~~Taxation of the People’s Republic of China, or ~~the MOF, and~~ the SAT, introduced a pilot tax program under which the PRC business tax would be replaced with a ~~VAT.~~value-added tax (“VAT”). On April 29, 2014, the MOF and the SAT announced that the pilot program would be extended to cover the telecommunications industry. Effective from June 1, 2014, the pilot tax rate for basic telecommunications services is 11% and the pilot tax rate for value-added telecommunications services is 6%. On March 18, 2016, the State Council standing committee meeting resolved to expand the VAT pilot program to all other industries which were previously subject to the PRC business tax starting from May 1, 2016. On March 23, 2016, the MOF and the SAT issued the Notice on Expanding the Pilot Program of Replacing the Business Tax with VAT, promulgating the relevant implementing rules. On April 4, 2018, the MOF and the SAT issued the Notice on Adjustment of VAT Rates pursuant to which the 11% VAT rate applicable to basic telecommunications services would be reduced to 10% and the 17% VAT rate applicable to sales of goods would be reduced to 16%, with effect from May 1, 2018. On March 20, 2019, the MOF, the SAT, the General Administration of Customs of the People’s Republic of China issued the Notice on Deepening the Policies Related to Value-Added Tax Reform, pursuant to which the 10% VAT rate applicable to basic telecommunications services would be reduced to 9% and the 16% VAT rate applicable to sales of goods would be reduced to 13%, with effect from April 1, 2019.
~~Amended Employment Contract Law~~
The amended PRC Employment Contract Law, effective as of July 1, 2013, and the Interim Provisions on Labor Dispatch, effective as of March 1, 2014, focus on strengthening the administration of the employment practice involving dispatched employees, and provide that, among others, the dispatched employees shall have the right to receive the same compensation as that received by other employees hired by the employer for the same type of positions, shall account for no more than 10% of the total employees hired by an employer and shall only be employed for temporary, supporting or substitutive positions. The amended PRC Employment Contract Law and the Interim Provisions on Labor Dispatch have not had, and we do not believe they will have, a material adverse effect on our personnel expenses or number of employees.
~~- 43 -~~-42-
Sharing of Telecommunications Infrastructure
In ~~June 2018,~~April 2019, the MIIT and the SASAC jointly issued the ~~2018~~2019 Implementation Opinions of the Ministry of Industry and Information Technology and the State-owned Assets Supervision and Administration Committee of the State Council on Promoting the Joint Construction and Sharing of Telecommunications Infrastructure, or the Opinions. The Opinions require that the supporting facilities for base stations, such as the telecommunications towers, and the passive indoor distribution systems for key areas of public transportation and buildings, shall generally be ~~planned,~~coordinated with respect to construction needs, constructed and delivered by the Tower Company, except that certain facilities may be constructed by a telecommunications operator if serving only such operators’ demand. The Opinions also set forth the sharing requirements in the construction of ~~FTTH infrastructure. In~~Fiber To The Home (FTTH) infrastructure facilities. The construction of supporting facilities, such as transmission poles, pipelines, and equipment rooms, in newly-built residential ~~areas,~~and commercial ~~areas and campus, FTTH construction~~properties must strictly observe the applicable national and local standards. Telecommunications operators are prohibited from entering into any agreement which contains exclusivity arrangement with ~~real estate developers~~ commercial property owners, their agents and/or property management companies. InMoreover, the ~~upgrading of FTTH for~~ existing ~~residential areas, commercial areas~~telecommunications infrastructure (transmission poles, pipelines, base station sites, and ~~campus, telecommunications operators and relevant stakeholders~~equipment rooms, etc.) must cooperate with each other to comply with the joint construction and sharing requirements. Moreover, with respect to transmission facilities, sharing and joint construction of transmission poles and pipeline is mandatorybe co-shared whenever conditions so ~~allow.~~allow, and new transmission poles or pipes covering the same operation routes must be jointly constructed by the operators.
Anti-Unfair Competition Law
On ~~January 1, 2018,~~April 23, 2019, the Standing Committee of the National People’s Congress (the “NPCSC”) promulgated the amended Anti-Unfair Competition Law of the People’s Republic of China ~~came into effect. It revised and expanded~~(the “Anti-Unfair Competition Law”), which was formally implemented on the same day. The amendments to the Anti-Unfair Competition Law mainly involve the provisions regarding the trade secrets of intellectual property rights. First, the scope of ~~unfair competitive acts~~trade secrets has been expanded through the incorporation of a catch-all description, which ~~include, among~~is no longer limited to “technical” or “business operation” information. Second, the scope of the trade secret infringer has been expanded. Apart from business operators, other natural persons, legal persons and non-legal entities have been included in the scope of the subject of liability for trade secret infringement. Third, given the practical situation of evolving infringement means and conducts, it has been clarified that misappropriation of trade secrets through electronic intrusion or indirect means, such as instigating, inducing and aiding others ~~a network operator’s interference with~~to acquire the right holder’s trade secrets, will constitute trade secret infringement. Fourth, the penalty on trade secret infringement has been increased. Fifth, in relation to the allocation of burden of proof for trade secret infringement in the civil trial procedure, it stipulates that the right holder may only need to provide preliminary evidences which can prove that the right holder has taken confidentiality measures and ~~destruction of products or services provided by other operators. It also further improved~~can reasonably indicate that the ~~provisions on confusing conducts and commercial bribery,~~trade secret has been infringed. The amendments to the Anti-Unfair Competition Law strengthened the protection of ~~trade secrets~~intellectual property rights in China and ~~enhanced supervision over~~had a positive impact on the establishment of a fair market order and ~~penalties on unfair competitive acts.~~protection of the legitimate interests of the right holders.
Mobile Number Portability ~~Trial~~
~~In May 2014,~~On November 11, 2019, the MIIT promulgated the ~~Administration Measures~~Notice of the Ministry of Industry and Information Technology on Printing and Publishing the Regulations on the Management of Mobile Number Portability ~~Trial,~~Service. The Regulations on the Management of Mobile Number Portability Service (the “Regulations”) became effective on December 1, 2019. The Regulations expressly allow the cellular mobile telecommunication users (excluding the users of Internet of Things) to apply for a change of the contracted fundamental business operator within the same local network area whilst retaining their phone numbers unchanged. Telecommunications business operators should strictly implement the relevant provisions on the real-name registration of users of mobile number portability service and ensure that the users whose mobile numbers have been transferred from other networks should be entitled to the same rights under the same conditions. Providing an important basis for the supervision and inspection of the telecommunications regulators, the Regulations explicitly require that in the course of providing the mobile number portability service telecommunications business operators should not engage in nine types of prohibited conducts including to refuse, prevent or delay the provision of mobile number portability service to users without justifiable reasons, to restrict the users from switching to another network by means of expanding the scope of the agreement in relation the terms of service, to affect the quality of telecommunications service provided to the mobile number portability service users through technical measures such as ~~of May 17, 2014, which regulated~~interception and restriction, to conduct a comparative promotion, fabricate or disseminate false or misleading information or discredit other telecommunication business operators when promoting the ~~implementation measures~~mobile number portability service and the relevant tariff plans, to design special tariff plans and marketing schemes for mobile number portability ~~trials. Pursuant~~service users, continue to occupy the ~~relevant policies issued~~mobile numbers transferred-in while the users have exited the network and to hinder or disrupt the normal operation of mobile number portability service by ~~the MIIT, currently mobile users~~means of China Mobile, China Unicom and our Company in Hainan, Jiangxi, Hubei, Yunnan and Tianjin may migrate among the networks of the three operators without changing their mobile numbers. In December 2018, these five provinces launched new and facilitated procedures to allow mobile users, starting from December 1, 2018, send text messages for qualification enquires and officially transfer to new operator in next hour after completing the procedures. The introduction of such policy allows mobile users to switch operator in a more efficient way and caused a larger number of switches. In addition, on March 5, 2019, the Government Work Report presented in the second plenary session of the 13th National People’s Congress of the PRC specified thathandling the mobile number ~~portability services will be implemented nationwide in 2019. In response, we expect to roll out corresponding measures in due course to meet~~transfer maliciously on behalf of the ~~policy requirements.~~users, making complaints maliciously on behalf of the users, etc.
E-Commerce Law
~~On January 1, 2019,~~In August 2018, the NPCSC approved the E-Commerce Law of the People’s Republic of China, ~~came into force.~~which was formally implemented on January 1, 2019. The E-Commerce Law consists of seven chapters and 89 articles which further regulate e-commerce activities conducted by relevant parties including e-commerce platform operators (“e-commerce platforms”). The E-Commerce Law defines and confirms, for the first time, the obligation of e-commerce platforms to protect the consumers’ security, and requires them to bear the corresponding responsibility when the obligation is breached. It ~~stipulates relevant rules to require all~~further refines the regulation for the responsibility of intellectual property infringement on the e-commerce platforms, regulates the industrial and commercial registration and tax collection and management of e-commerce operators, requires e-commerce operators to ~~fulfill~~publish information when terminating transactions at their ~~obligations~~own discretion, prohibits fabricating transactions and user comments to ~~protect consumers’ rights~~defraud and ~~interests as well as personal information, intellectual property rights, cyberspace security and~~mislead consumers, prohibits the ~~environment. It clarifiese-commerce~~ ~~operators intoe-commerce~~ ~~platform operators, merchants on~~e-commerce platforms from abusing the dominant market position to exclude and ~~those doing business on their own websites or via other web services. In addition, it specifically provides that ane-commerce~~ ~~platform operator will have joint~~restrict competition, regulates the rules of deposits collection and ~~several liability~~refund, requests the products participating in bidding ranking with the ~~merchants, where~~results marked therein.
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Civil Code
On May 28, 2020, the third session of the 13th National People’s Congress passed the Civil Code of the People’s Republic of China (the “Civil Code”), which was formally implemented on January 1, 2021. The Civil Code, for the first time, codifies the right of privacy as an independent personality right, stipulates a ~~platform operator knows,~~series of specific rules and formulates a framework of fundamental rights and obligations between natural persons and information processors. When conducting businesses, enterprises shall effectively strengthen the awareness of privacy rights of natural persons and personal data protection and strictly adhere to the principles of legality, justification and necessity. Enterprises shall collect and process personal information in strict compliance with the conditions as stipulated by laws and definitive agreements with the data subject concerned, and shall not over collect or process the data. The Civil Code provides principle provisions on the protection of data and online virtual assets. The Company should ~~know, that a merchant has violated another’s~~continue to strengthen the protection of intangible assets such as proprietary data, online virtual assets and intellectual property ~~rights~~ and ~~fails to take~~enhance the ~~necessary action~~compliance on the usage of such ~~as deleting, blocking links or stopping transactions. Moreover, it covers the requirement for registration and licensing ofe-commerce~~ ~~operators, taxation, electronic payment ande-commerce~~ ~~dispute resolution.~~intangible assets.
Disclosure of Iranian Activities under Section 13(r) of the ~~Securities~~ Exchange Act ~~of 1934~~
Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 added Section 13(r) to the Exchange Act, ~~of 1934,~~ as amended. Section 13(r) requires an issuer to disclose in its annual or quarterly reports, as applicable, ~~whether~~if it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with designated natural persons or entities involved in terrorism or the proliferation of weapons of mass destruction. Disclosure is required even where the activities, transactions or dealings are conducted outside the U.S. bynon-U.S. affiliates in compliance with applicable law, and whether or not the activities are sanctionable under U.S. law.
~~- 44 -~~
As of the date of this report, we are not aware of any activity, transaction or dealing by us or any of our affiliates in ~~2018~~2020 that requires disclosure in this annual report under Section 13(r) of the Exchange Act, ~~of 1934,~~ as amended.

C.
Organization Structure
See “—A. History and Development of the Company—~~Our Restructuring and Initial Public Offering in 2002”~~Organizational Structure” included elsewhere under this Item.

D.
Property, Plants and Equipment
Properties
Executive Offices
Our principal executive offices are located in Beijing and we obtained the right to occupy and use these offices pursuant to an agreement we entered into with China Telecom Group in September 2002 and supplemental agreements on October 26, 2003, April 13, 2004, December 15, 2005, December 26, 2007, March 31, 2008, August 25, 2010, August 22, 2012, September 23, 2015 and August 20, 2018, respectively. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ongoing Related Party Transactions between Us and China Telecom Group and ~~its affiliated companies—~~Its Affiliated Companies—Centralized Services ~~Agreement”~~Agreement��.
Properties
We conduct our business on land and premises either owned by ourselves or leased from China Telecom Group and/or its affiliates and third parties. As to our owned properties, ~~although the~~ land and building titles to ~~a majority~~very few of ~~these properties have been registered in our name after they were acquired by us as part of our restructuring, land and building titles to~~ the ~~remaining~~ properties are still registered in the name of China Telecom ~~Group.~~Group and/or its affiliates. China Telecom Group has agreed to indemnify us against any loss or damage incurred by us caused by or arising from any challenge to, or interference with, our right to use these properties. As to our leased properties, China Telecom Group has undertaken to us that it will indemnify us against any loss or damage caused by or arising from any challenge to, or interference with, such right. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ongoing Related Party Transactions between Us and China Telecom Group and ~~its affiliated companies —Property~~Its Affiliated Companies—Property Leasing Framework Agreement”.

Item 4A.
Unresolved Staff Comments.
None.

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Item 5.
Operating and Financial Review and Prospects.
You should read the following discussion and analysis in conjunction with ~~our audited~~the consolidated financial statements and ~~our selected financial data,~~their related notes included in this annual report, in each case included elsewhere in this annual report. Our consolidated financial statements have been prepared in accordance with IFRS, as issued by the International Accounting Standards Board. The information included in the following discussion and analysis provides details on the information for the years ended December 31, 2020 and December 31, 2019. Information related to the year ended December 31, 2018 has not been included and can be found on the Company’s previously filed annual report on Form 20-F for the year ended December 31, 2019.
Our ~~audited~~ consolidated financial statements included elsewhere in this annual report reflect the ~~disposal ofE-store,~~ ~~the~~ establishment of ~~Tianyi Capital~~China Telecom Leasing Corporation Limited in 2018, and the ~~acquisitions~~establishments of ~~the satellite communications business~~China Telecom Finance, Smart Home Company and ~~Zhonghe Hengtai~~IoT Company in ~~2017 and the establishment of a new subsidiary in 2018~~2019, described under “Item 4. Information on the Company—A. History and Development of the Company—Establishment of ~~the Tower Company and the Disposal and Lease of the Telecommunications Towers”~~China Telecom Leasing Corporation Limited”, ~~“—Disposal ofE-store~~ ~~and Establishment of Tianyi Capital” and~~ “—Establishment of China Telecom ~~Leasing Corporation Limited”.~~
~~- 45 -~~
On October 14, 2015, the Company entered into the Transfer Agreement with the Tower Company and certain other parties thereto, pursuant to which the Company agreed to sell certain telecommunications towers and related assets and inject cash to the Tower Company in exchange for new shares. Upon completion of the disposal of tower assets by the Company to the Tower Company, the Company and Tower Company entered into the Lease Agreement on July 8, 2016 that sets forth the pricing and related arrangements in relation to the lease of telecommunications towers and related assets. On February 1, 2018, the Company and Tower Company entered into a supplemental agreement on the basis of the original Lease Agreement mainly to adjust the relevant pricing arrangement of tower products under the Lease Agreement. In August 2018, the Tower Company completed its H shares global offering and was listed on the Main Board of The Stock Exchange of Hong Kong Limited. As a result, our equity interest in the Tower Company is diluted from 27.9% to 20.5%. See “Item 4. Information on the Company—A. History and Development of the Company—Group Finance Co., Ltd.”, “—Establishment of ~~the Tower Company and the Disposal and Lease of the Telecommunications Towers”, and Note 37(b) to our consolidated financial statements included elsewhere in this annual report on Form20-F.~~E-surfing
~~On December 15, 2017, we and China Telecom Satellite Communication~~ Smart Home Technology Co., Ltd.~~, a wholly owned subsidiary~~” and “—Establishment of ~~China Telecom Group entered into an acquisition agreement, pursuant to which we agreed to purchase from China Telecom Satellite Communication~~E-surfing Internet of Things Technology Co., Ltd. ~~the satellite communications business for a consideration of RMB70 million. The consideration had been settled in full by June 30, 2018. On December 20, 2017, we, throughE-surfing~~ Pay Co., Ltd., entered into an acquisition agreement with Shaanxi Comservice, which is ultimately controlled by China Telecom Group, to acquire 100% of equity interest in Zhonghe Hengtai, from Shaanxi Comservice for a consideration of RMB17 million. Zhonghe Hengtai primarily engages in insurance agency business in the PRC. The consideration had been settled in full by June 30, 2018.
Because we and the acquired satellite communications business and Zhonghe Hengtai were under the common control of China Telecom Group, our acquisitions of the satellite communications business and Zhonghe Hengtai were 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 the acquired satellite communications business and Zhonghe Hengtai have been accounted for at historical amounts and our consolidated financial statements for periods prior to the respective acquisitions have been restated to include the financial position and results of operations of the acquired satellite communications business and Zhonghe Hengtai on a combined basis. The considerations for the acquisition of the acquired satellite communications business and Zhonghe Hengtai were accounted for as an equity transaction in the consolidated statement of changes in equity. Unless otherwise indicated in this section, our financial data for periods prior to the acquisition are presented based on those restated amounts. See Note 1 to our consolidated financial statements included elsewhere in this annual report on Form~~20-F.~~”.
Overview
We are an integrated intelligent information service provider in the PRC. We offer a comprehensive range of telecommunications services, including Internet services, information and application services, voice services, telecommunications network resource and equipment services and other related services. We will continue to leverage our full-service capabilities to further enhance our integrated and differentiated development of operation of wireline, mobile and Internet services to achieve steady growth of our business.
Financial Overview
Our operating revenues increased by ~~3.0%~~4.7%, from ~~RMB366,229~~RMB375,734 million in ~~2017~~2019 to ~~RMB377,124~~RMB393,561 million in ~~2018.~~2020. The increase was mainly attributable to ~~revenue growth~~the increases of revenues from Internet services and information and application ~~services and telecommunications network resource and equipment~~ services. Our ~~total~~ operating expenses increased by ~~2.8%,~~5.3% from ~~RMB339,009~~RMB346,664 million in ~~2017~~2019 to ~~RMB348,410~~RMB364,921 million in ~~2018.~~2020. The increase in operating expenses was primarily due to the increases in network operations and support expenses as well as impairment loss on property, plant and ~~personnel expenses.~~equipment. Our operating income in ~~2017~~2019 and ~~2018~~2020 was ~~RMB27,220~~RMB29,070 million and ~~RMB28,714~~RMB28,640 million, respectively. The profit attributable to equity holders of the Company increased by ~~13.9%~~1.6%, from ~~RMB18,617~~RMB20,517 million in ~~2017~~2019 to ~~RMB21,210~~RMB20,850 million in ~~2018.~~2020.
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The table below sets forth a breakdown of our operating revenues in terms of amount and as a percentage of our total operating revenues for the periods indicated:

   Year Ended December 31,
   2016 2017 2018
   Amount    Percentage
of
Operating
Revenues Amount    Percentage
of
Operating
Revenues Amount    Percentage
of
Operating
Revenues
   (RMB in millions, except percentage data)
Operating Revenues:

Voice services⁽¹⁾
   70,185    19.9 % 61,678    16.8 % 50,811    13.5 %
Internet services⁽²⁾
   150,449    42.7 % 172,554    47.1 % 190,871    50.6 %
Information and application services⁽³⁾
   66,881    19.0 % 73,044    20.0 % 83,478    22.1 %
Telecommunications network resource and equipment services⁽⁴⁾
   17,781    5.0 % 19,125    5.2 % 20,211    5.4 %
Others⁽⁵⁾
   47,238    13.4 % 39,828    10.9 % 31,753    8.4 %








Total operating revenues
   352,534    100.0 % 366,229    100.0 % 377,124    100.0 %








   Year Ended December 31,
   2019 2020
   Amount    Percentage
of
Operating
Revenues Amount    Percentage
of
Operating
Revenues
   (RMB in millions, except percentage data)
Operating Revenues:

Voice services⁽¹⁾
   45,146    12.0 % 40,866    10.4 %
Internet services⁽²⁾
   197,244    52.5 % 208,019    52.9 %
Information and application services⁽³⁾
   87,623    23.3 % 96,885    24.6 %
Telecommunications network resource and equipment services⁽⁴⁾
   21,978    5.9 % 22,623    5.7 %
Others⁽⁵⁾
   23,743    6.3 % 25,168    6.4 %












Total operating revenues
   375,734    100.0 % 393,561    100.0 %






(1)
Represent the aggregate amount of voice usage fees, installation fees and interconnections fees charged to customers for the provision of telephony services.
(2)
Represent amounts charged to customers for the provision of Internet access services.
(3)
Represent primarily the aggregate amount of fees charged to customers for the provision of ~~Internet data center~~IDC service, ~~system integration~~digitalized platform services,~~e-Surfing~~ ~~HD service,~~ Smart Family, caller ID service and short messaging service and etc.
(4)
Represent amounts charged to other domestic telecommunications operators and enterprise customers for the provision of telecommunications network resource and equipment services.
(5)
Represent primarily ~~revenue~~revenues from ~~sale,~~sales, and repair and maintenance of telecommunications equipment as well as the resale of mobile services (MVNO), and ~~revenue from other sources, which primarily includes~~ revenue from property rental and other revenues.
-45-
The following table sets forth a breakdown of our operating expenses in terms of amount and as a percentage of our total operating revenues for the periods indicated:

   Year Ended December 31,    Year Ended December 31,
   2016 2017 2018    2019 2020
   Amount    Percentage
of
Operating
Revenues Amount    Percentage
of
Operating
Revenues Amount    Percentage
of
Operating
Revenues    Amount    Percentage
of
Operating
Revenues Amount    Percentage
of
Operating
Revenues
   (RMB in millions, except percentage data)    (RMB in millions, except percentage data)
Operating Expenses:

Depreciation and amortization
   67,942    19.3 % 74,951    20.5 % 75,493    20.0 %    88,145    23.5 % 90,240    22.9 %
Network operations and support expenses
   94,156    26.7 % 103,969    28.4 % 116,062    30.8 %    109,799    29.2 % 119,517    30.3 %
Selling, general and administrative expenses
   56,426    16.0 % 58,434    16.0 % 59,422    15.8 %    57,361    15.3 % 55,059    14.0 %
Personnel expenses
   54,504    15.5 % 56,043    15.3 % 59,736    15.8 %    63,567    16.9 % 65,989    16.8 %
Other operating expenses
   52,286    14.8 % 45,612    12.4 % 37,697    10.0 %    27,792    7.4 % 29,074    7.4 %
Impairment loss on property, plant and equipment
   —      —   5,042    1.3 %




















Total operating expenses
   325,314    92.3 % 339,009    92.6 % 348,410    92.4 %    346,664    92.3 % 364,921    92.7 %
The following table sets forth our operating revenues, operating expenses, operating income and profit attributable to equity holders of the Company in terms of amount and as a percentage of our total operating revenues, and cash flows from operating activities for the periods indicated:

   Year Ended December 31,
   2016 2017 2018
   Amount    Percentage
of
Operating
Revenues Amount    Percentage
of
Operating
Revenues Amount    Percentage
of
Operating
Revenues
   (RMB in millions, except percentage data)
Operating revenues
   352,534    100.0 % 366,229    100.0 % 377,124    100.0 %
Operating expenses
   325,314    92.3 % 339,009    92.6 % 348,410    92.4 %
Operating income
   27,220    7.7 % 27,220    7.4 % 28,714    7.6 %
Profit attributable to equity holders of the Company
   18,018    5.1 % 18,617    5.1 % 21,210    5.6 %
Net cash flow from operating activities
   101,135    —   96,502    —   99,298    —
~~- 47 -~~
   Year Ended December 31,
   2019 2020
   Amount    Percentage
of
Operating
Revenues Amount    Percentage
of
Operating
Revenues
   (RMB in millions, except percentage data)
Operating revenues
   375,734    100.0 % 393,561    100.0 %
Operating expenses
   346,664    92.3 % 364,921    92.7 %
Operating income
   29,070    7.7 % 28,640    7.3 %
Profit attributable to equity holders of the Company
   20,517    5.5 % 20,850    5.3 %
Net cash flow from operating activities
   112,600    —   132,260    —
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations contained elsewhere in this annual report are based on our consolidated financial statements include elsewhere in this annual report which have been prepared in accordance with IFRS. Our reported financial condition and results of operations are sensitive to accounting methods, assumptions and estimates that underlie the preparation of our consolidated financial statements. We base our assumptions and estimates on historical experience and on various other assumptions that we believe to be reasonable and which form the basis for making judgments about matters that are not readily apparent from other sources. On an ongoing basis, our management evaluates its estimates. Actual results may differ from those estimates as facts, circumstances and conditions change.
The selection of critical 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 our financial statements. Our principal accounting policies are set forth in detail in Note 3 to our consolidated financial statements included elsewhere in this annual report. We believe the following critical accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements.
Revenue from contract with customers ~~(upon application of IFRS 15)~~
~~Under IFRS 15, we~~We recognize revenue when (or as) a performance obligation is ~~satisfied.~~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 recognized 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 our performance as we perform;

-46-
our performance creates and enhances an asset that the customer controls as we perform; or

our performance does not create an asset with an alternative use to us and we have 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 recognized over time during which the services are provided to customers.
Otherwise, revenue is recognized at a point in time when the customer obtains control of the distinct good or service. As such, revenues from sales of equipment are ~~recognize~~recognized 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 our right to consideration in exchange for goods or services that we have transferred to a customer but the right is conditioned on our 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 our unconditional right to consideration, i.e. only the passage of time is required before payment of that consideration is due.
A contract liability represents our obligation to transfer goods or services to a customer for which we have received consideration (or an amount of consideration is due) from the customer. When we receive an advance payment before the performance obligation is satisfied, this will give rise to a contract liability, until the operating revenues recognized 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.
~~- 48 -~~
Contracts with multiple performance obligations (including allocation of transaction price)
For contracts that contain more than one performance obligations, such as our direct sales of promotional packages bundling terminal equipment, e.g. mobile handsets, and the telecommunications services, we allocate the transaction price to each performance obligation on a relative ~~stand-alone~~standalone selling price basis.
The ~~stand-alone~~standalone selling price of the distinct good or service underlying each performance obligation is determined at contract inception. It represents the price at which we would sell a promised good or service separately to a customer. If a ~~stand-alone~~standalone selling price is not directly observable, we estimate it using appropriate techniques such that the transaction price ultimately allocated to any performance obligation reflects the amount of consideration to which we expect 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 recognize 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, we determine whether the nature of our promise is a performance obligation to provide the specified goods or services ourselves (i.e. we are a principal) or to arrange for those goods or services to be provided by the other party (i.e. we are an agent).
We are a principal if we control the specified good or service before that good or service is transferred to a customer.
We are an agent if our performance obligation is to arrange for the provision of the specified good or service by another party. In this case, we do not control the specified good or service provided by another party before that good or service is transferred to the customer. When we act as an agent, we recognize revenue in the amount of any fee or commission to which we expect to be entitled in exchange for arranging for the specified goods or services to be provided by the other party.
Consideration payable to a customer
Consideration payable to a customer includes cash amounts that we pay, or expect to pay, to the customer, and also includes credit or other items that can be applied against amounts owed to us. We ~~accounted~~account 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 us and the fair value of the good or service received from the customer can be reasonably estimated.
-47-
Certain subsidies payable to third party agent incurred by us in respect of customer contracts, which will be ultimately enjoyed by end customers, and other subsidies incurred by us directly payable to our 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 we incur to obtain a contract with a customer that we would not have incurred if the contract had not been obtained.
Certain commissions incurred by us paid or payable to third party agents, whose selling activities ~~resulted~~result in customers entering into sale agreements for our telecommunications ~~service,~~services, are qualified as incremental costs. We recognize such costs as an asset, included in other assets, if we expect to recover these costs. The asset so recognized is subsequently amortized 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 asset is subject to impairment review.
We apply the practical expedient of expensing all incremental costs to obtain a contract if these costs would otherwise have been fully amortized to profit or loss within one year.
~~- 49 -~~
Costs to ~~fulfil~~fulfill a contract
When we incur costs to ~~fulfil~~fulfill a contract, we first assess whether these costs qualify for recognition as an asset in terms of other relevant standards, failing which we recognize 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 we can specifically identify;

the costs generate or enhance our resources 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 recognized is subsequently amortized 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.
~~Revenue recognition (prior~~ The asset is subject to ~~January 1, 2018)~~impairment review.
~~Before the application of IFRS 15, our revenue recognition methods 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 recognized 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 center 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 we are acting as principal in the arrangements with third parties:
-
We are primarily responsible for providing the applications or services desired by customers, and take responsibility for fulfillment of ordered applications or services, including the acceptability of the applications or services ordered or purchased by customers;
-
~~We take title of the inventory of the applications before they are ordered by customers;~~
-
~~We have risks and rewards of ownership, such as risks of loss for collection from customers after applications or services are provided to customers;~~
-
~~We have latitude in establishing selling prices with customers;~~
-
~~We can modify the applications or perform part of the services;~~
-
~~We have discretion in selecting suppliers used to fulfill an order; and~~
-
~~We determine 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, we are 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 recognized on a gross basis. If majority of the indicators of risks and responsibilities do not exist in the arrangements with third parties, we are acting as an agent, and revenues for these services are recognized on a net basis.
~~Sale of equipment is recognized on delivery of the equipment to customers and when the significant risks and rewards of ownership and title have been transferred to the customers.~~
We offer 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. We recognize 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 recognized based upon the actual usage of such services.
~~- 50 -~~
Accounting for goodwill and long-lived ~~Assets~~assets
Depreciation. Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets after taking into account their estimated residual value. The following estimated useful lives are used for depreciation purposes. These estimated useful lives are based on our historical experience with similar assets and take into account anticipated technological changes.

   Depreciable lives
primarily range from
Buildings and improvements
   8 - 30 years
Telecommunications network plant and equipment
   5 - 10 years
Furniture, fixture, motor vehicles and other equipment
   5 - 10 years
We review the estimated useful lives of the assets regularly in order to determine the amount of depreciation expense to be recorded during any reporting period. The depreciation expense for future periods is adjusted if there are significant changes from previous estimates.
Impairment. The carrying amounts of long-lived assets, including property, plant and equipment, right-of-use assets, intangible assets with finite useful lives, construction in progress and contract costs included in other assets are reviewed periodically in order 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 we recognize an impairment loss for assets capitalized as contract costs under IFRS 15, we assess and recognize any impairment loss on other assets related to the relevant contracts in accordance with applicable standards. Then, impairment loss, if any, for assets capitalized as contract costs is recognized to the extent the carrying amounts exceed the remaining amount of consideration that we expect 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 recognized as expenses. The assets capitalized 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.
-48-
The recoverable amount of an asset or a 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 apre-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 recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment loss is recognized as an expense in ~~the~~ profit or loss. Impairment loss recognized 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.
We assess at the end of each reporting period whether there is any indication that an impairment loss recognized for an asset in prior years may no longer exist. An impairment loss is reversed if there has been a favorable 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 recognized as an income in profit or loss. The reversal is reduced by the amount that would have been recognized as depreciation and amortization 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 recognized in profit or loss.
For the year ended December 31, 2020, provision for impairment losses of RMB5,042 million were made against the carrying value of long-lived assets mainly based on the impairment test on the 3G specific mobile network assets (“3G Assets”) on the basis of each individual asset.For the years ended December 31, 2019 and 2018, no provision for impairment losses were made against the carrying value of long-lived assets. For the year ended December 31, 2017, provision for impairment losses of RMB10 million were made against the carrying value of long-lived assets. For the year ended December 31, 2016, provision for impairment losses of RMB62 million were made against the carrying value of long-lived assets.
~~- 51 -~~
Provision of expected credit losses (“ECL”) for accounts receivable
We use 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 our historical ~~default rates~~credit loss experience taking into consideration reasonable and supportable forward-looking information that is available without undue cost or effort. The historical ~~observed default~~loss 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.
Amounts due from the provision of telecommunications services to residential and business customers are generally due within 30 days from the date of billing. Customers who have accounts overdue by more than 90 days will have their services disconnected.
~~Classification of lease arrangement with Tower Company~~
We entered into a lease arrangement with Tower Company regarding the lease of telecommunications towers and related assets, or Tower Assets on July 8, 2016, as further supplemented on February 1, 2018. We evaluated the detailed clauses of the lease agreements and determined such lease arrangements as operating leases according to the accounting policies on lease arrangements and based on the following judgments: (i) we do not expect any transfer of ownership of Tower Assets from Tower Company by the end of the lease term; (ii) we consider 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 specialized nature that only we can use without major modifications.
Recently Issued International Financial Reporting Standards
Up to the date of issue of our ~~2018~~2020 financial statements, the International Accounting Standards Board, or the IASB, has issued the following new and amendments to standards ~~new standards and interpretation~~ which are not yet effective and not early adopted for the annual accounting period ended December 31, ~~2018:~~2020:

   Effective for
accounting period
beginning on or after
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 “~~Leases~~Interest Rate Benchmark Reform – Phase 2”
   January 1, ~~2019~~
~~IFRIC 23, “~~~~Uncertainty over Income Tax Treatments~~”
~~January 1, 2019~~
~~Amendments to IFRS 9, “~~~~Prepayment Features with Negative Compensation~~”
~~January 1, 2019~~
~~Amendments to IAS 28, “~~~~Long-term Interests in Associates and Joint Ventures~~”
~~January 1, 2019~~
~~Amendments to IFRSs, “~~~~Annual Improvements to IFRS Standards 2015-2017 Cycle~~”
~~January 1, 2019~~
~~Amendments to IAS 19, “~~~~Plan Amendment, Curtailment or Settlement~~”
~~January 1, 2019~~2021
Amendments to IFRS 3, “~~Definition of a Business~~Reference to the Conceptual Framework”
   January 1, ~~2020~~2022
Amendments to IAS 16, “Property, Plant and Equipment: Proceeds before Intended Use”
January 1, 2022
Amendments to IAS 37, “Onerous Contracts – Cost of Fulfilling a Contract”
January 1, 2022
Amendments to IFRS Standards, “Annual Improvements to IFRS Standards 2018-2020”
January 1, 2022
IFRS 17, “Insurance Contracts and the related Amendments”
January 1, 2023
Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”
January 1, 2023
Amendments to IAS 1 and ~~IAS 8,~~IFRS Practice Statement 2, “~~Definition~~Disclosure of ~~Material~~Accounting Policies”
   January 1, ~~2020~~2023
~~IFRS 17,~~Amendments to IAS 8, “~~Insurance Contracts~~Definition of Accounting Estimates”
   January 1, ~~2021~~2023
Amendments to IFRS 10 and IAS 28, “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”
   ~~Postponed~~To be determined
We are in the process of making an assessment of the impact that will result from adopting the new and amendments to standards ~~new standards and interpretation~~ issued by the ~~International Accounting Standards Board, or~~ IASB, which are not yet effective for the accounting period ended on December 31, ~~2018. Except for IFRS 16,~~~~“Leases”~~~~, so~~2020. So far we believe that the adoption of these new and amendments to standards ~~new standards and interpretation~~ is unlikely to have a significant impact on our financial position and the results of operations.
~~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 recognized for all leases by lessees, except for short-term leases and leases of low value assets.~~
~~- 52 -~~-49-
~~Theright-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, we currently present 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, 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, we have already recognized an asset and a related finance lease liability for finance lease arrangement and prepaid lease payments for land use rights where we are a lessee. The application of IFRS 16 may result in potential changes in classification of these assets depending on whether we present~~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 of December 31, 2018, we hadnon-cancellable~~ operating lease commitments of RMB65,805 million as disclosed in Note 33 to the consolidated financial statements included elsewhere in this annual report. A preliminary assessment indicates that majority of these arrangements will meet the definition of a lease. Upon application of IFRS 16, we will recognize 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. We intend to elect the modified retrospective approach for the application of IFRS 16 as lessee and will recognize the cumulative effect of initial application to opening reserves without restating comparative information.
A.
Operating Results
Year Ended December 31, ~~2018~~2020 Compared to Year Ended December 31, ~~2017~~2019
Operating Revenues
Our operating revenues increased by ~~RMB10,895~~RMB17,827 million, or ~~3.0%~~4.7% from ~~RMB366,229~~RMB375,734 million in ~~2017~~2019 to ~~RMB377,124~~RMB393,561 million in ~~2018. If excluding the impact of the application of IFRS 15 for the current year, it represented an increase of 4.2% over 2017.~~2020. This increase was primarily ~~driven by the~~because our revenues ~~growth~~ from Internet services and information and application services ~~and telecommunications network resource and equipment services,~~increased, which was partially offset by ~~a decrease~~the revenue decline in ~~revenues from~~ voice ~~services and others.~~services.
Voice Services.Revenues from our voice services decreased by ~~17.6%~~9.5% from ~~RMB61,678~~RMB45,146 million in ~~2017~~2019 to ~~RMB50,811~~RMB40,866 million in ~~2018,~~2020, representing ~~13.5%~~10.4% of our operating revenues in ~~2018.~~2020. Among such revenues, revenues from our wireline voice services decreased by ~~11.4%~~13.0% from ~~RMB22,263~~RMB18,425 million in ~~2017~~2019 to ~~RMB19,723~~RMB16,034 million in ~~2018. This decrease was primarily due to the increasing penetration of mobile voice services~~2020 and ~~other alternative means of communications, which continued to divert~~ revenues ~~from wireline voice services. Revenues~~ from our mobile voice services decreased by ~~21.1%~~7.1% from ~~RMB39,415~~RMB26,721 million in ~~2017~~2019 to ~~RMB31,088~~RMB24,832 million in ~~2018. This~~2020. The decrease in revenue from our voice services was primarily due to the effect of the cannibalization of our mobile Internet services, in combination with alternative means of communication such asOver-the-Top messaging ~~services, as alternative means of communication.~~services.
Internet Services. Revenues from our Internet services increased by ~~10.6%~~5.5% from ~~RMB172,554~~RMB197,244 million in ~~2017~~2019 to ~~RMB190,871~~RMB208,019 million in ~~2018,~~2020, representing ~~50.6%~~52.9% of our operating revenues in ~~2018.~~2020. This increase was primarily due to our achievement of a valuable scale expansion in the ~~increase in~~mobile subscriber market leveraging the promising start for our 5G consumer services. The number of our mobile subscribers continued to rise. As of December 31, 2020, the number of our mobile subscribers increased to 351 million, representing a net addition of 15.5 million and expanding its market share to 22.0%. The revenue attributable to handset Internet access ~~revenues, which~~ was ~~attributable to the rapid growth~~RMB130,655 million in the volume of and revenue from our mobile handset Internet access. We promoted large data traffic packages and optimized our data traffic operation system to maintain the growth momentum of our Internet services. The revenues attributable to mobile Internet access services in 2018 was RMB113,502 million,2020, representing an increase of ~~22.1%~~6.0% from ~~RMB92,961 million in 2017, of which revenues attributable to mobile handset Internet access was RMB111,218 million, representing an increase of 22.4% from 2017.~~2019. In addition, the number of our wireline broadband subscribers increased to ~~145.8~~158.5 million as of December 31, ~~2018,~~2020, representing an increase of approximately ~~12.3~~5.4 million, or ~~9.2%~~3.5%, from ~~133.5~~153.1 million as of December 31, ~~2017.~~2019. Due to ~~intensified market competition,~~our comprehensive promotion of the upgrade of family informatization services, and reshaping of the value of broadband access business, the wireline broadband revenue was ~~RMB74,262~~RMB71,872 million in ~~2018,~~2020, representing ~~a decrease~~an increase of ~~3.2%~~5.1% from ~~RMB76,744~~RMB68,413 million in ~~2017.~~2019.
~~- 53 -~~
Information and Application Services.Revenues from our information and application services increased by ~~14.3%~~10.6% from ~~RMB73,044~~RMB87,623 million in ~~2017~~2019 to ~~RMB83,478~~RMB96,885 million in ~~2018,~~2020, representing ~~22.1%~~24.6% of our operating revenues in ~~2018.~~2020. This increase was primarily due to the rapid growth of our emerging businesses such as IDC, ~~cloud~~Industry Cloud, Smart Family and ~~IPTV(e-Surfing~~ ~~HD) services.~~Internet Finance.
Telecommunications Network Resource and Equipment Services. Revenues from our telecommunications network resource and equipment services increased by ~~5.7%~~2.9% from ~~RMB19,125~~RMB21,978 million in ~~2017~~2019 to ~~RMB20,211~~RMB22,623 million in ~~2018,~~2020, representing ~~5.4%~~5.7% of our operating revenues in ~~2018.~~2020. This increase was primarily due to the ~~increase~~growth in ~~digital circuit service~~revenues from cloud dedicated lines andIP-VPN ~~service revenues.~~service.
Others. Other revenues ~~decreased~~increased by ~~20.3%~~6.0% from ~~RMB39,828~~RMB23,743 million in ~~2017~~2019 to ~~RMB31,753~~RMB25,168 million in ~~2018,~~2020, representing ~~8.4%~~6.4% of our operating revenues in ~~2018.~~2020. The ~~decrease~~increase in other revenues was primarily due to the ~~increasing number~~increase in ~~mobile terminals sold through open channels and~~ the ~~decrease in number of terminals sold through our own channels. The revenues from sales~~scale of mobile terminals ~~decreased by 29.6% from RMB26,759 million in 2017 to RMB18,836 million in 2018.~~sold.
Operating Expenses
Our operating expenses increased by ~~2.8%~~5.3% from ~~RMB339,009~~RMB346,664 million in ~~2017~~2019 to ~~RMB348,410~~RMB364,921 million in ~~2018.~~2020. The increase in operating expenses was primarily due to increases in network operations and support expenses as well as impairment loss on property, plant and ~~personnel expenses,~~equipment, which ~~was~~were partially offset by the decrease in ~~other operating~~selling, general and administrative expenses.
Depreciation and Amortization. Our depreciation and amortization expenses increased by ~~0.7%~~2.4% from ~~RMB74,951~~RMB88,145 million in ~~2017~~2019 to ~~RMB75,493~~RMB90,240 million in ~~2018.~~2020. The depreciation and amortization expenses as a percentage of our operating revenues decreased from ~~20.5%~~23.5% in ~~2017~~2019 to ~~20.0%~~22.9% in ~~2018.~~2020. The increase in our depreciation and amortization expenses is primarily attributable to our increase in capital expenditure in order to support the scale construction of 5G network and constantly strengthen our competitive advantages in network.
Network Operations and Support Expenses.Our network operations and support expenses increased by ~~11.6%~~8.9% from ~~RMB103,969~~RMB109,799 million in ~~2017~~2019 to ~~RMB116,062~~RMB119,517 million in ~~2018, among which,~~2020. This is mainly attributable to our ~~operating and maintenance expenses increased by 15.7% from RMB55,360 million in 2017 to RMB64,056 million in 2018. The increase~~continuous optimization in network ~~operations~~quality while improving user perception, actively providing support for 5G and ~~support expenses is~~Industrial Digitalization (which primarily ~~due to~~includes Industry Cloud, IDC, digitalized platform, Network Dedicated Line, IoT and other services) service, and appropriately increasing the ~~Company’s persistent efforts~~deployment in ~~optimizing 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.operation expenditures.
Selling, General and Administrative Expenses. Our selling, general and administrative expenses ~~increased~~decreased by ~~1.7%~~4.0% from ~~RMB58,434~~RMB57,361 million in ~~2017~~2019 to ~~RMB59,422~~RMB55,059 million in ~~2018.~~2020. The selling expenses were ~~RMB50,794~~RMB45,447 million in ~~2018,~~2020, representing an ~~increase~~decrease of ~~0.9%~~6.2% from ~~2017. In order~~2019, primarily due to ~~maintain~~our persistent high-quality development, acceleration of the competitiveness in the market, we appropriately invested in sales and marketing resources and promoted the growth of subscriber scale. Our commission and service expenses for third parties were RMB43,166 million in 2018, representing an increase of 19.0% from 2017. At the same time, with continuous optimizationtransformation of our sales ~~and marketing~~ model and the online and offline synergistic development, enhancement in channel management and precision ~~management~~marketing capabilities and continuous improvement in the input efficiency of ~~sales and~~ marketing resources, taking into consideration the impact of the application of IFRS 15, upon which terminal subsidies were no longer presented in selling expenses in 2018 (terminal subsidies amounted to RMB4,707 million in 2017), the growth of the selling expenses slowed down. Theresources. Our general and administrative expenses were ~~RMB8,628~~RMB9,612 million in 2020, representing an increase of ~~6.7%~~8.1% from ~~2017,~~2019, primarily due to our active promotion of sci-tech innovation, accelerated transformation to a sci-tech company and increase in the ~~increase~~expenditure in research and ~~development expenditure to support our transformation and development and the innovative research and development of new business.~~development.
-50-
Personnel Expenses. Personnel expenses increased by ~~6.6%~~3.8% from ~~RMB56,043~~RMB63,567 million in ~~2017~~2019 to ~~RMB59,736~~RMB65,989 million in ~~2018,~~2020, primarily due to ~~the~~our continued introduction of high-tech talents and increased ~~performance-based bonus for our frontline staff and the economic~~ incentives for ~~emerging business~~front-line employees and ~~technical talents~~high performance team, so as to ~~join us.~~enhance employees’ vitality. Increase in personnel expenses is in line with our transformation towards a sci-tech company in the future. The personnel expenses as a percentage of our operating revenues ~~increased from 15.3%~~remained stable at 16.8% in ~~2017~~2020 compared to ~~15.8%~~16.9% in ~~2018.~~2019.
Other Operating Expenses. Our other operating expenses primarily consist of interconnection charges, cost of goods sold, donations and other expenses. Our other operating expenses were ~~RMB37,697~~RMB29,074 million in ~~2018,~~2020, which ~~decreased~~increased by ~~17.4%~~4.6% from ~~RMB45,612~~RMB27,792 million in ~~2017.~~2019. The ~~decrease~~increase was primarily due to the ~~decrease~~increase in the ~~cost~~scale of mobile ~~terminal equipment sold, which~~terminals sold.
Impairment loss on property, plant and equipment. Following the network evolution and the full coverage of 4G and 5G scale deployment, the data traffic carried by our 3G network was rapidly shrinking and the cash flow from the continual use of 3G Assets is ~~commensurate~~expected to be so small and even become negligible. Given we have made a commitment in the year to gradually terminate our use of 3G Assets in the near future, in accordance with the ~~decreased sales~~relevant requirements of ~~such goods.~~IFRS, we conducted an impairment test on the 3G Assets on the basis of each individual asset, and recognized an impairment loss of RMB5,042 million at the end of 2020. The ~~cost~~impairment loss on property, plant and equipment as a percentage of ~~mobile terminal equipment sold~~our operating revenues was ~~RMB18,192 million~~1.3% in ~~2018, which decreased by 28.6% from RMB25,488 million in 2017.~~2020.
Net Finance Costs
Our net finance costs decreased by ~~17.7%~~17.2% from ~~RMB3,291~~RMB3,639 million in ~~2017~~2019 to ~~RMB2,708~~RMB3,014 million in ~~2018,~~2020. This is primarily ~~due~~attributable to ~~the~~our implementation of low-cost financing ~~products we allocated in a flexible manner~~ and ~~the~~ reduction in financing costs, continuous improvement in the capability of funds management, sophisticated management on financing, and competent control of the scale of ~~interest-bearing debt as a result of our implementation of efficient centralized capital management.~~indebtedness by seizing favorable market opportunities.
~~- 54 -~~
The net exchange ~~gain~~loss was ~~RMB79~~RMB163 million in ~~2018,~~2020, compared to a net exchange loss of ~~RMB134~~RMB41 million in ~~2017,~~2019, which was primarily due to ~~depreciation~~fluctuation of the Renminbi exchange rate against the U.S. dollars in ~~2018.~~2020. According to the exchange rates published by the People’s Bank of China on December ~~28, 2018,~~31, 2020, the exchange rate of Renminbi ~~depreciated~~appreciated by ~~4.8%~~6.5% against the U.S. dollars from December ~~29, 2017.~~31, 2019.
Income Tax
In ~~2018,~~2020, our income tax expense was ~~RMB6,810~~RMB6,307 million with an effective tax rate of ~~24.2%~~23.0%. Our expected income tax expense at our statutory tax rate of 25.0% in ~~2018~~2020 would be ~~RMB7,037~~RMB6,847 million. The difference between our effective income tax rate and the statutory income tax rate was primarily due to the ~~preferential income~~low tax ~~rate, which was lower than the statutory income tax rate,~~rates enjoyed by some ~~of our~~subsidiaries and some branches ~~with operations~~located in the western region of China and ~~some of~~the preferential income tax policies enjoyed by us such as additional tax deduction on expenses for research and development proactively implemented by us. Furthermore, our ~~subsidiaries as well as that theone-off~~ ~~deemed disposal gain~~income from ~~the dilution of our interest~~investments in associate company, Tower Company, ~~in relation to its listing was~~is not subject to income tax in the current year. See Note 3032 to our consolidated financial statements included elsewhere in this annual report for further details in respect of the reconciliation of ~~our effective income~~the expected tax ~~rate to~~expense with the ~~statutory income~~actual tax ~~rate.~~expense.
Profit Attributable to Equity Holders of the Company
As a result of the foregoing, the profit attributable to equity holders of the Company was ~~RMB21,210~~RMB20,850 million in ~~2018, with a net margin~~2020, representing an increase of ~~5.6%, compared to a~~1.6% from the profit attributable to equity holders of the Company of ~~RMB18,617~~RMB20,517 million in ~~2017 with a net margin of 5.1%.~~
~~Year Ended December 31, 2017 Compared to Year Ended December 31, 2016~~
~~Operating Revenues~~
Our operating revenues increased by RMB13,695 million, or 3.9% from RMB352,534 million in 2016 to RMB366,229 million in 2017. This increase was primarily driven by the revenues growth from Internet services, information and application services and telecommunications network resource services and lease of network equipment, which was partially offset by a decrease in revenues from voice services and others.
~~Voice Services.~~Revenues from our voice services decreased by 12.1% from RMB70,185 million in 2016 to RMB61,678 million in 2017, representing 16.8% of our operating revenues in 2017. Of this, revenues from our wireline voice services decreased by 14.3% from RMB25,988 million in 2016 to RMB22,263 million in 2017. This decrease was primarily due to the increasing penetration of mobile voice services and other alternative means of communications, which continued to divert revenues from wireline voice services, as well as the migration of some of our wireline telephone subscribers to our 3G and 4G services. Revenues from our mobile voice services decreased by 10.8% from RMB44,197 million in 2016 to RMB39,415 million in 2017. This decrease was primarily due to the effect of the mobile Internet services, such as~~Over-the-Top~~ ~~messaging services, as alternative means of communication.~~
~~Internet Services.~~ Revenues from our Internet services increased by 14.7% from RMB150,449 million in 2016 to RMB172,554 million in 2017, representing 47.1% of our operating revenues. This increase was primarily due to the increase in our mobile Internet access revenues, which was attributable to the rapid growth in the volume of and revenue from our mobile handset Internet access. The revenues attributable to mobile Internet access services in 2017 was RMB92,961 million, representing an increase of 31.5% from RMB70,684 million in 2016, of which revenues attributable to mobile handset Internet access was RMB90,865 million, representing an increase of 33.1% from 2016. In addition, the number of our wireline broadband subscribers increased to 133.5 million as of December 31, 2017, representing an increase of 10.4 million, or 8.5%, from 123.1 million as of December 31, 2016. The wireline broadband revenue was RMB76,744 million in 2017, as compared to RMB76,805 million in 2016.
~~Information and Application Services.~~Revenues from our information and application services increased by 9.2% from RMB66,881 million in 2016 to RMB73,044 million in 2017, representing 20.0% of our operating revenues in 2017. This increase was primarily due to the increase in revenues from our wireline information and application services, which was partially offset by the decrease in revenues from our mobile information and application services. As a result of the rapid growth of our IDC, cloud, Big Data and IPTV~~(e-Surfing~~ HD) services, the revenues attributable to wireline information and application services increased by 17.3% from RMB44,369 million in 2016 to RMB52,037 million in 2017. The revenues attributable to mobile information and application services decreased by 6.7% from RMB22,512 ~~million in 2016 to RMB21,007 million in 2017 due to a decrease in revenue from traditional value-added services such as information inquiry services.~~
~~- 55 -~~
~~Telecommunications Network Resource and Equipment Services.~~ Revenues from our telecommunications network resource and equipment services increased by 7.6% from RMB17,781 million in 2016 to RMB19,125 million in 2017, representing 5.2% of our operating revenues in 2017. Revenue from wireline telecommunications network resource and equipment services was RMB18,835 million in 2017.
~~Others.~~ Other revenues decreased by 15.7% from RMB47,238 million in 2016 to RMB39,828 million in 2017, representing 10.9% of our operating revenues in 2017. The decrease in other revenues was primarily due to the decrease in the sales of mobile terminals. The revenues from sales of mobile terminals decreased by 22.7% from RMB34,612 million in 2016 to RMB26,759 million in 2017, primarily due to the reduction in our centralized procurement and the decrease in number of terminals sold through our own channels.
~~Operating Expenses~~
Our operating expenses increased by 4.2% from RMB325,314 million in 2016 to RMB339,009 million in 2017. The increase in operating expenses was primarily due to increases in network operations and support expenses and depreciation and amortization, which was partially offset by the decrease in other operating expenses.
~~Depreciation and Amortization.~~ Our depreciation and amortization expenses increased by 10.3% from RMB67,942 million in 2016 to RMB74,951 million in 2017. The increase in depreciation and amortization was mainly due to the changes in estimated depreciable lives of certain fixed assets from ten years to five years with effect from October 1, 2017, which resulted in an increase of RMB4,045 million of depreciation and amortization expenses in 2017, and the increase in depreciation and amortization expense of newly invested assets resulting from our continued investment in and construction of 4G and optic fiber network in recent years.
~~Network Operations and Support Expenses.~~Our network operations and support expenses increased by 10.4% from RMB94,156 million in 2016 to RMB103,969 million in 2017, primarily due to the increase in the tower assets lease fee and the operating and maintenance expenses. Our operating and maintenance expenses increased by 14.4% from RMB48,390 million in 2016 to RMB55,360 million in 2017, primarily attributable to the increase in costs of repairs and maintenance so as to ensure that high network quality services are provided.
~~Selling, General and Administrative Expenses.~~ Our selling, general and administrative expenses increased by 3.6% from RMB56,426 million in 2016 to RMB58,434 million in 2017. In 2017, we continued to optimize our sales and marketing model to improve the effectiveness of utilization of sales and marketing expenses by increasing investment in channel costs and reducing terminal subsidies. The selling expenses were RMB50,345 million in 2017, representing an increase of 5.3% from 2016. Our commission and service expenses for third parties were RMB36,273 million in 2017, representing an increase of 17.9% from 2016, while advertising and promotional expenses were RMB14,072 million in 2017, representing a decrease of 17.6% from 2016, of which the terminal subsidies was RMB4,707 million in 2017, representing a decrease of 49.8% from 2016.
~~Personnel Expenses.~~ Personnel expenses increased by 2.8% from RMB54,504 million in 2016 to RMB56,043 million in 2017. The personnel expenses as a percentage of our operating revenues decreased from 15.5% in 2016 to 15.3% in 2017.
~~Other Operating Expenses.~~ Our other operating expenses primarily consist of interconnection charges, cost of goods sold, donations and other expenses. Our other operating expenses were RMB45,612 million in 2017, which decreased by 12.8% from RMB52,286 million in 2016. The decrease was primarily due to the decrease in the cost of mobile terminal equipment sold, which is commensurate with the decreased sales of such goods. The cost of mobile terminal equipment sold was RMB25,488 million in 2017, which decreased by 22.5% from RMB32,878 million in 2016.
~~Net Finance Costs~~
~~Our net finance costs increased by 1.7% from RMB3,235 million in 2016 to RMB3,291 million in 2017.~~
The net exchange loss was RMB134 million in 2017, compared to a net exchange gain of RMB113 million in 2016, which was primarily due to appreciation of the Renminbi exchange rate against the U.S. dollars in 2017. According to the exchange rates published by the People’s Bank of China on December 29, 2017, the exchange rate of Renminbi appreciated by 6.2% against the U.S. dollars from December 30, 2016.
~~- 56 -~~
~~Income Tax~~
In 2017, our income tax expense was RMB6,192 million with the effective tax rate of 24.8%. Our expected income tax expense at our statutory tax rate of 25.0% in 2017 would be RMB6,238 million. The difference between our effective income tax rate and the statutory income tax rate was primarily due to the preferential income tax rate, which was lower than the statutory income tax rate, enjoyed by some of our branches with operations in the western region of China and some of our subsidiaries. See Note 30 to our consolidated financial statements included elsewhere in this annual report for further details in respect of the reconciliation of our effective income tax rate to the statutory income tax rate.
~~Profit Attributable to Equity Holders of the Company~~
As a result of the foregoing, the profit attributable to equity holders of the Company was RMB18,617 million in 2017, with a net margin of 5.1%, compared to a profit attributable to equity holders of the Company was RMB18,018 million in 2016 with a net margin of 5.1%.2019.

B.
Liquidity and Capital Resources
Cash Flows and Working Capital
The following table summarizes our cash flows for the periods indicated:

   Year Ended December 31,    Year Ended
December 31,
   2016 2017 2018    2019 2020
   (RMB in millions)    (RMB in millions)
Net cash flow from operating activities
   101,135 96,502 99,298    112,600 132,260
Net cash used in investing activities
   (99,043 ) (85,263 ) (85,954 )    (77,214 ) (87,077 )
Net cash used in financing activities
   (9,555 ) (16,147 ) (16,283 )    (31,288 ) (42,107 )




Net decrease in cash and cash equivalents
   (7,463 ) (4,908 ) (2,939 )


Net increase in cash and cash equivalents
   4,098 3,076
Cash and cash equivalents ~~decreased~~increased by ~~14.1%~~13.9% from ~~RMB19,410~~RMB20,791 as of December 31, 2019, of which 78.0% was denominated in RMB, to RMB23,684 million as of December 31, ~~2017,~~2020, of which ~~81.6% was denominated in RMB, to RMB16,666 million as of December 31, 2018, of which 64.0%~~73.0% was denominated in RMB. Our net cash ~~outflow~~inflow was ~~RMB2,939~~RMB3,076 million in ~~2018,~~2020, as compared with the net cash ~~outflow~~inflow of ~~RMB4,908~~RMB4,098 million in ~~2017.~~2019.
-51-
Our principal source of liquidity is net cash inflow from operating activities, which was ~~RMB99,298~~RMB132,260 million in ~~2018,~~2020, representing an increase of ~~RMB2,796~~RMB19,660 million from ~~RMB96,502~~RMB112,600 million of net cash inflow in ~~2017. The increase was mainly due to~~2019, primarily because we strengthened the ~~increase in~~management of accounts receivable and more subscribers applied the ~~revenue related to operating activities.~~pre-paid method.
Net cash outflow used in investing activities increased by ~~RMB691~~RMB9,863 million from ~~RMB85,263~~RMB77,214 million in ~~2017~~2019 to ~~RMB85,954~~RMB87,077 million in ~~2018.~~2020, primarily attributable to the increase in capital expenditure on supporting the development of 5G and Industrial Digitalization service.
Net cash outflow used in financing activities was ~~RMB16,283~~RMB42,107 million in ~~2018~~2020 compared to ~~RMB16,147~~RMB31,288 million in ~~2017.~~2019, primarily because we controlled the scale of indebtedness within a reasonable level, resulting in decline in the cash inflow from loans.
Our working capital (defined as current assets minus current liabilities) was a deficit of ~~RMB185,915~~RMB187,126 million as of December 31, ~~2018,~~2020, representing a decrease of deficit of RMB4,353 million, compared to a deficit of ~~RMB203,858~~RMB191,479 million as of December 31, ~~2017.~~2019.
We estimate that our current cash and cash equivalents, together with our existing credit facilities from domestic commercial banks, cash flows from operating activities, as well as funds available from short-term and long-term bank borrowings and debt financing, will be sufficient to satisfy our future working capital requirements and capital expenditures through the end of ~~2019.~~2021. We have established and maintained high credit ratings in domestic major financing markets, which have facilitated our ability to obtain short-term and long-term credit on favorable terms to meet our financing requirements. As of December 31, ~~2018,~~2020, we had unutilized credit facilities of ~~RMB150,693~~RMB244,326 million with major domestic commercial banks, from which we can draw upon.
~~- 57 -~~
Indebtedness
Our indebtedness as of the dates indicated was as follows:

   As of December 31,    As of
December 31,
   2016    2017    2018    2019    2020
   (RMB in millions)    (RMB in millions)
Short-term debt
   40,780    54,558    49,537    42,527    27,994
Long-term debt and payable maturing within one year
   62,276    1,146    1,139
Long-term debt maturing within one year
   4,444    1,126
Long-term debt
   9,370    48,596    44,852    32,051    24,222
Finance lease obligations (including current portion)
   102    77    216










Total debt
   112,528    104,377    95,744    79,022    53,342










Our total debt decreased by ~~RMB8,633~~RMB25,680 million from ~~RMB104,377~~RMB79,022 million as of December 31, ~~2017~~2019 to ~~RMB95,744~~RMB53,342 million as of December 31, ~~2018,~~2020, primarily due to our continuous enhancement of funds management, improvement in the ~~reduction in~~centralized funds management and appropriate control of the scale of ~~interest-bearing debt as a result of our implementation of efficient centralized capital management.~~indebtedness. Ourdebt-to-asset ratio (total debt divided by total assets) decreased from ~~15.8%~~11.2% as of December 31, ~~2017~~2019 to ~~14.4%~~7.5% as of December 31, ~~2018.~~2020. We believe that our Company has maintained a solid capital structure.
Our short-term debt constituted ~~51.7%~~52.5% of our total debt as of December 31, ~~2018.~~2020. The weighted average interest rate of our short-term debt was ~~3.2%~~2.8% as of December 31, ~~2018,~~2020, representing a decrease of ~~0.8~~0.1 percentage point from that as of December 31, ~~2017.~~2019.
Our long-term debt (including current portion) decreased from ~~RMB49,742~~RMB36,495 million as of December 31, ~~2017~~2019 to ~~RMB45,991~~RMB25,348 million as of December 31, ~~2018.~~2020.
Of our total debt as of December 31, ~~2018, 99.4%~~2020, 99.3%, 0.4% and ~~0.2%~~0.3% were denominated in Renminbi, U.S. dollars and Euros, respectively, and 90.1% and 9.9% were with fixed interest rate and floating interest rate, respectively.
Our short-term and long-term debt does not contain any financial ~~covenants which materially restrict~~covenants.
-52-
Contractual Obligations and Commercial Commitments
The following table sets forth our ~~operations.~~contractual obligations as of December 31, 2020:
   Payable in
   Total    2021    2022    2023    2024    2025    After
2025
   (RMB in millions)
Contractual Obligations⁽¹⁾:

Short-term debt
   27,994    27,994    —      —      —      —      —
Long-term debt
   25,348    1,126    17,081    3,009    984    952    2,196
Lease liabilities
   40,647    13,192    12,585    5,104    3,564    2,470    3,732
Interest payable
   6,129    1,964    1,535    664    506    466    994
Capital commitments
   20,199    20,199    —      —      —      —      —














Total contractual obligations
   120,317    64,475    31,201    8,777    5,054    3,888    6,922














(1)
See “Item 11. Quantitative and Qualitative Disclosures about Market Risk” for the contractual obligations relating to interest payments.
Capital Expenditure
The following table sets forth our historical and planned capital expenditure requirements for the periods indicated. Actual future capital expenditures for the ~~periods~~period after December 31, ~~2018~~2020 may differ from the amounts indicated below.

   Year Ended December 31,
   2017    2018    2019
(Planned)
   (RMB in millions)
Total capital expenditure
   88,712    74,940    78,000
   Year Ended December 31,
   2019    2020    2021
(Planned)
   (RMB in millions)
Total capital expenditure
   77,557    84,800    87,000
In ~~2018,~~2020, we ~~continued to implement Big Data precision~~continually promoted the 5G network co-building and co-sharing, sped up investment ~~persistently established superior~~in 5G network construction, and atcontinuously improved 5G network coverage. Meanwhile, we accelerated the ~~same time reinforced management~~construction of e-Surfing Cloud and ~~control in capital expenditure.~~IDC. In ~~2018,~~2020, our capital expenditure was ~~RMB74,940~~RMB84,800 million, ~~a decrease~~representing an increase of ~~15.5%~~9.3% from ~~RMB88,712~~RMB77,557 million in ~~2017.~~2019.
Our capital expenditure for ~~2019~~2021 is ~~projected~~expected to be approximately ~~RMB78,000~~RMB87,000 million. The investment in mobile networks will be mainly used for continuously ~~improving 4G~~expanding 5G network coverage, co-sharingand ~~enhancing~~co-building 4G ~~network capacity and quality~~base stations as well as ~~expanding 5G trials with a proper pace.~~redeploying under-utilized 4G base stations to busy or blind-spot areas. The investment in broadband networks will be mainly used for ~~maintaining fiber network edge, strengthening the benchmark~~modifying and ~~leadership position of Gbps service in key areas, improving the carrying capacity of the Internet as well as improving the~~constructing ~~end-to-end~~fiber-to-the-home ~~flexible resource allocation~~ports, and ~~scheduling capabilities.~~adding new 10G passive optical networks ports. The investment in ~~DICT~~Industrial Digitalization, which primarily includes IDC, Industry Cloud, digitalized platform, Network Dedicated Line, IoT and other services, will be mainly used for ~~improving IDC~~building 100,000 servers and scale deployment of multi-access edge computing (MEC)/edge cloud ~~resources layout~~business as well as focusing on four key regions of China to ~~uplift network agility~~build 52,000 newly commissioned cabinets. The remaining budget is expected to be mainly used for the construction and ~~flexibility~~upgrade of our operating systems, business platforms and ~~strengthenend-to-end~~ ~~service capability of cloud-network integration.~~infrastructure facilities.
Capital Resources
The main sources of our capital resources are cash generated from operating activities, bank borrowings and other indebtedness. Furthermore, we also plan to raise additional capital by publicly offering A shares. Please see “Item 4. Information on the Company—A. History and Development of the Company—Proposed A Share Offering” for more information. We expect that we will have sufficient funding sources to meet our capital resources requirements in the future.
Off-Balance Sheet Arrangements
~~- 58 -~~
As of December 31, 2020, we did not have any off-balance sheet arrangements or guarantees.
C.
Research and Development, Patents and Licenses, etc.
Our emphasis on research and development has contributed to the development of our advanced network, system, and the rollout of our new applications and services. Our ~~researchers focus~~research and development personnel focuses on cloud-network integration, cyber security, network planning and support, new technology trials, market evaluation, investment-related financial analysis and other key areas. Specific areas of research include 5G mobile communications technology,ultra-high-speed optic fiber transmission technology, cloud computing, Big Data, ~~AI or~~ artificial intelligence technology, ~~Internet of Things,~~IoT, broadband access, operation and service support systems and development of value-added services.

-53-
D.
Trend Information
Please ~~also~~ refer to our discussion in each section of “—Overview” and “—A. Operating Results” included elsewhere under this Item.

E.
~~Off-Balance~~ ~~Sheet Arrangements~~Critical Accounting Estimates
AsPlease refer to our discussion in each section of ~~December 31, 2018, we did not have anyoff-balance~~ ~~sheet arrangements or guarantees.~~“—Overview—Critical Accounting Policies” included elsewhere under this Item.
F.
~~Contractual Obligations and Commercial Commitments~~
~~The following table sets forth our contractual obligations as of December 31, 2018:~~

   Payable in
   Total    2019    2020    2021    2022    2023    After
2023
   (RMB in millions)
Contractual Obligations⁽¹⁾:

Short-term debt
   49,537    49,537    —      —      —      —      —
Long-term debt
   45,991    1,139    18,091    1,029    20,992    923    3,817
Interest payable
   8,213    3,028    1,517    917    963    246    1,542
Finance lease obligations
   216    101    36    26    20    27    6
Operating lease commitments
   65,805    15,658    14,466    13,440    12,682    3,461    6,098
Capital commitments
   15,303    15,303    —      —      —      —      —














Total contractual obligations
   185,065    84,766    34,110    15,412    34,657    4,657    11,463














~~(1)~~
~~See “Item 11. Quantitative and Qualitative Disclosures about Market Risk” for the contractual obligations relating to interest payments.~~

Item 6.
Directors, Senior Management and Employees.

A.
Directors and Senior Management
Directors and Senior Officers
Pursuant to our Articles of Association, our ~~directors~~Directors must be elected by our shareholders at a general meeting. Our ~~directors~~Directors are generally elected for a term of three years and may serve consecutive terms ifre-elected. The term of office for the ~~sixth~~current seventh session of the Board is three years, starting from May ~~23, 2017~~26, 2020 on which the Company’s annual general meeting for the year 2019, or 2019 AGM, was held until the date of the Company’s annual general meeting for the year ~~2019~~2022 expected to be held in the year ~~2020,~~2023, upon which the ~~seventh~~eighth session of the Board will be elected. At the 2019 AGM, the shareholders of the Company approved the re-election of Mr. Ke Ruiwen, Mr. Chen Zhongyue, Mr. Liu Guiqing, Madam Zhu Min, Mr. Wang Guoquan and Mr. Chen Shengguang as Directors of the seventh session of the Board, and approved the re-election of Mr. Tse Hau Yin, Aloysius, Mr. Xu Erming, Madam Wang Hsuehming and Mr. Yeung Chi Wai, Jason as Independent Directors of the seventh session of the Board. Meanwhile, the shareholders of the Company approved the election of Mr. Li Zhengmao, the President and Chief Operating Officer of the Company and Mr. Shao Guanglu as Directors of the seventh session of the Board at the 2019 AGM. As of December 31, ~~2018,~~2020, the Board comprised eleven Directors with six Executive Directors, one Non-Executive Director and four Independent Non-Executive Directors. Our Board currently consists of ten Directors with five Executive Directors, oneNon-Executive Director and four IndependentNon-Executive Directors.
On January ~~29, 2018,~~17, 2020, Mr. ~~Sun Kangmin retired~~Gao Tongqing resigned from his positions as an Executive Director and Executive Vice President of the Company due to ~~his age.~~
~~On May 28, 2018, Madam Cha May Lung, Laura resigned from her positions as an IndependentNon-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 July 10, 2018, Mr. Zhang Zhiyong and Mr. Liu Guiqing were appointed as Executive Vice Presidents of the Company.~~
~~- 59 -~~
~~On July 19, 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 ~~July 20, 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,~~March 23, 2020, Mr. ~~Ke Ruiwen resigned from his position as a Joint Company Secretary of the Company due to change in work arrangement.~~
~~On October 25, 2018, Mr. Ke Ruiwen~~Li Zhengmao 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 October 26, 2018, the appointment of Madam Zhu Min as an Executive Director of the Company was approved at the extraordinary general meeting of the Company. On~~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 Min was appointed as the Authorised Representative of the Company. Meanwhile, the appointment of Mr. Yeung Chi Wai, Jason as an Independent~~Non-Executive~~ ~~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 March 4, 2019, Mr. Yang Jie resigned from his positions as~~ an Executive Director, Chairman and Chief Executive Officer of the Company, ceased to act as the President and Chief Operating Officer of the Company.
On December 4, 2020, Mr. Wang Guoquan resigned from his positions as an Executive Director and Executive Vice President of the Company due to change in work arrangement.
On ~~March 8, 2019, the Board resolved to approve~~January 19, 2021, Mr. ~~Ke Ruiwen, the~~Chen Zhongyue resigned from his positions as an Executive Director ~~President~~ and ~~Chief Operating Officer of the Company, to performing the functions of the Chairman and Chief Executive Officer.~~
~~On March 11, 2019, Mr. Wang Guoquan was appointed as an~~ Executive Vice President of the ~~Company.~~Company due to change in work arrangement.
The following table sets forth certain information concerning our current Directors and executive officers. The business address of each of our Directors and executive officers is 31 Jinrong Street, Xicheng District, Beijing, PRC 100033.

Name
   Age
Position
Ke Ruiwen
   5557    ~~Performing the functions of the~~Executive Director, Chairman and Chief Executive ~~Officer;~~ Officer
Li Zhengmao
58 Executive Director, President and Chief Operating Officer
~~Gao Tongqing~~Shao Guanglu
57 Executive Director
Zhang Zhiyong
   55    Executive ~~Director and Executive~~ Vice President
~~Chen Zhongyue~~Liu Guiqing
   4754    Executive Director and Executive Vice President
Zhu Min
   5456    Executive Director, Executive Vice President, Chief Financial Officer and Secretary of the Board
Chen Shengguang
   5557    Non-Executive Director
Tse Hau Yin, Aloysius
   7173    IndependentNon-Executive Director
-54-
Name
Age
Position
Xu Erming
   6971    IndependentNon-Executive Director
Wang Hsuehming
   6971    IndependentNon-Executive Director
Yeung Chi Wai, Jason
   6466    IndependentNon-Executive Director
~~Zhang Zhiyong~~
53 ~~Executive Vice President~~
~~Liu Guiqing~~
52 ~~Executive Vice President~~
~~Wang Guoquan~~
46 ~~Executive Vice President~~
Ke Ruiwen, age ~~55,~~57, is an Executive Director, ~~President~~the Chairman of the Board and Chief ~~Operating~~Executive Officer of the ~~Company,~~Company. He joined the Board of the Company in May ~~2012 and has performed the functions of the Chairman and Chief Executive Officer of the Company since March 8, 2019.~~2012. 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, President and Chief Operating Officer of the Company, Vice President and President of China Telecommunications Corporation and the Chairman of Supervisory Committee of China Tower Corporation Limited. He is also the Chairman of China Telecommunications Corporation. Mr. Ke has extensive experience in management and the telecommunications industry.
~~- 60 -~~
~~Gao Tongqing~~Li Zhengmao, age ~~55,~~58, is an Executive Director, the President and ~~Executive Vice President~~Chief Operating Officer of the ~~Company and~~Company. He joined the Board of the Company in May ~~2017.~~2020. Mr. ~~Gao~~Li graduated from Sichuan University with a major in radio electronics and received a master degree in radio technology from Chengdu Telecommunications Engineering Institute and a doctorate degree in communication and electronic system of radio engineering from Southeast University. Mr. Li served as an Executive Director and Vice President of China Unicom Limited, a Director and Vice President of China United Telecommunications Corporation, a Vice President of China Mobile Limited which is listed on the Main Board of the HKSE, a Vice President and General Counsel of China Mobile Communications Group Co., Ltd. and a Director and Vice President of China Mobile Communication Co., Ltd., a Non-Executive Director of China Communications Services Corporation Limited which is listed on the Main Board of the HKSE and a Vice Chairman of True Corporation Public Company Limited which is listed on the Stock Exchange of Thailand. Mr. Li is also a Director and the President of China Telecommunications Corporation. Mr. Li has extensive experience in management and the telecommunications industry.
Shao Guanglu, age 57, is an Executive Director of the Company. He joined the Board of the Company in May 2020. Mr. Shao is a professor-level senior engineer. He graduated and received master degrees in engineering and economics from Harbin Institute of Technology and a doctorate degree in management from Nankai University. Mr. Shao served as a Deputy General Manager of China United Network Communications Group Company Limited, an Executive Director and Senior Vice President of China Unicom (Hong Kong) Limited, which is listed on the Main Board of the HKSE, a Senior Vice President of China United Network Communications Limited, which is listed on the Shanghai Stock Exchange, a Director and Senior Vice President of China United Network Communications Corporation Limited, a Non-Executive Director of China Communications Services Corporation Limited, China Tower Corporation Limited and PCCW Limited, all of which are listed on the Main Board of the HKSE, a member of the board of directors of Open Networking Foundation, a member of the strategy committee of GSM Association and a Vice President of China Information Technology Industry Federation. Mr. Shao is currently a Director of China Telecommunications Corporation and a Deputy Director of Communications Science and Technology Committee of the Ministry of Industry and Information Technology of the People’s Republic of China. Mr. Shao has extensive experience in management and the telecommunications industry.
Zhang Zhiyong, age 55, was appointed as an Executive Vice President of the Company on July 10, 2018. Mr. Zhang is a senior engineer. He graduated from the Changchun Institute of Posts and Telecommunications with a ~~major~~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 which is listed on the Main Board of the HKSE, General Manager of Xinjiang branch and Beijing branch of China Telecom Corporation Limited. He is also a Vice President and Chief Network Security Officer 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, both of which are listed on the Main Board of the HKSE. Mr. Zhang has extensive experience in management and the telecommunications ~~engineering~~industry.
Liu Guiqing, age 54, is an Executive Director and Executive Vice President of the Company. He joined the Board of the Company in August 2019. Mr. Liu is a professor-level senior engineer. He received a doctorate degree in ~~business administration~~engineering science from ~~the Hong Kong Polytechnic University.~~National University of Defense Technology. Mr. ~~Gao~~Liu 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~~China Unicom Hunan branch and General Manager of China ~~Telecom~~Unicom Jiangsu provincial branch. He is also a Vice President of China Telecommunications ~~Corporation.~~Corporation, a Deputy Director General of China Institute of Communications and a Director of Global System for Mobile communications Association (GSMA). Mr. ~~Gao~~Liu has extensive experience in management and the telecommunications industry.
~~Chen Zhongyue~~, age 47, is an Executive Director and Executive Vice President of the Company and joined the Board 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.
-55-
~~Zhu Min~~Liu Guiqing, age 54, is an Executive Director and Executive Vice President ~~Chief Financial Officer and Secretary~~ of the ~~Board and~~Company. He joined the Board of the Company in ~~October 2018. Madam Zhu~~August 2019. Mr. Liu is a professor-level senior ~~accountant. She~~engineer. He 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~~engineering science from ~~the Hong Kong Polytechnic University. Madam Zhu~~National University of Defense Technology. Mr. Liu 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.
~~Chen Shengguang~~~~, age 55, is aNon-Executive~~ Director of the Company and joined the Board 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~~Manager 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~~China Unicom Hunan branch 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 GuangdongSilk-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.~~
~~Tse Hau Yin, Aloysius~~~~, age 71, is an IndependentNon-Executive~~ ~~Director of the Company and joined the Board of the Company in September 2005. Mr. Tse is currently an IndependentNon-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 IndependentNon-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 IndependentNon-Executive~~ ~~Director of China Construction Bank Corporation, which is listed on the HKSE Main Board, from 2004 to 2010. Mr. Tse was also an IndependentNon-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 IndependentNon-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.~~
~~- 61 -~~
~~Xu Erming~~~~, age 69, is an IndependentNon-Executive~~ Director of the Company and joined the Board 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 atUnicom Jiangsu 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.
~~Wang Hsuehming~~, ~~age 69, is an IndependentNon-Executive~~ Director of the Company and joined the Board 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 privatizations 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.
~~Yeung Chi Wai, Jason~~~~, age 64, is an IndependentNon-Executive~~ Director of the Company and joined the Board 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 IndependentNon-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.
~~Zhang Zhiyong~~, age 53, was appointed as an Executive Vice President of the Company on July 10, 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.branch. He is also a Vice President of China Telecommunications Corporation, ~~the Chairman~~a Deputy Director General of ~~the board~~China Institute of ~~directors~~Communications and ~~an Executive~~a Director of ~~China Communications Services Corporation Limited and aNon-Executive~~ ~~Director of China Tower Corporation Limited.~~Global System for Mobile communications Association (GSMA). Mr. ~~Zhang~~Liu has extensive experience in management and the telecommunications industry.
-55-
Liu Guiqing, age ~~52, was appointed as~~54, is an Executive Director and Executive Vice President of the Company. He joined the Board of the Company ~~on July 10, 2018.~~in August 2019. 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.~~Corporation, a Deputy Director General of China Institute of Communications and a Director of Global System for Mobile communications Association (GSMA). Mr. Liu has extensive experience in management and the telecommunications industry.

~~- 62 -~~-55-
~~Wang Guoquan~~Zhu Min, age ~~46,~~56, is an Executive Director, Executive Vice President, Chief Financial Officer and Secretary of the Board of the Company. She joined the Board 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, which is listed on the Main Board of the HKSE, 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 a Director of Shanghai Pudong Development Bank Co., Ltd., which is listed on the Shanghai Stock Exchange. She is currently the Chief Accountant of China Telecommunications Corporation. Madam Zhu has extensive experience in finance, management and the telecommunications industry.
Chen Shengguang, age 57, is a Non-Executive Director of the Company. He joined the Board 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 Holdings Group 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, a Director of FSPG Hi-Tech Co., Ltd. which is listed on the Shenzhen Stock Exchange, a Non-Executive Director of Xingfa Aluminium Holdings Limited, which is listed on the Main Board of the HKSE, a Director of Guangdong Silk-Tex Group Co., Ltd., the Chief Accountant and Deputy General Manager of Guangdong Guangxin Holdings Group Ltd. Mr. Chen has extensive experience in finance and corporate management.
Tse Hau Yin, Aloysius, age 73, is an Independent Non-Executive Director of the Company. He joined the Board of the Company in September 2005. Mr. Tse is currently an Independent Non-Executive Director of CNOOC Limited, China Huarong Asset Management Co., Ltd. (which Mr. Tse sent a letter of resignation on March 23, 2021 and shall continue to perform his duties until the commencement of term of office of a new Independent Non-Executive Director and Chairman of the Audit Committee of the Board), Sinofert Holdings Limited and SJM Holdings Limited, all of which are listed on the Main Board of the HKSE. 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 Main Board of the HKSE until October 2014). From 2004 to 2010, he was an Independent Non-Executive Director of China Construction Bank Corporation, which is listed on the Main Board of the HKSE. From 2005 to 2016, 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 Main Board of the HKSE. Mr. Tse was appointed as an ~~Executive Vice President~~Independent Non-Executive Director of the Company on March 11, 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 DepartmentCCB International (Holdings) Limited, a wholly owned subsidiary of China ~~Telecommunications Corporation.~~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.
Xu Erming, age 71, is an Independent Non-Executive Director of the Company. He joined the Board of the Company in September 2005. Professor Xu is a Vice ~~President~~Chairman of the Chinese Enterprise Management Research Association. He is entitled to the State Council’s special government allowances. Professor Xu served as a professor, Ph.D. supervisor of the Graduate School and Dean of Business School at the Renmin University of China, a professor and Dean of Business School of Shantou University, and was an Independent Supervisor of Harbin Electric Company Limited and an Independent Non-Executive Director of Comtec Solar Systems Group Limited, both of which are listed on the Main Board of the HKSE. 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.
Wang Hsuehming, age 71, is an Independent Non-Executive Director of the Company. She joined the Board 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 ~~Corporation~~and Ministry of Information Industry (now known as Ministry of Industry and Information Technology) in the privatizations 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.
-56-
Yeung Chi Wai, Jason, age 66, is an Independent Non-Executive Director of the Company. He joined the Board 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, which is listed on the Main Board of the HKSE and the Shanghai Stock Exchange and a ~~director~~member of ~~Besttone Holding Co., Ltd..~~Hospital Authority Board of Hong Kong. Mr. ~~Wang~~Yeung has extensive experience in ~~management~~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 ~~telecommunications industry.~~General Counsel of China Everbright Limited, which is listed on the Main Board of the HKSE and was also a partner of Woo, Kwan, Lee, & Lo. He acted as the Board Secretary of BOC Hong Kong (Holdings) Limited, which is listed on the Main Board of the HKSE, from 2001 to 2011 and concurrently acted as the Board Secretary of Bank of China Limited, which is listed on the Main Board of the HKSE and the Shanghai Stock Exchange, 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.
There is no family relationship between any of our ~~directors~~Directors or executive officers.
Supervisors
The PRC Company Law requires a joint stock company with limited liability to establish a supervisory committee. Our Supervisory Committee has five Supervisors. Two members of our Supervisory Committee are employee representatives elected by our employees. The remaining members are appointed by shareholders at a general meeting. ~~The~~Our Supervisors are generally elected for a term of ~~office of our Supervisors is~~ three years ~~which is renewable upon~~and may serve consecutive terms if ~~re-election~~ or~~re-appointment.~~re-elected. The term of office for the ~~sixth~~seventh session of our Supervisory Committee is three years, starting from May ~~23, 2017~~26, 2020 until the ~~date of the Company’s~~ annual general meeting of the Company for the year ~~2019~~2022 to be held in the year ~~2020,~~2023, upon which the ~~seventh~~eighth session of the Supervisory Committee will be elected.
~~On February 27, 2018, Mr. Hu Jing resigned from his position as a Supervisor~~ At the 2019 AGM, the shareholders of the Company ~~due to change in work arrangement.~~
~~On October 26, 2018,~~approved the ~~appointment~~re-election of the current Shareholder Representative Supervisors, Mr. Sui Yixun and Mr. Xu Shiguang and the election of Mr. You Mingqiang as members of the seventh session of the Supervisory Committee. Due to their age, Mr. Yang Jianqing, an Employee Representative Supervisor, and Mr. Ye Zhong, a Shareholder Representative Supervisor, in each case of the sixth session of the Supervisory Committee, retired from their positions as Supervisors of the Company ~~was approved~~upon the expiry of their term of office at the ~~extraordinary general meeting~~2019 AGM. Meanwhile, Mr. Zhang Jianbin and Mr. Dai Bin have been elected by the employees of the ~~Company.~~Company democratically as the Employee Representative Supervisors of the seventh session of the Supervisory Committee.
The following table sets forth certain information concerning our current Supervisors:

Name
   Age
Position
Sui Yixun
   5557    Supervisor ~~(Chairman)~~(Chairman of the Supervisory Committee and Shareholder Representative)
Zhang Jianbin
   5355    Supervisor (Employee Representative)
~~Yang Jianqing~~Dai Bin
   5952    Supervisor (Employee Representative)
Xu Shiguang
   3941    Supervisor (Shareholder Representative)
~~Ye Zhong~~You Minqiang
   5947    Supervisor (Shareholder Representative)
Sui Yixun, age ~~55,~~57, is a Shareholder Representative Supervisor and the Chairman of the Supervisory Committee of the ~~Company and~~Company. He 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.~~Limited, which is listed on the Main Board of the HKSE. 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.~~branch and the Managing Director of audit department of the Company. Mr. Sui is a senior economist and has extensive experience in operational and financial management in the telecommunications industry.
-57-
Zhang Jianbin, age ~~53,~~55, is an Employee Representative Supervisor of the ~~Company and~~Company. He joined the Supervisory Committee of the Company in October 2012. Mr. Zhang is currently the Deputy Managing Director of the ~~Corporate Strategy~~Legal Department ~~(Legal~~(Compliance Management Department) of the Company and the Deputy General Counsel of China Telecommunications Corporation. Mr. Zhang graduated from the Law School of Peking University in 1989 and received a LLM degree. He also had an 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~~has extensive experience in ~~telecommunications legislation and regulation, corporate governance,~~ corporate legal ~~affairs and risk management.~~affairs.
~~Yang Jianqing~~Dai Bin, , age ~~59,~~52, is an Employee Representative Supervisor of the ~~Company and~~Company. He joined the Supervisory Committee of the Company in May ~~2017.~~2020. Mr. ~~Yang is currently~~Dai serves as the ~~senior consultant of Corporate Culture Department~~Vice Chairman of the ~~Company.~~Labour Union of China Telecommunications Corporation. Mr. ~~Yang~~Dai is a senior economist. He graduated from ~~the Beijing Institute of Posts~~Xiamen University and ~~Telecommunications with~~received a bachelor degree in ~~1982~~Chinese language and literature. He also obtained ~~a master~~an EMBA degree ~~in business administration~~ from the ~~University~~Guanghua School of ~~Hong Kong. Mr. Yang~~Management at Peking University. He served as a Deputy Managing Director ~~General~~ of ~~Xining Telecommunications Bureau in Qinghai province, Deputy General Manager and General Manager~~the Office of ~~China Telecom Qinghai branch, General Manager~~the Board of ~~China Telecom Gansu branch, financial controller~~Directors of the Company and ~~General Manager of Corporate Culture Department~~the Deputy Managing Director of the ~~Company.~~General Affairs Office (Office of the Board of Directors and Security Department) of China Telecommunications Corporation. Mr. ~~Yang is a senior engineer and~~Dai has extensive experience in operational ~~and financial~~ management in the telecommunications industry.
~~- 63 -~~
Xu Shiguang, age ~~39,~~41, is a Shareholder Representative Supervisor of the ~~Company and~~Company. He joined the Supervisory Committee of the Company in October 2018. Mr. Xu is currently the ~~Director~~Deputy General Manager of ~~general office of audit department~~Inner Mongolia Autonomous Region branch 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.~~University. Mr. Xu served at various positions in internal control and auditing at China Telecommunications Corporation for many ~~years.~~years and was the Director of general office of audit department of the Company. 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.
~~Ye Zhong~~You Minqiang, , age ~~59,~~47, is a Shareholder Representative Supervisor of the ~~Company and~~Company. He joined the Supervisory Committee of the Company in May ~~2015.~~2020. Mr. ~~Ye is~~You serves as a ~~senior accountant. He holds a bachelor degree. Mr. Ye is~~Deputy Director of the ~~Director~~Organisation Department (Human Resources Department) of Zhejiang Provincial Financial ~~Holdings~~Development 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), and the Supervisory Chairman of Zhejiang ~~Venture Capital Fund of Funds Management~~Nongdu Agricultural Products Co. ~~Ltd.~~, ~~Chairman~~Ltd.. Mr. You is a senior economist. He graduated from Hangzhou University and ~~General Manager of Zhejiang Agricultural Investment~~received a bachelor degree in education. Mr. You served in Armed Police Hangzhou Command School and ~~Development Fund Co. Ltd., Chairman and General Manager of Zhejiang Infrastructure Investment (including PPP) Fund Co. Ltd., Director of~~ Zhejiang Provincial ~~Industry Fund~~Financial Holdings 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. YeLtd.. He has extensive experience in ~~government’s work and state-owned enterprise management.~~the field of human resources.
B.
B. Compensation
Compensation of Key Management Personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company and its subsidiaries, directly or indirectly, including ~~directors, supervisors~~Directors, Supervisors and ~~executive vice presidents~~Executive Vice Presidents of the Company and its subsidiaries. The aggregate amount of compensation we paid to our key management personnel was approximately ~~RMB8.741~~RMB9.355 million for the year ended December 31, ~~2018.~~2020.
~~- 64 -~~
Our ~~directors~~Directors and ~~supervisors~~Supervisors receive compensation in the form of fees, salaries, allowances and benefits in kind, including our contribution to the pension plans for our ~~directors~~Directors and ~~supervisors.~~Supervisors. The aggregate amount of compensation we paid to our ~~directors~~Directors and ~~supervisors~~Supervisors as a group for the year ended December 31, ~~2018~~2020 was approximately ~~RMB7.316~~RMB8.512 million. The following table sets forth the compensation received or receivable by our Company’s ~~directors~~Directors and ~~supervisors~~Supervisors⁽¹⁾⁽²⁾:

   Directors’/
supervisors’
fees    Salaries,
allowances
and benefits
in kind    Discretionary
bonuses⁽³⁾    Share-based
payments    Retirement
scheme
contributions    Total
   RMB thousands
2018

Executive Directors

Yang Jie⁽⁴⁾
   —      207    536    —      89    832
Liu Aili⁽⁵⁾
   —      121    178    —      52    351
Ke Ruiwen
   —      197    497    —      85    779
Sun Kangmin⁽⁶⁾
   —      —      —      —      —      —
Gao Tongqing
   —      192    489    —      84    765
Chen Zhongyue
   —      192    489    —      82    763
Zhu Min⁽⁷⁾
   —      37    53    —      14    104
Non-Executive Director

Chen Shengguang
   —      —      —      —      —      —
IndependentNon-Executive Directors

Tse Hau Yin, Aloysius
   471    —      —      —      —      471
Cha May Lung, Laura⁽⁸⁾
   108    —      —      —      —      108
Xu Erming
   250    —      —      —      —      250
Wang Hsuehming
   257    —      —      —      —      257
Yeung Chi Wai, Jason⁽⁹⁾
   44    —      —      —      —      44
Supervisors

Sui Yixun
   —      216    485    —      84    785
Zhang Jianbin
   —      209    485    —      84    778
Yang Jianqing
   —      268    494    —      86    848
Hu Jing⁽¹⁰⁾
   —      15    83    —      12    110
Xu Shiguang⁽¹¹⁾
   —      18    40    —      13    71
Ye Zhong
   —      —      —      —      —      —












Total
   1,130    1,672    3,829    —      685    7,316












   Directors’/
supervisors’
fees    Salaries,
allowances
and benefits
in kind    Discretionary
bonuses⁽³⁾    Share-
based
payments    Retirement
scheme
contributions    Total
   RMB thousands
2020

Executive Directors

Ke Ruiwen
   —      221    527    —      73    821
Li Zhengmao⁽⁴⁾
   —      129    434    —      48    611
Shao Guanglu⁽⁵⁾
   —      116    436    —      46    598
Liu Guiqing
   —      197    464    —      59    720
Zhu Min
   —      197    464    —      52    713
Chen Zhongyue⁽⁶⁾
   —      199    468    —      71    738
Wang Guoquan⁽⁷⁾
   —      181    447    —      42    670
-58-
   Directors’/
supervisors’
fees    Salaries,
allowances
and benefits
in kind    Discretionary
bonuses⁽³⁾    Share-
based
payments    Retirement
scheme
contributions    Total
   RMB thousands
Gao Tongqing⁽⁸⁾
   —      17    16    —      8    41
Non-Executive Director

Chen Shengguang
   —      —      —      —      —      —
Independent Non-Executive Directors⁽²⁾

Tse Hau Yin, Aloysius
   477    —      —      —      —      477
Xu Erming
   250    —      —      —      —      250
Wang Hsuehming
   261    —      —      —      —      261
Yeung Chi Wai, Jason
   261    —      —      —      —      261
Supervisors

Sui Yixun
   —      227    494    —      49    770
Zhang Jianbin
   —      214    494    —      49    757
Dai Bin⁽⁹⁾
   —      110    202    —      26    338
Xu Shiguang
   —      118    335    —      33    486
You Minqiang⁽¹⁰⁾
   —      —      —      —      —      —
Yang Jianqing⁽¹¹⁾
   —      —      —      —      —      —
Ye Zhong⁽¹²⁾
   —      —      —      —      —      —












Total
   1,249    1,926    4,781    —      556    8,512












(1)
The remuneration of all ~~directors~~Directors and ~~supervisors were~~Supervisors was calculated based on their respective actual terms of office within this year. None of the ~~directors~~Directors or ~~supervisors~~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.
(2)
The ~~independent~~Independent ~~non-executive~~Non-Executive ~~directors’~~Directors’ remuneration ~~were~~was for their services as ~~directors~~Directors of the Company.
(3)
The discretionary bonuses of the ~~executive directors~~Executive Directors and ~~supervisors~~Supervisors were determined based on the ~~Group’s~~ performance of the Company and its subsidiaries 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. Such deferred bonuses were not included in the above compensation.
(4)
Mr. ~~Yang Jie resigned~~Li Zhengmao was appointed as an ~~executive director~~Executive Director of the Company on ~~March 4, 2019.~~May 26, 2020.
(5)
Mr. ~~Liu Aili resigned~~Shao Guanglu was appointed as an ~~executive director~~Executive Director of the Company on ~~July 19, 2018.~~May 26, 2020.
(6)
Mr. ~~Sun Kangmin retired~~Chen Zhongyue resigned as an ~~executive director~~Executive Director of the Company on January ~~29, 2018.~~19, 2021.
(7)
~~Madam Zhu Min was appointed~~Mr. Wang Guoquan resigned as an ~~executive director~~Executive Director of the Company on ~~October 26, 2018.~~December 4, 2020.
(8)
~~Madam Cha May Lung, Laura~~Mr. Gao Tongqing resigned as an ~~independentnon-executive~~ ~~director~~Executive Director of the Company on ~~May 28, 2018.~~January 17, 2020.
(9)
Mr. ~~Yeung Chi Wai, Jason~~Dai Bin was ~~appointed~~elected as ~~an independentnon-executive~~ ~~director~~a Supervisor of the Company on ~~October~~May 26, ~~2018.~~2020.
(10)
Mr. ~~Hu Jing resigned~~You Minqiang was appointed as a ~~supervisor~~Supervisor of the Company on ~~February 27, 2018.~~May 26, 2020.
(11)
Mr. ~~Xu Shiguang was appointed~~Yang Jianqing retired as a ~~supervisor~~Supervisor of the Company on ~~October~~May 26, ~~2018.~~2020.
~~- 65 -~~
(12)
Mr. Ye Zhong retired as a Supervisor of the Company on May 26, 2020.
Discretionary Bonuses for Executive Directors
Compensation of our Executive Directors is determined pursuant to our director compensation plans thereof approved and adopted by the Board and the Remuneration Committee. Under the director compensation plan, Executive Directors receive discretionary bonuses subject to achievement of certain performance targets. The amounts of discretionary bonuses are reviewed and determined annually, with reference to certain financial indicators of the preceding year. Independent ~~directors~~Non-Executive Directors and~~non-executive~~Non-Executive ~~directors~~Directors do not receive any discretionary bonus.
Discretionary Bonuses for Employee Supervisors
Certain of our ~~supervisors~~Supervisors are also our employees. Mr. You Minqiang is a non-employee Supervisor. Such employee supervisors are entitled to ~~receiving~~receive discretionary bonuses under our compensation policies that are generally applicable to all employees. The amounts of such discretionary bonuses are determined with reference to the performance of the department in which an employee serves as well as his or her individual performance. The amounts of discretionary bonuses are reviewed and determined annually, based on the review of performance in the preceding year.Non-employee supervisors do not receive any discretionary bonus from our Company.
-59-
Share Appreciation Rights
We implemented a plan of share appreciation rights for members of our management in order to provide ~~further~~ incentives for these employees. Under this plan, share appreciation rights were 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 Renminbi, 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 our Company’s H shares at the date of exercise based on the applicable exchange rate between Renminbi and Hong Kong ~~dollar~~dollars 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%.~~exercise. We recognize compensation expense of the share appreciation rights over the applicable vesting period. Changes in our payment obligation under the share appreciation rights plan resulting from changes in fair value of our H shares for the period subsequent to the vesting period through the date of the exercise are also reflected in our earnings.
In November 2018, we 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 December 31, ~~2018~~2020 and ~~2017,~~2019, no share appreciation right units were exercised. For the year ended December 31, ~~2018,~~2020, compensation expense of ~~RMB30~~RMB101 million was reversed by us in respect of share appreciation rights. For the year ended December 31, 2019, compensation expense of RMB136 million was recognized by us in respect of share appreciation rights. As of December 31, ~~2018,~~2020, the carrying amount of the liability arising from share appreciation rights was ~~RMB30~~RMB65 million. As of December 31, ~~2017, no~~2019, the carrying amount of the liability arising from share appreciation rights was ~~assumed by us.~~RMB166 million.
In March 2021, we approved the granting of approximately 2,412 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$2.686 per unit. A recipient of share appreciation rights may exercise the rights in stages commencing in March 2023.
C.
C. Board Practices
General
Pursuant to our Articles of Association, our ~~directors~~Directors must be elected by our shareholders at a general meeting. Our ~~directors~~Directors are generally elected for a term of three years and may serve consecutive terms ifre-elected. On May ~~23, 2017,~~26, 2020, election of members of the Board ~~were~~was conducted and this election generated the ~~sixth~~seventh session of the Board consisting of ~~11 directors~~twelve Directors with ~~six~~seven Executive Directors, oneNon-Executive Director and four IndependentNon-Executive Directors. The term of office for the ~~sixth~~seventh session of the Board lasts for three years, starting from May ~~23, 2017~~26, 2020 until the date of the Company’s annual general meeting for the year ~~2019~~2022 expected to be held in the year ~~2020,~~2023, upon which the ~~seventh~~eighth session of the Board will be elected. We determine the ~~directors’~~Directors’ remuneration with reference to factors such as their respective responsibilities and duties in the Company, as well as their experiences and market conditions at the relevant time. None of the service contracts with our ~~directors provide~~Directors provides benefits to them upon termination.
~~- 66 -~~
On ~~January 29, 2018,~~December 4, 2020, Mr. ~~Sun Kangmin retired~~Wang Guoquan resigned from his positions as an Executive Director and Executive Vice President of the Company due to ~~his age.~~change in work arrangement. On ~~May 28, 2018, Madam Cha May Lung, Laura resigned from her positions as an IndependentNon-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 July~~January 19, ~~2018,~~2021, Mr. ~~Liu Aili~~Chen Zhongyue resigned from his positions as an Executive Director ~~President~~ and ~~Chief Operating Officer of the Company due to change in work arrangement. On October 26, 2018, the appointments of Madam Zhu Min as an~~ Executive ~~Director of the Company and Mr. Yeung Chi Wai, Jason as an IndependentNon-Executive~~ Director of the Company were approved at the extraordinary general meeting and their term of office commences from October 26, 2018 until the annual general meeting of the Company for the year 2019 to be held in year 2020. On March 4, 2019, Mr. Yang Jie resigned from positions as an Executive Director, Chairman and Chief Executive OfficerVice President of the Company due to change in work arrangement. Our Board currently consists of ~~nine directors~~ten Directors with ~~four~~five Executive Directors, oneNon-Executive Director and four IndependentNon-Executive Directors.
The Board holds at least four meetings in each year. Additional Board meetings will be held in accordance with practical needs. In ~~2018,~~2020, 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~~Specifically, the Board reviewed ~~significant~~ matters including, ~~the Company’s~~but not limited to, our 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~~amendments to the Articles of Association, approval and ~~the grant proposal, renewal~~authorization of the ~~continuing connected transactions~~issuance of debentures, our budget for the years 2020 and 2021, review of the ~~applicable renewed annual caps thereto,~~structure and operations of the ~~implementation of continuing connected transactions, changes of~~Board, proposal for directors ~~and Board committee members, supervisors~~ and senior management liabilities insurance, proposal for election or re-electionof the ~~Company,~~Directors of the seventh session of the Board, election or re-election of the senior management, chairman and members of the Board Committees, remuneration proposal for the ~~newly appointed directors,~~Directors of the seventh session of the Board, report on relevant situations under the global epidemic environment, re-appointment and remuneration of auditors, ~~establishment~~and the progress report on the preparation of ~~independent board committee, appointment of independent financial adviser~~the Environmental, Social and ~~implementation of new lease standard.~~Governance Report. During the year, the Company convened four Board meetings and completed various written resolutions. In ~~2018,~~2020, the Chairman held a meeting to independently communicate with Independent Non-Executive Directors ~~(including IndependentNon-Executive~~ ~~Directors) without~~(without the presence of ~~Executive Directors independently~~any other Directors) to ensure their opinions can be fully expressed, further facilitating the exchange of different views onwithin the Board.
-60-
Audit Committee
The Audit Committee was established in 2002. ~~On October 26, 2018, Mr. Yeung Chi Wai, Jason was appointed as a member of the Audit Committee.~~ It currently consists of four members, Mr. Tse Hau Yin, Aloysius (as the Chairman), ~~Professor~~Mr. Xu Erming, Madam Wang Hsuehming and Mr. Yeung Chi Wai, Jason, all of whom are IndependentNon-executive Directors. The Audit Committee is accountable to the Board and reports to it periodically. The Committee meets at least twice each year. The Charter of the Audit Committee was approved by our Board in March 2005 and amended in March 2009, in December 2011, in March 2015 and in December 2018, respectively, pursuant to which the principal responsibilities of our Audit Committee include supervision of our Company to ensure authenticity and completeness of our financial statements and effectiveness and ~~integration~~completeness of the internal control and risk management system. The Audit Committee also supervises our internal audit department, and is responsible for the review and supervision of the qualifications, independence, selection and appointment of external independent auditors, and approval of services provided by the external independent auditors. In addition, the Audit Committee is responsible for ensuring that the management performs 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~~functions of the Company together with the adequacy of the staff’s training programs and related budget. The Audit Committee has established a mechanism for receiving and handling complaints or anonymous reports in respect of our accounting, internal control and audit matters.
In ~~2018,~~2020, the Audit Committee held ~~five~~four meetings and passed ~~one~~two written ~~resolution,~~resolutions, in which it reviewed ~~important~~ matters ~~related~~including but not limited to ~~the Company’s~~our annual and interim financial statements and quarterly financial results, assessment of the qualifications, independence and performance, appointments and remuneration of the external ~~independent~~ 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, selection of external auditors, the progress work report of the change of external auditors, review of the operations in 2019 and the ~~implementation~~Charter of ~~new lease standard.~~the Audit Committee, and the progress report on the preparation of the Environmental, Social and Governance Report. The Audit Committee reviewed the annual auditor’s report, interim review report and quarterly agreed-upon procedures reports prepared by the external ~~independent~~ auditors, communicated with the management and the external ~~independent~~ auditors ~~with~~in regard 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. In addition,~~Internal Audit Department. Additionally, the Audit Committee reviewed the internal control assessment ~~report~~ and the attestation report, followed up with the implementation procedures of the recommendations proposed by the external ~~independent~~ auditors, reviewed the U.S. annual report, and communicated independently with the external ~~independent~~ auditors twice a year.
~~- 67 -~~
Remuneration Committee
The Remuneration Committee was established in 2003, and currently consists of three members, ~~Professor~~Mr. Xu Erming (as the Chairman), Mr. Tse Hau Yin, Aloysius and Madam Wang Hsuehming, all of whom are IndependentNon-Executive Directors. The Remuneration Committee is accountable to the Board and reports to it on its work periodically. The Remuneration Committee meets when necessary. The Charter of the Remuneration Committee was approved by our Board in March 2005 and amended in December 2011 and in December 2018, pursuant to which the Remuneration Committee’s principal responsibilities 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,~~ making recommendations to the Board on our overall remuneration policies and structure relating to compensation of ~~directors~~Directors and senior management 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~~Executive Directors and senior management including benefits in kind, pension rights and compensation payments (including any compensation payable for loss or termination of their office or appointment).
The Remuneration Committee held one meeting ~~and passed one written resolution~~ in ~~2018,~~2020, in which it reviewed and discussed the remuneration ~~proposal~~proposals for the ~~newly appointed directors, share appreciation rights scheme and~~Directors of the ~~grant proposal.~~seventh session of the Board.
Nomination Committee
The Nomination Committee was established in 2005. ~~On May 28, 2018, Madam Cha May Lung, Laura resigned from her positions as an IndependentNon-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.~~ It currently consists of three members, Madam Wang Hsuehming (as the Chairlady), Mr. Tse Hau Yin, Aloysius and ~~Professor~~Mr. Xu Erming, all of whom are IndependentNon-Executive Directors. The Nomination Committee is accountable to the Board and regularly reports to the ~~latter~~Board on its work. The Nomination Committee meets ~~when necessary.~~at least once a year. The Charter of the Nomination Committee was approved by our Board in September 2005 and amended in December 2011 and August 2013, respectively, pursuant to which the Nomination Committee’s principal responsibilities include reviewing the structure, size, composition and diversity of the ~~board~~Board on a regular basis; identifying ~~individuals suitably qualified to become board members~~candidates and ~~selecting or making recommendations to~~advising the ~~board on~~Board with the ~~selection~~appropriate qualifications for the position of ~~individuals nominated for directorships;~~Directors; reviewing the Board Diversity Policy as appropriate to ~~evaluate~~ensure its effectiveness; assessing the independence of ~~proposed candidate for independent~~the Independent ~~non-executive~~Non-Executive ~~directors;~~Directors; and making recommendations to the ~~board~~Board on the appointment orre-appointment of ~~directors~~Directors and succession planning for Directors (especially Chairman and Chief Executive Officer) ~~and succession planning for directors.~~.
-61-
The Nomination Committee held one meeting ~~and passed one written resolution~~ in ~~2018,~~2020, where it performed a review of the structure and operations of the Board and considered the recommendation of the proposed ~~candidate~~candidates for ~~Director and other related matters.~~the Directors of the seventh session of the Board.
Independent Board Committee
The Independent Board Committee consists of ~~three~~four IndependentNon-Executive Directors. Meetings of the Independent Board Committee are convened to review certain connected transactions on a ~~case by case~~case-by-case basis pursuant to the Listing ~~Rules of the Hong Kong Stock Exchange.~~Rules.
The Independent Board Committee ~~held one~~did not hold any meeting or pass any written resolution in 2018, 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.2020.
~~- 68 -~~
D.
D. Employees
General
As of December 31, ~~2018,~~2020, we had ~~280,747~~281,192 employees. The table below sets forth the numbers of our employees according to their functions as of December 31, ~~2016, 2017~~2018, 2019 and ~~2018:~~2020:

   As of December 31,    As of December 31,
   2016 2017 2018    2018 2019 2020
   Number of
Employees    Percentage
of Total Number of
Employees    Percentage
of Total Number of
Employees    Percentage
of Total    Number of
Employees    Percentage
of Total Number of
Employees    Percentage
of Total Number of
Employees    Percentage
of Total
Management, finance and administrative
   43,194    15.1 % 44,289    15.6 % 45,045    16.0 %    45,045    16.0 % 46,521    16.5 % 47,743    17.0 %
Sales and marketing
   147,885    51.5 % 141,261    49.7 % 138,001    49.2 %    138,001    49.2 % 135,797    48.3 % 135,135    48.1 %
Operations and maintenance
   94,005    32.7 % 89,047    31.3 % 87,512    31.2 %    87,512    31.2 % 87,943    31.3 % 86,347    30.7 %
Others
   1,992    0.7 % 9,609    3.4 % 10,189    3.6 %
Research and development
   10,189    3.6 % 10,954    3.9 % 11,967    4.2 %
















Total
   287,076    100.0 % 284,206    100.0 % 280,747    100.0 %    280,747    100.0 % 281,215    100.0 % 281,192    100.0 %
















The primary components of an employee’s remuneration include basic salary, a ~~performance based~~performance-based bonus and compensation based on ~~seniority.~~length of service. In addition, we also emphasize the importance of employee training and use various means of training to improve the quality and capability of our key employees. We have not been subjected to any material labor disturbances that have interfered with our operations, and we believe that the relationship between our management and the labor union of our Company is good.
E.
E. Share Ownership
As of December 31, ~~2018,~~2020, none of our ~~directors, supervisors~~Directors, Supervisors or other senior executives was a legal or beneficial owner of any shares of our share capital.

~~- 69 -~~
Item 7.
Major Shareholders and Related Party Transactions.
A.
A. Major Shareholders
The table below sets forth information regarding the ownership of our share capital as of April 23, ~~2019~~2021 by all persons who are known to us to be the beneficial owners of 5.0% or more of each class of our voting securities.

Title of Shares

Identity of Person or Group
   Amount Owned    Nature of Interest    Percentage of
the Respective
Type of Shares⁽¹⁾ Percentage of
Total Shares⁽¹⁾
Domestic shares
   China Telecom Group    57,377,053,317    long position    85.57 % 70.89 %
Domestic shares
   Guangdong Rising Assets Management Co., Ltd.    5,614,082,653    long position    8.37 % 6.94 %
Title of Shares

Identity of Person or Group
   Amount Owned    Nature of Interest    Percentage of
the Respective
Type of Shares⁽¹⁾ Percentage of
Total Shares⁽¹⁾
H shares
   JPMorgan Chase & Co.    1,656,036,020    long position    11.93 % 2.05 %
      86,660,983    short position    0.62 % 0.11 %
      1,391,214,945    lending pool    10.03 % 1.72 %
H shares
   BlackRock, Inc.    1,270,388,123    long position    9.15 % 1.57 %
      4,496,000    short position    0.03 % 0.01 %
H shares
   The Bank of New York Mellon Corporation    1,190,211,519    long position    8.58 % 1.47 %
      625,101,100    short position    4.50 % 0.77 %
      534,051,135    lending pool    3.85 % 0.66 %
H shares
   Citigroup Inc.    1,107,293,104    long position    7.98 % 1.37 %
      10,490,832    short position    0.08 % 0.01 %
      1,063,017,708    lending pool    7.66 % 1.31 %
H shares
   Templeton Global Advisors Limited    1,087,529,062    long position    7.84 % 1.34 %
Title of Shares
   Identity of Person or Group    Amount Owned    Nature of Interest    Percentage of
the Respective
Type of Shares Percentage of
Total Shares
Domestic shares
   China Telecom Group    57,377,053,317    long position    85.57 % 70.89 %
Domestic shares
   Guangdong Rising
Holdings Group Co., Ltd.    5,614,082,653    long position    8.37 % 6.94 %
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Title of Shares
   Identity of Person or Group    Amount Owned    Nature of Interest    Percentage of
the Respective
Type of Shares⁽¹⁾ Percentage of
Total Shares⁽¹⁾
H shares
   GIC Private Limited    1,394,433,475    long position    10.05 % 1.72 %

(1)
The percentage figures above have been rounded ~~off~~down to the nearest second decimal place.
(2)
Information disclosed hereby is based on the information available on the website of the Hong Kong Stock Exchange at www.hkexnews.hk.
China Telecom Group, located at 31 Jinrong Street, Xicheng District, Beijing, PRC 100033, is our controlling shareholder and is a state-owned ~~enterprise owned by the SASAC.~~enterprise. Guangdong Rising ~~Assets Management~~Holdings Group Co., Ltd., located at 50-58/F, The Pinnacle Plaza, 17 ~~Pearl River~~Zhujiang West Road, ~~Pearl River New Town,~~ Tianhe District, Guangzhou, Guangdong Province, PRC, is a state-owned enterprise owned by the provincial governments in Guangdong Province. JP Morgan Chase & Co. is located at 383 Madison Ave., New York 10179, United States. BlackRock, Inc. is located at 1209 Orange Street, Wilmington, DE 19801. The Bank of New York Mellon Corporation is located at Corporate Trust Center, 1209 Orange Street, Wilmington, Delaware, 19801 USA. Citigroup Inc. is located at 388 Greenwich Street, New York, 10013, USA.~~Templeton Global Advisors~~GIC Private Limited is located at ~~Box~~168 Robinson Road, Capital Tower ~~N-7759,~~#37-01, ~~Lyford Cay, Nassau, Bahamas.~~
~~- 70 -~~
Based solely on information contained in an Amendment No. 12 to Schedule 13G, or the FRI Schedule 13G/A, jointly filed with the SEC, on January 25, 2019 by Franklin Resources, Inc., or FRI, Charles B. Johnson, Rupert H. Johnson, Jr. and Templeton Global Advisors Limited, 1,922,236,167 shares of our Company, or the FRI Shares, representing approximately 13.9% of the total number of our H shares outstanding as of December 31, 2018, were beneficially owned by investment companies or other managed accounts that were investment management clients of investment managers that were direct or indirect subsidiaries of FRI. These subsidiaries of FRI were generally granted all investment and/or voting power over the FRI Shares owned and, as a result, may be deemed to be the beneficial owners of the FRI Shares for the purposes of Rule~~13d-3~~ of the Exchange Act. Each of Charles B. Johnson and Rupert H. Johnson, Jr. owned in excess of 10% of the outstanding common stock of FRI and was a principal shareholder of FRI. Each of FRI, Charles B. Johnson and Rupert H. Johnson, Jr. could be deemed a beneficial owner of securities held by persons and entities for whom or for which the subsidiaries of FRI provided investment management services. However, each of FRI, Charles B. Johnson, Rupert H. Johnson, Jr. and Templeton Global Advisors Limited disclaims beneficial ownership of any of the FRI Shares. The principal place of business of each of FRI, Charles B. Johnson and Rupert H. Johnson, Jr., is One Franklin Parkway, San Mateo, CA 94403-1906, U.S.A. The principal place of business of Templeton Global Advisors Limited is Templeton Building, Lyford Cay, Nassau, Bahamas. The above disclosure is based solely on the information contained in the FRI Schedule 13G/A. For the numbers of our H shares that each of the subsidiaries of FRI has sole power to vote or to direct the voting of, or sole power to dispose or to direct the disposition of, or shared power to dispose or to direct the disposition of, and other details of the FRI Schedule 13G/A, please see the Schedule 13G/A jointly filed with the SEC by FRI, Charles B. Johnson, Rupert H. Johnson, Jr. and Templeton Global Advisors Limited on January 25, 2019.Singapore 068912.
None of our major shareholders has voting rights that differ from the voting rights of other shareholders. We are not aware of any arrangement which may at a subsequent date result in a change of control of our Company.
B.
B. Related Party Transactions
As of April 23, 2019, China Telecom Group, a state-owned enterprise owned by the SASAC, directly owned and controlled 70.89% of our issued share capital. Accordingly, transactions between China Telecom Group and us constitute connected transactions under the Listing Rules.
In connection with our restructuring in 2001, our acquisitions of telecommunications assets from China Telecom Group on December 31, 2003 and June 30, 2004, respectively, the Mobile Network Acquisition in 2012, and our sale of~~E-surfing~~ Media in 2013, we have entered into various agreements with China Telecom Group relating to the mutual provision of ongoing telecommunications and other services. Such agreements include those for trademark licensing, centralized services, interconnection arrangements, optic fiber leasing, property leasing, land use right leasing, CDMA network facilities leasing, Internet applications channel services and other services.
~~Our IndependentNon-Executive~~ ~~Directors have confirmed that all continuing connected transactions for the year ended December 31, 2018 to which our Company was a party:~~
~~had been entered into, and the agreements governing those transactions were entered into, by our Company in the ordinary and usual course of business;~~
~~had been entered into either:~~
~~on normal commercial terms or better; or~~
if there were not sufficient comparable transactions to judge whether they were on normal commercial terms, on terms no less favorable to the Company than those available to or (if applicable) from independent third parties; and
~~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 details of the related party arrangements are described below.
~~- 71 -~~
~~Arrangements Relating to Certain Acquisitions~~
~~Indemnification~~
In connection with the acquisition of telecommunications assets from China Telecom Group by our Company, under the Sale and Purchase Agreement, dated October 26, 2003, between our Company and China Telecom Group, China Telecom Group has undertaken to indemnify 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 for any loss or damages suffered by those companies as a result of, or related to, the reorganization of those companies under which China Telecom Group transferred to those companies the telecommunications operations of China Telecom Group in Anhui Province, Fujian Province, Jiangxi Province, Guangxi Zhuang Autonomous Region, Chongqing Municipality and Sichuan Province, and for any loss or damages suffered by those companies in connection with events preceding such reorganization.
In connection with the acquisition of telecommunications assets from China Telecom Group by our Company, under the Conditional Sale and Purchase Agreement, dated April 13, 2004, between our Company and China Telecom Group, China Telecom Group has undertaken to indemnify us and keep us indemnified against any loss or liability suffered by us or any acquired company including, but not limited to, any diminution in the value of the assets of or shares in any acquired company, any payment made or required to be made by us or any acquired company and any costs and expenses incurred as a result of or in connection with any claim falling on any acquired company resulting from or by reference to any income, profits or gains earned, accrued or received on or before the date of the acquisition or any event on or before the date of the acquisition whether alone or in conjunction with other circumstances and whether or not such taxation is chargeable against or attributable to any other person, firm or company.
Ongoing Related Party Transactions between Us and China Telecom Group and ~~its affiliated companies~~Its Affiliated Companies
The following table sets out the amounts of ongoing related party transactions between usour Company and China Telecom Group (as defined as China Telecom Group and its subsidiaries ~~except us herewith~~other than our Company under this section) for the year ended December 31, ~~2018:~~2020:

Transactions
Transaction
Amounts

(RMB millions)

Net transaction amount of centralized services
   ~~519~~268
Net expenses for interconnection settlement
   ~~124~~69
~~Lease of property from China Telecom Group~~Property lease income
   ~~713~~45
~~Lease of property to China Telecom Group~~Property lease related expenses
   48581
Addition to right-of-use assets
335
Interest expense on lease liabilities
16
Provision of IT services by China Telecom Group
   ~~1,895~~2,653
Provision of IT services to China Telecom Group
   ~~531~~556
Provision of supplies procurement services by China Telecom Group
   ~~3,760~~3,567
Provision of supplies procurement services to China Telecom Group
   ~~2,760~~2,070
Provision of engineering services by China Telecom Group
   ~~16,396~~15,046
Provision of community services by China Telecom Group
   ~~3,296~~3,682
Provision of ancillary telecommunications services by China Telecom Group
   ~~16,744~~18,903
Provision of Internet applications channel services to China Telecom Group
   ~~298~~73
Interest on loans from China Telecom Group
   ~~2,099~~975
Others*
   ~~186~~243
Net deposit by China Telecom Group with China Telecom Finance
5,728
Interest expense on the deposit by China Telecom Group with China Telecom Finance
82

*
Represent ~~lease~~usage of CDMA network facilities, ~~lease~~usage of inter-provincial transmission optic fibers, and ~~lease~~usage of land use rights from China Telecom Group.
On September 23, 2015, the Company and China Telecommunications Corporation entered into supplemental agreements and renewed the Centralized Services Agreement, the Interconnection Settlement Agreement, the Property Leasing Framework Agreement, the IT Services Framework Agreement, the Community Services Framework Agreement, the Supplies Procurement Services Framework Agreement, the Engineering Framework Agreement, the Ancillary Telecommunications Services Framework Agreement, the Optic Fiber Leasing Agreement and the Internet Applications Channel Services Framework Agreement on the same terms (except for the pricing terms) for a further term of three years expiring on December 31, 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. Set forth below are the details of these agreements, in addition to the Trademark License Agreement:~~
~~- 72 -~~-63-
Centralized Services Agreement
Pursuant to the centralized services agreement signed between the Company and China Telecommunications Corporation on September 10, 2002 and the related supplemental agreements subsequently entered into between the two parties (collectively, the “Centralized Services Agreement”), centralized services include centralized business management and operational services provided by the Company to China Telecommunications Corporation ~~and/or its associates (as defined under the Listing Rules)~~ in relation to key corporate customers, its network management center and business support center. Centralized services also include the provision of certain premises by China Telecommunications Corporation ~~and/or its associates~~ to the Company and the common use of international telecommunications facilities by both parties. The aggregate costs incurred by the Company and China Telecommunications Corporation ~~and/or its associates~~ for the provision of management and operation services will be apportioned between the Company and China Telecommunications Corporation ~~and/or its associates~~ on a pro rata basis according to the revenues generated by each party. Where the Company uses the premises provided by China Telecommunications Corporation, ~~and/or its associates,~~ the Company will pay premises usage fees to China Telecommunications Corporation ~~and/or its associates~~ on a pro rata basis according to the apportioned actual area allocated to the Company. 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 utilization fee and related service costs) and when both parties use the international telecommunications facilities of China Telecommunications Corporation, ~~and/or its associates,~~ 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 utilization fee each year. The utilization fee associated with the shared use of the international telecommunications facilities provided by China Telecommunications Corporation ~~and/or its associates~~ 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~~transaction price for any transaction under the agreement represents 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 September 23, 2015 and renewed the Centralized Services Agreement on the same terms (except for the pricing terms) for a further term of three years expiring on December 31, 2018. On August 20, 2018, the Company and China Telecommunications Corporation ~~have~~ entered into a supplemental agreement and renewed the Centralized Services Agreement pursuant to the terms thereof for a further term of three years from January 1, 2019 to December 31, 2021. Please see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ongoing Related Party Transactions between Us and China Telecom Group and its affiliated companies—Renewal of Continuing Connected Transactions”. No later than 30 days prior to the expiry of the Centralized Services Agreement, the Company is entitled to serve a written notice to China Telecommunications Corporation to renew the Centralized 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 September 10, 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 MIIT of the PRC from time to time. Interconnection charges are currently RMB0.06 per minute for local calls originated from the Company to China Telecommunications ~~Corporation and/or its associates.~~Corporation. The interconnection settlement charges will be calculated 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 MIIT of the PRC. The MIIT 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 MIIT 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.
~~- 73 -~~
The Company and China Telecommunications Corporation have entered into a supplemental agreement on September 23, 2015 and renewed the Interconnection Settlement Agreement on the same terms (except for the pricing terms) for a further term of three years expiring on December 31, 2018. On August 20, 2018, the Company and China Telecommunications Corporation ~~have~~ entered into a supplemental agreement and renewed the Interconnection Settlement Agreement pursuant to the terms thereof for a further term of three years from January 1, 2019 to December 31, 2021. Please see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ongoing Related Party Transactions between Us and China Telecom Group and its affiliated companies—Renewal of Continuing Connected Transactions”. 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.
Property Leasing Framework Agreement
Pursuant to the property leasing framework agreement signed between the Company and China Telecommunications Corporation on August 30, 2006 and the related supplemental agreement subsequently entered into between the two parties (collectively, the “Property Leasing Framework Agreement”), the Company and China Telecommunications Corporation and/or its associates can lease properties from the other party for use as business premises, offices, equipment storage facilities and sites for network ~~equipment.~~equipment installation. The rental charges under the Property Leasing Framework Agreement shall be determined according to comparable market rates. Market rates shall mean the rental ~~charge~~charges at which the same or similar ~~type~~types of properties or adjacent properties are leased by independent third parties in the ordinary course of business and ~~under~~on normal commercial terms. When determining whether the ~~relevant~~rental charges for any property under the agreement represent 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 three years.
The Company and China Telecommunications Corporation have entered into a supplemental agreement on September 23, 2015 and renewed the Property Leasing Framework Agreement on the same terms (except for the pricing terms) for a further term of three years expiring on December 31, 2018.
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On August 20, 2018, the Company and China Telecommunications Corporation have entered into a supplemental agreement and renewed the Property Leasing Framework Agreement pursuant to the terms thereof for a further term of three years from January 1, 2019 to December 31, 2021. Please see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ongoing Related Party Transactions between Us and China Telecom Group and its affiliated companies—Renewal of Continuing Connected Transactions”. 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 August 30, 2006 and the related supplemental agreements subsequently entered into between the two parties (collectively, the “IT Services Framework Agreement”), the Company and China Telecommunications Corporation and/or its associates can provide the other party with information technology services, including office automation and software testing. Each of the Company and China Telecommunications Corporation and/or its associates is entitled to participate in bidding for the right to provide information technology services to the other party in accordance with the IT Services Framework Agreement. The charges payable for such services shall be determined by reference to the market rates. 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~~on normal commercial terms. When determining whether the ~~relevant~~transaction price for any transaction under the agreement represents 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.
In ~~the~~those 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 Company shall solicit at least three tenderers for the tender process. If the terms offered by the Company or China Telecommunications Corporation and/or its associates are no less favorable than those offered by an independent ~~third party~~third-party provider, the Company or China Telecommunications Corporation and/or its associates may award the tender to the other party.
~~- 74 -~~
The Company and China Telecommunications Corporation have entered into a supplemental agreement on September 23, 2015 and renewed the IT Services Framework Agreement on the same terms (except for the pricing terms) for a further term of three years expiring on December 31, 2018. On August 20, 2018, the Company and China Telecommunications Corporation ~~have~~ entered into a supplemental agreement and renewed the IT Services Framework Agreement pursuant to the terms thereof for a further term of three years from January 1, 2019 to December 31, 2021. Please see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ongoing Related Party Transactions between Us and China Telecom Group and its affiliated companies —Renewal of Continuing Connected Transactions”. 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 August 30, 2006 and the related supplemental agreements subsequently entered into between the two parties (collectively, the “Community Services Framework Agreement”), China Telecommunications Corporation and/or its associates provide the Company 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:~~in accordance with the following pricing terms:
(1) market prices, which shall mean the prices at which the same or similar ~~type~~types of products or services are provided by independent third parties in the ordinary course of business and ~~under~~on normal commercial terms. When determining whether the ~~relevant~~transaction price for any transaction under the agreement represents 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 isare no or it is not possible to determine the market ~~price,~~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 Company. When determining the relevant “reasonable profit margin”, for any transaction under the agreement, 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.
The Company and China Telecommunications Corporation have entered into a supplemental agreement on September 23, 2015 and renewed the Community Services Framework Agreement on the same terms (except for the pricing terms) for a further term of three years expiring on December 31, 2018.
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On August 20, 2018, the Company and China Telecommunications Corporation ~~have~~ entered into a supplemental agreement and renewed the Community Services Framework Agreement pursuant to the terms thereof for a further term of three years from January 1, 2019 to December 31, 2021. Please see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ongoing Related Party Transactions between Us and China Telecom Group and its affiliated companies—Renewal of Continuing Connected Transactions”. 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 August 30, 2006 and the related supplemental agreements subsequently entered into between the two parties (collectively, the “Supplies Procurement Services Framework Agreement”), China Telecommunications Corporation and/or its associates and the Company provide each other with supplies procurement services, including the 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 domesticnon-telecommunications supplies.
~~- 75 -~~
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 September 23, 2015 and renewed the Supplies Procurement Services Framework Agreement on the same terms (except for the pricing terms) for a further term of three years expiring on December 31, 2018. On August 20, 2018, the Company and China Telecommunications Corporation ~~have~~ entered into a supplemental agreement and renewed the Supplies Procurement Services Framework Agreement pursuant to the terms thereof for a further term of three years from January 1, 2019 to December 31, 2021. Please see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ongoing Related Party Transactions between Us and China Telecom Group and its affiliated companies—Renewal of Continuing Connected Transactions”. No later than 30 days prior to the expiry of the Supplies Procurement Services Framework Agreement, the Company is entitled to serve a written notice to China Telecommunications Corporation to renew the Supplies Procurement Services Framework Agreement, and the parties shall consult and decide on matters relating to such renewal.
Engineering Framework Agreement
Pursuant to the engineering framework agreement signed between the Company and China Telecommunications Corporation on August 30, 2006 and the related supplemental agreements subsequently entered into between the two parties (collectively, the “Engineering Framework Agreement”), China Telecommunications Corporation and/or its associates, through bids, provide to the Company 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~~on normal commercial terms. When determining whether the ~~relevant~~transaction price for any transaction under the agreement represents the market ~~rates,~~rate, 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~~RMB1 million or engineering construction projects with a value of over ~~RMB2~~RMB4 million shall be determined by the tender award price, which is ~~in turn~~ determined in accordance with ~~the relevant tendering procedure of the Company 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”. or the final confirmed price in the relevant tender process. The Company 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 during the term of the agreement, both parties agreed to apply such amended rules and regulations and no amendment to the supplemental agreement is required. The Company does not accord any priority to China Telecommunications Corporation and/or its associates to provide such services, and the tender may be awarded to an independent third party. However, if the terms of an offer from China Telecommunications Corporation and/or its associates are at least as ~~favourable~~favorable as those offered by other tenderers, the Company may award the tender to China Telecommunications Corporation and/or its associates.
The Company and China Telecommunications Corporation have entered into a supplemental agreement on September 23, 2015 and renewed the Engineering Framework Agreement on the same terms (except for the pricing terms) for a further term of three years expiring on December 31, 2018. On August 20, 2018, the Company and China Telecommunications Corporation ~~have~~ entered into a supplemental agreement and renewed the Engineering Framework Agreement on the same terms for a further term of three years from January 1, 2019 to December 31, 2021, excepting the pricing ~~term~~terms updates. Please see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ongoing Related Party Transactions between Us and China Telecom Group and its affiliated companies—Renewal of Continuing Connected Transactions”. 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.
-66-
Ancillary Telecommunications Services Framework Agreement
Pursuant to the ancillary telecommunications services framework agreement signed between the Company and China Telecommunications Corporation on August 30, 2006 and the related supplemental agreements subsequently entered into between the two parties (collectively, the “Ancillary Telecommunications Services Framework Agreement”), China Telecommunications Corporation and/or its associates provide the Company 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.
~~- 76 -~~
The Company and China Telecommunications Corporation have entered into a supplemental agreement on September 23, 2015 and renewed the Ancillary Telecommunications Services Framework Agreement on the same terms (except for the pricing terms) for a further term of three years expiring on December 31, 2018. On August 20, 2018, the Company and China Telecommunications Corporation ~~have~~ entered into a supplemental agreement and renewed the Ancillary Telecommunications Services Framework Agreement pursuant to the terms thereof for a further term of three years from January 1, 2019 to December 31, 2021. Please see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ongoing Related Party Transactions between Us and China Telecom Group and its affiliated companies—Renewal of Continuing Connected Transactions”. 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.
Optic Fiber Leasing Agreement
The Company leases from China Telecom Group the inter-provincial transmission optic fibers in Shanghai Municipality, Guangdong Province, Jiangsu Province and Zhejiang Province, which the Company’s telecommunications services are dependent upon, under the Optic Fiber Leasing Agreement dated September 10, 2002 and the related supplemental agreements (collectively, the “Optic Fiber Leasing Agreement”). The rent payable by the Company to China Telecom Group to lease the relevant parts of the inter-provincial transmission optic fibers will be based on negotiations between the parties with reference to the market price. Market rates shall mean the rental charge at which the same or similar type of properties or adjacent properties are leased by independent third parties in the ordinary course of business and ~~under~~on 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. In addition, The Company agreed to be responsible for the maintenance of these optic fibers within those service regions.
The Company and China Telecommunications Corporation have entered into a supplemental agreement on September 23, 2015 and renewed the Optic Fiber Leasing Agreement on the same terms (except for the pricing terms) for a further term of three years expiring on December 31, 2018. On August 20, 2018, the Company and China Telecommunications Corporation ~~have~~ entered into a supplemental agreement and renewed the Optic Fiber Leasing Agreement pursuant to the terms thereof for a further term of three years from January 1, 2019 to December 31, 2021. Please see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ongoing Related Party Transactions between Us and China Telecom Group and its affiliated companies—Renewal of Continuing Connected Transactions”. The Company may renew the Optic Fiber Leasing Agreement for such further periods as the parties may agree, by 30 days’ written notification to China Telecommunications Corporation.
Internet Applications Channel Services Framework Agreement
Pursuant to the Internet applications channel services framework agreement signed between the Company and China Telecommunications Corporation on December 16, 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 Telecommunications Corporation and/or its associates. The channel services mainly include the provision of telecommunications channel and applications support platform, provision of billing and deduction services, coordination of sales promotion and development of customers services, etc. The pricing terms for such services are 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 September 23, 2015 and renewed the Internet Applications Channel Services Framework Agreement on the same terms (except for the pricing terms) for a further term of three years expiring on December 31, 2018. On August 20, 2018, the Company and China Telecommunications Corporation ~~have~~ entered into a supplemental agreement and renewed the Internet Applications Channel Services Framework Agreement pursuant to the terms thereof for a further term of three years from January 1, 2019 to December 31, 2021. Please see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ongoing Related Party Transactions between Us and China Telecom Group and its affiliated companies—Renewal of Continuing Connected Transactions”. 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.
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Trademark License Agreement
China Telecommunications Corporation has registered a number of trademarks, and is in the process of registering other trademarks with the Trademark Office. Under the trademark license agreement, dated September 10, 2002, and the related supplemental agreements (collectively, the “Trademark License Agreement”), China Telecommunications Corporation has granted to the Company a right to use its registered trademarks and its trademarks pending registration on a royalty-free basis.
The Company and China Telecommunications Corporation agreed on September 23, 2015 to renew the Trademark License Agreement pursuant to the terms thereof for a further term of three years expiring on December 31, 2018.
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On August 20, 2018, the Company and China Telecommunications Corporation ~~have~~ entered into a supplemental agreement and renewed the Trademark License Agreement pursuant to the terms thereof for a further term of three years from January 1, 2019 to December 31, 2021. Please see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ongoing Related Party Transactions between Us and China Telecom Group and its affiliated companies—Renewal of Continuing Connected Transactions”. The Company may renew the Trademark License Agreement for such further periods as the parties may agree, by 30 days’ written notification to China Telecommunications Corporation.
~~Renewal of Continuing Connected~~ Transactions between China Telecom Finance and the Parent Group and the CCS Group Respectively
On ~~August 20, 2018,~~February 1, 2019, China Telecom Finance entered into the financial services framework agreement with China Telecommunications Corporation and CCS, respectively, pursuant to such agreements China Telecom Finance agreed to provide financial services, including deposit services, loan services and other financial services to (i) China Telecommunications Corporation, its associates and its commonly held entity held with our Company, excluding our Company and the CCS Group (“Parent Group”), and (ii) CCS and its subsidiaries (“CCS Group”).
China Telecommunications Corporation Financial Services Framework Agreement Entered into between China Telecom Finance and China Telecommunications Corporation
On February 1, 2019, China Telecom Finance and China Telecommunications Corporation entered into ~~supplemental agreements~~a financial services framework agreement (the “China Telecommunications Corporation Financial Services Framework Agreement”), pursuant to which China Telecom Finance agreed to provide financial services, including deposit services, loan services and ~~renewed~~other financial services, to the ~~Centralized~~Parent Group. The pricing policy under the China Telecommunications Corporation Financial Services ~~Agreement, the Interconnection Settlement Agreement, the Property Leasing~~ Framework Agreement is set out below:
(i) Deposit Services
The deposit interest rates offered by China Telecom Finance to the ITParent Group shall comply with the relevant requirements of the People’s Bank of China and be with reference to the deposit benchmark interest rates promulgated by the People’s Bank of China from time to time (if any) and the deposit interest rates of the same type of deposit services for the same period offered by the major cooperative commercial banks of the Parent Group and are conducted on normal commercial terms or better. The deposit interest rates offered shall be equivalent to or higher than those offered by the major cooperative commercial banks of the Parent Group. Under the same conditions, the interest rates and terms for the deposit services offered by China Telecom Finance to the Parent Group shall be the same as those interest rates and terms of the same type of deposit services for the same period offered by China Telecom Finance to other member units.
(ii) Loan Services
The loan interest rates offered by China Telecom Finance to the Parent Group shall comply with the relevant requirements of the People’s Bank of China and be with reference to the loan benchmark interest rates promulgated by the People’s Bank of China from time to time (if any) and the loan interest rates of the same type of loan services for the same period offered by the major cooperative commercial banks of the Parent Group and are conducted on normal commercial terms or better. The loan interest rates offered shall be equivalent to or lower than those offered by the major cooperative commercial banks of the Parent Group. Under the same conditions, the interest rates and terms for the loan services offered by China Telecom Finance to the Parent Group shall be the same as those interest rates and terms of the same type of loan services for the same period offered by China Telecom Finance to other member units.
The above loan services provided by China Telecom Finance to the Parent Group do not require the Parent Group to pledge any security over its assets or make other arrangements for the loan services as guarantee.
(iii) Other Financial Services
China Telecom Finance provides other financial services (other than deposit and loan services) including financial and financing advice, credit authentication, guarantees, acceptance of bills and discounted bills, internal fund transfer and settlement and designs of relevant settlement and clearance arrangement proposals to the Parent Group under the China Telecommunications Corporation Financial Services Framework Agreement.
The fees charged for other financial services provided by China Telecom Finance to the Parent Group mentioned above shall comply with the fees standard promulgated by regulatory departments including the People’s Bank of China or China Banking and Insurance Regulatory Commission (including its designated institution) (“CBIRC”) (if applicable), and be with reference to the handling fees standard for the same type of other financial services charged by the major cooperative commercial banks of the Parent Group and are conducted on normal commercial terms or better. The handling fees standard shall be equivalent to or lower than those charged by the major cooperative commercial banks of the Parent Group. Under the same conditions, the fees standard charged to the Parent Group by China Telecom Finance shall be the same as those fees standard for the same type of other financial services charged by China Telecom Finance to other member units.
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For the respective specific transactions under the China Telecommunications Corporation Financial Services Framework Agreement, under the same conditions, the Parent Group should, in principle, choose the services provided by China Telecom Finance. If the Parent Group considers it is appropriate and beneficial to the Parent Group, the Parent Group has the discretion to engage one or more major cooperative commercial banks of the Parent Group as its financial services providers.
The China Telecommunications Corporation Financial Services Framework Agreement became effective from February 1, 2019 and will expire on December 31, 2021. Subject to the compliance of relevant laws and regulations and relevant regulatory requirements, both parties will negotiate and agree on the renewal arrangement.
CCS Financial Services Framework Agreement Entered into between China Telecom Finance and CCS
On February 1, 2019, China Telecom Finance and CCS entered into a financial services framework agreement (the “CCS Financial Services Framework Agreement”), pursuant to which China Telecom Finance agreed to provide financial services, including deposit services, loan services and other financial services to the CCS Group. The pricing policy under the CCS Financial Services Framework Agreement is set out below:
(i) Deposit Services
The deposit interest rates offered by China Telecom Finance to the CCS Group shall comply with the relevant requirements of the People’s Bank of China and be with reference to the deposit benchmark interest rates promulgated by the People’s Bank of China from time to time (if any) and the deposit interest rates of the same type of deposit services for the same period offered by the major cooperative commercial banks of the CCS Group and are conducted on normal commercial terms or better. The deposit interest rates offered shall be equivalent to or higher than those offered by the major cooperative commercial banks of the CCS Group. Under the same conditions, the interest rates and terms for the deposit services offered by China Telecom Finance to the CCS Group shall be the same as those interest rates and terms of the same type of deposit services for the same period offered by China Telecom Finance to other member units.
(ii) Loan Services
The loan interest rates offered by China Telecom Finance to the CCS Group shall comply with the relevant requirements of the People’s Bank of China and be with reference to the loan benchmark interest rates promulgated by the People’s Bank of China from time to time (if any) and the loan interest rates of the same type of loan services for the same period offered by the major cooperative commercial banks of the CCS Group and are conducted on normal commercial terms or better. The loan interest rates offered shall be equivalent to or lower than those offered by the major cooperative commercial banks of the CCS Group. Under the same conditions, the interest rates and terms for the loan services offered by China Telecom Finance to the CCS Group shall be the same as those interest rates and terms of the same type of loan services for the same period offered by China Telecom Finance to other member units. The above loan services provided by China Telecom Finance to the CCS Group do not require the CCS Group to pledge any security over its assets or make other arrangements for the loan services as guarantee.
(iii) Other Financial Services
China Telecom Finance provides other financial services (other than deposit and loan services) including financial and financing advice, credit authentication, guarantees, acceptance of bills and discounted bills, internal fund transfer and settlement and designs of relevant settlement and clearance arrangement proposals to the CCS Group under the CCS Financial Services Framework Agreement.
The fees charged for other financial services provided by China Telecom Finance to the CCS Group mentioned above shall comply with the fees standard promulgated by regulatory departments including the People’s Bank of China or the CBIRC (if applicable), and be with reference to the handling fees standard for the same type of other financial services charged by the major cooperative commercial banks of the CCS Group and are conducted on normal commercial terms or better. The handling fees standard shall be equivalent to or lower than those charged by the major cooperative commercial banks of the CCS Group. Under the same conditions, the fees standard charged to the CCS Group by China Telecom Finance shall be the same as those fees standard for the same type of other financial services charged by China Telecom Finance to other member units.
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For the respective specific transactions under the CCS Financial Services Framework Agreement, provided that it is in compliance with the terms and conditions of the CCS Financial Services Framework Agreement, China Telecom Finance was appointed as one of the financial institutions providing financial services to the CCS Group. Prior to the signing of any specific agreement with China Telecom Finance in respect of respective transactions under the CCS Financial Services Framework Agreement, the ~~Community~~CCS Group will compare the interest rates and terms or fees charged and other relevant transactions terms offered by China Telecom Finance with those interest rates and terms of the same type of deposit or loan services for the same period or fees charged and other relevant transaction terms for the same type of financial services offered by the major cooperative commercial banks of the CCS Group. Only when the interest rates and terms or fees charged or other relevant transactions terms offered by China Telecom Finance are equivalent to or better than those interest rates and terms offered or fees charged or other relevant transactions terms (e.g. transaction approval terms, procedures or time limit, etc.) offered by the major cooperative commercial banks of the CCS Group, the CCS Group has the discretion to enter into the transactions with China Telecom Finance. Under the circumstances which the CCS Group considers appropriate, the CCS Group may engage additional or other financial institutions other than China Telecom Finance to provide financial services.
The CCS Financial Services Framework Agreement the Supplies Procurement Services Framework Agreement, the Engineering Framework Agreement, the Ancillary Telecommunications Services Framework Agreement, the Optic Fiber Leasing Agreement, the Internet Applications Channel Services Framework Agreement and the Trademark License Agreement for a further term of three yearsbecame effective from ~~January~~February 1, 2019 toand will expire on December 31, 2021. ~~Pursuant~~Subject to the ~~Engineering Framework Agreement as amended by the supplemental agreement dated August 20, 2018, the charges payable for the design or supervision~~compliance of engineering projects with a value of over RMB1 million or engineering construction projects with a value of over RMB4 million shall apply 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 Company 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 and relevant regulatory requirements, both parties ~~agreed to apply such amended rules~~will negotiate 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 October 26, 2018. We filed Form~~6-Ks~~ ~~on August 21, 2018 and September 10, 2018, respectively, in relation to renewal of continuing connected transactions.~~
~~Our Acquisition from China Telecom Group of the CDMA Network Assets and Associated Liabilities~~
~~See “Item 4—Information~~agree on the ~~Company—A. History and Development of the Company—Our Acquisition from China Telecom Group of the CDMA Network Assets and Associated Liabilities”.~~renewal arrangement.
Our Transfer of Assets to and Tower Lease Arrangements with the Tower Company
See “Item 4—4. Information on the Company—A. History and Development of the ~~Company –~~ Company—Establishment of the Tower Company and the Disposal and Lease of the Telecommunications Towers”. Furthermore, during 2016 and 2017, the SEC issued comment letters relating to the Company’s previously filed annual reports on Form20-F for the fiscal years ended December 31, 2015 and 2016. The comment letters inquired mainly about the background, execution process, and accounting treatment in relation to the Company’s disposal and lease of telecommunications towers and related assets with the Tower Company. The Company responded to these comment letters and was notified by the SEC in its letter dated October 20, 2017 that it has completed its review of such previously filed annual reports of the Company. The SEC did not in its October 2017 letter require us to make any amendment to those previously filed annual reports.
Disposal of~~E-Store~~E-store to Besttone Holding
See “Item 4—4. Information on the Company—A. History and Development of the Company—Disposal of ~~E-Store~~Chengdu E-store Technology Co., Ltd. and Establishment ofTianyi ~~Capital”~~Capital Holding Co., Ltd.”.
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Establishment of China Telecom Finance
See “Item 4—4. Information on the Company—A. History and Development of the Company—Establishment of China Telecom Group Finance Co., Ltd.”.
Disposals of E-surfing Pay Co., Ltd and China Telecom Leasing Corporation Limited
See “Item 4. Information on the Company—A. History and Development of the Company—Disposals of E-surfing Pay Co., Ltd and China Telecom Leasing Corporation Limited”.
Our Borrowings from China Telecom Group
We from time to time borrow ~~short term~~short-term unsecured loans from China Telecom Group to supplement our working capital needs. As of December 31, ~~2018,~~2020, the aggregate outstanding principal amount of such loans was ~~RMB8,584~~RMB11,164 million, which bear interest at a fixed rate of ~~3.5%~~3.1% per annum. On December 25, 2017, we obtained long-term unsecured loans from China Telecom Group to meet our long-term funding needs. As of December 31, ~~2018,~~2020, the aggregate outstanding principal amount of such loans was ~~RMB37,000~~RMB11,000 million, which bear interest at a fixed rate of 3.8% per annum and are payable within ~~two~~one to ~~four~~two years. See Note 1819 to our audited financial statements included elsewhere in this report for details.
C.
C. Interests of Experts and Counsel
Not applicable.

Item 8.
Financial Information.
Our consolidated financial statements are set forth beginning on pageF-1. No significant change has occurred since the date of the annual financial statements.
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Legal ~~Proceeding~~Proceedings
On December 10, 2020, the FCC adopted an order (the “FCC Order”) that instituted proceedings to determine whether to revoke and/or terminate our 214 Authorizations. CTA has appealed the FCC Order in accordance with relevant laws, regulations and regulatory requirements to safeguard its legitimate rights. See “Item 3. Key Information – Risk Factors – Risks Relating to Our Business – Our authorizations to provide telecommunications services in the United States are subject to actions by the relevant authorities in the United States and we cannot assure you we will be able to maintain those authorizations in the future”.
On January 6, 2021, the NYSE, following reversal of a similar decision announced on December 31, 2020, announced that it had determined to commence delisting proceedings of our ADSs to comply with Executive Order signed by the then President of the United States. On January 20, 2021, we filed a written request with the NYSE for a review of its determination. See “Item 3. Key Information – Risk Factors – Risks Relating to Our Business – Transactions in and holdings of our ADSs and H shares by U.S. persons beyond specified dates are prohibited, and the continued listing of and trading in our ADSs are subject to significant uncertainty”.
We are the defendant in certain lawsuits and a named party in other legal proceedings arising in the ordinary course of business. While the outcomes of such contingencies, lawsuits or other legal proceedings cannot be determined at present, we believe that the outcomes of such contingencies, lawsuits or other legal proceedings will not likely result in any material adverse effect on our financial position, results of operations or cash flows.
Policy on Dividend Distributions
Pursuant to the shareholders’ approval at the annual general meeting held on May ~~28, 2018,~~26, 2020, a final dividend of ~~RMB7,568~~RMB9,262 million ~~(RMB0.093512~~(RMB0.114441 per share equivalent to HK$~~0.115~~0.125 per share,pre-tax) for the year ended December 31, ~~2017~~2019 was declared, all of which has been fully paid. Pursuant to a resolution passed at the Directors’ meeting on March ~~19, 2019,~~9, 2021, a final dividend of approximately ~~RMB8,629~~RMB8,403 million ~~(RMB0.106621~~(RMB0.10515 per share equivalent to HK$0.125 per share,pre-tax) for the year ended December 31, ~~2018~~2020 was proposed for shareholders’ approval at the ~~forthcoming~~ annual general ~~meeting.~~meeting for the year of 2020.
The Company attaches great importance to the investment returns of shareholders, strives to maintain the continuity and stability of the dividend policy taking into 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:

the operating results and cash flow level of the Company;

the Company’s future business development position and the capital expenditure requirements;

capital needs and gearing ratio;

the expectation from shareholders and investors; and

other factors that the Board deems appropriate.
Our 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 before proceeding with the distribution. In the future, we will strive for improvement on profitability and at the same time continue to deliver favorable dividend return for the shareholders. Our Board will declare dividends, if any, ~~in Renminbi~~ with respect to our H shares and domestic shares on a ~~per share~~per-share basis and will pay such dividends in Hong Kong ~~dollars.~~dollars and in Renminbi respectively. Any final dividend for a fiscal year will be subject to shareholders’ approval. Under the PRC Company Law and our Articles of Association, all of our shareholders have equal rights to dividends and distributions. The holders of our H shares will share proportionately on a ~~per share~~per-share basis in all dividends and other distributions declared by our Company.
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The Bank of New York Mellon, as depositary, will convert the Hong Kong dollar dividend payment and distribute it to holders of ADSs in U.S. dollars, less related fees and expenses and any withholding tax.

Item 9.
The Offer and Listing.
In connection with our initial public offering, our ADSs were listed and commenced trading on the NYSE on November 14, 2002 under the symbol “CHA”. Our H shares were listed and commenced trading on the Hong Kong Stock Exchange on November 15, ~~2002.~~2002 under the symbol “728”. Prior to these listings, there was no public market for our equity securities. The NYSE and the Hong Kong Stock Exchange are the principal host markets for our ADSs and H shares, which are not listed on any other exchanges in or outside the United States.
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On January 6, 2021, the NYSE, following reversal of a similar decision announced on December 31, 2020, announced that it had determined to commence delisting proceedings of our ADSs to comply with Executive Order signed by the then President of the United States. See “Item 8. Financial Information – Legal Proceedings” and “Item 3. Key Information – Risk Factors – Risks Relating to Our Business – Transactions in and holdings of our ADSs and H shares by U.S. persons beyond specified dates are prohibited, and the continued listing of and trading in our ADSs are subject to significant uncertainty”.
As of December 31, ~~2018~~2020 and April 23, ~~2019,~~2021, there were 13,877,410,000 H shares issued and outstanding. As of December 31, ~~2018~~2020 and April 23, ~~2019,~~2021, there were, respectively, 4030 and 3828 registered holders of American depositary receipts evidencing ~~5,445,990~~4,606,994 and ~~5,310,204~~1,152,450 ADSs. Since certain of the ADSs are held by nominees, the above number may not be representative of the actual number of U.S. beneficial holders of ADSs or the number of ADSs beneficially held by U.S. persons. The depositary for the ADSs is The Bank of New York Mellon.

Item 10.
Additional Information.
A.
A. Share Capital
Not applicable.
B.
B. Memorandum and Articles of Association
The following is a summary of certain provisions of our Articles of Association, as amended. Such summary does not purport to be complete. For further information, you and your advisors should refer to the text of our Articles of Association, as amended, and to the texts of applicable laws and regulations. A copy of our Articles of Association is filed as an exhibit to this annual report, which is incorporated herein by reference.
Holders of our domestic shares and H shares are deemed to be shareholders of different classes for various matters, which affect their respective interests. For instance, if we propose an increase in domestic shares, holders of H shares would be entitled to vote on that proposal as a separate class. See “—Voting Rights and Shareholders’ Meetings” included elsewhere under this Item.
Objects and Purposes
We are a joint stock limited company established in accordance with the PRC Company Law, the State Council’s Special Regulations Regarding the Issue of Shares Overseas and the Listing of Shares Overseas by Companies Limited by Shares and other relevant laws and regulations of the State. We registered with the ~~PRC~~ State Administration for Industry and ~~Commerce.~~Commerce of the People’s Republic of China. Article 14 of our Articles of Association provides that our scope of business includes, among other things, operation of basic and value-added telecommunications businesses.
Directors
Our Articles of Association provide that each of our ~~directors~~Directors is obligated to each shareholder to act honestly in our Company’s best interests; not to exploit corporate assets for personal gain; and not to expropriate the rights of our shareholders.
Where a director, supervisor, general manager or other senior officer of the Company is materially interested, directly or indirectly, in a contract, transaction or arrangement (including any proposed contract, transaction or arrangement) with us, he or she shall declare the nature and extent of his or her interests to the Board at the earliest opportunity, whether or not such contract, transaction or arrangement is otherwise subject to the approval of the Board. A director shall not vote, and shall not be counted in the quorum of the meeting, on any resolution concerning any contract, transaction or arrangement where the director owns material rights or interests therein. A director is deemed to be interested in a contract, transaction or arrangement in which his or her associate (as defined in the Listing ~~Rules of the Hong Kong Stock Exchange)~~Rules) is interested.
Unless the interested director, supervisor, general manager or other senior officer of the Company discloses his or her interests to the board and the contract, transaction or arrangement in which the director is materially interested is approved by the board of directors at a meeting in which the director neither votes nor is counted in the quorum, such contract, transaction or arrangement may be revoked by us except with respect to a bona fide party thereto who does not have notice of the breach of duty by the interested ~~director.~~director, supervisor, general manager or other senior officer.
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Furthermore, we may not make loans or provide guarantees to ~~directors~~a director, supervisor, general manager or other senior officer of the Company or of the Company’s holding company or any of their respective associates, except where such loan or guarantee is made or provided under a service contract as approved by shareholders at the shareholders’ general meeting and to meet expenditure ~~requirement~~requirements incurred or for the purpose of enabling the director, supervisor, general manager or other senior officer of the Company to perform his or her duties properly or made in the ordinary course of business.
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All decisions relating to the compensation of directors are made at shareholders’ meetings.
There are no provisions under our Articles of Association which relate to:

the retirement ornon-retirement of directors under any age limit requirement;

directors’ borrowing power; or

number of shares required for director’s qualification.
Dividends
Our Board may propose dividend distributions at any time. Our Board may declare interim and special dividends under general authorization by a shareholders’ ordinary resolution. A distribution of final dividends for any fiscal year is subject to shareholders’ approval. Dividends may be distributed in the form of cash or shares. A distribution of shares, however, must be approved by special resolution of the shareholders.
We may only distribute dividends from our retained earnings as determined in accordance with the accounting principles of the PRC or IFRS, whichever is lower, after allowance has been made for:

recovery of losses, if any;

allocations to the statutory common reserve fund of 10.0% of our profit; and

allocations to a discretionary common reserve fund if approved by the shareholders.
Our Articles of Association require us to appoint on behalf of the holders of H shares a receiving agent that is registered as a trust company under the Trustee Ordinance of Hong Kong to receive dividends declared by us in respect of the H shares on behalf of such shareholders. Our Articles of Association require that cash dividends in respect of H shares be declared in Renminbi and paid by us in Hong Kong dollars. The Bank of New York Mellon, as the ADS depositary, will convert these proceeds into U.S. dollars and will remit the converted proceeds to holders of our ADSs after deduction of related fees and expenses and any withholding tax.
Dividends payments may be subject to the PRC withholding tax. See “—E. Taxation—People’s Republic of China—Taxation of Dividends” included elsewhere under this Item.
Voting Rights and Shareholders’ Meetings
Our Board will convene a shareholders’ annual general meeting once every year and within six months from the end of the preceding fiscal year. Our Board must convene an extraordinary general meeting within two months of the occurrence of any of the following events:

where the number of directors is less than the number stipulated in the PRC Company Law ortwo-thirds of the number specified in our Articles of Association;

where our unrecovered losses reachone-third of the total amount of our share capital;

where shareholder(s) holding 10.0% or more of our issued and outstanding voting shares so request(s) in writing;

whenever our Board deems necessary or our supervisory committee so requests; or

whenever two or more of our independent directors so request.
Resolutions proposed by shareholder(s) holding ~~5.0%~~3% or more of the total voting shares shall be included in the agenda for the relevant annual general meeting if they are within the functions and powers of shareholders in general meetings.
When the Company convenes a shareholders’ general meeting, written notice of the meeting shall be given at least 20 clear business days before the date of the meeting in the case of an annual general meeting, or at least 10 clear business days or 15 days, whichever is longer, in the case of an extraordinary general meeting to notify all of the shareholders whose names appear in the share register of the matters to be considered and the date and place of the meeting.
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All shareholders’ meetings must be convened by our Board by written notice given to shareholders not less than 45 days before the meeting. We may convene a shareholders’ general meeting where the number of voting shares represented by those shareholders from whom we have received 20 days before the meeting notices of intention to attend the meeting reaches one half or more of our voting shares; or, if that number is not reached, we shall within five days notify the shareholders again of the matters proposed to be considered at the meeting, the date and the place of the meeting by way of public announcement. After such public announcement, we may hold the shareholders’ general meeting. The accidental omission by us to give notice of a meeting to, or the~~non-receipt~~ ~~of notice of a meeting by, a shareholder will not invalidate the proceedings at that shareholders’ meeting.~~
Shareholders at meetings have the power, among other matters, to approve or reject our profit distribution plans, annual budget, financial statements, increases or decreases in share capital, issuances of debentures, mergers, liquidation and any amendment to our Articles of Association. In addition, the rights of a class of shareholders may not be modified or abrogated, unless approved by a special resolution of shareholders at a general shareholders’ meeting and by a special resolution of shareholders of that class of shares at a separate meeting. Our Articles of Association enumerate various amendments which would be deemed to be a modification or abrogation of the rights of a class of shareholders, including, among others, increasing or decreasing the number of shares of a class disproportionate to increases or decreases of other classes of shares, removing or reducing rights to receive dividends in a particular currency or creating shares with voting or equity rights superior to those of shares of that class. There are no restrictions under PRC law or our Articles of Association on the ability of investors that are not PRC residents to hold H shares and exercise voting rights.
Each share is entitled to one vote on all matters submitted for vote at all shareholders’ meetings, except for meetings of a special class of shareholders where only holders of shares of the affected class are entitled to vote on the basis of one vote per share of the affected class.
Shareholders are entitled to attend and vote at general meetings either in person or by proxy. Proxies must be in writing and deposited at our legal address or such other place as is specified in the meeting notice, not less than 24 hours before the time for holding the meeting at which the proxy proposes to vote or the time appointed for the passing of the relevant resolution(s). When the instrument appointing a proxy is executed by the shareholder’sattorney-in-fact, such proxy when deposited must be accompanied by a ~~notary certified~~notary-certified copy of the relevant power of attorney or other authority under which the proxy was executed.
Resolutions on any of the following matters must be approved by more thantwo-thirds of the voting rights held by shareholders who are present in person or by proxy:

an increase or decrease in our share capital or the issuance of shares, warrants and other similar securities;

issuance of debentures;

our division, merger, dissolution or liquidation ~~(shareholders who object to a proposed merger are entitled to demand that either we~~as well as material acquisition or ~~the shareholders who approved the merger purchase their shares at a fair price);~~disposal;

amendments to our Articles of Association;

amendment of shareholders’ rights of any class of shares; and

any other matters ~~determined~~resolved by ~~a majority~~way of an ordinary resolution by shareholders ~~at a~~in general meeting towhich the shareholders consider may have a material impact on usthe Company and ~~which~~ should be ~~approved~~adopted by~~two-thirds~~ ~~of the voting rights.~~ a special resolution.
All other actions taken by the shareholders will be approved by a majority of the voting rights held by shareholders.
Any shareholder resolution that is in violation of any PRC laws or regulations or the Articles of Association will be null and void.
Pursuant to the Reply of the State Council on the Adjustment of the Notice Period of the General Meeting and Other Matters Applicable to the Overseas Listed Companies (Guo Han [2019] No. 97) (《国务院关于调整适用在境外上市公司召开股东大会通知期限等事项规定的批覆》(国函〔2019〕97号)) to amend the requirements with respect to notice period, shareholders’ proposal rights and convening procedures for general meetings applicable to joint stock companies incorporated in the People’s Republic of China and listed overseas, the Board proposed to amend the relevant provisions of the Articles of Association regarding the procedures convening general meetings accordingly. At the 2019 AGM held on May 26, 2020, the shareholders of the Company approved the amendments to the Articles of Association. We filed a Form 6-K with the SEC on March 25, 2020 in relation to the proposed amendments and a Form 6-K with the SEC on May 27, 2020 in relation to poll results of the 2019 AGM and the amended Articles of Association.
Liquidation Rights
In the event of our liquidation, the H shares will rank pari passu with the domestic shares, and any of our assets remaining after payment (in order of priority) of (a) the costs of liquidation, (b) wages and social insurance fees payable to or for our employees, (c) outstanding taxes and (d) bank loans, and company bonds and other debts, will be divided among our shareholders in accordance with the class of shares and their proportional shareholdings.

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Increases in Share Capital
Under our Articles of Association, issuance of new securities, including ordinary shares, securities convertible into ordinary shares, options, warrants or similar rights to subscribe for any ordinary shares or convertible securities, must be approved by votes representing more than two-thirds of ~~all~~the voting rights represented by the shareholders ~~and~~present at the shareholders meeting, votes representing more than two-thirds of ~~each~~the voting rights represented by the domestic shareholders present at the class meeting of domestic shareholders and votes representing more than two-thirds of the ~~class of domestic shares and~~voting rights represented by the H ~~shares,~~shareholders present at the class meeting of H shareholders, respectively. No such approval is required if, but only to the extent that, we issue domestic shares and H shares, either separately or concurrently, in numbers not exceeding 20.0% of the number of domestic shares and H shares then outstanding, respectively, in any12-month period, as already approved by votes representing more than two-thirds of ~~all shareholders.~~the voting rights represented by the shareholders (including proxies) present at the shareholders meeting. New issues of shares must also be approved by relevant PRC authorities.
Shareholders are not liable to make any further contribution to the share capital other than according to the terms that were agreed upon by the subscriber of the relevant shares at the time of subscription.
Shareholders do not have preemptive rights with respect to new issues of shares of the Company.
Decrease in Share Capital and Repurchase
We may reduce our registered share capital only upon obtaining the approval of ~~at least~~votes representing more than two-thirds of ~~our~~the voting rights represented by the shareholders (including proxies) present at the shareholders meeting and, in certain circumstances, of relevant PRC authorities. The number of H shares that may be repurchased is subject to the ~~Hong Kong Codes on~~ Takeovers ~~and Mergers and ShareBuy-backs.~~Code.
Ownership Threshold
There are no provisions under our Articles of Association which relate to ownership thresholds above which shareholder ownership is required to be disclosed.
Restrictions on Large or Controlling Shareholders
Our Articles of Association define a controlling shareholder as any person who acting alone or in concert with others:

is in a position to elect more thanone-half of the Board;

has the power to exercise, or to control the exercise of, 30.0%or more of our voting rights;

holds 30.0% or more of our issued and outstanding shares; or

has de facto control of us in any other way.
As of the date of this annual report, China Telecom Group, a state-owned enterprise, ~~owned by the SASAC,~~ is our only controlling shareholder.
Our Articles of Association provide that, in addition to any obligation imposed by laws and administrative regulations or required by the Listing Rules, a controlling shareholder shall not exercise its voting rights in a manner prejudicial to the interests of all or some shareholders:

to relieve a director or supervisor from his or her duty to act honestly in our best interests;

to approve the appropriation by a director or supervisor (for his or her own benefit or for the benefit of any other person) of our assets in any way, including, without limitation, opportunities which may benefit us; or

to approve the appropriation by a director or supervisor (for his or her own benefit or for the benefit of any other person) of the individual rights of any other shareholders, including, without limitation, rights to distributions and voting rights (except in accordance with a restructuring of our company which has been submitted for approval by the shareholders at a general meeting in accordance with our Articles of Association).
If a controlling shareholder exercises its voting rights in violation of the provisions set forth above, a shareholder can sue such controlling shareholder and enforce its rights through arbitration in the PRC or Hong Kong.
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Sources of Shareholders’ Rights
Currently, the primary sources of shareholders’ rights are our Articles of Association, the PRC Company Law and the Listing Rules ~~of the Hong Kong Stock Exchange~~ that, among other things, impose certain standards of conduct, fairness and disclosure on us, our directors and our controlling shareholder. Our Articles of Association have incorporated the provisions set forth in the Mandatory Provisions for the Articles of Association of Companies Listed Overseas, or the Mandatory Provisions, adopted in 1994, pursuant to the requirement of the China Securities Regulatory Commission. Any amendment to those provisions will only become effective after approval by the relevant governmental department authorized by the State Council and the China Securities Regulatory Commission. The Listing Rules of the Hong Kong Stock Exchange require a number of additional provisions to the Mandatory Provisions to be included in our Articles of Association.
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The listing agreement between us and the Hong Kong Stock Exchange provides that we may not amend certain provisions of our Articles of Association that have been mandated by the Hong Kong Stock Exchange. These provisions relate to:

varying the rights of existing classes of shares;

voting rights;

our power to purchase our own shares;

rights of minority shareholders; and

liquidation procedures.
In addition, for so long as our H shares are listed on the Hong Kong Stock Exchange, we will be subject to the relevant ordinances, rules and regulations applicable to companies listed on the Hong Kong Stock Exchange, including, among other things, the Listing Rules, ~~of the Hong Kong Stock Exchange,~~ the Securities &and Futures Ordinance and the ~~Hong Kong Codes on~~ Takeovers ~~and Mergers and ShareBuy-backs.~~Code.
Unless otherwise specified, all rights, obligations and protection discussed below are derived from our Articles of Association and the PRC Company Law.
Enforceability of Shareholders’ Rights
Enforceability of our shareholders’ rights may be limited. See “Item 3. Key Information—D. Risk Factors—Risks Relating to the People’s Republic of China—The PRC legal system has inherent uncertainties that could limit the legal protections available to you”.
Restrictions on Transferability and the Share Register
Under our Articles of Association, in order for any PRC shareholder to sell its domestic shares to persons outside the PRC who will receive H shares upon the sale, such sales must be approved by votes representing more than two-thirds of ~~our~~the voting rights represented by the shareholders present at the shareholders meeting, votes representing more than two-thirds of the voting rights represented by the domestic shareholders ~~and H shareholders~~present at ~~duly convened meetings~~the class meeting of domestic shareholders and votes representing more than two-thirds of the voting rights represented by the H shareholders ~~held separately and~~present at ~~a duly convened joint~~the class meeting of ~~domestic shareholders and~~ H shareholders. Such sales are also subject to approval by the ~~State-owned Assets Supervision and Administration Commission of the State Council,~~SASAC, the China Securities Regulatory Commission and other relevant governmental authorities.
We are required to keep a register of our shareholders which shall be comprised of various parts, including one part which is to be maintained in Hong Kong in relation to holders of H shares. Shareholders have the right to inspect and, for a reasonable charge, to copy the share register. No ~~transfers~~change may be made to the register of ~~ordinary~~shareholders as a result of a transfer of shares ~~shall be recorded in our share register~~ within 3020 days prior to the date of a shareholders’ general meeting or within five days ~~prior to~~before the record date ~~established~~ for the ~~purpose~~Company’s distribution of ~~distributing a dividend.~~dividends. However, in the event that there is any other relevant provision applicable to the registration of changes of the Company’s register of shareholders as promulgated and stipulated by the PRC laws, administrative regulations or the listing rules of the stock exchange on which the Company’s shares are listed, such provision shall prevail.
We have appointed Computershare Hong Kong Investor Services Limited to act as the registrar of our H shares. This registrar maintains our register of holders of H shares at our offices in Hong Kong and enters transfers of H shares in such register upon the presentation of the documents described above.

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C.
Material Contracts
See “Item 4. Information on the Company—A. History and Development of the Company” and “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions” for certain arrangements we have entered into with China Telecom Group and/or other entities.
In addition, we entered into the 5G Cooperation Agreement with CUCL in relation to the co-building and co-sharing of 5G network on September 9, 2019. See “Item 4. Information on the Company—B. Business Overview—Network System—Co-building and co-sharing with China Unicom”.
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D.
Exchange Controls
We conduct our business primarily in Renminbi, which is also our functional and reporting currency. The Renminbi is not a ~~fully-convertible~~fully convertible currency. Under the existing PRC foreign exchange regulations, we will be able to pay dividends in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. However, the PRC government may take measures at its discretion in the future to restrict access to foreign currencies for both current account transactions and capital account transactions if foreign currencies become scarce in the PRC. We may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs, if the PRC government restricts access to foreign currencies for current account transactions.
Foreign exchange transactions under our capital account, including but not limited to foreign currency-denominated borrowings from foreign banks, issuance of foreign currency-denominated debt securities and principal payments in respect of foreign currency-denominated obligations, continue to be subject to significant foreign exchange controls and require the approval of or registration with SAFE or certain banks designated by SAFE, as applicable. These limitations could affect our ability to obtain foreign exchange through debt or equity financing, or to obtain foreign exchange to meet our payment obligations under the debt securities or foreign exchange for capital expenditures.
There are no limitations on the right ofnon-resident or foreign owners to remit dividends or to hold or vote the ordinary shares or the ADSs imposed by Hong Kong law or by our Articles of Association or other constituent documents.

E.
Taxation
The taxation of income and capital gains of holders of H shares or ADSs is subject to the PRC laws and practices and of jurisdictions in which holders of H shares or ADSs are resident or otherwise subject to tax. The following summary of certain relevant taxation provisions is based on current law and practice, is subject to change and does not constitute legal or tax advice.
The discussion does not deal with all possible tax consequences relating to an investment in the H shares or ADSs. In particular, the discussion does not address the tax consequences under state, local and other laws, such asnon-U.S. federal laws. Accordingly, you should consult your own tax adviser regarding the tax consequences of an investment in the H shares and ADSs.
The discussion is based upon laws and relevant interpretations in effect as of the date of this annual report, all of which are subject to change.
People’s Republic of China
The following is a summary of certain PRC tax provisions relating to the ownership and disposition of H shares or ADSs held by the investors as capital assets. This summary does not purport to address all material tax consequences of the ownership of H shares, and does not take into account the specific circumstances of any particular investors. This summary is based on the PRC tax laws as in effect on the date of this annual report, as well as on the Agreement between the United States of America and the PRC for the Avoidance of Double Taxation, or thePRC-US Treaty, all of which are subject to change (or changes in interpretation), possibly with retroactive effect.
This discussion does not address any aspects of PRC taxation other than income taxation, capital taxation, stamp taxation and estate taxation. Prospective investors are urged to consult their tax advisors regarding Chinese, Hong Kong and other tax consequences of owning and disposing of H shares.
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Taxation of Dividends
Individual Investors. According to the PRC Individual Income Tax Law and its implementing regulations, dividends paid by PRC companies are ordinarily subject to a PRC withholding tax levied at a flat rate of 20.0%. For a foreign individual who is not a PRC resident, the receipt of dividends from a PRC company is normally subject to a withholding tax of 20.0% unless reduced by an applicable tax treaty. For example, Hong Kong and Macau individual residents are subject to a withholding tax of 10.0% on dividends paid to them. According to the Notice on Taxation Policies for Shanghai-Hong Kong Stock Connect Pilot Program (Cai Shui [2014] No. 81) and Notice on Taxation Policies forShenzhen-Hong Kong Stock Connect Pilot Program (Cai Shui [2016] No. 127), the Company shall withhold individual income tax at the rate of 20.0% with respect to dividends received by the mainland individual investors for investing in our H shares through the Southbound Trading Link. The tax levied on dividends derived from the investment by mainland securities investment funds in our H shares through the Southbound Trading Link shall be ascertained by reference to the rules applicable to the individual investors. We are not required to withhold income tax on dividends derived by the mainland enterprise investors through the Southbound Trading Link, and such enterprises shall report the income and make tax payment by themselves.
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Enterprises.According to the EIT Law and its implementing regulations, dividends paid by a PRC company to a foreign enterprise which is a“non-resident ~~enterprise,”~~enterprise”, which is established under the law of anon-PRC jurisdiction and has no establishment or residence in the PRC or whose dividends from the PRC do not relate to its establishment or residence in the PRC, are subject to a 10.0% tax, unless reduced by an applicable tax treaty. A resident enterprise, including an enterprise which is established under the law of anon-PRC jurisdiction but whose “de facto management body” is located in the PRC, is not subject to any PRC withholding tax with respect to dividends paid to it by a PRC company.
Tax Treaties. Investors who do not reside in the PRC and reside in countries that have entered into double-taxation treaties with the PRC may be entitled to a reduction of the withholding tax imposed on the payment of dividends to investors of our Company who do not reside in the PRC. The PRC currently has double-taxation treaties with a number of other countries, which include but are not limited to:

Australia;

Canada;

France;

Germany;

Japan;

Malaysia;

the Netherlands;

Singapore;

the United Kingdom; and

the United States.
Under thePRC-US Treaty, the PRC may tax a dividend paid by us to an Eligible U.S. Holder up to a maximum of 10.0% of the gross amount of such dividend. It is arguable that under thePRC-US Treaty, the PRC may only tax gains from the sale or disposition by an Eligible U.S. Holder of H shares or ADSs representing an interest in the Company of 25.0% or more, but this position is uncertain and the PRC authorities may take a different position. For the purposes of this discussion, an “Eligible U.S. Holder” is a U.S. holder that (i) is a resident of the United States for the purposes of thePRC-US Treaty, (ii) does not maintain a permanent establishment or fixed base in the PRC to which H shares or ADSs are attributable and through which the beneficial owner carries on or has carried on business (or, in the case of an individual, performs or has performed independent personal services) and (iii) is not otherwise ineligible for benefits under thePRC-US Treaty with respect to income and gains derived in connection with the H shares or ADSs.
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Taxation of Capital Gains
With respect to individual holders of H shares or ADSs, the PRC Individual Income Tax Law and its implementation regulations stipulate that gains realized on the sale of equity shares would be subject to income tax at a rate of 20.0%, and empower the MOF to draft detailed tax rules on the mechanism for collecting such tax subject to approval of the State Council. However, as of the date of this annual report, no such tax rules have been enacted and no income tax on gains realized on the sale of equity shares has been collected. Gains on the sale of shares issued by listed companies by individuals were temporarily exempted from individual income tax pursuant to notices issued by the ~~State Administration of Taxation~~SAT dated March 30, 1998. In the event this temporary exemption is withdrawn or ceases to be effective, individual holders of H shares or ADSs may be subject to capital gains tax at the rate of 20.0% unless such tax is reduced or eliminated by an applicable double-taxation treaty. If tax on capital gains from the sale of H shares or ADSs become applicable, it is arguable that under thePRC-US Treaty, the PRC may only tax gains from the sale or disposition by an Eligible U.S. Holder of H shares or ADSs representing an interest in our Company of 25.0% or more, but this position is uncertain and the PRC authorities may take a different position.
Under the EIT Law and its implementing regulations, capital gains realized by a foreign enterprise which is a“non-resident enterprise” upon the sale of the overseas-listed shares of a PRC company are subject to a 10.0% tax, unless reduced by an applicable double-taxation treaty. Capital gains realized by a resident enterprise, including an enterprise which is established under the law of anon-PRC jurisdiction but whose “de facto management body” is located in the PRC, are subject to the PRC enterprise income tax.
Additional PRC Tax Considerations
PRC Stamp Duty. PRC stamp duty imposed on the transfer of shares of PRC publicly traded companies under the PRC Provisional Regulations Concerning Stamp Duty, or the Provisional Regulations, which became effective on October 1, 1988 and were amended on January 8, 2011, should not apply to the acquisition and disposal bynon-PRC investors of H shares or ADSs outside of the PRC by virtue of the Provisional Regulations, which provide that PRC stamp duty is imposed only on documents executed or received within the PRC that are legally binding in the PRC and are protected under the PRC law.
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Estate Tax. No liability for estate tax under PRC law will arise fromnon-PRC nationals holding H shares or ADSs.
Hong Kong
Tax on Dividends
Under the current practice of the Hong Kong Inland Revenue Department, no tax is payable in Hong Kong in respect of dividends paid by us.
Profits
No tax is imposed in Hong Kong in respect of capital gains from the sale of H shares. Trading gains from the sale of shares by persons carrying on a trade, profession or business in Hong Kong where such gains are derived from or arise in Hong Kong from such trade, profession or business will be chargeable to Hong Kong profits tax, which is currently (for the year of assessment 2008-2009 onwards) imposed at the rate of 16.5% on corporations and 15.0% on unincorporated businesses, unless such gains are chargeable under the respective half-rates of 8.25% and 7.5% that may apply for the first HK$2 million of assessable profits for years of assessment beginning on or after April 1, 2018. Gains from sales of H shares effected on the Hong Kong Stock Exchange will be considered by the Hong Kong Inland Revenue Department to be derived from or arise in Hong Kong. Liability for Hong Kong profits tax would thus arise in respect of trading gains from sales of H shares realized by persons carrying on a business of trading or dealing in securities in Hong Kong. There is no tax treaty in effect between the United States and Hong Kong, and thePRC-US Treaty does not apply to Hong Kong.
There will be no liability for Hong Kong profits tax in respect of profits from the sale of ADSs, where purchases and sales of ADSs are effected outside Hong Kong, e.g., on the NYSE.
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Stamp Duty
Hong Kong stamp duty will be payable by the purchaser on every purchase and by the seller on every sale of H shares registered on the Hong Kong branch register. The duty is charged at the ad valorem rate of 0.1% (subject to the completion of the legislative process to increase the stamp duty rate, the rate will be increased to 0.13% with effect from 1 August 2021) of the consideration for, or (if greater) the value of, the H shares transferred on each of the seller and the purchaser. In other words, a total 0.2% (subject to the completion of the legislative process to increase the stamp duty rate, the rate will be increased to 0.26% with effect from 1 August 2021) is currently payable on a typical sale and purchase transaction of H shares. In addition, a fixed duty of HK$5 is currently payable on any instrument of transfer of shares.
The withdrawal of H shares upon the surrender of American Depositary Receipts, or ADRs, and the issuance of ADRs upon the deposit of H shares, will also attract stamp duty at the rate described above for sale and purchase transactions unless such withdrawal or deposit does not result in a change in the beneficial ownership of the H shares under Hong Kong law, in which case only a fixed duty of HK$5 is payable on the transfer. The issuance of the ADRs upon the deposit of H shares issued directly to the Depositary, as depositary of the ADSs, or for the account of the Depositary, will not be subject to any stamp duty. No Hong Kong stamp duty is payable upon the transfer of ADSs outside Hong Kong.
Estate Duty
No Hong Kong estate duty is currently payable.
United States
Material United States Federal Income Taxation
This section describes the material United States federal income tax consequences to a U.S. holder of the acquisition, ownership and disposition of H shares or ADSs. It applies to you only if you hold your H shares or ADSs as capital assets for United States federal income tax purposes. This discussion address only United States federal income taxation and does not discuss all of the tax consequences that may be relevant to you in light of your individual circumstances, including foreign, state or local tax consequences, estate and gift tax consequences, and tax consequences arising under the Medicare contribution tax on net investment income or the alternative minimum tax. This section does not apply to you if you are a member of a special class of holders subject to special rules, including:

a dealer in securities or currencies;

a trader in securities that elects to use amark-to-market method of accounting for your securities holdings;

atax-exempt organization;

an insurance company;
~~a person liable for alternative minimum tax;~~

a person that actually or constructively owns 10.0% or more of the combined voting power of our voting stock or of the total value of our stock;

a person that holds H shares or ADSs as part of a straddle or a hedging or conversion transaction;

a person that purchases or sells H shares or ADSs as part of a wash sale for tax purposes; or

a person whose functional currency is not the U.S. dollar.
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This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, published rulings and court decisions, all as currently in effect, as well as thePRC-US Treaty. These ~~laws~~authorities are subject to change, possibly on a retroactive basis. In addition, this section is based in part upon the representations of the Depositary and the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms.
You are a U.S. holder if you are a beneficial owner of H shares or ADSs and you ~~are:~~are, for United States federal income tax purposes:

a citizen or resident of the United States;

a domestic corporation;

an estate whose income is subject to United States federal income tax regardless of its source; or

a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust.
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If an entity or arrangement that is treated as a partnership for United States federal income tax purposes holds the H shares or ADSs, the United States federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. If you ~~hold~~are a partner in a partnership that holds the H shares or ADSs, ~~as a partner in a partnership~~ you should consult your tax advisor with regard to the United States federal income tax treatment of an investment in the H shares or ADSs.
You should consult your own tax advisor regarding the United States federal, state and local tax consequences of owning and disposing of H shares and ADSs in your particular circumstances.
In general, and taking into account the earlier assumptions, for United States federal income tax purposes, if you hold ADRs evidencing ADSs, you will be treated as the owner of H shares represented by those ADSs. Exchanges of H shares for ADRs, and ADRs for H shares, generally will not be subject to United States federal income tax.
~~Taxation~~The tax treatment of ~~Dividends~~
~~Under the United States federal income tax laws, and subject to the~~your H shares or ADSs will depend in part on whether or not we are classified as a passive foreign investment company, or PFIC, ~~rules~~for United States federal income tax purposes. Except as discussed below ~~if you~~under “-PFIC Rules”, this discussion assumes that we are not classified as a ~~U.S. holder, the~~PFIC for United States federal income tax purposes.
Taxation of Dividends
The gross amount of any ~~dividend~~distribution we pay out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes), other than certain pro-rata distributions of our shares, will be treated as a dividend that is subject to United States federal income taxation. If you are a noncorporate U.S. holder, dividends that constitute qualified dividend income will be taxable to you at the preferential rates applicable to long-term capital gains, provided that you hold H shares or ADSs for more than 60 days during the121-day period beginning 60 days before theex-dividend date and meet other holding period requirements. Dividends we pay with respect to H shares or ADSs generally will be qualified dividend ~~income.~~income, provided that, in the year that you receive the dividend, we are eligible for the benefits of the PRC-US Treaty. We believe that we are currently eligible for the benefits of the PRC-US Treaty and we therefore expect that dividends on the shares and ADSs will be qualified dividend income, but there can be no assurance that we will continue to be eligible for the benefits of the PRC-US Treaty.
Furthermore, even if we are not eligible for the benefits of the PRC-US Treaty in a taxable year, dividends on the ADSs will nevertheless be treated as qualified dividend income if the ADSs are readily tradable on an established securities market in the United States. However, as discussed above in “Key Information—Risk Factors—Risks Relating to Our Business—Transactions in and holdings of our ADSs and H shares by U.S. persons beyond specified dates are prohibited, and the continued listing of and trading in our ADSs are subject to significant uncertainty”, our ADSs cannot currently be traded on the NYSE. As a result, as long as that is the case, dividends paid with respect to ADSs will only be qualified dividend income if we are eligible for the benefits of the PRC-U.S. Treaty.
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You must include any PRC tax withheld from the dividend payment in this gross amount even though you do not in fact receive it. The dividend is taxable to you when you, in the case of H shares, or the depositary, in the case of ADSs, receive the dividend, actually or constructively. The dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. Subject to certain limitations, the PRC tax withheld and paid over to the PRC will be creditable or deductible against your United States federal income tax liability. To the extent a refund of the tax withheld is available under PRC law or under the PRC-US Treaty, the amount of tax withheld that is refundable will not be creditable against your United States federal income tax liability. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the preferential tax rates.
The amount of the dividend distribution that you must include in your income ~~as a U.S. holder~~ will be the U.S. dollar value of the Hong Kong dollar payments made, determined at the Hong Kong dollar/U.S. dollar spot rate on the date the dividend distribution is includible in your income, regardless of whether the payment is in fact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include the dividend payment in income to the date you convert the payment into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the preferential tax rates applicable to qualified dividend income. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as anon-taxable return of capital to the extent of your basis in the H shares or ADSs and thereafter as capital gain. However, we do not expect to calculate earnings and profits in accordance with United States federal income tax principles. Accordingly, you should expect to generally treat distributions we make as dividends.
For foreign tax credit purposes, dividends will generally be income from sources outside the United States and will generally be “passive” income for purposes of computing the foreign tax credit allowable to you.
Taxation of Capital Gains
~~Subject to the PFIC rules discussed below, if~~If you are a U.S. holder and you sell or otherwise dispose of your H shares or ADSs, you will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the U.S. dollar value of the amount that you realize and your tax basis, determined in U.S. dollars, in your H shares or ADSs. Capital gain of a noncorporate U.S. holder is generally taxed at preferential rates where the property is held for more than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes. Your ability to deduct capital losses is subject to limitations.
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However, under the~~U.S.-PRC~~PRC-US Treaty, if PRC tax were to be imposed on any gain from the disposition of your H shares or ADSs (as discussed above in “People’s Republic of ~~China —~~ China—Taxation of Capital Gains”) in accordance with the~~U.S.-PRC~~PRC-US Treaty, then such gain will generally be treated as PRC source ~~income. If~~income if you are an Eligible U.S. Holder (as defined ~~above), subject~~above in “People’s Republic of China—Taxation of Dividends—Tax Treaties”). Subject to certain limitations, any such PRC tax will be creditable against your United States federal income tax liability. U.S. holders should consult their tax advisors regarding the tax consequences if a PRC tax were to be imposed on a disposition of H shares or ADSs, including the availability of the foreign tax credit under your particular circumstances.
Hong Kong Stamp Duty
Any Hong Kong stamp duty that you pay will not be a creditable tax for United States federal income tax purposes, but ~~you may be able to deduct such~~would generally increase your basis in your H Shares or ADSs (in the case of stamp duty ~~subject to limitations under~~paid in respect of a purchase) or reduce your amount realized (in the ~~Code.~~case of stamp duty paid in respect of a sale).
PFIC Rules
We believe that H shares and ADSs should not currently be treated as stock of a PFIC for United States federal income tax purposes ~~but~~and we do not expect to become a PFIC in the foreseeable future. However, this conclusion is a factual determination that is made annually and thus may be subject to change. In general, if you are a U.S. holder, we will be a PFIC with respect to you if for any taxable year in which you held our ADSs or H shares:
at least 75% of our gross income for the taxable year is passive income or
at least 50% of the value, determined on the basis of a quarterly average, of our assets is attributable to assets that produce or are held for the production of passive income.
“Passive income” generally includes dividends, interest, gains from the sale or exchange of investment property rents and royalties (other than certain rents and royalties derived in the active conduct of a trade or business) and certain other specified categories of income. If a foreign corporation owns at least 25% by value of the stock of another corporation, the foreign corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation, and as receiving directly its proportionate share of the other corporation’s income.
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If we were to be treated as a PFIC, gain realized on the sale or other disposition of your H shares or ADSs would in general not be treated as capital gain. Instead, unless you elect to be taxed annually on amark-to-market basis with respect to your H shares or ADSs, you would be treated as if you had realized such gain and certain “excess distributions” ratably over your holding period for the H shares or ADSs and would generally be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. With certain exceptions, your H shares or ADSs will be treated as stock in a PFIC if we were a PFIC at any time during your holding period in your H shares or ADSs. Dividends that you receive from us will not be eligible for the special tax rates applicable to qualified dividend income if we are a PFIC (or are treated as a PFIC with respect to you) either in the taxable year of the distribution or the preceding taxable year, but instead will be taxable at rates applicable to ordinary income.

F.
Dividends and Paying Agents.
Not applicable.

G.
Statement by Experts.
Not applicable.

H.
Documents on Display
You may read and copy documents referred to in this annual report on Form20-F that have been filed with the SEC, at its public reference room located at 100 F Street, NW, Washington, D.C. 20549. Please call the SEC at1-800-SEC-0330 for further information on the public reference rooms and their copy charges. The SEC ~~also~~ maintains a website at http://www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the SEC.
The SEC allows us to “incorporate by reference” the information we file with the SEC. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this annual report on Form20-F.

I.
Subsidiary Information
Not applicable.

~~- 90 -~~
Item 11.
Quantitative and Qualitative Disclosures about Market Risk.
Our primary market risk exposures are fluctuations in exchange rates and interest rates.
Foreign Exchange Rate Risk
We conduct our business primarily in Renminbi, which is also our functional and reporting currency. The Renminbi is not a ~~fully-convertible~~fully convertible currency. The value of the Renminbi against the U.S. dollar and other foreign currencies fluctuates and is affected by, among other things, changes in the PRC’s and international political and economic conditions. Fluctuations in exchange rates may adversely affect the value, translated or converted into United States dollars or Hong Kong dollars, of our net assets, earnings and any declared dividends. We cannot give any assurance that any future movements in the exchange rate of the Renminbi against the United States dollar or other foreign currencies will not adversely affect our results of operations and financial condition. See “Item 3. Key Information—D. Risk Factors—Risks Relating to the People’s Republic of China—Government restriction on currency conversion may adversely affect our financial condition” and “—Fluctuation of the Renminbi could materially affect our financial condition, results of operations and cash flows”. We are exposed to foreign currency risk primarily because we receive some of our revenue from our international operations andpay-related expenses in foreign currencies. As a result, our foreign currency exposure relates to our foreign currency-denominated debt and, to a limited extent, cash and cash equivalents denominated in foreign currencies.
The following tables provide information regarding our financial instruments that are sensitive to foreign exchange rates as of December 31, ~~2018~~2020 and ~~2017,~~2019, respectively. For debt obligations, the tables present principal cash flows and related weighted average interest rates by expected maturity dates.
~~As of December 31, 2018:~~

   Expected Maturity
   2019 2020 2021 2022 2023 Thereafter Total    Fair
Value
   (RMB equivalent in millions, except interest rates)
Assets:

Cash and cash equivalents

United States dollars
   4,909 —   —   —   —   —   4,909    4,909
Japanese yen
   20 —   —   —   —   —   20    20
Euro
   76 —   —   —   —   —   76    76
Hong Kong dollars
   251 —   —   —   —   —   251    251
Other currencies
   751 —   —   —   —   —   751    751
Short-term bank deposits
   —   —   —   —   —
United States dollars
   69 —   —   —   —   —   69    69
Liabilities:

Debts in United States dollars

Fixed rate
   52 47 36 22 22 157 336    272
Average interest rate
   1.7 % 1.7 % 1.7 % 1.7 % 1.7 % 1.7 %
Debts in Euro

Fixed rate
   25 25 25 25 25 74 199    176
Average interest rate
   2.3 % 2.3 % 2.3 % 2.3 % 2.3 % 2.3 %
⁽¹⁾
~~The average interest rates for variable rate debts are calculated based on the rates reported as of December 31, 2018.~~
~~- 91 -~~-82-
As of December 31, ~~2017:~~2020:

   Expected Maturity    Expected Maturity
   2018 2019 2020 2021 2022 Thereafter Total    Fair
Value    2021 2022 2023 2024 2025 Thereafter Total    Fair
Value
   (RMB equivalent in millions, except interest rates)    (RMB equivalent in millions, except interest rates)
Assets:

Cash and cash equivalents

United States dollars
   3,009 —   —   —   —   —   3,009    3,009    5,004 —   —   —   —   —   5,004    5,004
Japanese yen
   24 —   —   —   —   —   24    24    11 —   —   —   —   —   11    11
Euro
   54 —   —   —   —   —   54    54    53 —   —   —   —   —   53    53
Hong Kong dollars
   197 —   —   —   —   —   197    197    833 —   —   —   —   —   833    833
Other currencies
   295 —   —   —   —   —   295    295    490 —   —   —   —   —   490    490
Short-term bank deposits

United States dollars
   638 —   —   —   —   —   638    638    1,593 —   —   —   —   —   1,593    1,593
Liabilities:

Debts in United States dollars

Fixed rate
   51 50 45 35 22 167 370    300    35 22 19 17 17 114 224    190
Average interest rate
   1.7 % 1.7 % 1.7 % 1.7 % 1.7 % 1.7 %       1.8 % 1.8 % 1.8 % 1.8 % 1.8 % 1.8 %
Debts in Euro

Fixed rate
   25 25 25 25 25 98 223    200    26 26 26 11 10 53 152    134
Average interest rate
   2.3 % 2.3 % 2.3 % 2.3 % 2.3 % 2.3 %       2.3 % 2.3 % 2.3 % 2.3 % 2.3 % 2.3 %
As of December 31, 2019:

⁽¹⁾
~~The average interest rates for variable rate debts are calculated based on the rates reported as of December 31, 2017.~~
   Expected Maturity
   2020 2021 2022 2023 2024 Thereafter Total    Fair
Value
   (RMB equivalent in millions, except interest rates)
Assets:

Cash and cash equivalents

United States dollars
   3,055 —   —   —   —   —   3,055    3,055
Japanese yen
   27 —   —   —   —   —   27    27
Euro
   75 —   —   —   —   —   75    75
Hong Kong dollars
   327 —   —   —   —   —   327    327
Other currencies
   1,092 —   —   —   —   —   1,092    1,092
Short-term bank deposits

United States dollars
   2,724 —   —   —   —   —   2,724    2,724
Liabilities:

Debts in United States dollars

Fixed rate
   48 37 24 20 18 141 288    235
Average interest rate
   1.7 % 1.7 % 1.7 % 1.7 % 1.7 % 1.7 %
Debts in Euro

Fixed rate
   25 25 25 25 11 62 173    157
Average interest rate
   2.3 % 2.3 % 2.3 % 2.3 % 2.3 % 2.3 %
Interest Rate Risk
The People’s Bank of China has the sole authority in the PRC to establish the official interest rates for Renminbi-denominated loans. Financial institutions in the PRC set their effective interest rates within the range established by the People’s Bank of China. Interest rates and payment methods on loans denominated in foreign currencies are set by financial institutions based on interest rate changes in the international financial market, cost of funds, risk levels and other factors.
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We are exposed to interest rate risk resulting from fluctuations in interest rates on our short-term and long-term debts. Increases in interest rates will increase the cost of new borrowing and the interest expense with respect to outstanding floating rate debt. As of December 31, ~~2017~~2019 and ~~2018,~~2020, our debt consisted of fixed and variable rate debt obligations with maturities from ~~2018~~2020 to ~~2060~~2036 and from ~~2019~~2021 to ~~2048,~~2036, respectively.
~~- 92 -~~
The following tables present cash flows and related weighted average interest rates by expected maturity dates of our interest rate sensitive financial instruments as of December 31, ~~2018~~2020 and ~~2017,~~2019, respectively.
As of December 31, ~~2018:~~2020:

   Expected Maturity    Expected Maturity
   2019 2020 2021 2022 2023 Thereafter Total    Fair
Value    2021 2022 2023 2024 2025 Thereafter Total    Fair
Value
   (RMB equivalent in millions, except interest rates)    (RMB equivalent in millions, except interest rates)
Liabilities:

Debts in Renminbi

Fixed rate
   50,409 18,019 968 20,945 876 3,586 94,803    93,867    23,784 17,033 2,964 956 925 2,029 47,691    47,689
Average interest rate
   3.3 % 3.3 % 3.3 % 3.3 % 1.2 % 1.2 %       2.8 % 2.8 % 1.2 % 1.2 % 1.2 % 1.2 %
Variable rate
   190 —   —   —   —   —   190    190    5,275 —   —   —   —   —   5,275    5,275
Average interest rate⁽¹⁾
   4.2 % —   —   —   —   —         3.3 % —   —   —   —   —
Debts in United States dollars

Fixed rate
   52 47 36 22 22 157 336    272    35 22 19 17 17 114 224    190
Average interest rate
   1.7 % 1.7 % 1.7 % 1.7 % 1.7 % 1.7 %       1.8 % 1.8 % 1.8 % 1.8 % 1.8 % 1.8 %
Debts in Euro

Fixed rate
   25 25 25 25 25 74 199    176    26 26 26 11 10 53 152    134
Average interest rate
   2.3 % 2.3 % 2.3 % 2.3 % 2.3 % 2.3 %       2.3 % 2.3 % 2.3 % 2.3 % 2.3 % 2.3 %

⁽¹⁾
The average interest rates for variable rate debts are calculated based on the rates reported as of December 31, ~~2018.~~2020.
As of December 31, ~~2017:~~2019:

   Expected Maturity    Expected Maturity
   2018 2019 2020 2021 2022 Thereafter Total    Fair
Value    2020 2021 2022 2023 2024 Thereafter Total    Fair
Value
   (RMB equivalent in millions, except interest rates)    (RMB equivalent in millions, except interest rates)
Liabilities:

Debts in Renminbi

Fixed rate
   55,112 1,013 20,974 923 20,897 4,272 103,191    101,798    33,393 1,016 25,983 920 911 2,833 65,056    64,410
Average interest rate
   3.7 % 3.3 % 3.3 % 3.3 % 3.3 % 1.2 %       2.8 % 2.8 % 2.8 % 1.2 % 1.2 % 1.2 %
Variable rate
   516 —   —   —   —   —   516    516    13,505 —   —   —   —   —   13,505    13,505
Average interest rate⁽¹⁾
   4.1 % —   —   —   —   —         3.8 % —   —   —   —   —
Debts in United States dollars

Fixed rate
   51 50 45 35 22 167 370    300    48 37 24 20 18 141 288    235
Average interest rate
   1.7 % 1.7 % 1.7 % 1.7 % 1.7 % 1.7 %       1.7 % 1.7 % 1.7 % 1.7 % 1.7 % 1.7 %
Debts in Euro

Fixed rate
   25 25 25 25 25 98 223    200    25 25 25 25 11 62 173    157
Average interest rate
   2.3 % 2.3 % 2.3 % 2.3 % 2.3 % 2.3 %       2.3 % 2.3 % 2.3 % 2.3 % 2.3 % 2.3 %

~~(4)~~⁽¹⁾
The average interest rates for variable rate debts are calculated based on the rates reported as of December 31, ~~2017.~~2019.

~~- 93 -~~
Item 12.
Description of Securities Other than Equity Securities.
The Bank of New York Mellon, as the depositary of our ADSs, collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may generally refuse to providefee-attracting services until its fees for those services are paid.

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   ADR holders must pay:       For:
•    US$5.00 (or less) per 100 ADRs (or portion thereof)    •    Each issuance of an ADR, including as a result of a distribution of shares or rights or other property
      •    Each cancellation of an ADR, including if the deposit agreement terminates
      •    Each distribution of securities, other than shares or ADRs, treating the securities as if they were shares for purpose of calculating fees
•    US$0.02 (or less) per ADR    •    Any cash distribution (not including cash dividend distribution)
•    Registration or transfer fees (if applicable)    •    Transfer and registration of shares on the share register of our transfer agent and the registrar in Hong Kong from an ADR holder’s name to the name of the depositary or its agent when the ADR holder deposit or withdraw shares
•    Expenses of the depositary    •    Conversion of foreign currency to U.S. dollars
      •    Cable, telex and facsimile transmission expenses
•    Taxes and other governmental charges the depositary or the custodian has to pay on any ADR or share underlying an ADR, for example, stock transfer taxes, stamp duty or withholding taxes    •    As necessary
•    Any other charge incurred by the depository or its agents (including the custodian) for servicing of the deposited securities    •    As necessary
The Bank of New York Mellon has agreed to reimburse us annually for our expenses incurred in connection with administration and maintenance of the depositary receipt facility. The amount of such reimbursements is subject to certain conditions and limits. From April 24, ~~2018~~2020 to April ~~24, 2019,~~23, 2021, with respect to certain expenses incurred by us in connection with our depositary facility, including listing and legal fees and expenses related to our attendance at the annual ADR training seminar, we received from the Bank of New York Mellon a total of US$~~65,000~~70,000 reimbursement, net of withholding tax. The Bank of New York Mellon also waived certain costs of US$~~131,523.95~~110,556.19 in connection with the administration of the ADR program and other services provided to our registered shareholders for the year ~~2018.~~2020.
PART II

Item 13.
Defaults, Dividend Arrearages and Delinquencies.
None.

Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds.
Material Modifications to the Rights of Security Holders
None.
~~- 94 -~~
Use of Proceeds
Not applicable.

-85-
Item 15.
Controls and Procedures.
Disclosure Controls and Procedures
Our management, with the participation of the Chief Executive Officer ~~(including the persons performing the functions of the Chief Executive Officer)~~ and the Chief Financial Officer, ~~(including the persons performing the functions of the Chief Financial Officer),~~ has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules13a-15(e) and15d-15(e) of the Exchange Act) as of the end of the period covered by this annual report. Based on this evaluation, the Chief Executive Officer ~~(including the persons performing the functions of the Chief Executive Officer)~~ and the Chief Financial Officer ~~(including the persons performing the functions of the Chief Financial Officer)~~ have concluded that, as of the end of the fiscal year covered by this annual report, our disclosure controls and procedures were designed, and were effective, to give reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and were also effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including the Chief Executive Officer ~~(including the persons performing the functions of the Chief Executive Officer)~~ and the Chief Financial Officer, ~~(including the persons performing the functions of the Chief Financial Officer),~~ to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial ~~Reporting.~~Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule13a-15(f) and Rule15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and/or our Board; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of December 31, ~~2018,~~2020, our management, with the participation of the Chief Executive Officer and the Chief Financial Officer, conducted an evaluation of the effectiveness of the internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, ~~2018.~~2020.
The effectiveness of our internal control over financial reporting as of December 31, ~~2018~~2020 has been audited by Deloitte Touche Tohmatsu, an independent registered public accounting firm, as stated in their report which is included herein.
~~- 95 -~~
Report of Independent Registered Public Accounting Firm
To the shareholders and the Board of Directors of China Telecom Corporation ~~Limited~~Limited:
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of China Telecom Corporation Limited and subsidiaries (the ~~“Group”~~“Company”) as of December 31, ~~2018,~~2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the ~~Treadway~~Tread way Commission (COSO). In our opinion, the ~~Group~~Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2018,~~2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, ~~2018,~~2020, of the ~~Group,~~Company, and our report dated March ~~19, 2019,~~9, 2021, expressed an unqualified opinion on those consolidated financial statements, and included an explanatory paragraph regarding the ~~Group’s~~Company’s change in its method of accounting for ~~revenues from contracts with customers and its method of accounting for financial instruments~~leases in ~~2018~~2019 due to the adoption of International Financial Reporting Standard ~~15, “~~~~Revenue from Contracts with Customers~~~~” and the related Amendments and International Financial Reporting Standard 9, “~~~~Financial Instruments~~~~”, respectively.~~16, “Leases”.
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Basis for Opinion
The ~~Group’s~~Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the ~~Group’s~~Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the ~~Group~~Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte Touche Tohmatsu
Deloitte Touche Tohmatsu
Hong Kong, the People’s Republic of China
March ~~19, 2019~~9, 2021
~~- 96 -~~
Changes in Internal Control Over Financial Reporting
During the fiscal year ended December 31, ~~2018,~~2020, there was no change to our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 16A.
Audit Committee Financial Expert.
Our Audit Committee currently consists of four members, Mr. Tse Hau Yin, Aloysius, ~~Professor~~Mr. Xu Erming, Madam Wang Hsuehming and Mr. Yeung Chi Wai, Jason. They are all ~~independent~~Independent ~~non-executive~~Non-Executive ~~directors.~~Directors. See “Item 6. Directors, Senior Management and Employees—C. Board Practices—Audit ~~Committee,”~~Committee”. Our Board has determined that Mr. Tse Hau Yin, Aloysius, our ~~independent~~Independent ~~non-executive~~Non-executive ~~director,~~Director, is qualified as an “audit committee financial ~~expert,”~~expert”, as defined in Item 16A of Form20-F.

Item 16B.
Code of Ethics.
We have adopted a code of ethics that applies to the chief executive officer (including the persons performing the functions of the chief executive officer), president, chief operating officer, chief financial officer (including the persons performing the functions of the chief financial officer), vice presidents,Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, Vice Presidents, controllers and other senior officers of our Company. We have filed this code of ethics as an exhibit to our annual report for the fiscal year ended December 31, 2003 and we hereby incorporate that exhibit into this annual report. The text of this code of ethics is also posted on our Internet website athttp://www.chinatelecom-h.com/en/cg/pdf/gaoguan.pdf.

-87-
Item 16C.
Principal Accountant Fees and Services.
The following table sets forth the aggregate audit fees, audit-related fees, tax fees of our principal accountants and all other fees billed for products and services provided by our principal accountants other than the audit fees, audit-related fees and tax fees for each of the fiscal years ~~2017~~2019 and ~~2018:~~2020:

   Audit Fees
(including VAT)    Audit-Related Fees Tax Fees Other Fees
~~2017~~2019
   ~~RMB78.80~~RMB81.46 million    ~~RMB1.79~~RMB0.70 million ~~RMB0.45~~RMB1.70 million ~~RMB0.12~~RMB0.82 million
~~2018~~2020
   ~~RMB76.80~~RMB76.83 million    RMB0.72 million ⁽¹⁾ ~~RMB0.96~~RMB1.50 million ⁽²⁾ ~~RMB1.73~~RMB0.91 million ⁽³⁾

(1)
Audit-related fees in the amount of RMB0.72 million were primarily paid for the advisory services provided to us regarding our internal control and the assurance service provided to us regarding our environmental, social and governance report.
(2)
Tax fees in the amount of ~~RMB0.96~~RMB1.50 million were primarily paid for profit tax filing assistance services.
(3)
Other fees in the amount of ~~RMB1.73~~RMB0.91 million were primarily paid for other operating advisory services.
Before our principal accountants were engaged by our Company or our subsidiaries to render audit ornon-audit services, the engagements were approved by our Audit Committee.

Item 16D.
Exemptions from the Listing Standards for Audit Committees.
Not applicable.

Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
None.

~~- 97 -~~
Item 16F.
Change in Registrant’s Certifying Accountant.
~~Not applicable.~~On March 9, 2021, the Board resolved, as recommended by our Audit Committee, not to re-appoint our principal accountants, Deloitte Touche Tohmatsu, or Deloitte, after their completion of the audit of our consolidated financial statements for the year ended December 31, 2020 and the effectiveness of our internal control over financial reporting as of December 31, 2020. They will retire effective upon the close of the 2020 annual general meeting of the Company. On the same date, the Board resolved, pursuant to the open selection process and as recommended by our Audit Committee, to appoint PricewaterhouseCoopers Zhong Tian LLP, as our new principal accountants, subject to the approval by our shareholders at the annual general meeting of the Company scheduled to be held on May 7, 2021. Such change in our principal accountants is due to the relevant regulations issued by the MOF and the SASAC, under which there are restrictions on the number of years of audit services that an accounting firm can continuously provide to a state-owned enterprise and its subsidiaries. The Company is a subsidiary of China Telecommunications Corporation, which is a state-owned enterprise under the supervision of the SASAC.
During the fiscal years ended December 31, 2019 and 2020, and the subsequent interim period through April 28, 2021, there were no: (1) disagreements with Deloitte on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to their satisfaction would have caused them to make reference in connection with their opinion to the subject matter of the disagreement (as defined in Item 16F(a)(1)(iv) of Form 20-F and related instructions to that item), or (2) reportable events (as defined in Item 16F(a)(1)(v) of Form 20-F).
The audit reports of Deloitte on the consolidated financial statements of the Company and its subsidiaries as of and for the years ended December 31, 2019 and 2020 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. The audit reports of Deloitte on the effectiveness of our internal control over financial reporting as of December 31, 2019 and 2020 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.
We have provided Deloitte with a copy of the foregoing disclosure and have requested that Deloitte furnish to us a letter addressed to the SEC stating whether or not Deloitte agrees with such disclosure. A copy of the letter is filed as Exhibit 15.1 to this annual report on Form 20-F.
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During the two fiscal years ended December 31, 2019 and 2020 and through April 28, 2021, neither we nor any person on our behalf consulted with PricewaterhouseCoopers Zhong Tian LLP regarding either (i) the application of accounting principles to a specific completed or proposed transaction or regarding the type of audit opinion that might be rendered on our consolidated financial statements and no written or oral advice was provided that PricewaterhouseCoopers Zhong Tian LLP concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issues, or (ii) any matter being the subject of disagreement (as defined in Item 16F(a)(1)(iv) of Form 20-F and related instructions to that item) or reportable events (as defined in Item 16F(a)(1)(v) of Form 20-F).

Item 16G.
Corporate Governance.
Our Company was incorporated under the PRC ~~laws~~Company Law on September 10, 2002 as a joint stock company with limited liability. Our ADSs are listed on the NYSE. Our H shares are listed on the Hong Kong Stock Exchange. As a foreign private issuer, in respect of its listing on the NYSE, we are not required to comply with all corporate governance rules of Section 303A of the Listed Company Manual of the NYSE. However, we are required to disclose the significant differences between our corporate governance practices and the listing standards followed by NYSE-listed U.S. companies.
Pursuant to the requirements of Section 303A.01 of the Listed Company Manual of the NYSE, the Board of Directors of all NYSE-listed U.S. companies must be made up by a majority of independent directors. Under applicable PRC and Hong Kong laws and regulations, our Board is not required to be formed with a majority of independent directors. As a listed company on the Hong Kong Stock Exchange, we need to comply with the Listing Rules, which require that at least one-third of the board of directors of a listed company in Hong Kong be independentnon-executive directors. Our Board currently consists of ~~nine directors,~~ten Directors, of which four are ~~independent directors,~~Independent Directors, making the number of ~~independent directors~~Independent Directors exceedsone-third of the total number of ~~directors~~Directors on the Board, in compliance with the requirements of the Listing Rules. These independent directors satisfy the requirements on “independence” under the Listing Rules, which, however, differ from the requirements in Section 303A.02 of the Listed Company Manual of the NYSE.
Section 303A.03 of the Listed Company Manual of the NYSE provides that listed companies must schedule regular executive sessions in whichnon-management directors meet without management participation. As a listed company on the Hong Kong Stock Exchange, the Company is subject to the requirement under the Listing Rules that the chairman of the board should hold meetings at least annually with the independent non-executive directors ~~(including independentnon-executive~~ ~~directors)~~ without the presence of ~~the executive~~other directors. It has been our practice that our ~~chairman~~Chairman holds a meeting to communicate with Independent ~~non-executive~~Non-Executive ~~directors~~Directors without the presence of ~~executive directors~~other Directors at least annually to ensure the views and opinions of Independent ~~non-executive~~Non-Executive ~~directors~~Directors are expressed. In addition, when a ~~board~~Board meeting considers a matter in which a substantial shareholder or a ~~director~~Director has a conflict of interest, the ~~independent directors~~Independent Directors with no material interest in such matter must be present.
Section 303A.04 of the Listed Company Manual of the NYSE provides that a listed company must have a nominating/corporate governance committee that consists entirely of independent directors and the nominating/corporate governance committee of a listed company must have a written charter that addresses the committee’s purpose and responsibilities, which shall include, among others, the development and recommendation of corporate governance guidelines to the board of ~~directors.~~directors, and an annual performance evaluation of the committee. The Listing Rules ~~require~~also contain a code provision that the listed companies should establish a nomination committee which is chaired by the chairman of the board or an independentnon-executive director and consists of a majority of independentnon-executive directors. The Company’s Nomination Committee was established in 2005 with a written charter that specifies its duties and authorities. In addition, our ~~board of directors~~Board is in charge of developing our corporate governance guidelines.
Section 303A.05 of the Listed Company Manual of the NYSE provides that a listed company must have a compensation committee that consists entirely of independent ~~directors.~~directors and the compensation committee must have a written charter that addresses the committee’s purpose and responsibilities and an annual performance evaluation of the compensation committee. The Listing Rules ~~also contain a code provision~~require that the listed companies should establish a remuneration committee which is chaired by an independent non-executive director and consists of a majority of independentnon-executive directors. The Company’s Remuneration Committee has a written charter that specifies its duties and authorities.
Section 303A.07 of the Listed Company Manual of the NYSE also provides that if an audit committee member simultaneously serves on the audit committee of more than three public companies, and the listed company does not limit the number of audit committees on which its audit committee members serve to three or less, then, the board of directors of the listed company must determine that such simultaneous service would not impair the ability of such member to effectively serve on the audit committee of the listed company and disclose such determination. The Company is not required, under applicable PRC laws or the Listing Rules to make such determination, and the Company has not made such determination.

~~- 98 -~~-89-
Section 303A.10 of the Listed Company Manual of the NYSE provides that listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees. While the Company is not required to adopt any similar code under the applicable PRC laws or the Listing Rules, the Company, as required under the Sarbanes-Oxley Act, has adopted a code of ethics that is applicable to the ~~chief executive officer, chief financial officer, vice presidents,~~Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, Vice Presidents, general managers, controller and other senior officers of the Company. We also adopted a code of ethics for our employees.
Section 303A.12(a) of the Listed Company Manual of the NYSE provides that each listed company’s chief executive officer must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards. The ~~chief executive officer~~Chief Executive Officer of the Company is not required, under the applicable PRC laws or the Listing Rules, to make similar certifications.

Item 16H.
Mine Safety Disclosure.
Not applicable.

Item 17.
Financial Statements.
We have elected to provide the financial statements and related information specified in Item 18 in lieu of Item 17.

Item 18.
Financial Statements.
See ~~Index~~“Index to Consolidated Financial ~~Statements~~Statements” for a list of all financial statements filed as part of this annual report.

~~- 99 -~~
Item 19.
Exhibits.

(a)
See Item 18 for a list of the financial statements filed as part of this annual report.

(b)
Exhibits to this annual report:

-90-
Exhibits

Description
1.1    Articles of Association (as amended) (English translation)
2.1    Form of H Share Certificate.^(1)(P)
2.2    Form of Deposit Agreement among the Registrant, ~~The~~the Bank of New York, as depositary, and Owners and Beneficial Owners from time to time of American Depositary Shares evidenced by American Depositary Receipts issued thereunder, including the form of American Depositary Receipt.^(2)(P)
2.3    We agree to provide the Securities and Exchange Commission, upon request, copies of instruments defining the rights of holders of our long-term debt.
2.4 Description of rights of each class of securities registered under Section 12 of the Securities Exchange Act of 1934.
4.1    Supplemental Trademark License Agreement, dated October 26, 2003, between the Registrant and China Telecommunications Corporation (English translation).⁽³⁾
4.2    Sale and Purchase Agreement, dated October 26, 2003, between the Registrant and China Telecommunications Corporation (English translation).⁽³⁾
4.3    Supplemental Connected Transactions Agreement, dated October 26, 2003, between the Registrant and China Telecommunications Corporation (English translation).⁽³⁾
4.4    Form of Underwriting Agreement.⁽⁴⁾
4.5    Supplemental Trademark License Agreement, dated April 13, 2004, between the Registrant and China Telecommunications Corporation (English translation).⁽⁵⁾
4.6    Supplemental Connected Transactions Agreement, dated April 13, 2004, between the Registrant and China Telecommunications Corporation (English translation).⁽⁶⁾
4.7    Conditional Sale and Purchase Agreement, dated April 13, 2004, between the Registrant and China Telecommunications Corporation (English translation).⁽⁷⁾
4.8    Supplemental Conditional Sale and Purchase Agreement, dated June 9, 2004, between the Registrant and China Telecommunications Corporation (English summary).⁽⁸⁾
4.9    Supplemental Centralized Services Agreement, dated December 15, 2005, between the Registrant and China Telecommunications Corporation (English summary).⁽⁹⁾
4.10    Property Leasing Framework Agreement, dated August 30, 2006, between the Registrant and China Telecommunications Corporation (English summary).⁽¹⁰⁾
4.11    IT Services Framework Agreement, dated August 30, 2006, between the Registrant and China Telecommunications Corporation (English summary).⁽¹⁰⁾
4.12    Equipment Procurement Services Framework Agreement, dated August 30, 2006, between the Registrant and China Telecommunications Corporation (English summary).⁽¹⁰⁾
4.13    Engineering Framework Agreement, dated August 30, 2006, between the Registrant and China Telecommunications Corporation (English summary).⁽¹⁰⁾
4.14    Community Services Framework Agreement, dated August 30, 2006, between the Registrant and China Telecommunications Corporation (English summary).⁽¹⁰⁾
4.15    Ancillary Telecommunications Service Framework Agreement, dated August 30, 2006, between the Registrant and China Telecommunications Corporation (English summary).⁽¹⁰⁾
4.16    Strategic Agreement, dated August 30, 2006, between the Registrant and China Communications Services Corporation Limited (English summary).⁽¹⁰⁾
~~- 100 -~~
~~Exhibits~~
~~Description~~
4.17    Supplemental Agreement to the Strategic Agreement, dated June 15, 2007, between the Registrant and the China Communications Services Corporation Limited (English Summary).⁽¹⁰⁾
4.18    Supplemental Agreement to the Strategic Agreement, dated October 29, 2009, between the Registrant and the China Communications Services Corporation Limited (English Summary).⁽¹³⁾
4.19    Master Agreement for sales and purchase of equity interests in China Telecom (Hong Kong) International Limited, China Telecom System Group Integration Co., Ltd. and China Telecom (USA) Corporation, dated June 15, 2007, between China Telecommunications Corporation and China Telecom Corporation Limited.⁽¹⁰⁾
4.20    Stock Purchase Agreement in respect of sales and purchase of shares in China Telecom (USA) Corporation, dated June 15, 2007, between China Telecommunications Corporation and China Telecom Corporation Limited.⁽¹⁰⁾
-91-
Exhibits
Description
4.21    Share Purchase Agreement in respect of sales and purchase of shares in China Telecom (Hong Kong) International Limited, dated June 15, 2007, between China Telecommunications Corporation and China Telecom Corporation Limited.⁽¹⁰⁾
4.22    Share Transfer Agreement in respect of transfer of shareholdings in China Telecom System Integration Co., Limited, dated June 15, 2007, among China Telecommunications Corporation, China Huaxin Post and Telecommunications Economy Development Center and China Telecom Corporation Limited.⁽¹⁰⁾
4.23    Agreement on the Transfer of the Entire Equity Interests in China Telecom Group Beijing Corporation, dated March 31, 2008, between the Registrant and China Telecommunications Corporation (English Translation).⁽¹¹⁾
4.24    Form Merger Agreement, dated January 10, 2008, between the Registrant and each of certain subsidiaries wholly owned by the Registrant (English Translation).⁽¹¹⁾
4.25    Supplemental Agreement to the Centralized Services Agreement, dated December 26, 2007, between the Registrant and China Telecommunications Corporation (English Summary).⁽¹¹⁾
4.26    Supplemental Agreement to the Centralized Services Agreement, dated March 31, 2008, between the Registrant and China Telecommunications Corporation (English Summary).⁽¹¹⁾
4.27    Framework Agreement for Transfer of CDMA Business, dated June 2, 2008, among the Registrant, China Unicom Limited and China Unicom Corporation Limited (English Summary).⁽¹¹⁾
4.28    Supplemental Agreement to the Interconnection Settlement Agreement, dated July 27, 2008, between the Registrant and China Telecommunications Corporation (English summary).⁽¹²⁾
4.29    Supplemental Agreement to the IT Services Framework Agreement, dated December 15, 2008, between the Registrant and China Telecommunications Corporation (English summary).⁽¹²⁾
4.30    Supplemental Agreement to the Supplies Procurement Services Framework Agreement, dated December 15, 2008, between the Registrant and China Telecommunications Corporation (English summary).⁽¹²⁾
4.31    Supplemental Agreement to the Engineering Framework Agreement, dated July 27, 2008, between the Registrant and China Telecommunications Corporation (English summary).⁽¹²⁾
4.32    Supplemental Agreement to the Community Services Framework Agreement, dated December 15, 2008, between the Registrant and China Telecommunications Corporation (English summary).⁽¹²⁾
4.33    Supplemental Agreement to the Ancillary Telecommunications Services Framework Agreement, dated July 27, 2008, between the Registrant and China Telecommunications Corporation (English summary).⁽¹²⁾
4.34    CDMA Network Capacity Lease Agreement, dated July 27, 2008, between the Registrant and China Telecommunications Corporation (English translation).⁽¹²⁾
4.35    Agreement for Transfer of CDMA Business, dated July 27, 2008, between the Registrant, China Unicom Limited and China Unicom Corporation Limited (English summary).⁽¹²⁾
4.36    Merger Agreement, dated November 14, 2008, between the Registrant and China Telecommunications Corporation Beijing Corporation (English translation).⁽¹²⁾
4.37    Supplemental Agreement to the Optic Fiber Leasing Agreement, dated July 10, 2008, between the Registrant and China Telecommunications Corporation (English summary).⁽¹²⁾
~~- 101 -~~
~~Exhibits~~
~~Description~~
4.38    Underwriting Agreement regarding Medium Term Notes of China Telecom Corporation Limited in 2008, dated April 15, 2008, among the Registrant, Industrial and Commercial Bank of China Limited and CITIC Securities Company Limited (English summary), and its Supplemental Agreement, dated December 15, 2008 (English summary).⁽¹²⁾
4.39    Underwriting Agreement regarding the First Tranche of Short-Term Commercial Paper of China Telecom Corporation Limited in 2008, dated July 7, 2008, among the Registrant, Bank of Communications Co., Ltd. and China Development Bank (English summary).⁽¹²⁾
4.40    Underwriting Agreement regarding the First Tranche of Medium Term Notes of China Telecom Corporation Limited in 2009, dated September 8, 2009 (as supplemented on September 9, 2009), among the Registrant, Bank of Communications Co., Ltd. and Agricultural Bank of China Limited (English summary).⁽¹³⁾
-92-
Exhibits
Description
4.41    Underwriting Agreement regarding the Second Tranche of Medium Term Notes of China Telecom Corporation Limited in 2009, dated October 19, 2009 (as supplemented respectively on October 20, 2009 and December 4, 2009), among the Registrant, Agriculture Bank of China Limited and China Merchants Bank Co., Ltd. (English summary).⁽¹³⁾
4.42    Underwriting Agreement regarding the Third Tranche of Medium Term Notes of China Telecom Corporation Limited in 2009, dated October 19, 2009 (as supplemented respectively on October 20, 2009 and December 4, 2009), among the Registrant, China Construction Bank Corporation and Industrial and Commercial Bank of China Ltd. (English summary).⁽¹³⁾
4.43    Supplemental Agreement to the Centralized Services Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾
4.44    Supplemental Agreement to the Interconnection Settlement Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾
4.45    Supplemental Agreement to the Property Leasing Framework Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾
4.46    Supplemental Agreement to the IT services Framework Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾
4.47    Supplemental Agreement to the Community Services Framework Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾
4.48    Supplemental Agreement to the Supplies Procurement Services Framework Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾
4.49    Supplemental Agreement to the Engineering Framework Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾
4.50    Supplemental Agreement to the Ancillary Telecommunications Services Framework Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾
4.51    Supplemental Agreement to the CDMA Network Capacity Lease Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾
4.52    Supplemental Agreement to the Trademark License Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾
4.53    Supplemental Agreement to the Optic Fiber Leasing Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾
4.54    Agreement on the Acquisition of CDMA Network Assets and Associated Liabilities, dated August 20, 2012, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁵⁾
4.55    Agreement on the Disposal of Equity Interest inE-surfing Media Co., Ltd., dated April 26, 2013, between the Registrant and China Telecommunications Corporation (English Summary)⁽¹⁵⁾
4.56    Agreement on the Acquisition of China Telecom (Europe) Limited, dated December 16, 2013, between the Registrant and China Telecommunications Corporation⁽¹⁶⁾
4.57    Internet Applications Channel Services Framework Agreement, dated December 16, 2013, between the Registrant and China Telecommunications Corporation (English Summary)⁽¹⁶⁾

~~- 102 -~~-93-
Exhibits

Description
4.58    Promoters’ Agreement for China Communications Facilities Services Corporation Limited (currently known as China Tower Corporation Limited) dated July 11, 2014, among the Registrant, China United Network Communications Corporation Limited and China Mobile Communication Company Limited⁽¹⁷⁾
4.59    Agreement on Purchase of Stock Tower-related Assets by Issuance of Shares and Payment of Cash, dated October 14, 2015, among the Registrant, the Tower Company, CUCL, CMCL, CRHC and other parties thereto (English translation)⁽¹⁸⁾
4.60    Share Subscription Agreement, dated January 29, 2016, between the Registrant and the Tower Company (English translation)⁽¹⁸⁾
4.61    Supplemental Agreement to the Centralized Services Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾
4.62    Supplemental Agreement to the Interconnection Settlement Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾
4.63    Supplemental Agreement to the Property Leasing Framework Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾
4.64    Supplemental Agreement to the IT Services Framework Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾
4.65    Supplemental Agreement to the Community Services Framework Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾
4.66    Supplemental Agreement to the Supplies Procurement Services Framework Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾
4.67    Supplemental Agreement to the Engineering Framework Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾
4.68    Supplemental Agreement to the Ancillary Telecommunications Services Framework Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾
4.69    Supplemental Agreement to the Internet Applications Channel Services Framework Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾
4.70    Supplemental Agreement to the Optic Fiber Leasing Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾
4.71    Lease Agreement, dated July 8, 2016, between the Registrant and the Tower Company (English translation)⁽¹⁹⁾
4.72    Supplemental Lease Agreement, dated February 1, 2018, between the Registrant and the Tower Company (English translation)⁽²⁰⁾
4.73    Supplemental Agreement to the Centralized Services Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾
4.74    Supplemental Agreement to the Interconnection Settlement Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾
4.75    Supplemental Agreement to the Property Leasing Framework Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾
-94-
Exhibits
Description
4.76    Supplemental Agreement to the IT Services Framework Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾
4.77    Supplemental Agreement to the Community Services Framework Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾
4.78    Supplemental Agreement to the Supplies Procurement Services Framework Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾
4.79    Supplemental Agreement to the Engineering Framework Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾
~~- 103 -~~
~~Exhibits~~
~~Description~~
4.80    Supplemental Agreement to the Ancillary Telecommunications Services Framework Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾
4.81    Supplemental Agreement to the Internet Applications Channel Services Framework Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾
4.82    Supplemental Agreement to the Optic Fiber Leasing Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾
4.83    Supplemental Agreement to the Trademark License Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾
4.84    China Telecommunications Corporation Financial Services Framework Agreement, dated February 1, 2019, between China Telecommunications Corporation and China Telecom Group Finance Co., Ltd. (English summary)⁽²¹⁾
4.85    China Telecom Financial Services Framework Agreement, dated February 1, 2019, between the Registrant and China Telecom Group Finance Co., Ltd. (English summary)⁽²¹⁾
4.86    CCS Financial Services Framework Agreement, dated February 1, 2019, between China Communications Services Corporation Limited and China Telecom Group Finance Co., Ltd. (English summary)⁽²¹⁾
4.87 5G Network Co-Build and Co-Share Framework Cooperation Agreement, dated September 9, 2019, between the Registrant and China United Network Communications Corporation Limited (English translation)⁽²²⁾
4.88 Agreement on the Disposal of Equity Interest in E-surfing Pay Co., Ltd, dated March 26, 2021, between the Registrant and China Telecommunications Corporation (English Summary)
4.89 Agreements on the Disposal of Equity Interest in China Telecom Leasing Corporation Limited, dated March 26, 2021, among the Registrant, China Telecom Global Limited, China Telecommunications Corporation and Guang Hua Properties Limited (English Summary)
8.1    List of ~~subsidiaries~~Significant Subsidiaries of the Registrant as of December 31, 2020
11.1    Code of Ethics (English translation).⁽³⁾
12.1    Certification of CEO pursuant to Rule13a-14(a)
12.2    Certification of CFO pursuant to Rule13a-14(a)
13.1    Certification of CEO pursuant to Rule13a-14(b)
13.2    Certification of CFO pursuant to Rule13a-14(b)
15.1 Letter to SEC from Deloitte
-95-
Exhibits
Description
101.INS    XBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema Document
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document
101.LAB    XBRL Taxonomy Extension Label Linkbase Document
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document

(1)
Incorporated by reference to our Registration Statement on FormF-1 (FileNo. 333-100042), filed with the Securities and Exchange Commission on November 5, 2002.
(2)
Incorporated by reference to our Registration Statement on FormF-6 (FileNo. 333-100617), filed with the Securities and Exchange Commission with respect to American Depositary Shares representing our H shares.
(3)
Incorporated by reference to our Annual Report on Form20-F for the fiscal year ended December 31, 2003 (FileNo. 001-31517), filed with the Securities and Exchange Commission.
(4)
Incorporated by reference to Exhibit 1.1 to our Form6-K filed on April 29, 2004
(5)
Incorporated by reference to Exhibit 1.2 to our Form6-K filed on April 29, 2004.
(6)
Incorporated by reference to Exhibit 1.3 to our Form6-K filed on April 29, 2004.
(7)
Incorporated by reference to Exhibit 1.5 to our Form6-K filed on April 29, 2004.
(8)
Incorporated by reference to our Annual Report on Form20-F for the fiscal year ended December 31, 2004 (FileNo. 001-31517), filed with the Securities and Exchange Commission.
(9)
Incorporated by reference to our Annual Report on Form20-F for the fiscal year ended December 31, 2005 (FileNo. 001-31517), filed with the Securities and Exchange Commission.
~~- 104 -~~
(10)
Incorporated by reference to our Annual Report on Form20-F for the fiscal year ended December 31, 2006 (FileNo. 001-31517), filed with the Securities and Exchange Commission.
(11)
Incorporated by reference to our Annual Report on Form20-F for the fiscal year ended December 31, 2007 (FileNo. 001-31517), filed with the Securities and Exchange Commission.
(12)
Incorporated by reference to our Annual Report on Form20-F for the fiscal year ended December 31, 2008 (FileNo. 001-31517), filed with the Securities and Exchange Commission.
(13)
Incorporated by reference to our Annual Report on Form20-F for the fiscal year ended December 31, 2009 (FileNo. 001-31517), filed with the Securities and Exchange Commission.
(14)
Incorporated by reference to our Annual Report on Form20-F for the fiscal year ended December 31, 2010 (FileNo. 001-31517), filed with the Securities and Exchange Commission.
(15)
Incorporated by reference to our Annual Report on Form20-F for the fiscal year ended December 31, 2012 (FileNo. 001-31517), filed with the Securities and Exchange Commission.
(16)
Incorporated by reference to our Annual Report on Form20-F for the fiscal year ended December 31, 2013 (FileNo. 001-31517), filed with the Securities and Exchange Commission.
(17)
Incorporated by reference to our Annual Report on Form20-F for the fiscal year ended December 31, 2014 (FileNo. 001-31517), filed with the Securities and Exchange Commission.
(18)
Incorporated by reference to our Annual Report on Form20-F for the fiscal year ended December 31, 2015 (FileNo. 001-31517), filed with the Securities and Exchange Commission.
(19)
Incorporated by reference to our Annual Report on Form20-F for the fiscal year ended December 31, 2016 (FileNo. 001-31517), filed with the Securities and Exchange Commission.
(20)
Incorporated by reference to our Annual Report on Form20-F for the fiscal year ended December 31, 2017 (FileNo. 001-31517), filed with the Securities and Exchange Commission.
(21)
Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended December 31, 2018 (File No. 001-31517), filed with the Securities and Exchange Commission.
(22)
Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended December 31, 2019 (File No. 001-31517), filed with the Securities and Exchange Commission.
(P)
Paper filing.

~~- 105 -~~-96-
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

CHINA TELECOM CORPORATION LIMITED
By:
/s/ Ke Ruiwen
Name: Ke Ruiwen
Title: Executive Director, ~~President and Chief Operating Officer (performing the functions of the~~ Chairman and Chief Executive ~~Officer)~~Officer
Date: April ~~29, 2019~~28, 2021
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

   Pages
Report of independent registered public accounting firm
   F-2
Consolidated statements of financial position as of December 31, ~~2017~~2019 and ~~2018~~2020
   ~~F-3~~F-5
Consolidated statements of comprehensive income for the years ended December 31, ~~2016, 2017~~2018, 2019 and ~~2018~~2020
   ~~F-4~~F-6
Consolidated statements of changes in equity for the years ended December 31, ~~2016, 2017~~2018, 2019 and ~~2018~~2020
   ~~F-5~~F-7
Consolidated statements of cash flows for the years ended December 31, ~~2016, 2017~~2018, 2019 and ~~2018~~2020
~~F-6~~
~~Notes to the consolidated financial statements~~
   F-8
Notes to the consolidated financial statements
F-10
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
China Telecom Corporation Limited:
Opinion on the ~~Consolidated~~ Financial Statements
We have audited the accompanying consolidated statements of financial position of China Telecom Corporation Limited and subsidiaries (the ~~“Group”~~“Company”) as of December 31, ~~2017~~2019 and ~~2018,~~2020, the related consolidated statements of comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, ~~2018,~~2020, and the related notes (collectively referred to as the ~~“consolidated financial~~“financial statements”). In our opinion, the ~~consolidated~~ financial statements present fairly, in all material respects, the financial position of the ~~Group~~Company as of December 31, ~~2017~~2019 and ~~2018,~~2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2018,~~2020, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the ~~Group’s~~Company’s internal control over financial reporting as of December 31, ~~2018,~~2020, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March ~~19, 2019,~~9, 2021, expressed an unqualified opinion on the ~~Group’s~~Company’s internal control over financial reporting.
~~Change~~Changes in Accounting Policies
As discussed in Note 23(n) to the consolidated financial statements, the ~~Group~~Company has changed its method of accounting for ~~revenues from contracts with customers and its method of accounting for financial instruments~~leases in ~~2018~~2019 due to ~~the~~ adoption of International Financial Reporting Standard ~~15,~~16, “~~Revenue from Contracts with Customers~~Leases” ~~and the related Amendments and International Financial Reporting Standard 9, “~~~~Financial Instruments~~~~”, respectively.~~.
Basis for Opinion
These ~~consolidated~~ financial statements are the responsibility of the ~~Group’s~~Company’s management. Our responsibility is to express an opinion on the ~~Group’s consolidated~~Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the ~~Group~~Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the ~~consolidated~~ financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the ~~consolidated~~ financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the ~~consolidated~~ financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the ~~consolidated~~ financial statements. We believe that our audits provide a reasonable basis for our opinion.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)
To the Shareholders and Board of Directors of China Telecom Corporation Limited:
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue Recognition—Refer to Notes 3(m) and 27 to the consolidated financial statements
Critical Audit Matter Description
Revenues from the provision of telecommunications services are, in general, recognized as performance obligations are satisfied. Fees for telecommunications packages are recognized for each service type in the packages. The data records are captured and the revenue transactions are recorded by the IT billing systems.
We identified revenue recognition as a critical 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 large volumes of data processed by the systems. This required an increased extent of effort, including the need for us to involve our IT specialists, to identify, test, and evaluate the Company’s systems, software applications, and automated controls.
How the Critical Audit Matter Was Addressed in the Audit
Our procedures in relation to revenue recognition, comprising both control testing and substantive procedures on a sample basis, included the following, among others:
With the assistance of our IT specialist, we tested:

~~/s/ Deloitte Touche Tohmatsu~~-
~~Deloitte Touche Tohmatsu~~
~~Hong Kong,~~
the ~~People’s Republic of China~~
~~March 19, 2019~~IT environment in which the billing systems reside, including interface controls between different IT applications.
-
the key controls over the calculation of the amounts billed to customers and the capturing and recording of the revenue transactions.
-
the key controls over the authorization of the rate changes and the input of such rates to the billing systems.
-
the end-to-end reconciliations from data records to the billing systems and to the general ledger.
-
the material journals processed between the billing systems and the general ledger.
-
the accuracy of customer bill calculations and the respective revenue transactions recorded.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)
To the Shareholders and Board of Directors of China Telecom Corporation Limited:
Critical Audit Matters (continued)
Impairment of goodwill and long-lived assets within the cash-generating unit—Refer to Notes 3(h), 12 and 43 to the consolidated financial statements
Critical Audit Matter Description
The Company’s evaluation of cash-generating unit for impairment involves the comparison of the recoverable amount of the cash-generating unit, which is the greater of its value in use and fair value less costs of disposal, to its carrying value. 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. 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.
We identified the impairment of goodwill and long-lived assets within the cash-generating unit as a critical audit matter because the impairment assessment of cash-generating unit requires the management to exercise significant judgments. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our valuation specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the estimation of level of revenue, amount of operating costs and applicable discount rate.
How the Critical Audit Matter Was Addressed in the Audit
Our procedures in relation to the impairment of goodwill and long-lived assets within the cash-generating unit included, among others:
We tested the effectiveness of controls over management’s impairment assessment of cash-generating unit, such as controls related to management’s selection of the discount rate and key inputs to the projected cash flows, which include the number of subscribers, the average revenue per subscriber and amount of operating costs.
With the assistance of our valuation specialists, we assessed the discount rate and assumptions used by the management in the value in use model and compared 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 valuation specialists, we compared the key inputs to the projected cash flows, such as the number of subscribers, the average revenue per subscriber and amount of operating costs, with corresponding historical data to evaluate the reasonableness of the management’s projections.
We assessed and challenged the significant judgments and estimates used in the management’s impairment assessment and evaluated the sensitivity analysis performed by the management.
/s/ Deloitte Touche Tohmatsu
Deloitte Touche Tohmatsu
Hong Kong, the People’s Republic of China
March 9, 2021
We have served as the ~~Group’s~~Company’s auditor since 2013.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS OF DECEMBER 31, ~~2017~~2019 AND ~~2018~~2020
(Amounts in millions)

   Notes    December 31,
2017    December 31,
2018    Notes    December 31,
2019    December 31,
2020
      RMB    RMB       RMB    RMB
ASSETS

Current assets

Cash and cash equivalents
   4    19,410    16,666    4    20,791    23,684
Short-term bank deposits
      3,100    6,814
Short-term bank deposits and restricted cash
      3,628    9,408
Accounts receivable, net
   5    22,096    20,475    5    21,489    21,502
Contract assets
   6    —      478    6    474    604
Inventories
   7    4,123    4,832    7    2,880    3,317
Prepayments and other current assets
   8    22,128    23,619    8    22,219    25,167
Financial assets at fair value through profit or loss
      39    —
Income tax recoverable
      693    121       1,662    334








Total current assets
      71,550    73,005       73,182    84,016
Non-current assets

Property, plant and equipment, net
   9    406,257    407,795    9    410,008    418,605
Construction in progress
   10    73,106    66,644    10    59,206    48,425
Lease prepayments
      22,262    21,568
Right-of-use assets
   11    61,549    59,457
Goodwill
   11    29,920    29,922    12    29,923    29,920
Intangible assets
   12    12,391    14,161    13    16,349    18,508
Interests in associates
   13    35,726    38,051    14    39,192    40,303
Investments
   14    1,154    —
Financial assets at fair value through profit or loss
      —      73
Equity instruments at fair value through other comprehensive income
   15    —      852    15    1,458    1,073
Deferred tax assets
   16    5,479    6,544    16    7,577    8,164
Other assets
   17    3,349    4,840    17    4,687    6,552








Totalnon-current assets
      589,644    590,377       629,949    631,080








Total assets
      661,194    663,382       703,131    715,096








LIABILITIES AND EQUITY

Current liabilities

Short-term debt
   18    54,558    49,537    19    42,527    27,994
Current portion of long-term debt
   18    1,146    1,139    19    4,444    1,126
Accounts payable
   19    119,321    107,887    20    102,616    107,578
Accrued expenses and other payables
   20    98,695    43,497    21    48,516    56,775
Contract liabilities
   21    —      55,783    22    54,388    63,849
Income tax payable
      404    601       243    350
Current portion of finance lease obligations
      51    101
Current portion of lease liabilities
   23    11,569    13,192
Current portion of deferred revenues
   22    1,233    375    24    358    278








Total current liabilities
      275,408    258,920       264,661    271,142
Non-current liabilities

Long-term debt
   18    48,596    44,852    19    32,051    24,222
Finance lease obligations
      26    115
Lease liabilities
   23    30,577    27,455
Deferred revenues
   22    1,828    1,454    24    1,097    861
Deferred tax liabilities
   16    8,010    13,138    16    19,078    24,208
Othernon-current liabilities
      629    804       627    1,033








Totalnon-current liabilities
      59,089    60,363       83,430    77,779








Total liabilities
      334,497    319,283       348,091    348,921
Equity

Share capital
   23    80,932    80,932    25    80,932    80,932
Reserves
   24    244,935    262,137    26    271,578    282,524








Total equity attributable to equity holders of the Company
      325,867    343,069       352,510    363,456
Non-controlling interests
      830    1,030       2,530    2,719








Total equity
      326,697    344,099       355,040    366,175








Total liabilities and equity
      661,194    663,382       703,131    715,096








See accompanying notes to consolidated financial statements.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, ~~2016, 2017~~2018, 2019 AND ~~2018~~2020
(Amounts in millions, except per share data)

      Year ended December 31,       Year ended December 31,
   Notes    2016 2017 2018    Notes    2018 2019 2020
      RMB RMB RMB       RMB RMB RMB
Operating revenues
   25    352,534 366,229 377,124    27    377,124 375,734 393,561
Operating expenses

Depreciation and amortization
      (67,942 ) (74,951 ) (75,493 )       (75,493 ) (88,145 ) (90,240 )
Network operations and support
   26    (94,156 ) (103,969 ) (116,062 )    28    (116,062 ) (109,799 ) (119,517 )
Selling, general and administrative
      (56,426 ) (58,434 ) (59,422 )       (59,422 ) (57,361 ) (55,059 )
Personnel expenses
   27    (54,504 ) (56,043 ) (59,736 )    29    (59,736 ) (63,567 ) (65,989 )
Other operating expenses
   28    (52,286 ) (45,612 ) (37,697 )    30    (37,697 ) (27,792 ) (29,074 )
Impairment loss on property, plant and equipment
   9    —   —   (5,042 )




Total operating expenses
      (325,314 ) (339,009 ) (348,410 )       (348,410 ) (346,664 ) (364,921 )




Operating income
      27,220 27,220 28,714       28,714 29,070 28,640
Net finance costs
   29    (3,235 ) (3,291 ) (2,708 )    31    (2,708 ) (3,639 ) (3,014 )
Investment income
      40 147 38       38 30 60
Income from investments in associates
      91 877 2,104       2,104 1,573 1,701




Earnings before income tax
      24,116 24,953 28,148       28,148 27,034 27,387
Income tax
   30    (5,993 ) (6,192 ) (6,810 )    32    (6,810 ) (6,322 ) (6,307 )




Profit for the year
      18,123 18,761 21,338       21,338 20,712 21,080




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
      —   —   (324 )       (324 ) 604 (385 )
Deferred tax on change in fair value of investments in equity instruments at fair value through other comprehensive income
      —   —   82       82 (147 ) 97




      —   —   (242 )       (242 ) 457 (288 )




Items that may be reclassified subsequently to profit or loss:

Change in fair value ofavailable-for-sale equity securities
      (228 ) (400 ) —
Deferred tax on change in fair value ofavailable-for-sale equity securities
      57 100 —
Exchange difference on translation of financial statements of subsidiaries outside mainland China
      190 (259 ) 154       154 102 (312 )
Share of other comprehensive income of associates
      6 7 (7 )       (7 ) (2 ) (4 )




      25 (552 ) 147       147 100 (316 )




Other comprehensive income for the year, net of tax
      25 (552 ) (95 )       (95 ) 557 (604 )




Total comprehensive income for the year
      18,148 18,209 21,243       21,243 21,269 20,476




Profit attributable to

Equity holders of the Company
      18,018 18,617 21,210       21,210 20,517 20,850
Non-controlling interests
      105 144 128       128 195 230




Profit for the year
      18,123 18,761 21,338       21,338 20,712 21,080




Total comprehensive income attributable to

Equity holders of the Company
      18,043 18,065 21,115       21,115 21,074 20,244
Non-controlling interests
      105 144 128       128 195 232




Total comprehensive income for the year
      18,148 18,209 21,243       21,243 21,269 20,476




Basic earnings per share
   32    0.22 0.23 0.26    34    0.26 0.25 0.26




Number of shares (in millions)
   32    80,932 80,932 80,932    34    80,932 80,932 80,932




See accompanying notes to consolidated financial statements.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, ~~2016, 2017~~2018, 2019 AND ~~2018~~2020
(Amounts in millions)

   Attributable to equity holders of the Company Attributable to equity holders of the Company
   Notes    Share
capital    Capital
reserve Share
premium    Surplus
reserves    Other
reserves Exchange
reserve Retained
earnings Total Non-controlling
interests Total
Equity Notes Share
capital Capital
reserve Share
premium Surplus
reserves General
risk
reserve Other
reserves Exchange
reserve Retained
earnings Total Non-
controlling
interests Total
Equity
      RMB    RMB RMB    RMB    RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB
Balance as of January 1, 2016
      80,932    17,160 10,746    70,973    876 (812 ) 123,948 303,823 967 304,790
Profit for the year
      —      —   —      —      —   —   18,018 18,018 105 18,123
Other comprehensive income for the year
      —      —   —      —      (165 ) 190 —   25 —   25








Total comprehensive income for the year
      —      —   —      —      (165 ) 190 18,018 18,043 105 18,148








Disposal of a subsidiary
      —      —   —      —      —   —   —   —   (15 ) (15 )
Distribution tonon-controlling interests
      —      —   —      —      —   —   —   —   (86 ) (86 )
Dividends
   31    —      —   —      —      —   —   (6,489 ) (6,489 ) —   (6,489 )
Appropriations
   24    —      —   —      1,638    —   —   (1,638 ) —   —   —








Balance as of December 31, 2016
      80,932    17,160 10,746    72,611    711 (622 ) 133,839 315,377 971 316,348








Profit for the year
      —      —   —      —      —   —   18,617 18,617 144 18,761
Other comprehensive income for the year
      —      —   —      —      (293 ) (259 ) —   (552 ) —   (552 )








Total comprehensive income for the year
      —      —   —      —      (293 ) (259 ) 18,617 18,065 144 18,209








Acquisition of the Eighth Acquired Group
   1    —      (80 ) —      —      —   —   (7 ) (87 ) —   (87 )
Acquisition ofnon-controlling interests
      —      46 —      —      —   —   —   46 (196 ) (150 )
Distribution tonon-controlling interests
      —      —   —      —      —   —   —   —   (89 ) (89 )
Dividends
   31    —      —   —      —      —   —   (7,530 ) (7,530 ) —   (7,530 )
Appropriations
   24    —      —   —      1,686    —   —   (1,686 ) —   —   —
Others
      —      —   —      —      (4 ) —   —   (4 ) —   (4 )








Balance as of December 31, 2017
      80,932    17,126 10,746    74,297    414 (881 ) 143,233 325,867 830 326,697








Changes in accounting policies
   2    —      —   —      302    —   —   2,673 2,975 (1 ) 2,974








Balance as of January 1, 2018, as restated
      80,932    17,126 10,746    74,599    414 (881 ) 145,906 328,842 829 329,671
Balance as of January 1, 2018
80,932 17,126 10,746 74,599 —   414 (881 ) 145,906 328,842 829 329,671
Profit for the year
      —      —   —      —      —   —   21,210 21,210 128 21,338 —   —   —   —   —   —   —   21,210 21,210 128 21,338
Other comprehensive income for the year
      —      —   —      —      (249 ) 154 —   (95 ) —   (95 ) —   —   —   —   —   (249 ) 154 —   (95 ) —   (95 )








Total comprehensive income for the year
      —      —         (249 ) 154 21,210 21,115 128 21,243 —   —   —   —   —   (249 ) 154 21,210 21,115 128 21,243








Disposal of investments in equity instruments at fair value through other comprehensive income
      —      —   —      —      (5 ) —   5 —   —   —   —   —   —   —   —   (5 ) —   5 —   —   —
Disposal of a subsidiary
      —      —   —      —      —   —   —   —   5 5 —   —   —   —   —   —   —   —   —   5 5
Contribution fromnon-controlling interests
      —      680 —      —      —   —   —   680 265 945 —   680 —   —   —   —   —   —   680 265 945
Reduction of capital bynon-controlling interests
      —      —   —      —      —   —   —   —   (20 ) (20 ) —   —   —   —   —   —   —   —   —   (20 ) (20 )
Distribution tonon-controlling interests
      —      —   —      —      —   —   —   —   (177 ) (177 ) —   —   —   —   —   —   —   —   —   (177 ) (177 )
Dividends
   31    —      —   —      —      —   —   (7,568 ) (7,568 ) —   (7,568 ) 33 —   —   —   —   —   —   —   (7,568 ) (7,568 ) —   (7,568 )
Appropriations
   24    —      —   —      1,875    —   —   (1,875 ) —   —   —
Appropriations to statutory surplus reserve
26 —   —   —   1,875 —   —   —   (1,875 ) —   —   —








Balance as of December 31, 2018
      80,932    17,806 10,746    76,474    160 (727 ) 157,678 343,069 1,030 344,099 80,932 17,806 10,746 76,474 —   160 (727 ) 157,678 343,069 1,030 344,099








Change in accounting policy
—   —   —   (243 ) —   —   —   (2,197 ) (2,440 ) (3 ) (2,443 )

Balance as of January 1, 2019, as restated
80,932 17,806 10,746 76,231 —   160 (727 ) 155,481 340,629 1,027 341,656
Profit for the year
—   —   —   —   —   —   —   20,517 20,517 195 20,712
Other comprehensive income for the year
—   —   —   —   —   455 102 —   557 —   557

Total comprehensive income for the year
—   —   —   —   —   455 102 20,517 21,074 195 21,269

Contribution from non-controlling interests
—   —   —   —   —   —   —   —   —   1,500 1,500
Acquisition of non-controlling interests
—   3 —   —   —   —   —   —   3 (11 ) (8 )
Distribution to non-controlling interests
—   —   —   —   —   —   —   —   —   (181 ) (181 )
Share of an associate’s other changes in reserves
—   (305 ) —   —   —   —   —   —   (305 ) —   (305 )
Dividends
33 —   —   —   —   —   —   —   (8,891 ) (8,891 ) —   (8,891 )
Appropriations to statutory surplus reserve
26 —   —   —   1,812 —   —   —   (1,812 ) —   —   —
Appropriations to general risk reserve
26 —   —   —   —   23 —   —   (23 ) —   —   —

Balance as of December 31, 2019
80,932 17,504 10,746 78,043 23 615 (625 ) 165,272 352,510 2,530 355,040

Profit for the year
—   —   —   —   —   —   —   20,850 20,850 230 21,080
Other comprehensive income for the year
—   —   —   —   —   (294 ) (312 ) —   (606 ) 2 (604 )

Total comprehensive income for the year
—   —   —   —   —   (294 ) (312 ) 20,850 20,244 232 20,476

Acquisition of non-controlling interests
—   —   —   —   —   —   —   —   —   (1 ) (1 )
Distribution to non-controlling interests
—   —   —   —   —   —   —   —   —   (42 ) (42 )
Share of associates’ other changes in reserves
—   (36 ) —   —   —   —   —   —   (36 ) —   (36 )
Dividends
33 —   —   —   —   —   —   —   (9,262 ) (9,262 ) —   (9,262 )
Appropriations to statutory surplus reserve
26 —   —   —   1,811 —   —   —   (1,811 ) —   —   —
Appropriations to general risk reserve
26 —   —   —   —   33 —   —   (33 ) —   —   —

Balance as of December 31, 2020
80,932 17,468 10,746 79,854 56 321 (937 ) 175,016 363,456 2,719 366,175

See accompanying notes to consolidated financial statements.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, ~~2016, 2017~~2018, 2019 AND ~~2018~~2020
(Amounts in millions)

   Year ended December 31,    Year ended December 31,
   Notes 2016 2017 2018    Notes 2018 2019 2020
   RMB RMB RMB    RMB RMB RMB
Net cash from operating activities
   (a ) 101,135 96,502 99,298    (a ) 99,298 112,600 132,260




Cash flows used in investing activities

Capital expenditure
   (96,678 ) (87,334 ) (83,835 )    (83,835 ) (82,853 ) (88,748 )
Lease prepayments
   (99 ) (89 ) (20 )
Payments for lease prepayments / right-of-use assets
   (20 ) (310 ) (220 )
Purchase of investments
   (b ) (3,099 ) (443 ) (328 )    (328 ) (478 ) (74 )
Proceeds from disposal of property, plant and equipment
   1,560 2,066 1,866    1,866 2,514 863
Proceeds from disposal of lease prepayments
   10 72 45
Proceeds from disposal of lease prepayments / right-of-use assets
   45 115 24
Proceeds from disposal of investments
   —   —   96    96 296 47
Net cash (outflow) / inflow from disposal of subsidiaries
   (50 ) 184 (1 )
Net cash outflow from disposal of subsidiaries
   (1 ) —   —
Purchase of short-term bank deposits
   (3,237 ) (2,815 ) (7,726 )    (7,726 ) (5,119 ) (4,664 )
Maturity of short-term bank deposits
   2,550 3,096 3,949    3,949 8,621 5,695




Net cash used in investing activities
   (99,043 ) (85,263 ) (85,954 )    (85,954 ) (77,214 ) (87,077 )




Cash flows used in financing activities

Principal element of finance lease payments
   (59 ) (84 ) (73 )
Repayments of principal of finance lease obligations / lease liabilities
   (73 ) (10,699 ) (12,738 )
Proceeds from bank debt and other loans
   110,446 123,250 97,829    97,829 103,315 81,049
Repayments of bank debt and other loans
   (113,366 ) (69,953 ) (106,923 )    (106,923 ) (120,107 ) (106,982 )
Repayment of deferred consideration in respect of the
Mobile Network Acquisition
   —   (61,710 ) —
Payment of the acquisition price of
the Eighth Acquisition (Note 1)
   —   —   (87 )    (87 ) —   —
Payment of dividends
   (6,489 ) (7,530 ) (7,568 )    (7,568 ) (8,891 ) (9,262 )
Cash distributions tonon-controlling interests
   (87 ) (89 ) (177 )    (177 ) (181 ) (42 )
Payment for the acquisition ofnon-controlling interests
   —   (31 ) (119 )    (119 ) (8 ) (1 )
Contribution fromnon-controlling interests
   —   —   855    855 1,590 —
Advanced payment received in respect of contribution from non-controlling interest
   —   —   978
Net deposits with Finance Company
   (b ) —   4,098 5,728
Increase in statutory reserve deposits placed by Finance Company
   (b ) —   (405 ) (837 )
Reduction of capital bynon-controlling interests
   —   —   (20 )    (20 ) —   —




Net cash used in financing activities
   (9,555 ) (16,147 ) (16,283 )    (16,283 ) (31,288 ) (42,107 )




Net decrease in cash and cash equivalents
   (7,463 ) (4,908 ) (2,939 )
Net (decrease) / increase in cash and cash equivalents
   (2,939 ) 4,098 3,076
Cash and cash equivalents at beginning of year
   31,869 24,617 19,410    19,410 16,666 20,791
Effect of changes in foreign exchange rate
   211 (299 ) 195    195 27 (183 )




Cash and cash equivalents at end of year
   24,617 19,410 16,666    16,666 20,791 23,684




See accompanying notes to consolidated financial statements.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, ~~2016, 2017~~2018, 2019 AND ~~2018~~2020
(Amounts in millions)

(a) Reconciliation of earnings before income tax to net cash from operating activities
   Year ended December 31,
   2018 2019 2020
   RMB RMB RMB
Earnings before income tax
   28,148 27,034 27,387
Adjustments for:

Depreciation and amortization
   75,493 88,145 90,240
Impairment loss on property, plant and equipment
   —   —   5,042
Impairment losses for financial assets and other items, net of reversal
   2,050 1,695 1,512
Write down of inventories, net of reversal
   66 61 35
Investment income
   (38 ) (30 ) (60 )
Income from investments in associates
   (2,104 ) (1,573 ) (1,701 )
Interest income
   (306 ) (492 ) (582 )
Interest expense
   3,093 4,090 3,433
Net foreign exchange (gain) / loss
   (79 ) 41 163
Net loss on retirement and disposal of long-lived assets
   1,757 2,710 3,827
Increase in accounts receivable
   (1,848 ) (2,601 ) (1,771 )
Decrease / (increase) in contract assets
   170 4 (132 )
(Increase) / decrease in inventories
   (622 ) 1,891 (474 )
(Increase) / decrease in prepayments and other current assets
   (1,412 ) 1,045 (116 )
Decrease / (increase) in restricted cash
   63 89 (6,097 )
Decrease / (increase) in other assets
   271 414 (2,971 )
(Decrease) / increase in accounts payable
   (3,181 ) (2,657 ) 5,689
Increase in accrued expenses and other payables
   9,842 614 1,934
(Decrease) / increase in contract liabilities
   (6,414 ) (1,412 ) 9,516
Decrease in deferred revenues
   (138 ) (90 ) (55 )


Cash generated from operations
   104,811 118,978 134,819
Interest received
   306 474 594
Interest paid
   (3,094 ) (4,200 ) (3,524 )
Investment income received
   34 133 603
Income tax paid
   (2,759 ) (2,785 ) (232 )


Net cash from operating activities
   99,298 112,600 132,260


~~(a)~~(b)
~~Reconciliation~~“Finance Company” refers to China Telecom Group Finance Co., Ltd., a subsidiary of ~~earnings before income tax~~the Company established on January 8, 2019, providing capital and financial management services to ~~net cash from operating activities~~the member units of China Telecommunications Corporation.

   Year ended December 31,
   2016 2017 2018
   RMB RMB RMB
Earnings before income tax
   24,116 24,953 28,148
Adjustments for:

Depreciation and amortization
   67,942 74,951 75,493
Credit impairment losses, net of reversal
   2,278 2,036 2,050
Impairment losses for long-lived assets
   62 10 —
Write down of inventories
   176 178 66
Investment income
   (40 ) (147 ) (38 )
Income from investments in associates
   (91 ) (877 ) (2,104 )
Interest income
   (354 ) (429 ) (306 )
Interest expense
   3,702 3,586 3,093
Net foreign exchange (gain) / loss
   (113 ) 134 (79 )
Net loss on retirement and disposal of long-lived assets
   1,867 1,841 1,757
Increase in accounts receivable
   (2,306 ) (2,770 ) (1,848 )
Decrease in contract assets
   —   —   170
Decrease / (increase) in inventories
   1,038 905 (622 )
Increase in prepayments and other current assets
   (3,783 ) (2,618 ) (1,349 )
Decrease / (increase) in other assets
   366 (231 ) 271
Increase / (decrease) in accounts payable
   3,755 (4,213 ) (3,181 )
Increase in accrued expenses and other payables
   10,878 7,232 9,842
Decrease in contract liabilities
   —   —   (6,414 )
Decrease in deferred revenues
   (418 ) (202 ) (138 )


Cash generated from operations
   109,075 104,339 104,811
Interest received
   366 433 306
Interest paid
   (3,737 ) (3,707 ) (3,094 )
Investment income received
   57 63 34
Income tax paid
   (4,626 ) (4,626 ) (2,759 )


Net cash from operating activities
   101,135 96,502 99,298


~~(b)~~ The amount for the year ended December 31, 2016 included the payment for the cash injection amounting to RMB2,966 (“Cash Consideration”) to China Tower Corporation Limited (“China Tower”) in relation to the disposal of certain telecommunications towers and related assets to China Tower (the “Tower Assets Disposal”) in 2015. The Cash Consideration was paid in February 2016.
See accompanying notes to consolidated financial statements.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

1.
PRINCIPAL ACTIVITIES, ORGANIZATION 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 center 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.~~government and relevant regulations.
Organization
As part of the reorganization (the “Restructuring”) of China Telecommunications Corporation, the Company was incorporated in the PRC on September 10, 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 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 December 31, 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 (hereinafter, referred to as the “First Acquisition”).
On June 30, 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 (hereinafter, referred to as the “Second Acquisition”).
On June 30, 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 (hereinafter, referred to as the “Third Acquisition”).
On June 30, 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 (hereinafter, referred to as the “Fourth Acquisition”).
On August 1, 2011 and December 1, 2011, the subsidiaries of the Company,E-surfing Pay Co., Ltd(“E-surfing Pay”) andE-surfing Media Co., Ltd.(“E-surfing Media”), acquired thee-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 (hereinafter, referred to as the “Fifth Acquisition”). The Company disposed the equity interest inE-surfing Media to China Telecommunications Corporation in 2013.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~ ~~amounts in millions, except per share data and except otherwise stated)~~
1.
~~PRINCIPAL ACTIVITIES, ORGANIZATION AND BASIS OF PRESENTATION (continued)~~
~~Organization (continued)~~
On April 30, 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 (hereinafter, referred to as the “Sixth Acquisition”).
On December 31, 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 (hereinafter, referred to as the “Seventh Acquisition”).
On October 31, 2017, the Company disposed of the 100% equity interest in ChengduE-store Technology Co., Ltd(“E-store”), a subsidiary of the Company, to Besttone Holding. The final consideration for the disposal of the equity interest inE-store ~~was arrived at~~amounted to RMB251, among which RMB249 was received on November 16, 2017 and the remaining balance of RMB2 was received in 2018.
~~Analysis of assets and liabilities of the disposed subsidiary:~~
~~October 31, 2017~~
~~RMB~~
~~Current Assets~~
~~Cash and cash equivalents~~
65
~~Accounts receivable, net~~
48
~~Prepayments and other current assets~~
67
~~Non-current~~ ~~Assets~~
~~Property, plant and equipment, net~~
16
~~Intangible assets~~
3
~~Current liabilities~~
~~Accounts payable~~
29
~~Accrued expenses and other payables~~
27
~~Net assets disposal of~~
~~143~~
~~Gain on disposal of a subsidiary:~~
~~2017~~
~~RMB~~
~~Consideration for the disposal~~
~~251~~
~~Net assets disposed of~~
~~(143~~ )
~~Gain on disposal~~
~~108~~
~~The gain on disposal ofE-store~~ ~~has been included in investment income of the consolidated statement of comprehensive income.~~
~~Net cash inflow from disposal of a subsidiary:~~
~~2017~~
~~RMB~~
~~Consideration received in cash and cash equivalents~~
~~249~~
~~Less: Cash and cash equivalents disposed of~~
~~(65~~ )
~~Net cash inflow from disposal of a subsidiary~~
~~184~~
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~
1.
~~PRINCIPAL ACTIVITIES, ORGANIZATION AND BASIS OF PRESENTATION (continued)~~
~~Organization (continued)~~
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. In the same month,E-surfing Pay acquired a 100% interest in Shaanxi Zhonghe Hengtai Insurance Agent Limited (currently known as Orange Insurance Agent Limited (“~~Zhonghe Hengtai”~~Orange Insurance”), 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. The acquisitions of the Satcom Business and ~~Zhonghe Hengtai~~Orange Insurance (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 June 30, 2018.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
1.
PRINCIPAL ACTIVITIES, ORGANIZATION AND BASIS OF PRESENTATION (continued)
Organization (continued)
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”.
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 apooling-of-interests. Accordingly, the assets and liabilities of these entities have been accounted for at historical amounts and the consolidated financial statements of the Group prior to the acquisitions are combined with the financial statements of the Acquired Groups. The considerations for the acquisition of the Acquired Groups are accounted for as an equity transaction in the consolidated statement of changes in equity.
The consolidated results of operations for the year ended December 31, 2016 and the consolidated statement of financial position as of December 31, 2016 as previously reported by the Group and the combined amounts presented in the consolidated financial statements of the Group to reflect the acquisition of the Eighth Acquired Group are set out below:


The Group
(as previously
reported)
RMB

The Eighth
Acquired Group
RMB

The Group
(restated)
RMB

Consolidated statement of comprehensive income for the year ended December 31, 2016:

Operating revenues
   352,285    249    352,534
Profit for the year
   18,109    14    18,123
Consolidated statement of financial position as of December 31, 2016:

Total assets
   652,368    190    652,558
Total liabilities
   336,073    137    336,210
Total equity
   316,295    53    316,348
~~For the periods presented, all significant transactions and balances between the Group and the Eighth Acquired Group have been eliminated on combination.~~
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~
1.
~~PRINCIPAL ACTIVITIES, ORGANIZATION AND BASIS OF PRESENTATION (continued)~~
Merger with subsidiaries
Pursuant to the resolution passed by the Company’s shareholders at an Extraordinary General Meeting held on February 25, 2008, the Company entered into merger agreements with each of the following subsidiaries: Shanghai Telecom Company Limited, Guangdong Telecom Company Limited, Jiangsu Telecom Company Limited, Zhejiang Telecom Company Limited, Anhui Telecom Company Limited, Fujian Telecom Company Limited, Jiangxi Telecom Company Limited, Guangxi Telecom Company Limited, Chongqing Telecom Company Limited, Sichuan Telecom Company Limited, Hubei Telecom Company Limited, Hunan Telecom Company Limited, Hainan Telecom Company Limited, Guizhou Telecom Company Limited, Yunnan Telecom Company Limited, Shaanxi Telecom Company Limited, Gansu Telecom Company Limited, Qinghai Telecom Company Limited, Ningxia Telecom Company Limited and Xinjiang Telecom Company Limited. In addition, the Company entered into merger agreements with Beijing Telecom on July 1, 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 Amendments to References to the Conceptual Framework in IFRS Standards and the following ~~new and~~ amendments to IFRSs ~~and interpretation~~ issued by the International Accounting Standards Board ~~(“IASB”~~(the “IASB”) that are mandatorily effective for the current year:

•
~~IFRS 9,~~~~“Financial Instruments”~~
Amendments to IAS 1 and IAS 8, “Definition of Material”

•
~~IFRS 15,~~~~“Revenue from Contracts with Customers”~~ ~~and the related Amendments~~
Amendments to IFRS 3, “Definition of a Business”

•
~~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”~~
~~Except for~~ IFRS 9,~~“Financial Instruments”~~ IAS 39 and IFRS ~~15,~~~~“Revenue from Contracts with Customers”~~ ~~and~~7, “Interest Rate Benchmark Reform”
In addition, the ~~related Amendments~~Group has early applied the Amendment to IFRS 16, “Covid-19-Related Rent Concessions”.
Except as described below, the application of the Amendments to References to the Conceptual Framework in IFRS Standards and the above amendments to IFRSs ~~and interpretation~~in the current year 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 42).~~

2.1
Impacts on early application of Amendment to IFRS ~~15,~~16, “~~“Revenue from Contracts with Customers”~~Covid-19-Related Rent Concessions”
The Group has applied ~~IFRS 15~~the amendment 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~~amendment introduces a new practical expedient for lessees to elect not to assess whether a Covid-19-related rent concession is a lease modification. The practical expedient only applies to rent concessions occurring as a direct consequence of ~~initially applying this standard recognized at the date~~Covid-19 that meets all of initial application, January 1, 2018. Any difference at the date of initial application is recognized 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 January 1, 2018. Accordingly, certain comparative information may not be comparable as comparative information was prepared under IAS 18,~~“Revenue”~~ ~~and the related interpretations.~~
~~The Group recognizes revenue from~~ the following ~~major sources which arise from contracts with customers:~~conditions:

~~Telecommunications services, including voice, Internet, information and application and telecommunications network resource and equipment services, and resale of mobile services (MVNO);~~the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;
any reduction in lease payments affects only payments originally due on or before June 30, 2021; and

~~Sales,~~there is no substantive change to other terms and ~~repair and maintenance~~conditions of ~~telecommunications equipment and others.~~the lease.
~~Information about the Group’s performance obligations and the accounting policies resulting from application of IFRS 15 are disclosed in Notes 25 and 3(m) respectively.~~
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

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~~
~~The following table summarizes the impacts of transition to IFRS 15 on reserves as of January 1, 2018.~~
~~RMB~~
~~Reserves~~
~~Consideration payable to customers~~
~~2,884~~
~~Contract with multiple performance obligations~~
~~663~~
~~Incremental costs of obtaining contracts~~
~~1,210~~
~~Tax effect~~
~~(1,066~~ )
~~Increase as of 1 January 2018~~
~~3,691~~
The following adjustments were made to the amounts recognized in the consolidated statement of financial position as of January 1, 2018. Line items that were not affected by the changes have not been included.

      Carrying amounts
previously
reported as of
December 31, 2017          Carrying amounts
under IFRS 15 as of
January 1, 2018*
   Notes    Reclassification    Remeasurement
      RMB    RMB    RMB    RMB
Non-current assets

Other assets
   (a )    3,349    —      1,210    4,559
Current assets

Accounts receivable, net
   (b )    22,096    (596 )    —      21,500
Contract assets
   (b,e )    —      633    23    656
Prepayments and other current assets
   (b )    22,128    (37 )    —      22,091
Current liabilities

Accrued expenses and other payables
   (c )    98,695    (64,912 )    —      33,783
Contract liabilities
   (c,d,e )    —      65,699    (3,524 )    62,175
Current portion of deferred revenues
   (c )    1,233    (787 )    —      446
Non-current liabilities

Deferred tax liabilities
   (a,d,e )    8,010    —      1,066    9,076
Equity

Reserves
      244,935    —      3,691    248,626
*
~~The amounts in this column are before the adjustments from the application of IFRS 9.~~
~~Notes:~~
~~(a)~~
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 were recognized with corresponding adjustments to reserves.
~~(b)~~
At the date of initial application of IFRS 15, unbilled revenue of RMB633 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.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~ ~~amounts in millions, except per share data and except otherwise stated)~~
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)~~
~~(c)~~
~~At the date of initial~~Impacts on early application of Amendment to IFRS 15, considerations received from telecommunications service contracts included in receipts in advance and deferred revenues amounting to RMB64,912 and RMB787, respectively, were reclassified from accrued expenses and other payables and current portion of deferred revenues to contract liabilities.
~~(d)~~
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 were recognized with corresponding adjustments to reserves.
~~(e)~~
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 recognized as revenue at contract inception, i.e. when the equipment are delivered, while consideration allocated to provision of telecommunications services would be subsequently recognized as revenue as services are delivered during the contract period, with the impact, netted of deferred tax, amounting to RMB527 recognized with corresponding adjustments to reserves.
The following tables summarize the impacts of applying IFRS 15 on the Group’s consolidated statement of financial position as of December 31, 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~~

   Notes As reported as of
December 31, 2018    Adjustments Amounts without
application of
IFRS 15 as of
December 31, 2018
   RMB    RMB RMB
Non-current assets

Other assets
   (a ) 4,840    (1,287 ) 3,553
Current assets

Accounts receivable, net
   (b ) 20,475    461 20,936
Contract assets
   (b,e ) 478    (478 ) —
Current liabilities

Accrued expenses and other payables
   (c,d,e ) 43,497    57,681 101,178
Contract liabilities
   (c ) 55,783    (55,783 ) —
Current portion of deferred revenues
   (c ) 375    765 1,140
Non-current liabilities

Deferred tax liabilities
   13,138    (869 ) 12,269
Equity

Reserves
   262,137    (3,098 ) 259,039
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~ ~~amounts in millions, except per share data and except otherwise stated)~~
2.
~~APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”) AND INTERPRETATION (continued)~~
~~2.1~~
~~IFRS 15,~~16, “~~“Revenue from Contracts with Customers” (continued)~~Covid-19-Related
~~Summary of effects arising from initial application of IFRS 15 (continued)~~
~~Impact on the consolidated statement of comprehensive income~~

   Notes As reported
for the year ended
December 31, 2018 Adjustments Amounts without
application of IFRS
15 for the year ended
December 31, 2018
   RMB RMB RMB
Operating revenues
   (d,e ) 377,124 4,377 381,501
Operating expenses

Selling, general and administrative
   (a,d,e ) 59,422 3,956 63,378
Other operating expenses
   (e ) 37,697 (369 ) 37,328
Total operating expenses
   348,410 3,587 351,997
Operating profit
   28,714 790 29,504
Profit before taxation
   28,148 790 28,938
Income tax
   6,810 197 7,007
Profit for the year
   21,338 593 21,931
Total comprehensive income for the year
   21,243 593 21,836

Impact on the consolidated statement of cash flows

   As reported
for the year ended
December 31, 2018 Adjustments Amounts without
application of IFRS
15 for the year ended
December 31, 2018
   RMB RMB RMB
Profit before taxation
   28,148 790 28,938
Operating profit before changes in working capital
   108,080 790 108,870
Increase in accounts receivable
   (1,848 ) 164 (1,684 )
Decrease in contract assets
   170 (170 ) —
Decrease in other assets
   271 77 348
Increase in accrued expenses and other payables
   9,842 (7,253 ) 2,589
Decrease in contract liabilities
   (6,414 ) 6,414 —
Decrease in contract revenues
   (138 ) (22 ) (160 )
Net cash from operating activities
   99,298 —   99,298
~~Notes:~~
~~(a)~~
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 recognized as an asset if the Group expects to recover such cost. The asset so recognized was subsequently amortized 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 for the year ended December 31, 2018, and an increase in contract costs, included in other assets, by RMB1,287 as of December 31, 2018.
~~(b)~~
At December 31, 2018, upon application of IFRS 15, unbilled revenue of RMB461 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 recognized as contract assets. Before application of IFRS 15, such balance was presented as accounts receivable.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~ ~~amounts in millions, except per share data and except otherwise stated)~~
2.
~~APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”) AND INTERPRETATION (continued)~~
~~2.1~~
~~IFRS 15,~~~~“Revenue from Contracts with Customers”~~ Rent Concessions” (continued)
~~Summary of effects arising from initial application of IFRS 15 (continued)~~
~~Notes: (continued)~~
~~(c)~~
At December 31, 2018, upon application of IFRS 15, consideration received from telecommunications service contracts amounting to RMB55,783 was recognized 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 and RMB765, respectively.
~~(d)~~
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 and a reduction of operating expenses by RMB3,510 for the year ended December 31, 2018, and a reduction of contract liabilities, which was presented as accrued expenses and other payables before application of IFRS 15, by RMB2,497 as of December 31, 2018.
~~(e)~~
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 recognized as revenue at contract inception, i.e. when the equipment are delivered, while consideration allocated to provision of telecommunications services would be subsequently recognized as revenue as services are delivered during the contract period. This change in accounting policy resulted in a reduction of operating revenues by RMB480 for the year ended December 31, 2018, a reduction of contract liabilities, which was presented as accrued expenses and other payables before application of IFRS 15, by RMB166, and an increase of contract assets by RMB17 as of December 31, 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 derecognized as of January 1, 2018 (date of initial application) and has not applied the requirements to instruments that have already been derecognized as of January 1, 2018. The difference between carrying amounts as of December 31, 2017 and the carrying amounts as of January 1, 2018 are recognized 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).~~
~~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, January 1, 2018.~~
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~ ~~amounts in millions, except per share data and except otherwise stated)~~
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 Investments Equity
instruments
at fair value
through other
comprehensive
income Accounts
receivable Contract
assets Prepayments
and other
current
assets Deferred
tax
assets Deferred
tax
liabilities Reserves Non-
controlling
interests
RMB RMB RMB RMB RMB RMB RMB RMB RMB
Closing balance as of December 31, 2017 – IAS 39
1,154 —   22,096 —   22,128 5,479 8,010 244,935 830
Effect arising from initial application of IFRS 15
—   —   (596 ) 656 (37 ) —   1,066 3,691 —
Effect arising from initial application of IFRS 9:

Reclassification

From investments
(a ) (1,154 ) 1,154 —   —   —   —   —   —   —
Remeasurement

Impairment under ECL model
(b ) —   —   (919 ) —   (1 ) 203 —   (716 ) (1 )

Opening balance as of January 1, 2018
—   1,154 20,581 656 22,090 5,682 9,076 247,910 829

~~Notes:~~
~~(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 asavailable-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 were reclassified from investments to equity instruments at FVTOCI, of which RMB185 related to unquoted equity investments previously measured at cost less impairment under IAS 39. The fair value gains of RMB674 relating to those investments previously carried at fair value continued to accumulate in other reserves.
~~(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 amortized cost mainly comprise of financial assets included in prepayments and other current assets, are measured on12-month~~ ~~ECL (“12m ECL”) basis and there have been no significant increase in credit risk since initial recognition.~~
~~As of January 1, 2018, the additional credit loss allowance of RMB920 and the related deferred tax impact of RMB203 have been recognized against reserves andnon-controlling~~ ~~interests. The additional loss allowance is charged against the respective assets.~~
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~ ~~amounts in millions, except per share data and except otherwise stated)~~
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 (continued)~~
All loss allowances for financial assets measured at amortized cost, including accounts receivable and financial assets included in prepayments and other current assets as of December, 31 2017 reconciled to the opening loss allowance as of January,1 2018 are as follows:

   Accounts
receivable    Prepayments and
other current assets
   RMB    RMB
As of December 31, 2017 – IAS 39
   3,842    370
Amount remeasured through opening reserves
   919    1




As of January 1, 2018
   4,761    371




~~2.3~~
~~Impacts on opening consolidated statement of financial position arising from the application of all new standards~~
As a result of applying the practical expedient, the Group accounts for changes in lease payments resulting from rent concessions the same way it would account for the changes applying IFRS 16, “Leases” (“IFRS 16”) if the changes were not a lease modification. Forgiveness or waiver of lease payments are accounted for as variable lease payments. The related lease liabilities are adjusted to reflect the amounts forgiven or waived with a corresponding adjustment recognised in the ~~Group’s accounting policies above,~~profit or loss in the period in which the event occurs.
The application has no impact to the opening reserves as of January 1, 2020. The amounts related to changes in lease payments that resulted from rent concessions in the profit or loss for the current year was not material to the consolidated ~~statement of~~ financial ~~position had to be restated. The following table shows the adjustments recognized for each of the line items affected.~~

   December 31,
2017 IFRS
15 IFRS
9 January 1,
2018
   RMB RMB RMB RMB
   (audited) (restated)
Non-current assets

Investments
   1,154 —   (1,154 ) —
Equity instruments at fair value through other comprehensive income
   —   —   1,154 1,154
Deferred tax assets
   5,479 —   203 5,682
Other assets
   3,349 1,210 —   4,559
Others with no adjustments
   579,662 —   —   579,662


Totalnon-current assets
   589,644 1,210 203 591,057


Current assets

Accounts receivable, net
   22,096 (596 ) (919 ) 20,581
Contract assets
   —   656 —   656
Prepayments and other current assets
   22,128 (37 ) (1 ) 22,090
Others with no adjustments
   27,326 —   —   27,326


Total current assets
   71,550 23 (920 ) 70,653


Total assets
   661,194 1,233 (717 ) 661,710


Current liabilities

Accrued expenses and other payables
   98,695 (64,912 ) —   33,783
Contract liabilities
   —   62,175 —   62,175
Current portion of deferred revenues
   1,233 (787 ) —   446
Others with no adjustments
   175,480 —   —   175,480


Total current liabilities
   275,408 (3,524 ) —   271,884


Net current liabilities
   (203,858 ) 3,547 (920 ) (201,231 )


Total assets less current liabilities
   385,786 4,757 (717 ) 389,826


Non-current liabilities

Deferred tax liabilities
   8,010 1,066 —   9,076
Others with no adjustments
   51,079 —   —   51,079


Totalnon-current liabilities
   59,089 1,066 —   60,155


Total liabilities
   334,497 (2,458 ) —   332,039


Equity

Share capital
   80,932 —   —   80,932
Reserves
   244,935 3,691 (716 ) 247,910


Total equity attributable to equity holders of the Company
   325,867 3,691 (716 ) 328,842
Non-controlling interests
   830 —   (1 ) 829


Total equity
   326,697 3,691 (717 ) 329,671


Total liabilities and equity
   661,194 1,233 (717 ) 661,710


~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~
statements.

2.3.
~~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)~~SIGNIFICANT ACCOUNTING POLICIES

~~Note:~~(a)
For the purpose of reporting cash flows from operating activities under indirect method for the year ended December 31, 2018, movements in working capital have been computed based on opening consolidated statement of financial position as of January 1, 2018 as disclosed above.
3.
~~SIGNIFICANT ACCOUNTING POLICIES~~
~~(a)~~
Basis of preparation
The accompanying consolidated financial statements have been prepared in accordance with IFRSs as issued by the IASB. For the purpose of preparation of the consolidated financial statements, information is considered material if such information is reasonably expected to influence decisions made by primary users. The consolidated financial statements of the Group have been prepared on a going concern basis. These consolidated financial statements were approved and authorized by the Board of Directors on March ~~19, 2019.~~9, 2021.
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 recognized 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 ~~41.~~43.

(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.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~
3.
~~SIGNIFICANT ACCOUNTING POLICIES (continued)~~
~~(b)~~
~~Basis of consolidation (continued)~~
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 AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
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 tonon-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 thenon-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 thenon-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 andnon-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 recognized. 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 recognized in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognized 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 recognized in profit or loss. Any interest retained in that former investee at the date when significant influence is lost is recognized 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 unrealized gains arising from intercompany transactions are eliminated on consolidation. Unrealized gains arising from transactions with associates are eliminated to the extent of the Group’s interest in the entity. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

(c)
Foreign currencies
The accompanying consolidated financial statements are presented in Renminbi (“RMB”). The functional currency of the Company and its subsidiaries in mainland China is RMB. The functional currency of the Group’s foreign operations is the currency of the primary economic environment in which the foreign operations operate. Transactions denominated in currencies other than the functional currency during the year are translated into the functional currency at the applicable rates of exchange prevailing on the transaction dates. Foreign currency monetary assets and liabilities are translated into the functional currency using the applicable exchange rates at the end of the reporting period. The resulting exchange differences, other than those capitalized as construction in progress (Note 3(e)), are recognized as income or expense in profit or loss. For the periods presented, no exchange differences were capitalized.
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 recognized in other comprehensive income and accumulated separately in equity in the exchange reserve.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

3.
SIGNIFICANT ACCOUNTING POLICIES (continued)

(d)
Property, plant and equipment
Property, plant and equipment are initially recorded at cost, less subsequent accumulated depreciation and impairment losses (Note ~~3(i)~~3(h)). 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 capitalized 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 amortized over the shorter of the lease term and their estimated useful lives on a straight-line basis. As of December 31, 2018, no asset was held by the Group under finance leases (December 31, 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 recognized 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:

   Depreciable lives
primarily range from
Buildings and improvements
   8 to 30 years
Telecommunications network plant and equipment
   5 to 10 years
Furniture, fixture, motor vehicles and other equipment
   5 to 10 years
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)~~3(h)). The cost of an item comprises direct costs of construction, capitalization 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. Capitalization 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 ~~11)~~12) 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)~~3(h)). 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.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

3.
SIGNIFICANT ACCOUNTING POLICIES (continued)

~~(h)~~(g)
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 amortization and impairment losses (Note ~~3(i)~~3(h)). Amortization of software is mainly calculated on a straight-line basis over the estimated useful lives, which range from 3 to 5 years.
~~(i) Impairment of goodwill and long-lived assets~~
(h)
Impairment of goodwill and long-lived assets
The carrying amounts of the Group’s long-lived assets, including property, plant and equipment,right-of-use assets, 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 recognizes an impairment loss for assets capitalized as contract costs under IFRS 15, “Revenue from Contracts with Customers” (“IFRS 15”), the Group assesses and recognizes any impairment loss on other assets related to the relevant contracts in accordance with applicable standards. Then, impairment loss, if any, for assets capitalized as contract costs is recognized 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 recognized as expenses. The assets capitalized 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 apre-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 recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment loss is recognized as an expense in profit or loss. Impairment loss recognized 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 recognized for an asset in prior years may no longer exist. An impairment loss is reversed if there has been a favorable 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 recognized as an income in profit or loss. The reversal is reduced by the amount that would have been recognized as depreciation and amortization 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 recognized in profit or loss.
~~(j) Inventories~~
(i)
Interests in joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have the rights to the assets, and obligation for the liabilities, relating to the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(i)
Interests in joint operations (continued)
The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and expenses.
When a group entity transacts with a joint operation in which a group entity is a joint operator (such as a sale or contribution of assets), the Group is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions are recognised in the consolidated financial statements only to the extent of other parties’ interests in the joint operation.
When a group entity transacts with a joint operation in which a group entity is a joint operator (such as a purchase of assets), the Group does not recognise its share of the gains and losses until it resells those assets to a third party.
(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 realizable value. Net realizable 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.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~

3.(k)
~~SIGNIFICANT ACCOUNTING POLICIES (continued)~~
~~(k)~~
Financial instruments
Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual provisions of the instrument. All regular way purchases or sales of financial assets are recognized and derecognized on a ~~settlement~~trade 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 receivable arising from contracts with customers which are initially measured in accordance with IFRS ~~15 since January 1, 2018.~~15. 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. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.
The effective interest method is a method of calculating the amortized 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.
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 amortized cost and equity instruments designated as at FVTOCI.~~

(i)
Financial assets measured subsequently at amortized cost
Financial assets that meet the following conditions are subsequently measured at amortized 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.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(k)
Financial instruments (continued)
Financial assets (continued)
Classification and subsequent measurement of financial assets (continued)
(i)
Financial assets measured subsequently at amortized cost (continued)
Interest income is recognized using the effective interest method for financial assets measured subsequently at amortized 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 recognized by applying the effective interest rate to the amortized 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 recognized 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.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~ ~~amounts in millions, except per share data and except otherwise stated)~~
3.
~~SIGNIFICANT ACCOUNTING POLICIES (continued)~~
~~(k)~~
~~Financial instruments (continued)~~
~~Financial assets (continued)~~
~~Classification and subsequent measurement of financial assets (upon application of IFRS 9 in accordance with transition in note 2.2) (continued)~~

(ii)
Equity instruments designated as ~~at FVTOCI~~of fair value through other comprehensive income (“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 recognized by an acquirer in a business combination to which IFRS 3, ““Business ~~Combinations”~~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 recognized 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.
(iii)
Financial assets at FVTPL
Financial assets that do not meet the criteria for being measured at amortized cost or FVTOCI or designated as FVTOCI are measured at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognized in profit or loss. The net gain or loss recognized in profit or loss includes any dividend or interest earned on the financial asset and is included in the “investment income” line item.
Impairment of financial assets ~~(upon application of~~and other items subject to impairment assessment under IFRS 9, ~~with transitions in accordance with note 2.2)~~“Financial Instruments” (“IFRS 9”)
The Group ~~recognizes a loss allowance for~~performs impairment assessment under ECL model on financial assets ~~which are subject to impairment under IFRS 9~~ (including accounts receivable, ~~and~~ financial assets included in prepayments and other current assets, short-term bank deposit, restricted cash, cash and cash equivalents) and other items (contract assets) ~~and contract assets.~~which are subject to impairment assessment under IFRS 9. 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, 12-month ECL (“12m ~~ECL~~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.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(k)
Financial instruments (continued)
Financial assets (continued)
(iii)
Financial assets at FVTPL (continued)
Impairment of financial assets and other items subject to impairment assessment under IFRS 9, “Financial Instruments” (“IFRS 9”) (continued)
The Group always recognizes lifetime ECL for accounts receivable and contract assets. The ECL on these assets are assessed individually for debtors with significant balances or credit-impaired debtors, 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 recognizes lifetime ECL. The assessment of whether lifetime ECL should be recognized 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 of the reporting date with the risk of a default occurring on the financial instrument as of 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.
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.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~ ~~amounts in millions, except per share data and except otherwise stated)~~
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)~~

(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).

(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 reorganization; or

the disappearance of an active market for that financial asset because of financial difficulties.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(k)
Financial instruments (continued)
Financial assets (continued)
Impairment of financial assets and other items subject to impairment assessment under IFRS 9, “Financial Instruments” (“IFRS 9”) (continued)

(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. A write-off constitutes a derecognition event. Any subsequent recoveries are recognized 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~~and forward-looking information. The Group uses a practical expedient in estimating ECL on accounts receivable using a provision matrix taking into consideration historical credit loss experience, adjusted for forward-looking information that is available without undue cost or effort.
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~~Lifetime ECL ~~is measured~~for accounts receivable and contract assets are considered on a collective basis ~~or cater for cases where evidence at~~taking into consideration past due information and relevant credit information such as forward-looking macroeconomic information.
For collective assessment, the ~~individual instrument level may not be available, the financial instruments are grouped on~~Group takes into consideration the following ~~basis:~~characteristics when formulating the grouping:

~~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.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~ ~~amounts in millions, except per share data and except otherwise stated)~~
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)~~
The Group recognizes an impairment gain or loss in profit or loss for all financial instruments measured at amortized cost by adjusting their carrying amount, with the exception of accounts receivable and other receivables where the corresponding adjustment is recognized through a loss allowance account.
~~Classification and subsequent measurement of financial assets (before application of IFRS 9 on January 1, 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 recognized and derecognized 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 inavailable-for-sale~~ ~~listed equity securities are carried at fair value with any change in fair value being recognized in other comprehensive income and accumulated separately in equity. For investments inavailable-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 derecognized or impaired, the cumulative gain or loss previously recognized in other comprehensive income is recognized 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 recognized at fair value and thereafter stated at amortized 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.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(k)
Financial instruments (continued)

~~(k)~~
~~Financial instruments (continued)~~
Financial assets (continued)

~~Impairment of financial assets (before application of IFRS 9 on January 1, 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 reorganization; and~~
~~significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor/issuer.~~
The impairment loss for accounts and other receivables is measured as the difference between the asset’s carrying amount and the estimated future cash flows, discounted at the financial asset’s original effective interest rate where the effect of discounting is material, and is recognized 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 recognized 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 derecognizes 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 amortized cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized 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 AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~
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~~Company are recognized at the proceeds received, net of direct issue costs.
Financial liabilities
All financial liabilities are subsequently measured at amortized 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 amortized 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 consolidated statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the recognized amounts; and intends either to settle on a net basis, or to realize 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~~
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and ~~cash equivalents is restricted as to withdrawal.~~except otherwise stated)

~~(m)~~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~~The Group recognizes 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 recognized 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~~or 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 recognized over time during which the services are provided to customers.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~
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)~~
Otherwise, revenue is recognized at a point in time when the customer obtains control of the distinct good or service. As such, revenues from sales of equipment are recognize 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 recognized 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.
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.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(m)
Revenue from contract with customers (continued)
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 recognize 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 recognizes 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.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~
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~~telecommunications service agreements ~~for~~with the ~~Group’s telecommunications service,~~Group, are qualified as incremental costs. The Group recognizes such costs as an asset, included in other assets, if it expects to recover these costs. The asset so recognized is subsequently amortized 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 asset is subject to impairment review.
The Group applies the practical expedient of expensing all incremental costs to obtain a contract if these costs would otherwise have been fully amortized 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 recognizes 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 recognized is subsequently amortized 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 asset is subject to impairment review.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

3.
SIGNIFICANT ACCOUNTING POLICIES (continued)

(n)
~~Revenue recognition (prior to January 1, 2018)~~Leases
~~Before~~Effective January 1, 2019, the Group applied IFRS 16. IFRS 16 superseded IAS 17, “Leases” (“IAS 17”) and the related interpretations. The Group applied IFRS 16 retrospectively with the cumulative effect of initially applying this standard recognized at the date of initial application, January 1, 2019. As of January 1, 2019, the Group recognized additional lease liabilities and measured right-of-use assets at the carrying amounts as if IFRS 16 had been applied since the commencement dates, but discounted using the incremental borrowing rates of the relevant lessees at the date of initial application by applying IFRS 16 transition provisions. Any difference at the date of initial application was recognized in and decreased the opening reserves as of January 1, 2019 by RMB2,440 and comparative information was not restated. Accordingly, certain comparative information may not be comparable as comparative information was prepared under IAS 17 and the related interpretations.
Definition of a lease (upon application of IFRS ~~15,~~16)
A contract is, or contains, a lease if the ~~revenue recognition methods~~contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Group assesses whether a contract is or contains a lease based on the definition under IFRS 16 at inception or modification date. Such contract will not be reassessed unless the terms and conditions of the contract are subsequently changed.
The Group as a lessee (upon application of IFRS 16)
As a practical expedient, leases with similar characteristics are accounted on a portfolio basis when the Group reasonably expects that the effects on the consolidated financial statements would not differ materially from individual leases within the portfolio.
Allocation of consideration to components of a contract
For a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option. It also applies the recognition exemption for lease of low-value assets. Lease payments on short-term leases and leases of low-value assets are recognized as ~~follows:~~expenses on a straight-line basis over the lease term.
Right-of-use assets
The cost of right-of-use asset includes:

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 recognized 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 center 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~~amount of the ~~indicators~~initial measurement of ~~risks~~the lease liability;
any lease payments made at or before the commencement date, less any lease incentives received;
any initial direct costs incurred by the lessee; and ~~responsibilities exist~~
an estimate of costs to be incurred by the lessee in dismantling and removing the ~~arrangements with third parties,~~underlying assets, restoring the ~~Group~~site on which it is ~~acting as a principal and have exposure~~located or restoring the underlying asset to the ~~significant risks~~condition required by the terms and ~~rewards associated with the rendering of services or the sale of applications, and revenues for these services are recognized on a gross basis. If majority~~conditions 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 recognized on a net basis.~~
~~Sale of equipment is recognized on delivery of the equipment to customers and when the significant risks and rewards of ownership and title have been transferred to the customers.~~lease.
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 recognizes 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 recognized based upon the actual usage of such services.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

3.
SIGNIFICANT ACCOUNTING POLICIES (continued)

~~(o)~~(n)
~~Leasing~~Leases (continued)
~~Leases~~
The Group as a lessee (upon application of IFRS 16) (continued)
Right-of-use assets (continued)
Right-of-use assets are ~~classified as finance leases whenever~~measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities other than adjustments to lease liabilities resulting from Covid-19-related rent concessions in which the ~~terms~~Group applied the practical expedient.
Right-of-use assets in which the Group is reasonably certain to obtain ownership of the underlying leased assets at the end of the lease ~~transfer substantially all the risks and rewards of ownership~~term is depreciated from commencement date to the ~~lessee.~~ end of the useful life. Otherwise, right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.
The Group presents right-of-use assets as a separate line item on the consolidated statement of financial position.
Lease liabilities
At the commencement date of a lease, the Group recognizes and measures the lease liability at the present value of lease payments that are unpaid at that date. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable.
The lease payments include:
fixed payments (including in-substance fixed payments) less any lease incentives receivable;
variable lease payments that depend on an index or a rate;
the exercise price of a purchase option reasonably certain to be exercised by the Group; and
payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate the lease.
Variable lease payments that depend on an index or a rate are initially measured using the index or rate as of the commencement date. Variable lease payments that do not depend on an index or a rate are not included in the measurement of lease liabilities and right-of-use assets, and are recognized as expense in the period on which the event or condition that triggers the payment occurs.
After the commencement date, lease liabilities are adjusted by interest accretion and lease payments.
The Group remeasures lease liabilities (and makes a corresponding adjustment to the related right-of-use assets) whenever:
the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the related lease liability is remeasured by discounting the revised lease payments using a revised discount rate at the date of assessment.
the lease payments change due to changes in market rental rates following a market rent review, in which cases the related lease liability is remeasured by discounting the revised lease payments using the initial discount rate.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All ~~other leases are classified as operating leases.~~Renminbiamounts in millions, except per share data and except otherwise stated)
3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(n)
Leases (continued)
The Group as ~~lessor~~a lessee (upon application of IFRS 16) (continued)
Lease ~~income from operating~~modifications
Except for Covid-19-related rent concessions in which the Group applied the practical expedient, the Group accounts for a lease modification as a separate lease if:
the modification increases the scope of the lease by adding the right to use one or more underlying assets; and
the consideration for the leases increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract.
For a lease modification that is ~~recognized over~~not accounted for as a separate lease, the Group remeasures the lease liability based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.
The Group accounts for the remeasurement of lease liabilities by making corresponding adjustments to the relevant right-of-use asset. When the modified contract contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the modified contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.
Covid-19-related rent concessions
In relation to rent concessions that occurred as a direct consequence of the Covid-19 pandemic, the Group has elected to apply the practical expedient not to assess whether the change is a lease modification if all of the following conditions are met:
the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;
any reduction in lease payments affects only payments originally due on or before 30 June 2021; and
there is no substantive change to other terms and conditions of the lease.
As a result of applying the practical expedient, the Group accounts for changes in lease payments resulting from rent concessions the same way it would account for the changes applying IFRS 16 if the changes were not a lease modification. Forgiveness or waiver of lease payments are accounted for as variable lease payments. The related lease liabilities are adjusted to reflect the amounts forgiven or waived with a corresponding adjustment recognised in the profit or loss in the period in which the event occurs.
The Group as lessee(prior to January 1, 2019)
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 recognized 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.
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.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)

~~(p)~~3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(n)
Leases (continued)
The Group as a lessor
Classification and measurement of leases
Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards incidental to ownership of an underlying asset to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
Amounts due from lessees under finance leases are recognized as receivables at commencement date at amounts equal to net investments in the leases, measured using the interest rate implicit in the respective leases. Initial direct costs (other than those incurred by manufacturer or dealer lessors) are included in the initial measurement of the net investments in the leases. Interest income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.
Rental income from operating leases is recognized in profit or loss on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset, and such costs are recognized as an expense on a straight-line basis over the lease term. Upon application of IFRS 16 on January 1, 2019, variable lease payments for operating leases that depend on an index or a rate are estimated and included in the total lease payments to be recognized on a straight-line basis over the lease term. Variable lease payments that do not depend on an index or a rate are recognized as income when they arise.
The Group as a lessor (upon application of IFRS 16)
Allocation of consideration to components of a contract
When a contract includes both leases and non-lease components, the Group applies IFRS 15 to allocate consideration in a contract to lease and non-lease components. Non-lease components are separated from lease component on the basis of their relative stand-alone selling prices.
Refundable rental deposits
Refundable rental deposits received are accounted under IFRS 9 and initially measured at fair value. Adjustments to fair value at initial recognition are considered as additional lease payments from lessees.
Sublease
When the Group is an intermediate lessor, it accounts for the head lease and the sublease as two separate contracts. The sub-lease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.
Lease modification
Changes in considerations of lease contracts that were not part of the original terms and conditions are accounted for as lease modifications, including lease incentives provided through forgiveness or reduction of rentals.
The Group accounts for a modification to an operating lease as a new lease from the effective date of the modification, considering any prepaid or accrued lease payments relating to the original lease as part of the lease payments for the new lease.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(o)
Net finance costs
Net finance costs comprise interest income on bank deposits, interest costs on borrowings, interest expense on lease liabilities and foreign exchange gains and losses. Interest income from bank deposits is recognized 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 capitalized 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)~~(p)
Research and development expense
Research and development expenditure is expensed as ~~incurred.~~incurred if the criteria of recognition as intangible assets were not met. For the years ended December 31, ~~2016, 2017~~2018, 2019 and ~~2018,~~2020, research and development related personnel expenses amounted to RMB1,327, RMB1,950 and RMB2,392, and research and development related depreciation amounted to RMB110, RMB141 and RMB130, respectively. In addition, other research and development expense for the years ended December 31, 2018, 2019 and 2020 was ~~RMB825, RMB1,088~~RMB1,341, RMB2,105 and ~~RMB 1,341,~~RMB2,215, respectively.

~~(r)~~(q)
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 recognized in profit or loss as incurred. Further information is set out in Note ~~38.~~40.
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 isre-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 ~~39.~~
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~
41.

3.(r)
~~SIGNIFICANT ACCOUNTING POLICIES (continued)~~
~~(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 recognized until there is reasonable assurance that:

~~(i)~~
~~the Group will comply with all the conditions attaching to them; and~~
the Group will comply with all the conditions attaching to them; and

~~(ii)~~
~~the grants will be received.~~
the grants will be received.
Government grants that compensate expenses incurred are recognized in the consolidated statement of comprehensive income in the same periods in which the expenses are incurred.
Government grants relating to assets are recognized 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.

~~(t)~~(s)
Provisions and contingent liabilities
A provision is recognized in the consolidated statement of financial position when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation 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 ornon-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)

~~(u)~~3.
~~Value-added tax~~SIGNIFICANT ACCOUNTING POLICIES (continued)
~~Under current PRC tax rules and regulations, output~~
(t)
Value-added tax (“VAT”)
Output VAT rate for basic telecommunications services (including voice communication, lease or sale of network resources) is 9% since April 1, 2019, or 10% ,between May 1, 2018 and April 1, 2019, or 11% before May 1, 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 13% since April 1, 2019, 16%, between May 1, 2018 and April 1, 2019, or 17% before May 1, 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 13% since April 1, 2019, or 3% to 16%, between May 1, 2018 and April 1, 2019, or 3% to 17% before May 1, 2018.
Output VAT is excluded from operating revenues while input VAT, which is incurred as a result of the Company’s receipt of services and purchases of telecommunications equipment and materials, 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, and the net amount of VAT recoverable or payable of branches and subsidiaries are not offset at the consolidation level. Such net amount of VAT recoverable or payable is recorded in the line item of prepayments and other current assets and accrued expenses and other payables, respectively on the face of consolidated statements of financial position.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~

3.(u)
~~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 recognized in profit or loss except to the extent that it relates to items recognized in other comprehensive income, or directly in equity, in which case the relevant amounts of tax are recognized 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 realized 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 recognized in other comprehensive income, in such case the effect of a change in tax rate is also recognized in other comprehensive income.
A deferred tax asset is recognized only to the extent that it is probable that future taxable income will be available against which the asset can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax liabilities are recognized 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.
For the purposes of measuring deferred tax for leasing transactions in which the Group recognizes the right-of-use assets and the related lease liabilities, the Group first determines whether the tax deductions are attributable to the right-of-use assets or the lease liabilities.
The tax deductions of the Group’s leasing transactions are attributable to the lease liabilities. The Group applies IAS 12, “Income Taxes” requirements to the leasing transaction as a whole. Temporary differences relating to right-of-use assets and lease liabilities are assessed on a net basis. Excess of depreciation on right-of-use assets over the lease payments for the principal portion of lease liabilities resulting in net deductible temporary differences.

~~(w)~~(v)
Dividends
Dividends are recognized as a liability in the period in which they are declared.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)

~~(x)~~3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(w)
Related parties

(a)
A person, or a close member of that person’s family, is related to the Group if that person:

(i)
has control or joint control over the Group;

(ii)
has significant influence over the Group; or

(iii)
is a member of the key management personnel of the Group or the Group’s parent.

(b)
An entity is related to the Group if any of the following conditions applies:

(i)
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);

(ii)
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.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~

3.(x)
~~SIGNIFICANT ACCOUNTING POLICIES (continued)~~
~~(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 resource and assess performance of the segment. For the periods presented, management has determined that the Group has one operating segment as the Group is only engaged in the integrated telecommunications business. The Group’s assets located outside mainland China and operating revenues derived from activities outside mainland China are less than 10% of the Group’s assets and operating revenues, respectively. No geographical area information has been presented as such amount is immaterial. No single external customer accounts for 10% or more of the Group’s operating revenues.

4.
CASH AND CASH EQUIVALENTS

   December 31,    December 31,
   2017    2018    2019    2020
   RMB    RMB    RMB    RMB
Cash at bank and in hand
   17,763    14,937    20,006    23,193
Time deposits with original maturity within three months
   1,647    1,729    785    491








   19,410    16,666    20,791    23,684








CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)

5.
ACCOUNTS RECEIVABLE, NET
Accounts receivable, net, are analyzed as follows:

   December 31,    December 31,
   Note 2017 2018    Note 2019 2020
   RMB RMB
RMB

RMB

Third parties
   23,762 23,308

24,438

23,688

China Telecom Group
   (i ) 1,502 1,327

(i
)

1,188

1,784

China Tower (See definition in Note 13)
   5 10
China Tower (See definition in Note 14)


5

23

Other telecommunications operators in the PRC
   669 510

550

441





   25,938 25,155

26,181

25,936

Less: Allowance for credit losses
   (3,842 ) (4,680 )

(4,692
)

(4,434
)




   22,096 20,475

21,489

21,502





Note:
(i)
China Telecommunications Corporation together with its subsidiaries other than the Group are referred to as “China Telecom Group”.
As of January 1, 2019, December 31, ~~2018~~2019 and ~~January 1, 2018,~~2020, the gross carrying amounts of accounts receivable from contracts with customers amounted to RMB25,155, RMB26,087 and ~~RMB25,342,~~RMB25,836, respectively.
Aging analysis of accounts receivable from telephone and Internet subscribers based on the billing dates is as follows:

   December 31,
   2017 2018
   RMB RMB
Current, within 1 month
   9,323 8,376
1 to 3 months
   2,607 2,117
4 to 12 months
   1,780 1,932
More than 12 months
   878 943


   14,588 13,368
Less: Allowance for credit losses
   (2,603 ) (2,898 )


   11,985 10,470


~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~
5.
~~ACCOUNTS RECEIVABLE, NET (continued)~~
   December 31,
   2019 2020
   RMB RMB
Current, within 1 month


7,545

7,068

1 to 3 months


1,777

1,601

4 to 12 months


1,822

1,481

More than 12 months


1,002

921





12,146

11,071

Less: Allowance for credit losses


(2,803
)

(2,438
)




9,343

8,633



Aging analysis of accounts receivable from other telecommunications operators and enterprise customers based on dates of rendering of services is as follows:

   31 December    December 31,
   2017 2018    2019 2020
   RMB RMB    RMB RMB
Current, within 1 month
   4,421 3,318

4,701

5,331

1 to 3 months
   1,973 2,300

2,964

2,785

4 to 12 months
   2,644 3,994

3,768

3,801

More than 12 months
   2,312 2,175

2,602

2,948





   11,350 11,787

14,035

14,865

Less: Allowance for credit losses
   (1,239 ) (1,782 )

(1,889
)

(1,996
)




   10,111 10,005

12,146

12,869





As of December 31, ~~2018,~~2019 and 2020, included in the net balance of the Group’s accounts receivable are debtors with aggregate carrying amount of ~~RMB2,503~~RMB1,936 and RMB1,694 respectively, which are past due as of the reporting date.
~~Aging analysis of accounts receivable that are not impaired as of December 31, 2017 is as follows:~~
~~December 31,~~
~~2017~~
~~RMB~~
~~Not past due~~
~~19,623~~
~~Less than 1 month past due~~
~~1,518~~
~~1 to 3 months past due~~
~~955~~
~~Amounts past due~~
~~2,473~~
~~22,096~~
~~The following table summarizes the changes in allowance for doubtful debts in 2016 and 2017:~~

   Year ended
December 31,
   2016 2017
   RMB RMB
At beginning of year
   2,935 3,402
Impairment losses for doubtful debts
   2,203 1,962
Accounts receivable written off
   (1,736 ) (1,522 )


At end of year
   3,402 3,842


Details of impairment assessment of accounts receivable for the year ended December 31, ~~2018~~2019 and 2020 are set out in note ~~34.~~36.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)

6.
CONTRACT ASSETS

   December 31,
   January 1,
2018*    December 31,
2018    2019    2020
   RMB    RMB    RMB    RMB
Third parties
   480    454    447    555
China Telecom Group
   176    24    27    49








   656    478    474    604








* The amounts in this column are after the adjustments from the application of IFRS 9 and 15.As at January 1, 2019, contract assets amounted to RMB478.
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 realize them in its normal operating cycle.
7.
INVENTORIES
   December 31,
   2019    2020
   RMB    RMB
Materials and supplies
   577    484
Goods for resale
   2,303    2,833




   2,880    3,317




8.
PREPAYMENTS AND OTHER CURRENT ASSETS
   December 31,
   2019    2020
   RMB    RMB
Amounts due from China Telecom Group
   1,233    1,189
Amounts due from China Tower (See definition in Note 14)
   192    138
Amounts due from other telecommunications operators in the PRC
   352    204
Prepayments in connection with construction work and equipment purchases
   3,352    6,080
Prepaid expenses and deposits
   2,993    2,994
Value-added tax recoverable
   8,803    8,501
Other receivables
   5,294    6,061




   22,219    25,167




CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

7.9.
~~INVENTORIES~~

   December 31,
   2017    2018
   RMB    RMB
Materials and supplies
   1,071    1,012
Goods for resale
   3,052    3,820




   4,123    4,832




8.
~~PREPAYMENTS AND OTHER CURRENT ASSETS~~

   December 31,
   Note 2017    2018
   RMB    RMB
Amounts due from China Telecom Group
   774    1,035
Amounts due from China Tower
   2,152    293
Amounts due from other telecommunications operators in the PRC
   369    333
Prepayments in connection with construction work and equipment purchases
   2,542    2,752
Prepaid expenses and deposits
   3,486    3,628
Value-added tax recoverable
   7,186    8,618
Other receivables
   (i ) 5,619    6,960




   22,128    23,619




~~Note:~~
~~(i)~~
~~Other receivables as of December 31, 2018 include the unpaid remaining consideration of the contribution fromnon-controlling~~ ~~interest of a subsidiary of the Group amounting to RMB90, which was received in January 2019.~~
9.
PROPERTY, PLANT AND EQUIPMENT, NET

   Buildings and
improve-
ments Telecom-
munications
network plant
and
equipment Furniture,
fixture, motor
vehicles and
other
equipment Total    Buildings and
improvements Telecom-munications
network plant
and
equipment Furniture,
fixture, motor
vehicles and
other
equipment Total
   RMB RMB RMB RMB    RMB RMB RMB RMB
Cost/Deemed cost:

Balance at January 1, 2017
   99,509 823,836 30,114 953,459
Additions
   583 532 410 1,525
Transferred from construction in progress
   1,967 87,129 1,707 90,803
Retirement and disposal
   (709 ) (68,719 ) (1,936 ) (71,364 )
Disposal of a subsidiary
   —   (33 ) —   (33 )
Reclassification
   (18 ) (272 ) 290 —


Balance at December 31, 2017
   101,332 842,473 30,585 974,390
Balance at January 1, 2019
   102,541 854,382 31,558 988,481
Additions
   712 512 306 1,530    554 274 277 1,105
Transferred from construction in progress
   1,454 71,704 1,721 74,879    2,060 74,157 1,644 77,861
Retirement and disposal
   (860 ) (59,822 ) (1,636 ) (62,318 )    (751 ) (62,560 ) (2,419 ) (65,730 )
Reclassification
   (97 ) (485 ) 582 —      (39 ) (536 ) 575 —




Balance at December 31, 2018
   102,541 854,382 31,558 988,481
Balance at December 31, 2019
   104,365 865,717 31,635 1,001,717


Additions
   425 139 253 817
Transferred from construction in progress
   2,249 84,567 1,791 88,607
Retirement and disposal
   (1,435 ) (53,500 ) (3,039 ) (57,974 )
Reclassification
   (10 ) (512 ) 522 —


Balance at December 31, 2020
   105,594 896,411 31,162 1,033,167




Accumulated depreciation and impairment:

Balance at January 1, 2017
   (51,018 ) (490,917 ) (21,853 ) (563,788 )
Depreciation and impairment charge for the year
   (4,326 ) (63,903 ) (2,145 ) (70,374 )
Written back on retirement and disposal
   620 63,553 1,839 66,012
Disposal of a subsidiary
   —   17 —   17
Reclassification
   18 184 (202 ) —


Balance at December 31, 2017
   (54,706 ) (491,066 ) (22,361 ) (568,133 )


Balance at January 1, 2019
   (58,300 ) (498,986 ) (23,400 ) (580,686 )
Depreciation charge for the year
   (4,370 ) (63,878 ) (2,135 ) (70,383 )    (4,185 ) (64,672 ) (2,101 ) (70,958 )
Written back on retirement and disposal
   750 55,519 1,561 57,830    681 56,943 2,311 59,935
Reclassification
   26 439 (465 ) —      19 358 (377 ) —




Balance at December 31, 2018
   (58,300 ) (498,986 ) (23,400 ) (580,686 )
Balance at December 31, 2019
   (61,785 ) (506,357 ) (23,567 ) (591,709 )




Net book value at December 31, 2018
   44,241 355,396 8,158 407,795
Depreciation charge for the year
   (4,196 ) (64,208 ) (2,038 ) (70,442 )
Provision for impairment loss
   —   (5,027 ) (15 ) (5,042 )
Written back on retirement and disposal
   1,324 48,451 2,856 52,631
Reclassification
   8 401 (409 ) —




Net book value at December 31, 2017
   46,626 351,407 8,224 406,257
Balance at December 31, 2020
   (64,649 ) (526,740 ) (23,173 ) (614,562 )




Net book value at December 31, 2020
   40,945 369,671 7,989 418,605


Net book value at December 31, 2019
   42,580 359,360 8,068 410,008


As a result of the continuing optimization of the Group’s 4G mobile network coverage and the scale deployment of the Group’s 5G mobile network, the utilisation of the Group’s 3G mobile network have been decreasing rapidly. For the year ended December 31, 2020, 3G handset data traffic only accounted for a low proportion of the Group’s total handset data traffic. As a result, the Group has identified an impairment indicator on the 3G specific mobile network assets (the “3G Assets”). Given the Group has made a commitment in the year to gradually terminate its use of 3G Assets in the near future, the Group performed an impairment test on the 3G Assets on the basis of each individual asset as of December 31, 2020. The recoverable amount of the 3G Assets was determined based on their fair value less costs of disposal, which was nominal. As a result, for the year ended December 31, 2020, an impairment loss on property, plant and equipment of RMB5,042 (2019: nil) was recognized.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

10.
CONSTRUCTION IN PROGRESS

   RMB
Balance at January 1, ~~2017~~2019
   ~~80,386~~66,644
Additions
   ~~88,359~~76,870
Transferred to property, plant and equipment
   (~~90,803~~77,861 )
Transferred to intangible assets
   (~~4,836~~6,447 )


Balance at December 31, ~~2017~~2019
   ~~73,106~~59,206

Additions
   ~~74,457~~84,145
Transferred to property, plant and equipment
   (~~74,879~~88,607 )
Transferred to intangible assets
   (~~6,040~~6,319 )


Balance at December 31, ~~2018~~2020
   ~~66,644~~48,425


11.
~~GOODWILL~~RIGHT-OF-USE ASSETS

   December 31,
   2017    2018
   RMB    RMB
Cost:

Goodwill arising from acquisition of CDMA business
   29,920    29,922





Leasehold
Lands
   Buildings
Telecommunications
towers and
related assets
   Equipment    Others    Total
   RMB    RMB    RMB    RMB    RMB    RMB
As of December 31, 2020

Carrying amount
   20,441    8,672    18,866    11,230    248    59,457
As of December 31, 2019

Carrying amount
   20,952    8,289    23,740    8,361    207    61,549
For the year ended December 31, 2020
      ��
Depreciation charge
   745    3,626    7,642    2,151    78    14,242
For the year ended December 31, 2019

Depreciation charge
   732    2,968    6,966    1,612    65    12,343












For the year ended December 31, 2020, expenses relating to short-term leases amounting to RMB1,077 (2019: RMB939, including those relating to other leases with lease terms ended within 12 months of the date of initial application of IFRS 16), expenses relating to leases of low value assets (excluding short-term leases of low value assets) amounting to RMB46 (2019: RMB45) and variable lease payments not included in the measurement of lease liabilities amounting to RMB5,151 (2019: RMB4,640), are recognized in profit or loss.
For the year ended December 31, 2020, total cash outflow for leases is RMB20,798 (2019: RMB18,240), and additions to right-of-use assets are RMB13,561 (2019: RMB9,172).
The Group leases telecommunications towers and related assets, land and buildings, equipment and other assets for its operations. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. In determining the lease term and assessing the length of the non-cancellable period, the Group applies the definition of a contract and determines the period for which the contract is enforceable.
The Group regularly entered into short-term leases for buildings and other assets. As of December 31, 2020 and 2019, the portfolio of short-term leases is similar to the portfolio of short-term leases to which the short-term lease expense disclosed above in this note.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
12.
GOODWILL
   December 31,
   2019    2020
   RMB    RMB
Cost:

Goodwill arising from acquisition of CDMA business
   29,923    29,920




On October 1, 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”~~“Unicom Group”). The purchase price of the business combination was RMB43,800, which was fully settled as of December 31, 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 due from ~~China Unicom.~~Unicom Group. This amount was subsequently settled by ~~China~~ Unicom Group in 2009. The business combination was accounted for using the purchase method.
The goodwill recognized in the business combination is attributable to the skills and technical talent of the acquired business’s workforce, and the synergies expected to be achieved from integrating and combining the CDMA mobile communication business into the Group’s telecommunications business.
For the purpose of goodwill impairment testing, the goodwill arising from the acquisition of CDMA business was allocated to the appropriate cash-generating unit of the Group, which is the Group’s telecommunications business. The recoverable amount of the Group’s telecommunications business is estimated based on the value in use model, which considers the Group’s financial budgets covering a five-year period and apre-tax discount rate of ~~9.4% (2017: 9.8%~~9.6% (2019: 9.2%). Cash flows beyond the five-year period are ~~projected to perpetuity at annual~~extrapolated using a steady 1.5% growth rate (2019: 1.5%). The financial budgets, growth rate and discount rate have been reassessed as of ~~1.5%.~~December 31, 2020 taking into consideration higher degree of estimation uncertainties in the current year due to uncertainty on how the Covid-19 pandemic may progress and evolve and volatility in financial markets. 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, the average revenue per subscriber and ~~gross margin.~~the amount of operating cost. Management determined the number of subscribers, the average revenue per subscriber and ~~gross margin~~the amount of operating cost based on historical trends and financial information and operational data.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

~~12.~~13.
INTANGIBLE ASSETS

   Software
   RMB
Cost:

Balance at January 1, ~~2017~~2019
   ~~29,818~~37,314
Additions
   ~~175~~624
Transferred from construction in progress
   ~~4,836~~6,447
Disposals
   (~~268~~ )
~~Disposal of a subsidiary~~
~~(11~~591 )


Balance at December 31, ~~2017~~2019
   ~~34,550~~43,794

Additions
   ~~269~~1,489
Transferred from construction in progress
   ~~6,040~~6,319
Disposals
   (~~3,545~~748 )


Balance at December 31, ~~2018~~2020
   ~~37,314~~50,854


Accumulated amortization and impairment:

Balance at January 1, ~~2017~~2019
   (~~18,574~~23,153 )
Amortization charge for the year
   (~~3,843~~4,844 )
Written back on disposals
   ~~250~~
~~Disposal of a subsidiary~~
8552


Balance at December 31, ~~2017~~2019
   (~~22,159~~27,445 )


Amortization charge for the year
   (~~4,366~~5,556 )
Written back on disposals
   ~~3,372~~655


Balance at December 31, ~~2018~~2020
   (~~23,153~~32,346 )


Net book value at December 31, ~~2018~~2020
   ~~14,161~~18,508


Net book value at December 31, ~~2017~~2019
   ~~12,391~~16,349


~~13.~~14.
INTERESTS IN ASSOCIATES

   December 31,    December 31,
   2017 2018    2019    2020
   RMB RMB    RMB    RMB
Unlisted equity investments, at cost
   36,648 36,933
Cost of investment in associates
   37,173    37,168
Share of post-acquisition changes in net assets
   (922 ) 1,118    2,019    3,135






   35,726 38,051    39,192    40,303






Fair value of listed investments
   N/A 46,797    55,601    34,625






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 ancillary facilities
Shanghai Information Investment Incorporation (Note (ii))
   24.0 % 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 August 8, 2018. Income from investments in associates for the year ended December 31, 2018 includes: (a) aone-off gain amounting to RMB1,170 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~~disposal of telecommunications towers and related assets (the “Tower Assets ~~Disposal;~~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.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

~~13.~~14.
INTERESTS IN ASSOCIATES (continued)

Summarized 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
Corporation Limited

China Tower
   December 31,    December 31,
   2017 2018    2019 2020
   RMB RMB    RMB RMB
Current assets
   30,517 31,799    40,995 43,204
Non-current assets
   292,126 283,565    297,072 294,176
Current liabilities
   150,438 114,759    128,364 106,635
Non-current liabilities
   44,710 20,103    27,142 44,499
     2017     2018      2019 2020
   RMB RMB    RMB RMB
Operating revenues
   68,665 71,819    76,428 81,099
Profit for the year
   1,943 2,650    5,221 6,427
Other comprehensive income for the year
   —   —      — —
Total comprehensive income for the year
   1,943 2,650    5,221 6,427
Dividend received from the associate
   —   —
Dividend received from China Tower
   81 525

Reconcile to the Group’s interests in the associate:


   December 31,    December 31,
   2017 2018    2019 2020
   RMB RMB    RMB RMB
Net assets of the associate
   127,495 180,502
Non-controlling interests of the associate
   —   —
The Group’s effective interest in the associate
   27.9 % 20.5 %
The Group’s share of net assets of the associate
   35,571 37,003
Net assets of China Tower
   182,561 186,246
Non-controlling interests of China Tower
   (2 ) (1 )
The Group’s effective interest in China Tower
   20.5 % 20.5 %
The Group’s share of net assets of China Tower
   37,425 38,180
Adjustment for the remaining balance of the deferred gain from the Tower Assets Disposal
   (1,580 ) (1,013 )    (865 ) (717 )




Carrying amount of the interest in the associate in the consolidated financial statements of the Group
   33,991 35,990
Carrying amount of the interest in China Tower in the consolidated financial statements of the Group
   36,560 37,463





Shanghai Information
Investment Incorporation

   December 31,
   2017 2018
   RMB RMB
Current assets
   7,146 7,181
Non-current assets
   8,049 8,592
Current liabilities
   5,835 6,615
Non-current liabilities
   2,673 1,985
   2017 2018
   RMB RMB
Operating revenues
   4,313 4,337
Profit for the year
   563 586
Other comprehensive income for the year
   22 (29 )
Total comprehensive income for the year
   585 557
Dividend received from the associate
   9 9

Reconcile to the Group’s interests in the associate:


   December 31,
   2017 2018
   RMB RMB
Net assets of the associate
   6,687 7,173
Non-controlling interests of the associate
   (2,004 ) (2,180 )
The Group’s effective interest in the associate
   24.0 % 24.0 %
The Group’s share of net assets of the associate
   1,124 1,198


Carrying amount of the interest in the associate in the consolidated financial statements of the Group
   1,124 1,198


Shanghai Info-investment
   December 31,
   2019 2020
   RMB RMB
Current assets
   4,292 4,752
Non-current assets
   5,203 5,878
Current liabilities
   2,494 2,124
Non-current liabilities
   787 1,803
   2019 2020
   RMB RMB
Operating revenues
   3,214 982
Profit for the year
   1,158 641
Other comprehensive income for the year
   (7 ) (17 )
Total comprehensive income for the year
   1,151 624
Dividend received from Shanghai Info-investment
   9 14

Reconcile to the Group’s interests in the associate:


   December 31,
   2019 2020
   RMB RMB
Net assets of Shanghai Info-investment
   6,214 6,703
Non-controlling interests of Shanghai Info-investment
   (144 ) (83 )
The Group’s effective interest in Shanghai Info-investment
   24.0 % 24.0 %
The Group’s share of net assets of Shanghai Info-investment
   1,457 1,589


Carrying amount of the interest in Shanghai Info-investment in the consolidated financial statements of the Group
   1,457 1,589


CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

~~13.~~14.
INTERESTS IN ASSOCIATES (continued)

Aggregate financial information of the Group’s associates that are not individually material is disclosed below:

   2017    2018
   RMB    RMB
The Group’s share of profit of these associates
   36    14
The Group’s share of other comprehensive income of these associates
   2    —




The Group’s share of total comprehensive income of these associates
   38    14




   December 31,
   2017    2018
   RMB    RMB
Aggregate carrying amount of interests in these associates in the consolidated financial statements of the Group
   611    863




   2019    2020
   RMB    RMB
The Group’s share of profit of these associates
   85    86




The Group’s share of total comprehensive income of these associates
   85    86




   December 31,
   2019    2020
   RMB    RMB
Aggregate carrying amount of interests in these associates in the consolidated financial statements of the Group
   1,175    1,251




~~14.~~15.
~~INVESTMENTS~~
~~December 31,~~
~~2017~~
~~RMB~~
~~Available-for-sale~~ ~~listed equity securities~~
~~969~~
~~Other unlisted equity investments~~
~~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.
~~15.~~
EQUITY INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

~~Notes~~ ~~December 31,~~
~~2018~~
~~RMB~~
~~Equity securities listed in the mainland China~~
~~(i)~~ ~~638~~
~~Unlisted equity securities~~
~~(ii)~~ ~~214~~
~~852~~
   December 31,
   Notes 2019    2020
   RMB    RMB
Equity securities listed in the mainland China
   (i ) 1,228    838
Unlisted equity securities
   (ii ) 230    235




   1,458    1,073




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 of FVTOCI as they believe that recognizing 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 realizing 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 of FVTOCI as they believe that the Group will hold these investments for long-term strategic purposes.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

16.
DEFERRED TAX ASSETS AND LIABILITIES
The components of deferred tax assets and deferred tax liabilities recognized in the consolidated statement of financial position and the movements are as follows:

   Assets    Liabilities Net Balance    Assets    Liabilities Net Balance
   2018    2017    2018 2017 2018 2017    2019    2020    2019 2020 2019 2020
   RMB    RMB    RMB RMB RMB RMB    RMB    RMB    RMB RMB RMB RMB
Provisions and impairment losses, primarily for credit losses
   1,925    1,626    —   —   1,925 1,626    1,953    2,069    —   —   1,953 2,069
Property, plant and equipment, and others
   4,580    3,782    (13,022 ) (7,789 ) (8,442 ) (4,007 )    4,862    5,299    (18,831 ) (24,067 ) (13,969 ) (18,768 )
Right-of-use assets and lease liabilities
   744    791    —   —   744 791
Deferred revenues and installation costs
   39    71    (29 ) (52 ) 10 19    18    5    (13 ) (4 ) 5 1
Available-for-sale equity securities
   —      —      —   (169 ) —   (169 )
Equity instruments at fair value through other comprehensive income
   —      —      (87 ) —   (87 ) —      —      —      (234 ) (137 ) (234 ) (137 )












Deferred tax assets/(liabilities)
   6,544    5,479    (13,138 ) (8,010 ) (6,594 ) (2,531 )    7,577    8,164    (19,078 ) (24,208 ) (11,501 ) (16,044 )












   Balance at
January 1,
2016 Recognized
in consolidated
statement of
comprehensive
income Balance at
December 31,
2016
   RMB RMB RMB
Provisions and impairment losses, primarily for doubtful debts
   1,291 240 1,531
Property, plant and equipment, and others
   1,569 (2,575 ) (1,006 )
Deferred revenues and installation costs
   60 (25 ) 35
Available-for-sale equity securities
   (326 ) 57 (269 )


Net deferred tax assets
   2,594 (2,303 ) 291


   Balance at
January 1,
2017 Recognized
in consolidated
statement of
comprehensive
income Balance at
December 31,
2017
   RMB RMB RMB
Provisions and impairment losses, primarily for doubtful debts
   1,531 95 1,626
Property, plant and equipment, and others
   (1,006 ) (3,001 ) (4,007 )
Deferred revenues and installation costs
   35 (16 ) 19
Available-for-sale equity securities
   (269 ) 100 (169 )


Net deferred tax assets/(liabilities)
   291 (2,822 ) (2,531 )


   Balance at
January 1,
2018 Recognized
in consolidated
statement of
comprehensive
income Balance at
December 31,
2018
   RMB RMB RMB
Provisions and impairment losses, primarily for credit losses
   1,829 96 1,925
Property, plant and equipment, and others
   (5,073 ) (3,369 ) (8,442 )
Deferred revenues and installation costs
   19 (9 ) 10
Equity instruments at fair value through other comprehensive income
   (169 ) 82 (87 )


Net deferred tax liabilities
   (3,394 ) (3,200 ) (6,594 )


   Balance at
December 31,
2017 Changes
in
accounting
policies Recognized
in
consolidated
statement of
comprehensive
income Balance at
December 31,
2018    Balance at
December 31,
2018 Change in
accounting
policy    Recognized
in consolidated
statement of
comprehensive
income Balance at
December 31,
2019
   RMB RMB RMB RMB    RMB RMB    RMB RMB
Provisions and impairment losses, primarily for credit losses
   1,626 203 96 1,925    1,925 —      28 1,953
Property, plant and equipment, and others
   (4,007 ) (1,066 ) (3,369 ) (8,442 )    (8,442 ) —      (5,527 ) (13,969 )
Right-of-use assets and lease liabilities
   —   676    68 744
Deferred revenues and installation costs
   19 —   (9 ) 10    10 —      (5 ) 5
Available-for-sale equity securities
   (169 ) 169 —   —
Equity instruments at fair value through other comprehensive income
   —   (169 ) 82 (87 )    (87 ) —      (147 ) (234 )






Net deferred tax liabilities
   (2,531 ) (863 ) (3,200 ) (6,594 )    (6,594 ) 676    (5,583 ) (11,501 )






   Balance at
December 31,
2019 Recognized
in consolidated
statement of
comprehensive
income Balance at
December 31,
2020
   RMB RMB RMB
Provisions and impairment losses, primarily for credit losses
   1,953 116 2,069
Property, plant and equipment, and others
   (13,969 ) (4,799 ) (18,768 )
Right-of-use assets and lease liabilities
   744 47 791
Deferred revenues and installation costs
   5 (4 ) 1
Equity instruments at fair value through other comprehensive income
   (234 ) 97 (137 )


Net deferred tax liabilities
   (11,501 ) (4,543 ) (16,044 )


CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

17.
OTHER ASSETS

   December 31,    December 31,
   Note 2017    2018    Note 2019    2020
   RMB    RMB    RMB    RMB
Contract costs
   (i ) —      1,287    (i ) 988    1,151
Installation fees
   228    124    56    16
Other long-term prepaid expenses
   3,121    3,429
Other long-term prepaid expenses and receivables
   3,643    5,385








   3,349    4,840    4,687    6,552








Note:
(i)
Contract costs capitalized as of December 31, ~~2018~~2019 and 2020 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 and the cost of installing terminal equipment at subscribers’ homes for the provision of Smart Family services of the Group. The amount of capitalized costs recognized in profit or loss during the ~~year~~years ended December 31, 2019 and 2020 was ~~RMB1,744.~~RMB1,367 and RMB1,234, respectively. There was no impairment in relation to the opening balance of capitalized costs or the costs capitalized during the year.

18.
JOINT OPERATION
On September 9, 2019, the Group entered into a framework cooperation agreement (the “Cooperation Agreement”) with China United Network Communications Corporation Limited (“China Unicom”) to co-build and co-share 5G access network. Pursuant to the Cooperation Agreement, the Group and China Unicom delineate and designate the regions to jointly construct and operate one 5G access network nationwide. In certain regions in which the 5G access network is constructed, operated and maintained by China Unicom, the Group operates its 5G business relying on China Unicom’s network, while in other regions in which the 5G access network is constructed, operated and maintained by the Group, China Unicom operates its 5G business relying on the Group’s network.
Pursuant to the Cooperation Agreement, the Group and China Unicom co-share 5G spectrum resources while the 5G core network is respectively constructed, operated and maintained by each party. Both parties jointly ensure a unified standard on network planning, construction, operation, maintenance and service quality in the 5G network co-build and co-share regions, and assure the same service level.
The 5G network co-build and co-share arrangement is agreed by the Group and China Unicom through coordination and promotion institution jointly established by both parties, in order to set up relevant mechanism, system and rules with unanimous consensus from both parties. The main function of such joint coordination and promotion institution is to carry out joint network planning and investment decision, project initiation and acceptance and other related works, such as the determination of the location of 5G base stations and types of equipment, and coordinate the operation and maintenance of 5G co-build and co-share network in order to ensure the effective implementation of the Cooperation Agreement. For example, the timing, scale and location of the 5G base station construction, selection of equipment and appointment of maintenance suppliers across all regions are all negotiated and agreed by both parties with unanimous consensus.
Under the joint operation, the business and branding of each party continue to operate independently and the subscribers belong to each party respectively. Revenues from each party’s subscribers are recognised by each party, cost and expenses are assumed by each party respectively, while assets constructed by each party and the relevant liabilities are recognised and assumed by each respective party.
19.
SHORT-TERM AND LONG-TERM DEBT
Short-term debt comprises:

   December 31,
   2017    2018
   RMB    RMB
Loans from banks – unsecured
   16,565    12,881
Super short-term commercial papers – unsecured
   18,745    27,992
Other loans – unsecured
   150    80
Loans from China Telecom Group – unsecured
   19,098    8,584




Total short-term debt
   54,558    49,537




   December 31,
   2019    2020
   RMB    RMB
Loans from banks—unsecured
   15,831    4,831
Super short-term commercial papers—unsecured
   19,995    11,999
Other loans—unsecured
   80    —
Loans from China Telecom Group—unsecured
   6,621    11,164




Total short-term debt
   42,527    27,994




CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
19.
SHORT-TERM AND LONG-TERM DEBT (continued)
The weighted average interest rate of the Group’s total short-term debt as of December 31, ~~2017~~2019 and ~~2018~~2020 was ~~4.0%~~2.9% per annum and ~~3.2%~~2.8% per annum, respectively. As of December 31, ~~2018,~~2020, the Group’s loans from banks and other loans bear interest at rates ranging from 3.3% to 4.4% (December 31, 2019: 3.5% to ~~4.6% (December 31, 2017: 3.5% to 7.3%~~4.4%) per annum, and are repayable within one year; as of December 31, ~~2018,~~2020, super short-term commercial papers bear interest at rates ranging from ~~2.1%~~1.6% to ~~3.3%~~2.5% (December 31, ~~2017: 4.1%~~2019: 1.9% to ~~4.2%~~2.2%) per annum, ~~and are repayable~~of which RMB8,999 was repaid in January 2021 while the remaining balance will be repaid by ~~July 26, 2019;~~March 12, 2021; the loans from China Telecom Group bear interest at rate of ~~3.5%~~3.1% (December 31, ~~2017:~~2019: 3.5%) per annum and are repayable within one year.
Long-term debt comprises:

      December 31,       December 31,

Interest rates and final maturity
   2017    2018
Interest rates and final maturity
   2019    2020
      RMB    RMB       RMB    RMB
Bank loans – unsecured

Bank loans—unsecured

Renminbi denominated (Note (i))
   Interest rates ranging from 1.08% to 7.04% per annum with maturities through 2036    9,148    8,455    Interest rates ranging from 1.08% to 1.20% per annum with maturities through 2036    7,738    6,975
US Dollars denominated
   Interest rates ranging from 1.00% to 8.30% per annum with maturities through 2048    370    336    Interest rates ranging from 1.25% to 2.00% per annum with maturities through 2028    288    224
Euro denominated
   Interest rate of 2.30% per annum with maturities through 2032    223    199    Interest rate of 2.30% per annum with maturities through 2032    173    152








      9,741    8,990       8,199    7,351
Other loans – unsecured

Other loans—unsecured

Renminbi denominated
      1    1       1    1
Loans from China Telecom Group – unsecured

Renminbi denominated (Note (ii))
      40,000    37,000
Medium-term note—unsecured (Note (ii))
      4,995    4,996
Company bonds – unsecured (Note (iii))
      —      2,000
Loans from China Telecom Group—unsecured

Renminbi denominated (Note (iv))
      23,300    11,000








Total long-term debt
      49,742    45,991       36,495    25,348
Less: Current portion
      (1,146 )    (1,139 )       (4,444 )    (1,126 )








Non-current portion
      48,596    44,852       32,051    24,222








Notes:
(i)
The Group obtained long-term RMB denominated government loans with below-market interest ~~rate~~rates ranging from 1.08% to 1.20% per annum through banks (the“Low-interest Loans”). The Group recognized 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 ~~the~~ face value of theLow-interest Loans was recognized as government grants in deferred revenue ~~at initial recognition~~ (Note ~~22)~~24).
(ii)
On January 22, 2019, the Group issued three-year RMB denominated medium-term note, amounting to RMB3,000, with interest rate of 3.42% per annum, and incurred issuing costs of RMB3. The medium-term note is unsecured and is repayable on January 21, 2022.
On March 19, 2019, the Group issued three-year RMB denominated medium-term note, amounting to RMB2,000, with interest rate of 3.41% per annum and incurred issuing costs of RMB3. The medium-term note is unsecured and is repayable on March 18, 2022.
(iii) On March 10, 2020, the Group issued three-year RMB denominated company bonds, amounting to RMB2,000, to qualified investors in Shanghai Stock Exchange, with interest rate of 2.90% per annum. The company bonds are unsecured and are payable on March 9, 2023.
(iv) On December 25, 2017, the Group obtained long-term RMB denominated loans, amounting to RMB40,000, from China Telecommunications Corporation, with interest rate of 3.8% per annum, which are repayable within 3 to 5 years. The Group partially repaid these loans amounting to RMB3,000, RMB13,700 and RMB12,300, respectively, in 2018, 2019 and 2020.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

~~18.~~19.
SHORT-TERM AND LONG-TERM DEBT (continued)

~~Notes: (continued)~~
~~(ii)~~
The Group obtained long-term RMB denominated loans with the interest rate of 3.8% per annum from China Telecommunications Corporation on December 25, 2017, which are repayable within 3 to 5 years. The Group partially repaid these loans amounting to RMB3,000 in 2018.
The aggregate maturities of the Group’s long-term debt subsequent to December 31, ~~2018~~2020 are as follows:

   RMB    RMB
2019
   1,139
2020
   18,091
2021
   1,029    1,126
2022
   20,992    17,081
2023
   923    3,009
2024
   984
2025
   952
Thereafter
   3,817    2,196




   45,991    25,348




The Group’s short-term and long-term debt do not contain any financial covenants. As of December 31, ~~2017~~2019 and ~~2018,~~2020, the Group had unutilized committed credit facilities amounting to ~~RMB154,793~~RMB245,847 and ~~RMB150,693~~RMB244,326, respectively.

~~19.~~20.
ACCOUNTS PAYABLE

   December 31,    December 31,
   2017    2018    2019    2020
   RMB    RMB    RMB    RMB
Third parties
   93,324    83,418    78,123    83,254
China Telecom Group
   22,682    20,983    19,531    19,272
China Tower
   2,611    2,850    4,312    4,344
Other telecommunications operators in the PRC
   704    636    650    708








   119,321    107,887    102,616    107,578








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.

~~20.~~21.
ACCRUED EXPENSES AND OTHER PAYABLES

   December 31,    December 31,
   Notes 2017    2018    Note 2019    2020
   RMB    RMB    RMB    RMB
Amounts due to China Telecom Group
   (i ) 1,838    2,171    6,069    11,279
Amounts due to China Tower
   1,374    1,246    1,261    1,192
Amounts due to other telecommunications operators in the PRC
   59    46    32    34
Accrued expenses
   (ii ) 24,864    33,811    34,628    36,885
Advanced payment received in respect of contribution from non-controlling interests
   (i) —      978
Value-added tax payable
   645    484    564    600
Customer deposits and receipts in advance
   69,915    5,739    5,962    5,807








   98,695    43,497    48,516    56,775








Notes:
(i)
~~Amounts due to China Telecom Group as of~~For the year ended 31 December ~~31, 2017 include the consideration of the Eighth Acquisition amounting to RMB87, which has been fully settled by June 30, 2018.~~
~~(ii)~~
2020, ~~Accrued expenses as of December 31, 2017 include the unpaid portion of consideration of the acquisition ofnon-controlling~~E-surfing ~~interest of~~Pay, a subsidiary of the ~~Group amounting to RMB119, which has been fully settled on January 23, 2018.~~Company, received RMB978 advanced payment in respect of contribution from non-controlling interests.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

~~21.~~22.
CONTRACT LIABILITIES

   December 31,
   January 1,
2018*    December 31,
2018    2019    2020
   RMB    RMB    RMB    RMB
Third parties
   62,001    55,638    54,225    63,629
China Telecom Group
   174    145    162    217
China Tower
   1    3








   62,175    55,783    54,388    63,849








*
~~The amounts in this column are after the adjustments from the application of IFRS 9 and 15.~~
As of January 1, 2019, contract liabilities amounted to RMB55,783. Majority of contract liabilities as of ~~January 1, 2018~~December 31, 2019 was recognized as operating revenues for the year ended December 31, ~~2018.~~2020.

~~22.~~23.
LEASE LIABILITIES
   December 31,
   2019 2020
   RMB RMB
Within one year
   11,569 13,192
Within a period of more than one year but not more than two years
   10,887 12,585
Within a period of more than two year but not more than five years
   16,255 11,138
Within a period of more than five years
   3,435 3,732


   42,146 40,647
Less: Current portion
   (11,569 ) (13,192 )


Non-current portion
   30,577 27,455


24.
DEFERRED REVENUES
Deferred revenues as of December 31, ~~2017~~2020 and 2019 mainly represent the unearned portion of installation fees for wireline services received from customers ~~the unused portion of calling cards,~~(Note 17), and the unamortized portion of government grants (Note ~~18)~~19). ~~On January 1, 2018, upon application of IFRS 15, the unused portion of calling cards was reclassified into contract liabilities.~~

   2017 2018    2019 2020
   RMB RMB    RMB RMB
Balance at end of last year
   3,558 3,061
Change in accounting policy (Note 2)
   —   (787 )


Balance at beginning of the year, as restated
   3,558 2,274
Additions for the year:

Calling cards
   390 —
Balance at beginning of the year
   1,829 1,455
Reductions for the year:

Amortization of installation fees
   (208 ) (138 )    (90 ) (55 )
Usage of calling cards
   (384 ) —
Amortization of government grants
   (295 ) (307 )    (284 ) (261 )




Balance at end of year
   3,061 1,829    1,455 1,139




Representing:

Current portion
   1,233 375    358 278
Non-current portion
   1,828 1,454    1,097 861




   3,061 1,829    1,455 1,139




~~23.~~25.
SHARE CAPITAL

   December 31,    December 31,
   2017    2018    2019    2020
   RMB    RMB    RMB    RMB
Registered, issued and fully paid

Registered, issued and fully paid:

67,054,958,321 ordinary domestic shares of RMB1.00 each
   67,055    67,055    67,055    67,055
13,877,410,000 overseas listed H shares of RMB1.00 each
   13,877    13,877    13,877    13,877








   80,932    80,932    80,932    80,932








All ordinary domestic shares and H shares rankpari passu in all material respects.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

~~24.~~26.
RESERVES

   Capital
reserve Share
premium    Surplus
reserves    Other
reserves Exchange
reserve Retained
earnings Total
   RMB RMB    RMB    RMB RMB RMB RMB
   (Note (i))    (Note (iii))    (Note (ii))
Balance as of January 1, 2016
   17,160 10,746    70,973    876 (812 ) 123,948 222,891
Total comprehensive income for the year
   —   —      —      (165 ) 190 18,018 18,043
Dividends (Note 31)
   —   —      —      —   —   (6,489 ) (6,489 )
Appropriations (Note (iii))
   —   —      1,638    —   —   (1,638 ) —






Balance as of December 31, 2016
   17,160 10,746    72,611    711 (622 ) 133,839 234,445
Total comprehensive income for the year
   —   —      —      (293 ) (259 ) 18,617 18,065
Acquisition of the Eighth Acquired Group (Note 1)
   (80 ) —      —      —   —   (7 ) (87 )
Acquisition ofnon-controlling interests
   46 —      —      —   —   —   46
Dividends (Note 31)
   —   —      —      —   —   (7.530 ) (7,530 )
Appropriations (Note (iii))
   —   —      1,686    —   —   (1,686 ) —
Others
   —   —      —      (4 ) —   —   (4 )






Balance as of December 31, 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 of 1 January 2018, as restated
   17,126 10,746    74,599    414 (881 ) 145,906 247,910
Total comprehensive income for the year
   —   —      —      (249 ) 154 21,210 21,115
Disposal of investments in equity instruments at fair value through other comprehensive income
   —   —      —      (5 ) —   5 —
Contribution fromnon-controlling interests
   680 —      —      —   —   —   680
Dividends (Note 31)
   —   —      —      —   —   (7,568 ) (7,568 )
Appropriations (Note (iii))
   —   —      1,875    —   —   (1,875 ) —






Balance as of December 31, 2018
   17,806 10,746    76,474    160 (727 ) 157,678 262,137






~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~
~~24.~~
~~RESERVES (continued)~~
   Capital
reserve Share
premium    Surplus
reserves General
risk
reserve    Other
reserves Exchange
reserve Retained
earnings Total
   RMB RMB    RMB RMB    RMB RMB RMB RMB
   (Note (i))    (Note (iii)) (Note (v))    (Note (ii))
Balance as of January 1, 2018
   17,126 10,746    74,599 —      414 (881 ) 145,906 247,910
Total comprehensive income for the year
   —   —      —   —      (249 ) 154 21,210 21,115
Disposal of investments in equity instruments at fair value through other comprehensive income
   —   —      —   —      (5 ) —   5 —
Contribution from non-controlling interests
   680 —      —   —      —   —   —   680
Dividends (Note 33)
   —   —      —   —      —   —   (7,568 ) (7,568 )
Appropriations to statutory surplus reserve (Note (iii))
   —   —      1,875 —      —   —   (1,875 ) —






Balance as of December 31, 2018
   17,806 10,746    76,474 —      160 (727 ) 157,678 262,137






Change in accounting policy (Note 2)
   —   —      (243 ) —      —   —   (2,197 ) (2,440 )






Balance as of January 1, 2019, as restated
   17,806 10,746    76,231 —      160 (727 ) 155,481 259,697
Total comprehensive income for the year
   —   —      —   —      455 102 20,517 21,074
Acquisition of non-controlling interests
   3 —      —   —      —   —   —   3
Share of an associate’s other changes in reserves
   (305 ) —      —   —      —   —   —   (305 )
Dividends (Note 33)
   —   —      —   —      —   —   (8,891 ) (8,891 )
Appropriations to statutory surplus reserve (Note (iii))
   —   —      1,812 —      —   —   (1,812 ) —
Appropriations to general risk reserve (Note (v))
   —   —      —   23    —   —   (23 ) —






Balance as of December 31, 2019
   17,504 10,746    78,043 23    615 (625 ) 165,272 271,578






Total comprehensive income for the year
   —   —      —   —      (294 ) (312 ) 20,850 20,244
Share of associates’ other changes in reserves
   (36 ) —      —   —      —   —   —   (36 )
Dividends (Note 33)
   —   —      —   —      —   —   (9,262 ) (9,262 )
Appropriations to statutory surplus reserve (Note (iii))
   —   —      1,811 —      —   —   (1,811 ) —
Appropriations to general risk reserve (Note (v))
   —   —      —   33    —   —   (33 ) —






Balance as of December 31, 2020
   17,468 10,746    79,854 56    321 (937 ) 175,016 282,524






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 ofnon-controlling interests and the ~~historical~~ carrying amount of thenon-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 at FVTOCI and the deferred tax liabilities recognized due to the change in fair value of those investment in equity instruments.
(iii)
The surplus reserves consist of statutory surplus reserve and discretionary surplus reserve.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
26.
RESERVES (continued)
Notes: (continued)
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 December 31, 2018, the Company transferred RMB1,875, 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 December 31, 2017,2020 and 2019, 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 December 31, ~~2017,~~2020, the Company transferred ~~RMB1,686,~~RMB1,811 (2019: RMB1,812), being 10% of the year’s net profit, to this reserve. As of December 31, ~~2017, January 1, 2018~~2019 and December 31, ~~2018,~~2020, the amount of statutory surplus reserve was ~~RMB28,218, RMB28,520~~RMB31,964 and ~~RMB30,395,~~RMB33,775, respectively.
The Company did not transfer any discretionary surplus reserve for the years ended December 31, ~~2017~~2019 and ~~2018.~~2020. As of December 31, ~~2017~~2019 and ~~2018,~~2020, the amount of discretionary surplus reserve was RMB46,079.
The statutory and discretionary surplus reserves arenon-distributable other than in liquidation and can be used to make good of previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholdings or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 25% of the registered capital.
(iv)
According to the Company’s Articles of Association, the amount of retained earnings available for distribution to shareholders of the Company is the lower of the amount of the Company’s retained earnings determined in accordance with the PRC Accounting Standards for Business Enterprises and the amount determined in accordance with IFRSs. As of December 31, ~~2017, January 1, 2018~~2019 and December 31, ~~2018,~~2020, the amount of retained earnings available for distribution was ~~RMB120,270, RMB122,987~~RMB138,312 and ~~RMB133,076~~RMB145,351 respectively, being the amount determined in accordance with IFRSs. Final dividend of approximately ~~RMB8,629~~RMB8,403 in respect of the financial year ~~2018~~2020 proposed after the end of the reporting period has not been recognized as a liability in the consolidated financial statements at the end of the reporting period (Note ~~31)~~33).
(v)
Pursuant to “Requirements on Impairment Allowance for Financial Institutions” (Caijin [2012] No. 20) issued by the Ministry of Finance of the PRC effective on July 1, 2012 (the “Requirements”), the Group’s subsidiaries, mainly Finance Company, establish a general risk reserve within equity, through appropriation of retained earnings, to address unidentified potential losses relating to risk assets. The general risk reserve balance should not be less than 1.5% of the ending balance of risk assets, as defined in the Requirements.
27.
OPERATING REVENUES
Disaggregation of revenues
   Note 2018    2019    2020
   RMB    RMB    RMB
Type of goods or services

Revenue from contracts with customers

Voice
   (i ) 50,811    45,146    40,866
Internet
   (ii ) 190,871    197,244    208,019
Information and application services
   (iii ) 83,478    87,623    96,885
Telecommunications network resource and equipment services
   (iv ) 20,211    21,978    22,623
Sales of goods and others
   (v ) 27,450    17,906    19,598






Subtotal
   372,821    369,897    387,991
Revenue from other sources
   (vi ) 4,303    5,837    5,570
Total operating revenues
   377,124    375,734    393,561






Timing of revenue recognition

A point in time
   24,496    14,591    16,141
Over time
   352,628    361,143    377,420






Total operating revenues
   377,124    375,734    393,561






CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

~~25.~~27.
OPERATING REVENUES (continued)
~~For the year ended December~~ ~~31, 2018~~
Disaggregation of revenues (continued)

~~Notes~~ ~~2018~~
~~RMB~~
~~Type of goods or services~~
~~Revenue from contracts with customers~~
~~Voice~~
(i ) ~~50,811~~
~~Internet~~
~~(ii~~ ) ~~190,871~~
~~Information and application services~~
~~(iii~~ ) ~~83,478~~
~~Telecommunications network resource and equipment services~~
~~(iv~~ ) ~~20,211~~
~~Others~~
(v ) ~~27,450~~
~~Subtotal~~
~~372,821~~
~~Revenue from other sources~~
~~(vi~~ ) ~~4,303~~
~~Total operating revenues~~
~~377,124~~
~~Timing of revenue recognition~~
~~A point in time~~
~~24,496~~
~~Over time~~
~~352,628~~
~~Total operating revenues~~
~~377,124~~

Notes:
(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 ~~charge~~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 center service, ~~system integration~~digitalized platform services,~~e-Surfing~~ ~~HD service,~~ Smart Family, 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 revenue 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 of December 31, 2018, 2019 and 2020, the aggregated amount of the transaction price allocated to the remaining performance obligations under the Group’s existing contracts represents revenue expected to be recognized in the future when service is provided over the contract terms over the next 1 year to 3 years.
~~For the year ended December~~ ~~31, 2016 and 2017~~
~~The components of the Group’s operating revenues are as follows:~~

   Year ended
December 31,
   2016    2017
   RMB    RMB
Voice
   70,185    61,678
Internet
   150,449    172,554
Information and application services
   66,881    73,044
Telecommunications network resource and equipment services
   17,781    19,125
Others
   47,238    39,828




   352,534    366,229




~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~

~~26.~~28.
NETWORK OPERATIONS AND SUPPORT EXPENSES

   Year ended December 31,    Year ended December 31,
   Note 2016    2017    2018    Note 2018    2019    2020
   RMB    RMB    RMB    RMB    RMB    RMB
Operating and maintenance
   48,390    55,360    64,056    64,056    65,087    70,943
Utility
   13,148    12,522    13,477    13,477    13,818    14,637
Property rental and management fee
   (i ) 22,327    26,926    29,434
Network resources usage and related fee
   (i ) 29,434    20,976    22,766
Others
   10,291    9,161    9,095    9,095    9,918    11,171












   94,156    103,969    116,062    116,062    109,799    119,517












Note:
(i)
~~Property rental~~Network resources usage and ~~management~~related fee includes the variable lease payments not depending on an index or a rate and fee for non-lease components in ~~relation to the lease~~respect of telecommunications towers and related assets ~~(“Tower Assets”) (hereinafter referred to as the “tower assets~~ lease and ~~related fee”).~~fee in respect of the short-term leases and leases of low-value assets, variable lease payments and fee for non-lease components in respect of the usage of network resources provided by third parties.

~~27.~~29.
PERSONNEL EXPENSES
Personnel expenses are attributable to the following functions:

   Year ended December 31,    Year ended December 31,
   2016    2017    2018    2018    2019    2020
   RMB    RMB    RMB    RMB    RMB    RMB
Network operations and support
   36,286    38,574    40,388    40,388    42,214    43,260
Selling, general and administrative
   18,218    17,469    19,348    19,348    21,353    22,729












   54,504    56,043    59,736    59,736    63,567    65,989












CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)

~~28.~~30.
OTHER OPERATING EXPENSES

   Year ended December 31,    Year ended December 31,
   Notes 2016    2017    2018    Notes 2018    2019    2020
   RMB    RMB    RMB    RMB    RMB    RMB
Interconnection charges
   (i ) 11,822    12,223    12,878    (i ) 12,878    12,683    12,050
Cost of goods sold
   (ii ) 38,705    31,712    23,185    (ii ) 23,185    13,413    15,440
Donations
   19    23    20    20    1    13
Others
   (iii ) 1,740    1,654    1,614    (iii ) 1,614    1,695    1,571












   52,286    45,612    37,697    37,697    27,792    29,074












Notes:
(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.

~~29.~~31.
NET FINANCE COSTS

   Year ended December 31,
   2016 2017 2018
   RMB RMB RMB
Interest expense incurred
   4,200 3,913 3,278
Less: Interest expense capitalized*
   (498 ) (327 ) (185 )


Net interest expense
   3,702 3,586 3,093
Interest income
   (354 ) (429 ) (306 )
Foreign exchange losses
   209 664 423
Foreign exchange gains
   (322 ) (530 ) (502 )


   3,235 3,291 2,708


* Interest expense was capitalized in construction in progress at the following rates per annum
   4.1%-5.0% 3.9%-4.9% 3.8%-4.4%


~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~
   Year ended December 31,
   2018 2019 2020
   RMB RMB RMB
Interest expense on short-term and long-term debts
   3,278 2,623 1,981
Interest expense on lease liabilities
   —   1,607 1,566
Less: Interest expense capitalized*
   (185 ) (140 ) (114 )


Net interest expense
   3,093 4,090 3,433
Interest income
   (306 ) (492 ) (582 )
Foreign exchange losses
   423 680 1,018
Foreign exchange gains
   (502 ) (639 ) (855 )


   2,708 3,639 3,014


* Interest expense was capitalized in construction in progress at the following rates per annum
   3.8%-4.4 % 3.5%-4.4 % 3.0%-4.4 %


~~30.~~32.
INCOME TAX
Income tax in the profit or loss comprises:

   Year ended December 31,    Year ended December 31,
   2016    2017    2018    2018    2019    2020
   RMB    RMB    RMB    RMB    RMB    RMB
Provision for PRC income tax
   3,478    3,147    3,408    3,408    781    1,532
Provision for income tax of other tax jurisdictions
   155    123    120    120    105    135
Deferred taxation
   2,360    2,922    3,282    3,282    5,436    4,640












   5,993    6,192    6,810    6,810    6,322    6,307












A reconciliation of the expected tax expense with the actual tax expense is as follows:

   Year ended December 31,    Year ended December 31,
   Notes 2016 2017 2018    Notes 2018 2019 2020
   RMB RMB RMB    RMB RMB RMB
Earnings before income tax
   24,116 24,953 28,148    28,148 27,034 27,387




Expected income tax expense at statutory tax rate of 25%
   (i ) 6,029 6,238 7,037    (i ) 7,037 6,759 6,847
Differential tax rate on PRC subsidiaries’ and branches’ income
   (i ) (275 ) (108 ) (291 )    (i ) (291 ) (315 ) (306 )
Differential tax rate on other subsidiaries’ income
   (ii ) (53 ) (82 ) (58 )    (ii ) (58 ) (129 ) (47 )
Non-deductible expenses
   (iii ) 485 380 537    (iii ) 537 979 915
Non-taxable income
   (iv ) (105 ) (112 ) (319 )    (iv ) (319 ) (460 ) (576 )
Effect of change in tax rate
   (v ) —   —   (29 )
Others
   (v ) (88 ) (124 ) (96 )    (vi ) (96 ) (512 ) (497 )




Actual income tax expense
   5,993 6,192 6,810    6,810 6,322 6,307




CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
32.
INCOME TAX (continued)

Notes:
(i)
Except for certain subsidiaries and branches which are mainly taxed at a 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.
(ii)
Income tax provisions of the Company’s subsidiaries in Hong Kong and Macau Special Administrative Regions of the PRC, and in other countries are based on the subsidiaries’ assessable income and income tax rates applicable in the respective tax jurisdictions which range from 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)
Hainan branch of the Company obtained approval from tax authority to adopt the preferential income tax rate of 15% during the current year. Accordingly, deferred tax assets and deferred tax liabilities that were expected to be recovered or settled after December 31, 2019 were adjusted to reflect the change in tax rate. The overall effect of change in tax rate amounting to RMB29 was credited to the consolidated statement of comprehensive income.
(vi)
Amounts primarily represent settlement of tax filing differences of prior year annual tax return and other tax ~~benefits.~~benefits such as additional tax deduction on research and development expenses.

~~31.~~33.
DIVIDENDS
Pursuant to a resolution passed at the Board of Directors’ meeting on March ~~19, 2019,~~9, 2021, a final dividend of equivalent to HK$0.125 per share totaling approximately ~~RMB8,629~~RMB8,403 for the year ended December 31, ~~2018~~2020 was proposed for shareholders’ approval at the Annual General Meeting. The dividend has not been provided for in the consolidated financial statements for the year ended December 31, ~~2018.~~2020.
Pursuant to the shareholders’ approval at the Annual General Meeting held on May ~~28, 2018,~~26, 2020, a final dividend of ~~RMB0.093512~~RMB0.114441 (equivalent to HK$~~0.115)~~0.125) per share totaling ~~RMB7,568~~RMB9,262 in respect of the year ended December 31, ~~2017~~2019 was declared, and paid on July ~~27, 2018.~~31, 2020.
Pursuant to the shareholders’ approval at the Annual General Meeting held on May ~~23, 2017,~~29, 2019, a final dividend of ~~RMB0.093043~~RMB0.109851 (equivalent to HK$~~0.105)~~0.125) per share totaling ~~RMB7,530~~RMB8,891 in respect of the year ended December 31, ~~2016~~2018 was declared, and paid on July ~~21, 2017.~~
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~26, 2019.

~~32.~~34.
BASIC EARNINGS PER SHARE
The calculation of basic earnings per share for the years ended December 31, ~~2016, 2017~~2018, 2019 and ~~2018~~2020 is based on the profit attributable to equity holders of the Company of ~~RMB18,018, RMB18,617~~RMB21,210, RMB20,517 and ~~RMB21,210,~~RMB20,850, respectively, divided by 80,932,368,321 shares.
~~The amount of diluted~~Diluted earnings per share ~~is not presented~~were equivalent to basic earnings per share, as there were no dilutive potential ordinary shares in existence for the periods presented.

~~33.~~35.
COMMITMENTS AND CONTINGENCIES
~~Operating lease commitments~~
~~The Group leases business premises and equipment throughnon-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 of December 31, 2018, the Group’s future minimum lease payments undernon-cancellable~~ ~~operating leases are as follows:~~

   RMB
2019
   15,658
2020
   14,466
2021
   13,440
2022
   12,682
2023
   3,461
Thereafter
   6,098


Total minimum lease payments
   65,805


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 years ended December 31, 2016, 2017 and 2018 were RMB21,240, RMB25,493 and RMB27,810, respectively.~~
Capital commitments
As of December 31, ~~2018,~~2020, the Group had capital commitments as follows:

   RMB
Contracted for but not provided

- property
   ~~1,103~~1,202
- telecommunications network plant and equipment
   ~~14,200~~18,997


   ~~15,303~~20,199


CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
35.
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 of December 31, ~~2017~~2019 and ~~2018,~~2020, 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 ~~unfavorable~~unfavourable outcome of such contingencies, lawsuits or other proceedings and based on such assessment, believes that any resulting liabilities will not have a material adverse effect on the financial position, operating results or cash flows of the Group.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~

~~34.~~36.
FINANCIAL INSTRUMENTS
Financial assets of the Group include cash and cash equivalents, bank deposits and restricted cash, equity instrument, accounts receivable, financial assets at FVTPL 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~~“Fair Value ~~Measurement~~”Measurement”, the fair value of each financial instrument is categorized 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~~financial instruments measured at fair value) approximate their carrying amounts due to the short-term maturity of these instruments.
The listed equity securities investment included in the Group’s equity instruments at fair value through other comprehensive income ~~(2017:available-for-sale~~ ~~listed equity securities)~~ are categorized as level 1 financial instruments. The fair value of the Group’s listed equity securities investment, which amounted to ~~RMB969~~RMB1,228 and ~~RMB638~~RMB838 as of December 31, ~~2017~~2019 and ~~2018~~2020 respectively was based on quoted market price on PRC stock exchanges.
The fair values 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 categorized 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%~~2.9% to 4.9% ~~(2017: 1.0%~~(2019: 3.7% to 4.9%). As of December 31, ~~2017~~2019 and ~~2018,~~2020, the carrying amounts and fair value of the Group’s long-term debt was as follows:

   December 31, 2017    December 31, 2018

Carrying
amount

Fair
value

Carrying
amount

Fair
value

   RMB    RMB    RMB    RMB
Long-term debt
   49,742    48,256    45,991    44,968








   December 31, 2019    December 31, 2020

Carrying
amount

Fair
value

Carrying
amount

Fair
value

   RMB    RMB    RMB    RMB
Long-term debt
   36,495    35,780    25,348    25,294








During the year, there were no transfers among instruments in level 1, level 2 or level 3.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
36.
FINANCIAL INSTRUMENTS (continued)
(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 program focuses on the unpredictability of financial markets and seeks to minimize 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 authorizes changes if necessary based on operating and market conditions and other relevant risks. The following summarizes 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 and restricted cash
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.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~
~~(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.~~matrix, or individually assessed for those debtors with significant balances or credit impaired debtors. 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~~receivables and contract assets from telephone and Internet subscribers and enterprise customers, ~~and contract assets,~~ respectively, as of December 31, ~~2018:~~2019 and 2020:
Accounts receivable from telephone and Internet subscribers:

   December 31, 2018    December 31, 2019
   Expected
loss rate Gross carrying
amount    Loss
allowance    Expected
loss rate Gross carrying
amount    Loss
allowance
   % RMB    RMB    % RMB    RMB
Current, within 1 month
   2 % 8,376    158    2 % 7,545    141
1 to 3 months
   20 % 2,117    420    20 % 1,777    349
4 to 6 months
   60 % 839    502    60 % 739    444
7 to 12 months
   80 % 1,093    875    80 % 1,083    867
Over 12 months
   100 % 943    943    100 % 1,002    1,002








   13,368    2,898    12,146    2,803








Accounts receivable from enterprise customers and contract assets:


   December 31, 2018
   Expected
loss rate Gross carrying
amount    Loss
allowance
   % RMB    RMB
1 to 6 months
   2 % 4,478    109
7 to 12 months
   20 % 800    157
1 to 2 years
   60 % 479    290
2 to 3 years
   90 % 225    202
Over 3 years
   100 % 298    298




   6,280    1,056




   December 31, 2020
   Expected
loss rate Gross carrying
amount    Loss
allowance
   % RMB    RMB
Current, within 1 month
   2 % 7,068    132
1 to 3 months
   20 % 1,601    317
4 to 6 months
   60 % 561    333
7 to 12 months
   80 % 920    735
Over 12 months
   100 % 921    921




   11,071    2,438




CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
36.
FINANCIAL INSTRUMENTS (continued)
(b) Risks(continued)
(i) Credit risk (continued)
Accounts receivable and contract assets arising from contracts with customers (continued)
Accounts receivable and contract assets from enterprise customers:
Due to greater financial uncertainty triggered by the Covid-19 pandemic, the Group has increased the expected loss rates on accounts receivable and contract assets from enterprise customers in the current year as there is higher risk that a prolonged pandemic could lead to increased credit default rates.

   December 31, 2019
   Expected
loss rate Gross carrying
amount    Loss
allowance
   % RMB    RMB
1 to 6 months
   2 % 5,452    102
7 to 12 months
   20 % 1,428    239
1 to 2 years
   60 % 621    353
2 to 3 years
   90 % 258    224
Over 3 years
   100 % 371    364




   8,130    1,282




   December 31, 2020
   Expected
loss rate Gross carrying
amount    Loss
allowance
   % RMB    RMB
1 to 6 months
   2 % 6,031    124
7 to 12 months
   22 % 1,120    232
1 to 2 years
   67 % 685    445
2 to 3 years
   100 % 347    333
Over 3 years
   100 % 324    324




   8,507    1,458




As of December 31, ~~2018,~~2020, the loss allowance for accounts receivable and contract assets was ~~RMB4,680~~RMB4,434 and ~~RMB8,~~RMB9 (2019: RMB4,692 and RMB8), respectively. Loss allowance of ~~RMB734~~RMB556 and RMB615 as of December ~~31,2018,~~31, 2020 and 2019, respectively, which was not calculated collectively in the above tables, was made individually on debtors with significant balances ~~and~~or credit impaired debtors.
Expected loss rates are based on actual loss experience over the past 1 to 3 ~~year.~~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.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

36.
FINANCIAL INSTRUMENTS (continued)
(b) Risks (continued)

(i) Credit risk (continued)
Accounts receivable and contract assets arising from contracts with customers (continued)
Accounts receivable and contract assets from enterprise customers (continued):

Movement in the loss allowance account in respect of accounts receivable during the ~~year~~years ended December 31, 2018, 2019 and 2020 is as follows:

~~RMB~~
~~At December 31, 2017 under IAS 39~~
~~3,842~~
~~Impact on initial application of IFRS 9 (note 2.2)~~
~~919~~
~~At January 1, 2018~~
~~4,761~~
~~Impairment losses for ECL~~
~~2,008~~
~~Accounts receivable written off~~
~~(2,089~~ )
~~At December 31, 2018~~
~~4,680~~

   2018 2019 2020
   RMB RMB RMB
At beginning of year
   4,761 4,680 4,692
Impairment losses for ECL
   2,008 1,653 1,382
Amounts written off
   (2,089 ) (1,641 ) (1,640 )


At end of year
   4,680 4,692 4,434


(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..~~months.
The following table sets out the remaining contractual maturities at the end of the reporting period of the Group’s financial liabilities and lease 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:

   2017    2019
   Carrying
amount    Total
contractual
undiscounted
cash flow    Within 1
year or on
demand    More than 1
year but less
than 2 years    More than 2
years but less
than 5 years    More
than 5
years
Carrying
amount

Total
contractual
undiscounted
cash flow

Within 1
year or on
demand

More than 1
year but less
than 2 years

More than 2
years but less
than 5 years

More
than 5
years

   RMB    RMB    RMB    RMB    RMB    RMB    RMB    RMB    RMB    RMB    RMB    RMB
Short-term debt
   54,558    55,682    55,682    —      —      —      42,527    43,697    43,697    —      —      —
Long-term debt
   49,742    58,543    2,725    2,716    46,612    6,490    36,495    40,791    4,625    1,184    30,824    4,158
Accounts payable
   119,321    119,321    119,321    —      —      —      102,616    102,616    102,616    —      —      —
Accrued expenses and other payables
   98,695    98,695    98,695    —      —      —      48,516    48,516    48,516    —      —      —
Finance lease obligations
   77    85    56    14    13    2
Lease liabilities
   42,146    45,535    12,846    11,794    17,266    3,629
























   322,393    332,326    276,479    2,730    46,625    6,492    272,300    281,155    212,300    12,978    48,090    7,787
























   2018
   Carrying
amount    Total
contractual
undiscounted
cash flow    Within 1
year or on
demand    More than 1
year but less
than 2 years    More than 2
years but less
than 5 years    More
than 5
years
   RMB    RMB    RMB    RMB    RMB    RMB
Short-term debt
   49,537    51,091    51,091    —      —      —
Long-term debt
   45,991    52,625    2,602    19,604    25,061    5,358
Accounts payable
   107,887    107,887    107,887    —      —      —
Accrued expenses and other payables
   43,497    43,497    43,497    —      —      —
Finance lease obligations
   216    241    112    40    82    7












   247,128    255,341    205,189    19,644    25,143    5,365












   2020

Carrying
amount

Total
contractual
undiscounted
cash flow

Within 1
year or on
demand

More than 1
year but less
than 2 years

More than 2
years but less
than 5 years

More
than 5
years

   RMB    RMB    RMB    RMB    RMB    RMB
Short-term debt
   27,994    28,417    28,417    —      —      —
Long-term debt
   25,348    27,805    1,410    17,838    5,609    2,948
Accounts payable
   107,578    107,578    107,578    —      —      —
Accrued expenses and other payables
   56,775    56,775    56,775    —      —      —
Lease liabilities
   40,647    43,896    14,449    13,363    12,110    3,974












   258,342    264,471    208,629    31,201    17,719    6,922












Management believes that the Group’s current cash on hand, expected cash flows from operations and available credit facilities from banks (Note ~~18)~~19) will be sufficient to meet the Group’s working capital requirements and repay its borrowings and obligations when they become due.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

~~34.~~36.
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:

   2017 2018    2019 2020
   Effective
interest rate    Effective
interest rate       Effective
interest rate

Effective
interest rate

   %    RMB %    RMB    %    RMB %    RMB
Fixed rate debt:

Short-term debt
   4.0    54,042 3.2    49,347    2.5    29,022 2.7    22,719
Long-term debt
   3.3    49,742 3.3    45,991    3.1    36,495 2.7    25,348








      103,784    95,338       65,517    48,067
Variable rate debt:

Short-term debt
   4.1    516 4.2    190    3.8    13,505 3.3    5,275








      516    190       13,505    5,275








Total debt
      104,300    95,528       79,022    53,342








Fixed rate debt as a percentage of total debt
      99.5 %    99.8 %       82.9 %    90.1 %








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%~~90.1% (December 31, ~~2017: 99.5%~~2019: 82.9%) of the Group’s short-term and long-term debt as of December 31, ~~2018~~2020 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 mainly 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%~~73.0% (December 31, ~~2017: 81.6%~~2019: 78.0%) of the Group’s cash and cash equivalents and ~~99.4%~~99.3% (December 31, ~~2017:~~2019: 99.4%) of the Group’s short-term and long-term debt as of December 31, ~~2018~~2020 are denominated in Renminbi. Details of bank loans denominated in other currencies are set out in Note ~~18.~~19.

~~35.~~37.
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 totaldebt-to-total assets ratio. For this purpose the Group defines total debt as the sum of short-term debt and long-term ~~debt,~~debt. Total debts do not include balance of deposits received by Finance Company from China Telecom Group amounting to RMB9,826 and ~~finance~~ lease ~~obligations.~~liabilities amounting to RMB40,647 as of December 31, 2020 (December 31, 2019: RMB4,098 and RMB42,146). As of December 31, ~~2017~~2019 and ~~2018,~~2020, the Group’s totaldebt-to-total assets ratio was ~~15.8%~~11.2% and ~~14.4%~~7.5% respectively, which is within the range of management’s expectation.
~~Neither~~Except Finance Company is subject to certain capital requirements imposed by China Banking and Insurance Regulatory Commission, neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

~~36.~~38.
RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
The table below details changes in the Group’s liabilities arising from financing activities, including both cash andnon-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~~statements of cash flows as cash flows from financing activities.

   Short-term
Debt Long-term
debt and
payable Finance lease
obligation Other payables
in respect of
the reduction
of capital by
non-controlling
interests Consideration
payable in respect of
the Eighth
Acquisition (Note 20) Consideration
payable in respect
of the acquisition
ofnon-controlling
interests (Note 20) Dividend
payable Total
   RMB RMB RMB RMB RMB RMB RMB RMB
Balance as of January 1, 2017
   40,780 71,646 102 —   —   —   —   112,528
Financing cash flows
   13,778 (22,191 ) (84 ) —   —   (31 ) (7,619 ) (16,147 )
New finance leases
   —   —   55 —   —   —   —   55
Interest expenses
   —   295 9 —   —   —   —   304
Foreign exchange gain
   —   (8 ) —   —   —   —   —   (8 )
Acquisition of the Eighth Acquired Group
   —   —   —   —   87 —   —   87
Acquisition ofnon-controlling interests
   —   —   —   —   —   150 —   150
Distribution tonon-controlling interests
   —   —   —   —   —   —   89 89
Dividends declared
   —   —   —   —   —   —   7,530 7,530
Others
   —   —   (5 ) —   —   —   —   (5 )


Balance as of December 31, 2017
   54,558 49,742 77 —   87 119 —   104,583
Financing cash flows
   (5,021 ) (4,073 ) (73 ) (20 ) (87 ) (119 ) (7,745 ) (17,138 )
New finance leases
   —   —   200 —   —   —   —   200
Interest expenses
   —   304 12 —   —   —   —   316
Foreign exchange loss
   —   18 —   —   —   —   —   18
Reduction of capital by
non-controlling interests
   —   —   —   20 —   —   —   20
Distribution tonon-controlling interests
   —   —   —   —   —   —   177 177
Dividends declared
   —   —   —   —   —   —   7,568 7,568


Balance as of December 31, 2018
   49,537 45,991 216 —   —   —   —   95,744


   Short-term debt Long-term debt
Lease
liabilities
Dividend payable
Deposits
with Finance
Company

Other payables in
respect of
certain equity
transactions
Total
   RMB RMB RMB RMB RMB    RMB RMB
   (Note (i))
Balance as at January 1, 2019
   49,537 45,991 45,864 —   —      —   141,392
Financing cash flows
   (7,010 ) (9,782 ) (10,699 ) (9,072 ) 4,098    (8 ) (32,473 )
New leases
   —   —   8,856 —   —      —   8,856
Lease modifications
   —   —   (589 ) —   —      —   (589 )
Transferred to accounts payables
   —   —   (2,900 ) —   —      —   (2,900 )
Interest expenses
   —   284 1,607 —   —      —   1,891
Foreign exchange loss
   —   2 7 —   —      —   9
Acquisition of non-controlling interests
   —   —   —   —   —      8 8
Distribution to non-controlling interests
   —   —   —   181 —      —   181
Dividends declared
   —   —   —   8,891 —      —   8,891




Balance as at December 31, 2019
   42,527 36,495 42,146 —   4,098    —   125,266




Financing cash flows
   (14,533 ) (11,400 ) (12,738 ) (9,304 ) 5,728    977 (41,270 )
New leases
   —   —   13,561 —   —      —   13,561
Lease modifications
   —   —   (1,254 ) —   —      —   (1,254 )
Transferred to accounts payables
   —   —   (2,618 ) —   —      —   (2,618 )
Interest expenses
   —   266 1,566 —   —      —   1,832
Foreign exchange gain
   —   (13 ) (16 ) —   —      —   (29 )
Acquisition of non-controlling interests
   —   —   —   —   —      1 1
Distribution to non-controlling interests
   —   —   —   42 —      —   42
Dividends declared
   —   —   —   9,262 —      —   9,262




Balance as at December 31, 2020
   27,994 25,348 40,647 —   9,826    978 104,793




~~Other than net financing cash outflows for the year ended December 31, 2018 totaling RMB17,138 as presented above,E-surfing~~ ~~Pay, a subsidiary of the Company, received RMB855~~
Notes:
(i)
As of December 31, 2020, the balance of deposits with Finance Company amounting to RMB9,826 (December 31, 2019: RMB4,098) were included in amounts due to China Telecom Group in accrued expenses and other payables (Note 21).
(ii)
For the year ended December 31, 2020, other than the net financing cash outflows totalling RMB41,270 as presented above: Finance Company, a subsidiary of the Company, placed statutory reserve deposits amounting to RMB837 at the People’s Bank of China which was included in the balance of short-term bank deposits and restricted cash as of December 31, 2020.
For the year ended December 31, 2019, other than the net financing cash outflows totalling RMB32,473 as presented above: E-surfing Pay received RMB90 as part of the total consideration amounting to RMB945 in respect of contribution from non-controlling interests; Finance Company received RMB1,500 in respect of contribution from non-controlling interests, and placed statutory reserve deposits amounting to RMB405 at the People’s Bank of China which was included in the balance of short-term bank deposits and restricted cash as of December 31, 2019.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in ~~the current year as part of the consideration amounting to RMB945 in respect of contribution fromnon-controlling~~ ~~interests. The remaining balance of RMB90 as of December 31, 2018 was included in prepayments~~millions, except per share data and ~~other current assets (Note 8).~~except otherwise stated)

~~37.~~39.
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 which were carried out in the ordinary course of business are as follows.

   Year ended December 31,
   Notes 2016    2017    2018
   RMB    RMB    RMB
Construction and engineering services.
   (i ) 18,936    18,672    16,396
Receiving ancillary services.
   (ii ) 13,938    16,072    16,744
Interconnection revenues
   (iii ) 60    48    80
Interconnection charges
   (iii ) 232    193    204
Receiving community services
   (iv ) 2,871    3,028    3,296
Net transaction amount of centralized services
   (v ) 523    727    519
Property lease income
   (vi ) 36    53    48
Property lease expenses
   (vi ) 559    654    713
Provision of IT services
   (vii ) 312    642    531
Receiving IT services
   (vii ) 1,597    1,812    1,895
Purchases of telecommunications equipment and materials.
   (viii ) 5,199    4,248    3,760
Sales of telecommunications equipment and materials.
   (viii ) 2,786    3,291    2,760
Internet applications channel services
   (ix ) 332    344    298
Interest on amounts due to and loans from China Telecom Group
   (x ) 2,928    2,720    2,099
Others
   (xi ) 176    190    186

~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~
~~37.~~
~~RELATED PARTY TRANSACTIONS (continued)~~
~~(a)~~
~~Transactions with China Telecom Group (continued)~~

   Year ended December 31,
   Notes 2018    2019    2020
   RMB    RMB    RMB
Construction and engineering services
   (i ) 16,396    14,014    15,046
Receiving ancillary services
   (ii ) 16,744    18,571    18,903
Interconnection revenues
   (iii ) 80    97    54
Interconnection charges
   (iii ) 204    183    123
Receiving community services
   (iv ) 3,296    3,464    3,682
Net transaction amount of centralized services
   (v ) 519    133    268
Property lease income
   (vi ) 48    57    45
Property lease related expenses
   (vii ) 713    577    581
Addition to right-of-use assets
   (vii ) —      284    335
Interest expense on lease liabilities
   (vii ) —      11    16
Provision of IT services
   (viii ) 531    464    556
Receiving IT services
   (viii ) 1,895    2,175    2,653
Purchases of telecommunications equipment and materials
   (ix ) 3,760    3,538    3,567
Sales of telecommunications equipment and materials
   (ix ) 2,760    1,444    2,070
Internet applications channel services
   (x ) 298    108    73
Interest on amounts due to and loans from China Telecom Group
   (xi ) 2,099    1,485    975
Others
   (xii ) 186    189    243
Net deposit by China Telecom Group with Finance Company
   (xiii ) —      4,098    5,728
Interest expense on the deposit by China Telecom Group with Finance Company
   (xiii ) —      7    82

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.
(v)
Represent net amount shared between the Company and China Telecom Group for costs associated with centralized services. The amount represents amounts received or receivable for the net amount of centralized services.
(vi)
Represent amounts of property lease fee received and receivable ~~from/~~from China Telecom Group for leasing of properties.
(vii)
Represent amounts in relation to the leasing of properties from China Telecom Group. Property lease related expenses for the year ended 31 December 2020 include the fee for short-term leases, leases of low-value assets, variable lease payments not depending on an index or a rate and fee for non-lease components. Property lease related expenses for the years ended 31 December 2018 and 2019 represent lease fee paid and payable to China Telecom ~~Group for mutual leasing of properties.~~Group.
~~(vii)~~(viii)
Represent IT services provided to and received from China Telecom Group.
~~(viii)~~(ix)
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)
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.
~~(x)~~(xi)
Represent interest paid and payable to China Telecom Group with respect to the ~~amounts~~amount due to China Telecommunications Corporation and loans from China Telecom Group (Note ~~18)~~19).
~~(xi)~~(xii)
Represent amounts paid and payable to China Telecom Group primarily for ~~lease~~usage of CDMA mobile telecommunications network (“CDMA network”) facilities located in Xizang Autonomous Region, certain inter-provincial transmission optic fibers within its service regions and land use rights.
(xiii)
Represent amounts related to financial services provided by Finance Company to China Telecom Group, including lending services, deposit services and other financial services.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
39.
RELATED PARTY TRANSACTIONS (continued)
(a)
Transactions with China Telecom Group (continued)
Amounts due from/to China Telecom Group are summarized as follows:

   December 31,    December 31,
   2017    2018    2019    2020
   RMB    RMB    RMB    RMB
Accounts receivable
   1,502    1,327    1,188    1,784
Contract assets
   —      24    27    49
Prepayments and other current assets
   774    1,035    1,233    1,189








Total amounts due from China Telecom Group
   2,276    2,386    2,448    3,022








Accounts payable
   22,682    20,983    19,531    19,272
Accrued expenses and other payables
   1,838    2,171    6,069    11,279
Contract liabilities
   —      145    162    217
Lease liabilities
   389    489
Short-term debt
   19,098    8,584    6,621    11,164
Long-term debt
   40,000    37,000    23,300    11,000








Total amounts due to China Telecom Group
   83,618    68,883    56,072    53,421








Amounts due from/to China Telecom Group, other than short-term debt, ~~and~~ long-term debt, deposit with Finance Company included in accrued expenses and other payables (Note 38(i)), 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 ~~18.~~19.
As of December 31, ~~2017~~2019 and ~~2018,~~2020, no material loss allowance was recognized in respect of amounts due from China Telecom Group.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~

~~37.~~(b)
~~RELATED PARTY TRANSACTIONS (continued)~~
~~(b)~~
Transactions with China Tower
The principal transactions with China Tower are as follows:

   Year ended December 31,    Year ended December 31,
   Notes 2016    2017    2018    Notes 2018    2019    2020
   RMB    RMB    RMB    RMB    RMB    RMB
Tower assets lease and related fee
   (i ) 11,657    15,389    16,063
Tower assets lease related expenses
   (i ) 16,063    10,543    10,746
Additions of right-of-use assets
   (i ) —      3,735    3,645
Interest expense on lease liabilities
   (i ) —      938    805
Provision of IT services
   (ii ) 12    49    32    (ii ) 32    31    31

Notes:
(i)
Represent amounts in relation to the lease of tower assets. Tower assets lease related expenses for the year ended 31 December 2020 includes the variable lease payments not depending on an index or a rate and fee for non-lease components. Tower assets lease related expenses for the years ended 31 December 2018 and 2019 represent tower assets lease and related fee paid and payable to China Tower. The Company and China Tower entered into agreement on July 8, 2016 and a supplemental agreement on February 1, 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 summarized as follows:

   2017    2018    2019    2020
   RMB    RMB    RMB    RMB
Accounts receivable
   5    10    5    23
Prepayments and other current assets
   2,152    293    192    138








Total amounts due from China Tower
   2,157    303    197    161








Accounts payable
   2,611    2,850    4,312    4,344
Accrued expenses and other payables
   1,374    1,246    1,261    1,192
Contract liabilities
   1    3
Lease liabilities
   24,474    19,798








Total amounts due to China Tower
   3,985    4,096    30,048    25,337








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.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
39.
RELATED PARTY TRANSACTIONS (continued)
(b)
Transactions with China Tower (continued)
As of December 31, ~~2017~~2019 and ~~2018,~~2020, no material loss allowance was recognized in respect of amounts due from China Tower.

(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 summarized as follows:

   Year ended December 31,
   2016    2017    2018
   RMB    RMB    RMB
   thousands    thousands    thousands
Short-term employee benefits.
   9,886    7,804    7,942
Post-employment benefits.
   801    816    799






   10,687    8,620    8,741






   Year ended December 31,
   2018    2019    2020
   RMB    RMB    RMB
   thousands    thousands    thousands
Short-term employee benefits
   7,942    9,604    8,727
Post-employment benefits
   799    1,199    628






   8,741    10,803    9,355






The above remuneration is included in personnel expenses.

(d)
Contributions to post-employment benefit plans
The Group participates in various defined contribution post-employment benefit plans organized by municipal, autonomous regional and provincial governments for its employees. Further details of the Group’s post-employment benefit plans are disclosed in Note ~~38.~~
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~
40.

~~37.~~(e)
~~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 organizations (collectively referred to as “government-related entities”).
Apart from transactions with parent company and its fellow subsidiaries (Note ~~37(a)~~39(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.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)

~~38.~~40.
POST-EMPLOYMENT BENEFITS PLANS
As stipulated by the regulations of the PRC, the Group participates in various defined contribution retirement plans organized 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%~~14% to 20% of the salaries, bonuses and certain allowances of the ~~employees.~~employees, while the PRC government resolved to waive certain proportion of such contributions during the specific period affected by the Covid-19 in order to help enterprises withstand the pandemic and stabilise employment. 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. During the reporting period, no forfeited contributions may be used by the Group to reduce the existing level of contributions.
The Group’s contributions for the above plans for the years ended December 31, ~~2016, 2017~~2018, 2019 and ~~2018~~2020 were ~~RMB6,656~~RMB7,256 and ~~RMB6,884~~RMB8,616 and ~~RMB7,256,~~RMB6,599, respectively.
The amount payable for contributions to the above defined contribution retirement plans as of December 31, ~~2017~~2019 and ~~2018~~2020 was ~~RMB569~~RMB755 and ~~RMB675,~~RMB746, respectively.

~~39.~~41.
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%.~~exercise. The Company recognizes compensation expense of the share appreciation rights over the applicable period.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~
~~39.~~
~~SHARE APPRECIATION RIGHTS (continued)~~
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 of 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 year ended December 31, ~~2018~~2019 and ~~2017,~~2020, no share appreciation right units were exercised. For the year ended December 31, ~~2018,~~2020, compensation expense of ~~RMB30~~RMB101 was ~~recognized~~reversed by the Group in respect of share appreciation ~~rights (2017: Nil).~~rights. For the year ended 31 December 2019, compensation expense of RMB136 was recognised by the Group in respect of share appreciation rights.
As of December 31, ~~2018,~~2019 and 2020, the carrying amount of the liability arising from share appreciation rights ~~was RMB30. As of December 31, 2017, no liability arising from~~were RMB166 and RMB65, respectively.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share ~~appreciation rights was assumed by the Group.~~data and except otherwise stated)

~~40.~~42.
PRINCIPAL SUBSIDIARIES
Details of the Company’s subsidiaries which principally affected the results, assets and liabilities of the Group as of December 31, ~~2018~~2020 are as follows:

Name of company

Type of legal entity

    Date of incorporation

Place of incorporation and

operation

Registered /issued capital
(in RMB million unless
otherwise stated)

Principal
            activities
China Telecom System Integration Co., Limited Limited Company September 13, 2001
PRC
542 Provision of system integration and consulting services
China Telecom Global Limited Limited Company February 25, 2000
Hong Kong Special Administrative Region of the PRC
HK$168 million Provision of telecommunications services
China Telecom (Americas) Corporation Limited Company November 22, 2001
The United States of America
US$43 million Provision of telecommunications services
China Telecom Best Tone Information Service Co., Limited Limited Company August 15, 2007
PRC
350
Provision of Best
Tone information services
China Telecom (Macau) Company Limited Limited Company October 15, 2004
Macau Special Administrative Region of the PRC
MOP60 million Provision of telecommunications services
Tianyi Telecom Terminals Company Limited Limited Company July 1, 2005
PRC
500 Sales of telecommunications terminals
China Telecom (Singapore) Pte. Limited Limited Company October 5, 2006
Singapore
S$1,000,001
Provision of international
value-added network services
E-surfing Pay Co., Ltd Limited Company March 3, 2011
PRC
~~500~~635 Provision ofe-commerce service
Shenzhen Shekou Telecommunications Company Limited Limited Company May 5, 1984
PRC
91 Provision of telecommunications services
China Telecom (Australia) Pty Ltd Limited Company January 10, 2011
Australia
AUD1 million Provision of international value-added network services
China Telecom Korea Co.,Ltd Limited Company May 16, 2012
South Korea
KRW500 million Provision of international value-added network services
China Telecom (Malaysia) SDN BHD Limited Company June 26, 2012
Malaysia
MYR3,723,500 Provision of international value-added network services
China Telecom Information Technology (Vietnam) Co., Ltd Limited Company July 9, 2012
Vietnam
VND10,500 million Provision of international value-added network services
iMUSIC Culture & Technology Co., Ltd. Limited Company June 9, 2013
PRC
250 Provision of music production and related information services
China Telecom (Europe) Limited Limited Company March 2, 2006
The United Kingdom of Great Britain and Northern Ireland
GBP16.15 million Provision of ~~international value-added network~~telecommunications services
Zhejiang Yixin Technology Co., Ltd. Limited Company August 19, 2013
PRC
11 Provision of instant messenger service
Tianyi Capital Holding Co., Ltd. Limited Company November 30, 2017
PRC
5,000 Capital Investment and provision of consulting services
China Telecom Leasing Corporation Limited. Limited Company November 30, 2018
PRC
5,000 Provision of finance lease service
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~
~~40.~~
China Telecom Group
Finance Co., Ltd.
(“Finance Company”)
Limited Company January 8, 2019
~~PRINCIPAL SUBSIDIARIES (continued)~~PRC
5,000 Provision of capital and financial management services
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 and Finance Company, which is 70% owned by the Company, all of the above subsidiaries are directly or indirectly wholly-owned by the Company. No subsidiaries of the Group have materialnon-controlling interest. None of the subsidiaries had issued any debt securities at the end of the year.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)

~~41.~~43.
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 anon-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~~credit loss experience taking into consideration reasonable and supportable forward-looking information that is available without undue cost or effort. The historical ~~observed default~~loss rates are reassessed annually, and changes in the forward-looking information are considered. In addition, accounts receivable with significant balances ~~and~~or credit-impaired are assessed for ECL individually.
The provision of ECL is sensitive to changes in estimates. Due to greater financial uncertainty triggered by the Covid-19 pandemic, the Group has increased the expected loss rates in the current year as there is higher risk that a prolonged pandemic could lead to increased credit default rate. The information about the ECL and the Group’s accounts receivable are disclosed in notes 5 and ~~34.~~
36.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~
~~41.~~
~~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 recognized in accordance with accounting policy for impairment of long-lived assets as described in Note ~~3(i)~~3(h). The carrying amounts of the Group’s long-lived assets, including property, plant and equipment,right-of-use assets, 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 recognized 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.~~amount.
For the year ended December 31, 2020, provision for impairment loss of RMB5,042 were made against the carrying value of property, plant and equipment (Note 9), mainly based on the impairment test on the 3G Assets on the basis of each individual asset. For the year ended December 31 2019 and 2018, no provision for impairment ~~losses were~~loss was made against the carrying value of long-lived assets. For the year ended December 31, 2017, provision for impairment losses of RMB10 were made against the carrying value of long-lived assets. For the year ended December 31, 2016, provision for impairment losses of RMB62 were made against the carrying value of long-lived assets.
In determining the recoverable amount of ~~these equipment,~~the assets with the cash-generating unit, 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. Furthermore, the financial budgets, growth rate and discount rate are subject to greater uncertainties in the current year due to uncertainty on how the Covid-19 pandemic may progress and evolve and volatility in financial markets.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All Renminbiamounts in millions, except per share data and except otherwise stated)
43.
ACCOUNTING ESTIMATES AND JUDGMENTS (continued)
Depreciation and amortization
Property, plant and equipment and intangible assets with finite useful lives are depreciated and amortized 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 amortization 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 amortization 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 lease of Tower Assets on July 8, 2016 and a supplemental agreement on February 1, 2018. Management evaluated the detailed clauses of the lease agreements 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 specialized nature that only the Company can use them without major modifications.
~~CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(All~~~~Renminbi~~~~amounts in millions, except per share data and except otherwise stated)~~

~~42.~~44.
POSSIBLE IMPACT OF NEW AND AMENDMENTS TO STANDARDS ~~NEW STANDARDS AND INTERPRETATION~~ ISSUED BUT NOT YET EFFECTIVE FOR THE ANNUAL ACCOUNTING PERIOD ENDED DECEMBER 31, ~~2018~~2020
Up to the date of issue of these consolidated financial statements, the IASB has issued the following new and amendments to standards ~~new standards and interpretation~~ which are not yet effective and not early adopted for the annual accounting period ended December 31, ~~2018:~~2020:


Effective for accounting
period beginning on or after
~~IFRS 16,~~~~“Leases”~~
~~1 January 2019~~
~~IFRIC 23,~~~~“Uncertainty over Income Tax Treatments”~~
~~1 January 2019~~
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16,~~“Prepayment Features with Negative Compensation”~~ “Interest Rate Benchmark Reform–Phase 2”
   January 1, ~~January 2019~~2021
Amendments to IFRS 3, “Reference to the Conceptual Framework”
January 1, 2022
Amendments to IAS ~~28,~~16, “~~Long-term Interests in Associates~~Property, Plant and ~~Joint Ventures”~~Equipment: Proceeds before Intended Use”
   January 1, ~~January 2019~~2022
Amendments to ~~IFRSs,~~IAS 37, “Onerous Contracts – Cost of Fulfilling a Contract”
January 1, 2022
Amendments to IFRS Standards, “Annual Improvements to IFRS Standards ~~2015-2017 Cycle”~~2018-2020”
   January 1, ~~January 2019~~2022
IFRS 17, “Insurance Contracts and the related Amendments”
January 1, 2023
Amendments to IAS ~~19,~~1, “~~Plan Amendment, Curtailment~~Classification of Liabilities as Current or ~~Settlement”~~Non-current”
   January 1, ~~January 2019~~2023
~~Amendments to IFRS 3,~~~~“Definition of a Business”~~
~~1 January 2020~~
Amendments to IAS 1 and IFRS Practice Statement 2, “Disclosure of Accounting Policies”
January 1, 2023
Amendments to IAS 8,“Definition of ~~Material”~~Accounting Estimates”
   January 1, ~~January 2020~~2023
~~IFRS 17,~~~~“Insurance Contracts”~~
~~1 January 2021~~
Amendments to IFRS 10 and IAS 28,“Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”
   ~~Postponed~~To be determined
The Group is in the process of making an assessment of the impact that will result from adopting the new and amendments to standards ~~new standards and interpretation~~ issued by the IASB which are not yet effective for the accounting period ended on December 31, ~~2018. Except for IFRS 16,~~~~“Leases”~~~~, so~~2020. So far the Group believes that the adoption of these new and amendments to standards ~~new standards and interpretation~~ is unlikely to have a significant impact on its financial position and the results of operations.
~~IFRS 16,~~~~“Leases”~~
45.
EVENTS AFTER THE REPORTING PERIOD
~~IFRS 16 introduces a comprehensive model for~~
(a)
NYSE determination to delist American Depositary Shares of the Company
The New York Stock Exchange LLC (the “NYSE”) announced on December 31, 2020 (US Eastern standard time) that the ~~identification~~staff of ~~lease arrangements and accounting treatments for both lessors and lessees. IFRS 16 will supersede IAS 17,~~~~“Leases”~~~~and~~NYSE Regulation had determined to commence proceedings to delist the ~~related interpretations when it becomes effective.~~
~~IFRS 16 distinguishes lease and service contracts~~securities of three issuers, including the American Depositary Shares (the “ADSs”) of the Company, on the basis ~~of whether an identified asset~~that the Company is ~~controlled by a customer. Distinctions of operating leases and finance leases are removed~~no longer suitable for ~~lessee accounting, and is replaced by a model where aright-of-use~~ ~~asset and a corresponding liability have~~listing pursuant to ~~be recognized for all leases by lessees, except for short-term leases and leases of low value assets.~~
~~Theright-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~~the NYSE Listed Company Manual Section 802.01D in light of the ~~lease liability. The lease liability is initially measured at~~Executive Order issued on November 12, 2020 (as amended on January 13, 2021 (US Eastern standard time)) by the ~~present value~~then President of the ~~lease payments~~United States. On January 4, 2021(US Eastern standard time), NYSE announced that ~~are not paid at that date. Subsequently,~~NYSE Regulation no longer intended to move forward with 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 flowsdelisting action in relation to ~~land use rights while other operating lease payments are presented~~the ADSs, and then on January 6, 2021 (US Eastern standard time), NYSE announced that NYSE Regulation determined to re-commence delisting proceedings of the ADSs (the “Determination”), following which trading of the ADSs was suspended at 4:00 a.m. (US Eastern standard time) on January 11, 2021. In addition, on January 8, 2021 (US Eastern standard time), the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) added the Company to the “Issuer Name” column of a list of companies identified as ~~operating cash flows. Upon application~~a Restricted Company (the “Restricted List”).
In order to protect the legitimate interests of ~~IFRS 16, lease payments~~the Company and its shareholders, on January 20, 2021 (US Eastern standard time), the Company filed with the NYSE a written request for a review of the Determination by a Committee of the Board of Directors of the NYSE (the “Committee”) and stay of the trading suspension of the ADSs pending review of the Determination. On January 27, 2021 (US Eastern standard time), OFAC published General License No. 1A in relation to ~~lease liability will be allocated into a principal~~the Executive Order (“GL 1A”), dated January 26, 2021 (US Eastern standard time), and ~~an interest portion which will be presented as financing~~guidance relating to two related frequently asked questions (respectively, “FAQ 878” and ~~operating cash flows respectively by~~“FAQ 879”). GL 1A and FAQ 879 provide, among others, that, pursuant to the ~~Group, upfront prepaid lease payments~~Executive Order, the Prohibitions with respect to the Company take effect on the date that is 60 days after the Company was added to the Restricted List, or March 9, 2021 (US Eastern standard time) (instead of January 11, 2021 (US Eastern standard time)).
The Company will continue to ~~be presented as investing or operating cash flows in accordance~~pay close attention to the ~~nature, as appropriate.~~development of related matters and also seek professional advice and reserve all rights to protect the legitimate interests of the Company.
CHINA TELECOM CORPORATION LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AllRenminbiamounts in millions, except per share data and except otherwise stated)

~~42.~~45.
~~POSSIBLE IMPACT OF AMENDMENTS TO STANDARDS, NEW STANDARDS AND INTERPRETATION ISSUED BUT NOT YET EFFECTIVE FOR~~EVENTS AFTER THE ~~ANNUAL ACCOUNTING~~REPORTING PERIOD ~~ENDED DECEMBER 31, 2018~~ (continued)
~~IFRS 16,~~~~“Leases”~~~~(continued)~~
(b)
Proposal of share appreciation rights grant for key personnel
~~Under IAS 17,~~On February 9, 2021, the ~~Group~~Board of Directors of the Company has ~~already recognized an asset~~considered and approved the resolution in relation to the “2021 Share Appreciation Rights Grant Proposal for Key Personnel of China Telecom Corporation Limited” (now renamed as “The Phase II Incentive Scheme for Share Appreciation Rights of China Telecom Corporation Limited” as instructed by the State-owned Assets Supervision and Administration Commission of the State Council of China (“SASAC”)) (the “Proposal”). According to the Proposal, the Company proposed to grant a ~~related finance lease liability for finance lease arrangement~~maximum of approximately 2,412 million share appreciation rights to a maximum of approximately 8,300 key personnel (excluding the Executive Directors, Non-Executive Director, Independent Directors, Supervisors and ~~prepaid lease payments for land use rights where~~senior management of 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 presentsright-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 of December 31, 2018, the Group hasnon-cancellable~~ operating lease commitments of RMB65,805 as disclosed in Note 33. A preliminary assessment indicates that majority of these arrangements will meet the definition of a lease. Upon application of IFRS 16, the Group will recognize a~~right-of-use~~ ~~asset and a corresponding liability in respect of these leases unless they qualify for low value or short-term leases.~~Company).
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 recognize the cumulative effect of initial application to opening reserves without restating comparative information.Proposal has been approved by SASAC on March 3, 2021.

~~43.~~(c)
~~EVENT AFTER THE REPORTING PERIOD~~Proposed A share offering
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 June 22, 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 January 8, 2019. Pursuant to the Capital Contribution Agreement, the registered share capital of China Telecom Finance is RMB5,000.
The Company, China Telecommunications Corporation and CCS respectively contributed RMB3,500, RMB750 and RMB750, which respectively represented 70%, 15% and 15% of the total registered capital of China Telecom Finance. AsOn March 9, 2021, the Company ~~holds 70%~~announced it plans to apply for the offering and listing of A shares on the ~~issued share capital~~Main Board of ~~China Telecom Finance, China Telecom Finance is a subsidiary of the Company.~~Shanghai Stock Exchange.

~~44.~~46.
PARENT AND ULTIMATE HOLDING COMPANY
The parent and ultimate holding company of the Company as of December 31, ~~2018~~2020 is China Telecommunications Corporation, a state-owned enterprise established in the PRC.

~~F-63~~F-61


	As of or for the year ended December 31,
	2014 RMB			2015 RMB			2016 RMB			2017 RMB			2018 RMB			2018 US$
	(in millions, except share numbers and per share and per ADS data)
Consolidated Statements of Comprehensive Income Data:
Operating revenues		324,755			331,517			352,534			366,229			377,124			54,850
Operating expenses		(296,239	)		(305,070	)		(325,314	)		(339,009	)		(348,410	)		(50,674	)
Operating income		28,516			26,447			27,220			27,220			28,714			4,176
Earnings before income tax		23,265			26,698			24,116			24,953			28,148			4,094
Income tax		(5,498	)		(6,552	)		(5,993	)		(6,192	)		(6,810	)		(990	)
Profit attributable to equity holders of the Company		17,688			20,058			18,018			18,617			21,210			3,085
Basic earnings per share⁽¹⁾		0.22			0.25			0.22			0.23			0.26			0.04
Basic earnings per ADS⁽¹⁾		21.86			24.78			22.26			23.00			26.21			3.81
Cash dividends declared per share		0.08			0.08			0.09			0.09			0.11			0.02


	As of or for the year ended December 31,
	2016		2017		2018
Mobile subscribers (in millions)		215.0		250.0		303.0
of which: 4G users (in millions)		121.9		182.0		242.4
Mobile voice usage (in billion minutes)		720.6		769.2		827.7
Handset data traffic (in kTB)		1,277.0		3,597.0		14,073.0
4G users DOU (in megabyte)		1,029		2,012		5,680
Wireline broadband subscribers (in millions)		123.1		133.5		145.8
of which:Fiber-to-the-Home (FTTH) subscribers (in millions)		106.0		126.2		140.7
Access lines in service (in millions)		126.9		121.8		116.5
Wireline local voice usage (in billion pulses)		93.4		75.1		60.2
e-Surfing HD subscribers (in millions)		61.3		85.8		105.3
BestPay average monthly active users (in millions)		16.2		33.0		43.4
Internet of Things connected devices (in millions)		14.2		44.3		106.9


	As of or for the year ended December 31,
	2018		2019		2020
Mobile subscribers (in millions)		303.0		335.6		351.0
Mobile voice usage (in billion minutes)		827.7		820.3		784.5
Handset data traffic (in kTB)		14,073.0		24,370.0		34,690.0
Wireline broadband subscribers (in millions)		145.8		153.1		158.5
Wireline telephone subscribers (in millions)		116.5		110.9		107.9
e-Surfing HD subscribers (in millions)		105.3		112.6		115.9
IoT connected devices (in millions)		106.9		157.4		237.6


Network from Which Calls Originated	Network at Which Calls Terminated	Current Main Settlement Arrangement

Mobile operator	Wireline local operator or transferred through mobile operator’s long distance network to wireline local operator	(1) Mobile operator collects the cellular usage charge from its subscribers (2) Mobile operator pays RMB0.06 per minute to wireline operator (3) ~~Starting~~Between January 1, 2010 and June 30, 2020, mobile operator (China Mobile) pays RMB0.012 per minute to wireline operator for calls originated from~~TD-SCDMA“157”~~TD-SCDMA “157” or “188” prefix phone numbers in local areas. Starting July 1, 2020, mobile operator (China Mobile) pays RMB0.06 per minute to wireline operator for calls originated from TD-SCDMA “157” or “188” prefix phone numbers in local areas

Wireline local operator	Mobile local operator	(1) Wireline operator collects the usage charge from its subscribers (2) No ~~revenues~~revenue sharing or settlement prior to June 1, 2010. Wireline operator pays RMB0.001 per minute to mobile operator after June 1, 2010

Wireline operator	Transferred through wireline operator’s long distance network to mobile operator	(1) Wireline operator collects the usage charge from its subscribers (2) Wireline operator pays RMB0.06 per minute to mobile operator


	Year Ended December 31,
	2016					2017					2018
	Amount		Percentage of Operating Revenues			Amount		Percentage of Operating Revenues			Amount		Percentage of Operating Revenues
	(RMB in millions, except percentage data)
Operating Revenues:
Voice services⁽¹⁾		70,185		19.9	%		61,678		16.8	%		50,811		13.5	%
Internet services⁽²⁾		150,449		42.7	%		172,554		47.1	%		190,871		50.6	%
Information and application services⁽³⁾		66,881		19.0	%		73,044		20.0	%		83,478		22.1	%
Telecommunications network resource and equipment services⁽⁴⁾		17,781		5.0	%		19,125		5.2	%		20,211		5.4	%
Others⁽⁵⁾		47,238		13.4	%		39,828		10.9	%		31,753		8.4	%

Total operating revenues		352,534		100.0	%		366,229		100.0	%		377,124		100.0	%


		Depreciable lives primarily range from

Buildings and improvements		8 - 30 years
Telecommunications network plant and equipment		5 - 10 years
Furniture, fixture, motor vehicles and other equipment		5 - 10 years


	Effective for accounting period beginning on or after

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 “~~Leases~~Interest Rate Benchmark Reform – Phase 2”		January 1, ~~2019~~
~~IFRIC 23, “~~~~Uncertainty over Income Tax Treatments~~”		~~January 1, 2019~~
~~Amendments to IFRS 9, “~~~~Prepayment Features with Negative Compensation~~”		~~January 1, 2019~~
~~Amendments to IAS 28, “~~~~Long-term Interests in Associates and Joint Ventures~~”		~~January 1, 2019~~
~~Amendments to IFRSs, “~~~~Annual Improvements to IFRS Standards 2015-2017 Cycle~~”		~~January 1, 2019~~
~~Amendments to IAS 19, “~~~~Plan Amendment, Curtailment or Settlement~~”		~~January 1, 2019~~2021
Amendments to IFRS 3, “~~Definition of a Business~~Reference to the Conceptual Framework”		January 1, ~~2020~~2022
Amendments to IAS 16, “Property, Plant and Equipment: Proceeds before Intended Use”		January 1, 2022
Amendments to IAS 37, “Onerous Contracts – Cost of Fulfilling a Contract”		January 1, 2022
Amendments to IFRS Standards, “Annual Improvements to IFRS Standards 2018-2020”		January 1, 2022
IFRS 17, “Insurance Contracts and the related Amendments”		January 1, 2023
Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”		January 1, 2023
Amendments to IAS 1 and ~~IAS 8,~~IFRS Practice Statement 2, “~~Definition~~Disclosure of ~~Material~~Accounting Policies”		January 1, ~~2020~~2023
~~IFRS 17,~~Amendments to IAS 8, “~~Insurance Contracts~~Definition of Accounting Estimates”		January 1, ~~2021~~2023
Amendments to IFRS 10 and IAS 28, “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”		~~Postponed~~To be determined


	Year Ended December 31,									Year Ended December 31,
	2016			2017			2018			2019			2020
	(RMB in millions)									(RMB in millions)
Net cash flow from operating activities		101,135			96,502			99,298			112,600			132,260
Net cash used in investing activities		(99,043	)		(85,263	)		(85,954	)		(77,214	)		(87,077	)
Net cash used in financing activities		(9,555	)		(16,147	)		(16,283	)		(31,288	)		(42,107	)

Net decrease in cash and cash equivalents		(7,463	)		(4,908	)		(2,939	)

Net increase in cash and cash equivalents											4,098			3,076


	As of December 31,						As of December 31,
	2016		2017		2018		2019		2020
	(RMB in millions)						(RMB in millions)
Short-term debt		40,780		54,558		49,537		42,527		27,994
Long-term debt and payable maturing within one year		62,276		1,146		1,139
Long-term debt maturing within one year								4,444		1,126
Long-term debt		9,370		48,596		44,852		32,051		24,222
Finance lease obligations (including current portion)		102		77		216

Total debt		112,528		104,377		95,744		79,022		53,342


	Payable in
	Total		2021		2022		2023		2024		2025		After 2025
	(RMB in millions)
Contractual Obligations⁽¹⁾:
Short-term debt		27,994		27,994		—		—		—		—		—
Long-term debt		25,348		1,126		17,081		3,009		984		952		2,196
Lease liabilities		40,647		13,192		12,585		5,104		3,564		2,470		3,732
Interest payable		6,129		1,964		1,535		664		506		466		994
Capital commitments		20,199		20,199		—		—		—		—		—

Total contractual obligations		120,317		64,475		31,201		8,777		5,054		3,888		6,922


Name	Age		Position
Ke Ruiwen		5557	~~Performing the functions of the~~Executive Director, Chairman and Chief Executive ~~Officer;~~ Officer
Li Zhengmao		58	Executive Director, President and Chief Operating Officer
~~Gao Tongqing~~Shao Guanglu		57	Executive Director
Zhang Zhiyong		55	Executive ~~Director and Executive~~ Vice President
~~Chen Zhongyue~~Liu Guiqing		4754	Executive Director and Executive Vice President
Zhu Min		5456	Executive Director, Executive Vice President, Chief Financial Officer and Secretary of the Board
Chen Shengguang		5557	Non-Executive Director
Tse Hau Yin, Aloysius		7173	IndependentNon-Executive Director


Name	Age		Position
Xu Erming		6971	IndependentNon-Executive Director
Wang Hsuehming		6971	IndependentNon-Executive Director
Yeung Chi Wai, Jason		6466	IndependentNon-Executive Director
~~Zhang Zhiyong~~		53	~~Executive Vice President~~
~~Liu Guiqing~~		52	~~Executive Vice President~~
~~Wang Guoquan~~		46	~~Executive Vice President~~


Name	Age		Position
Sui Yixun		5557	Supervisor ~~(Chairman)~~(Chairman of the Supervisory Committee and Shareholder Representative)
Zhang Jianbin		5355	Supervisor (Employee Representative)
~~Yang Jianqing~~Dai Bin		5952	Supervisor (Employee Representative)
Xu Shiguang		3941	Supervisor (Shareholder Representative)
~~Ye Zhong~~You Minqiang		5947	Supervisor (Shareholder Representative)


	Directors’/ supervisors’ fees		Salaries, allowances and benefits in kind		Discretionary bonuses⁽³⁾		Share-based payments		Retirement scheme contributions		Total
	RMB thousands
2018
Executive Directors
Yang Jie⁽⁴⁾		—		207		536		—		89		832
Liu Aili⁽⁵⁾		—		121		178		—		52		351
Ke Ruiwen		—		197		497		—		85		779
Sun Kangmin⁽⁶⁾		—		—		—		—		—		—
Gao Tongqing		—		192		489		—		84		765
Chen Zhongyue		—		192		489		—		82		763
Zhu Min⁽⁷⁾		—		37		53		—		14		104

Non-Executive Director
Chen Shengguang		—		—		—		—		—		—

IndependentNon-Executive Directors
Tse Hau Yin, Aloysius		471		—		—		—		—		471
Cha May Lung, Laura⁽⁸⁾		108		—		—		—		—		108
Xu Erming		250		—		—		—		—		250
Wang Hsuehming		257		—		—		—		—		257
Yeung Chi Wai, Jason⁽⁹⁾		44		—		—		—		—		44

Supervisors
Sui Yixun		—		216		485		—		84		785
Zhang Jianbin		—		209		485		—		84		778
Yang Jianqing		—		268		494		—		86		848
Hu Jing⁽¹⁰⁾		—		15		83		—		12		110
Xu Shiguang⁽¹¹⁾		—		18		40		—		13		71
Ye Zhong		—		—		—		—		—		—

Total		1,130		1,672		3,829		—		685		7,316


	Directors’/ supervisors’ fees		Salaries, allowances and benefits in kind		Discretionary bonuses⁽³⁾		Share- based payments		Retirement scheme contributions		Total
	RMB thousands
2020
Executive Directors
Ke Ruiwen		—		221		527		—		73		821
Li Zhengmao⁽⁴⁾		—		129		434		—		48		611
Shao Guanglu⁽⁵⁾		—		116		436		—		46		598
Liu Guiqing		—		197		464		—		59		720
Zhu Min		—		197		464		—		52		713
Chen Zhongyue⁽⁶⁾		—		199		468		—		71		738
Wang Guoquan⁽⁷⁾		—		181		447		—		42		670


Title of Shares	Identity of Person or Group	Amount Owned		Nature of Interest		Percentage of the Respective Type of Shares⁽¹⁾			Percentage of Total Shares⁽¹⁾
Domestic shares	China Telecom Group		57,377,053,317		long position		85.57	%		70.89	%
Domestic shares	Guangdong Rising Assets Management Co., Ltd.		5,614,082,653		long position		8.37	%		6.94	%

Title of Shares	Identity of Person or Group	Amount Owned		Nature of Interest		Percentage of the Respective Type of Shares⁽¹⁾			Percentage of Total Shares⁽¹⁾
H shares	JPMorgan Chase & Co.		1,656,036,020		long position		11.93	%		2.05	%
			86,660,983		short position		0.62	%		0.11	%
			1,391,214,945		lending pool		10.03	%		1.72	%
H shares	BlackRock, Inc.		1,270,388,123		long position		9.15	%		1.57	%
			4,496,000		short position		0.03	%		0.01	%
H shares	The Bank of New York Mellon Corporation		1,190,211,519		long position		8.58	%		1.47	%
			625,101,100		short position		4.50	%		0.77	%
			534,051,135		lending pool		3.85	%		0.66	%
H shares	Citigroup Inc.		1,107,293,104		long position		7.98	%		1.37	%
			10,490,832		short position		0.08	%		0.01	%
			1,063,017,708		lending pool		7.66	%		1.31	%
H shares	Templeton Global Advisors Limited		1,087,529,062		long position		7.84	%		1.34	%


Transactions	Transaction Amounts
	(RMB millions)
Net transaction amount of centralized services		~~519~~268
Net expenses for interconnection settlement		~~124~~69
~~Lease of property from China Telecom Group~~Property lease income		~~713~~45
~~Lease of property to China Telecom Group~~Property lease related expenses		48581
Addition to right-of-use assets		335
Interest expense on lease liabilities		16
Provision of IT services by China Telecom Group		~~1,895~~2,653
Provision of IT services to China Telecom Group		~~531~~556
Provision of supplies procurement services by China Telecom Group		~~3,760~~3,567
Provision of supplies procurement services to China Telecom Group		~~2,760~~2,070
Provision of engineering services by China Telecom Group		~~16,396~~15,046
Provision of community services by China Telecom Group		~~3,296~~3,682
Provision of ancillary telecommunications services by China Telecom Group		~~16,744~~18,903
Provision of Internet applications channel services to China Telecom Group		~~298~~73
Interest on loans from China Telecom Group		~~2,099~~975
Others*		~~186~~243
Net deposit by China Telecom Group with China Telecom Finance		5,728
Interest expense on the deposit by China Telecom Group with China Telecom Finance		82


	Expected Maturity
	2019			2020			2021			2022			2023			Thereafter			Total		Fair Value
	(RMB equivalent in millions, except interest rates)
Assets:
Cash and cash equivalents
United States dollars		4,909			—			—			—			—			—			4,909		4,909
Japanese yen		20			—			—			—			—			—			20		20
Euro		76			—			—			—			—			—			76		76
Hong Kong dollars		251			—			—			—			—			—			251		251
Other currencies		751			—			—			—			—			—			751		751
Short-term bank deposits					—			—			—			—			—
United States dollars		69			—			—			—			—			—			69		69
Liabilities:
Debts in United States dollars
Fixed rate		52			47			36			22			22			157			336		272
Average interest rate		1.7	%		1.7	%		1.7	%		1.7	%		1.7	%		1.7	%
Debts in Euro
Fixed rate		25			25			25			25			25			74			199		176
Average interest rate		2.3	%		2.3	%		2.3	%		2.3	%		2.3	%		2.3	%


	ADR holders must pay:		For:

•	US$5.00 (or less) per 100 ADRs (or portion thereof)	•	Each issuance of an ADR, including as a result of a distribution of shares or rights or other property

		•	Each cancellation of an ADR, including if the deposit agreement terminates

		•	Each distribution of securities, other than shares or ADRs, treating the securities as if they were shares for purpose of calculating fees

•	US$0.02 (or less) per ADR	•	Any cash distribution (not including cash dividend distribution)

•	Registration or transfer fees (if applicable)	•	Transfer and registration of shares on the share register of our transfer agent and the registrar in Hong Kong from an ADR holder’s name to the name of the depositary or its agent when the ADR holder deposit or withdraw shares

•	Expenses of the depositary	•	Conversion of foreign currency to U.S. dollars

		•	Cable, telex and facsimile transmission expenses

•	Taxes and other governmental charges the depositary or the custodian has to pay on any ADR or share underlying an ADR, for example, stock transfer taxes, stamp duty or withholding taxes	•	As necessary

•	Any other charge incurred by the depository or its agents (including the custodian) for servicing of the deposited securities	•	As necessary


Exhibits		Description

1.1		Articles of Association (as amended) (English translation)

2.1		Form of H Share Certificate.^(1)(P)

2.2		Form of Deposit Agreement among the Registrant, ~~The~~the Bank of New York, as depositary, and Owners and Beneficial Owners from time to time of American Depositary Shares evidenced by American Depositary Receipts issued thereunder, including the form of American Depositary Receipt.^(2)(P)

2.3		We agree to provide the Securities and Exchange Commission, upon request, copies of instruments defining the rights of holders of our long-term debt.

2.4		Description of rights of each class of securities registered under Section 12 of the Securities Exchange Act of 1934.

4.1		Supplemental Trademark License Agreement, dated October 26, 2003, between the Registrant and China Telecommunications Corporation (English translation).⁽³⁾

4.2		Sale and Purchase Agreement, dated October 26, 2003, between the Registrant and China Telecommunications Corporation (English translation).⁽³⁾

4.3		Supplemental Connected Transactions Agreement, dated October 26, 2003, between the Registrant and China Telecommunications Corporation (English translation).⁽³⁾

4.4		Form of Underwriting Agreement.⁽⁴⁾

4.5		Supplemental Trademark License Agreement, dated April 13, 2004, between the Registrant and China Telecommunications Corporation (English translation).⁽⁵⁾

4.6		Supplemental Connected Transactions Agreement, dated April 13, 2004, between the Registrant and China Telecommunications Corporation (English translation).⁽⁶⁾

4.7		Conditional Sale and Purchase Agreement, dated April 13, 2004, between the Registrant and China Telecommunications Corporation (English translation).⁽⁷⁾

4.8		Supplemental Conditional Sale and Purchase Agreement, dated June 9, 2004, between the Registrant and China Telecommunications Corporation (English summary).⁽⁸⁾

4.9		Supplemental Centralized Services Agreement, dated December 15, 2005, between the Registrant and China Telecommunications Corporation (English summary).⁽⁹⁾

4.10		Property Leasing Framework Agreement, dated August 30, 2006, between the Registrant and China Telecommunications Corporation (English summary).⁽¹⁰⁾

4.11		IT Services Framework Agreement, dated August 30, 2006, between the Registrant and China Telecommunications Corporation (English summary).⁽¹⁰⁾

4.12		Equipment Procurement Services Framework Agreement, dated August 30, 2006, between the Registrant and China Telecommunications Corporation (English summary).⁽¹⁰⁾

4.13		Engineering Framework Agreement, dated August 30, 2006, between the Registrant and China Telecommunications Corporation (English summary).⁽¹⁰⁾

4.14		Community Services Framework Agreement, dated August 30, 2006, between the Registrant and China Telecommunications Corporation (English summary).⁽¹⁰⁾

4.15		Ancillary Telecommunications Service Framework Agreement, dated August 30, 2006, between the Registrant and China Telecommunications Corporation (English summary).⁽¹⁰⁾

4.16		Strategic Agreement, dated August 30, 2006, between the Registrant and China Communications Services Corporation Limited (English summary).⁽¹⁰⁾


~~Exhibits~~		~~Description~~

4.17		Supplemental Agreement to the Strategic Agreement, dated June 15, 2007, between the Registrant and the China Communications Services Corporation Limited (English Summary).⁽¹⁰⁾

4.18		Supplemental Agreement to the Strategic Agreement, dated October 29, 2009, between the Registrant and the China Communications Services Corporation Limited (English Summary).⁽¹³⁾

4.19		Master Agreement for sales and purchase of equity interests in China Telecom (Hong Kong) International Limited, China Telecom System Group Integration Co., Ltd. and China Telecom (USA) Corporation, dated June 15, 2007, between China Telecommunications Corporation and China Telecom Corporation Limited.⁽¹⁰⁾

4.20		Stock Purchase Agreement in respect of sales and purchase of shares in China Telecom (USA) Corporation, dated June 15, 2007, between China Telecommunications Corporation and China Telecom Corporation Limited.⁽¹⁰⁾


Exhibits		Description

4.21		Share Purchase Agreement in respect of sales and purchase of shares in China Telecom (Hong Kong) International Limited, dated June 15, 2007, between China Telecommunications Corporation and China Telecom Corporation Limited.⁽¹⁰⁾

4.22		Share Transfer Agreement in respect of transfer of shareholdings in China Telecom System Integration Co., Limited, dated June 15, 2007, among China Telecommunications Corporation, China Huaxin Post and Telecommunications Economy Development Center and China Telecom Corporation Limited.⁽¹⁰⁾

4.23		Agreement on the Transfer of the Entire Equity Interests in China Telecom Group Beijing Corporation, dated March 31, 2008, between the Registrant and China Telecommunications Corporation (English Translation).⁽¹¹⁾

4.24		Form Merger Agreement, dated January 10, 2008, between the Registrant and each of certain subsidiaries wholly owned by the Registrant (English Translation).⁽¹¹⁾

4.25		Supplemental Agreement to the Centralized Services Agreement, dated December 26, 2007, between the Registrant and China Telecommunications Corporation (English Summary).⁽¹¹⁾

4.26		Supplemental Agreement to the Centralized Services Agreement, dated March 31, 2008, between the Registrant and China Telecommunications Corporation (English Summary).⁽¹¹⁾

4.27		Framework Agreement for Transfer of CDMA Business, dated June 2, 2008, among the Registrant, China Unicom Limited and China Unicom Corporation Limited (English Summary).⁽¹¹⁾

4.28		Supplemental Agreement to the Interconnection Settlement Agreement, dated July 27, 2008, between the Registrant and China Telecommunications Corporation (English summary).⁽¹²⁾

4.29		Supplemental Agreement to the IT Services Framework Agreement, dated December 15, 2008, between the Registrant and China Telecommunications Corporation (English summary).⁽¹²⁾

4.30		Supplemental Agreement to the Supplies Procurement Services Framework Agreement, dated December 15, 2008, between the Registrant and China Telecommunications Corporation (English summary).⁽¹²⁾

4.31		Supplemental Agreement to the Engineering Framework Agreement, dated July 27, 2008, between the Registrant and China Telecommunications Corporation (English summary).⁽¹²⁾

4.32		Supplemental Agreement to the Community Services Framework Agreement, dated December 15, 2008, between the Registrant and China Telecommunications Corporation (English summary).⁽¹²⁾

4.33		Supplemental Agreement to the Ancillary Telecommunications Services Framework Agreement, dated July 27, 2008, between the Registrant and China Telecommunications Corporation (English summary).⁽¹²⁾

4.34		CDMA Network Capacity Lease Agreement, dated July 27, 2008, between the Registrant and China Telecommunications Corporation (English translation).⁽¹²⁾

4.35		Agreement for Transfer of CDMA Business, dated July 27, 2008, between the Registrant, China Unicom Limited and China Unicom Corporation Limited (English summary).⁽¹²⁾

4.36		Merger Agreement, dated November 14, 2008, between the Registrant and China Telecommunications Corporation Beijing Corporation (English translation).⁽¹²⁾

4.37		Supplemental Agreement to the Optic Fiber Leasing Agreement, dated July 10, 2008, between the Registrant and China Telecommunications Corporation (English summary).⁽¹²⁾


~~Exhibits~~		~~Description~~

4.38		Underwriting Agreement regarding Medium Term Notes of China Telecom Corporation Limited in 2008, dated April 15, 2008, among the Registrant, Industrial and Commercial Bank of China Limited and CITIC Securities Company Limited (English summary), and its Supplemental Agreement, dated December 15, 2008 (English summary).⁽¹²⁾

4.39		Underwriting Agreement regarding the First Tranche of Short-Term Commercial Paper of China Telecom Corporation Limited in 2008, dated July 7, 2008, among the Registrant, Bank of Communications Co., Ltd. and China Development Bank (English summary).⁽¹²⁾

4.40		Underwriting Agreement regarding the First Tranche of Medium Term Notes of China Telecom Corporation Limited in 2009, dated September 8, 2009 (as supplemented on September 9, 2009), among the Registrant, Bank of Communications Co., Ltd. and Agricultural Bank of China Limited (English summary).⁽¹³⁾


Exhibits		Description

4.41		Underwriting Agreement regarding the Second Tranche of Medium Term Notes of China Telecom Corporation Limited in 2009, dated October 19, 2009 (as supplemented respectively on October 20, 2009 and December 4, 2009), among the Registrant, Agriculture Bank of China Limited and China Merchants Bank Co., Ltd. (English summary).⁽¹³⁾

4.42		Underwriting Agreement regarding the Third Tranche of Medium Term Notes of China Telecom Corporation Limited in 2009, dated October 19, 2009 (as supplemented respectively on October 20, 2009 and December 4, 2009), among the Registrant, China Construction Bank Corporation and Industrial and Commercial Bank of China Ltd. (English summary).⁽¹³⁾

4.43		Supplemental Agreement to the Centralized Services Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾

4.44		Supplemental Agreement to the Interconnection Settlement Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾

4.45		Supplemental Agreement to the Property Leasing Framework Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾

4.46		Supplemental Agreement to the IT services Framework Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾

4.47		Supplemental Agreement to the Community Services Framework Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾

4.48		Supplemental Agreement to the Supplies Procurement Services Framework Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾

4.49		Supplemental Agreement to the Engineering Framework Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾

4.50		Supplemental Agreement to the Ancillary Telecommunications Services Framework Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾

4.51		Supplemental Agreement to the CDMA Network Capacity Lease Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾

4.52		Supplemental Agreement to the Trademark License Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾

4.53		Supplemental Agreement to the Optic Fiber Leasing Agreement, dated August 25, 2010, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁴⁾

4.54		Agreement on the Acquisition of CDMA Network Assets and Associated Liabilities, dated August 20, 2012, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁵⁾

4.55		Agreement on the Disposal of Equity Interest inE-surfing Media Co., Ltd., dated April 26, 2013, between the Registrant and China Telecommunications Corporation (English Summary)⁽¹⁵⁾

4.56		Agreement on the Acquisition of China Telecom (Europe) Limited, dated December 16, 2013, between the Registrant and China Telecommunications Corporation⁽¹⁶⁾

4.57		Internet Applications Channel Services Framework Agreement, dated December 16, 2013, between the Registrant and China Telecommunications Corporation (English Summary)⁽¹⁶⁾


Exhibits		Description

4.58		Promoters’ Agreement for China Communications Facilities Services Corporation Limited (currently known as China Tower Corporation Limited) dated July 11, 2014, among the Registrant, China United Network Communications Corporation Limited and China Mobile Communication Company Limited⁽¹⁷⁾

4.59		Agreement on Purchase of Stock Tower-related Assets by Issuance of Shares and Payment of Cash, dated October 14, 2015, among the Registrant, the Tower Company, CUCL, CMCL, CRHC and other parties thereto (English translation)⁽¹⁸⁾

4.60		Share Subscription Agreement, dated January 29, 2016, between the Registrant and the Tower Company (English translation)⁽¹⁸⁾

4.61		Supplemental Agreement to the Centralized Services Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾

4.62		Supplemental Agreement to the Interconnection Settlement Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾

4.63		Supplemental Agreement to the Property Leasing Framework Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾

4.64		Supplemental Agreement to the IT Services Framework Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾

4.65		Supplemental Agreement to the Community Services Framework Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾

4.66		Supplemental Agreement to the Supplies Procurement Services Framework Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾

4.67		Supplemental Agreement to the Engineering Framework Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾

4.68		Supplemental Agreement to the Ancillary Telecommunications Services Framework Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾

4.69		Supplemental Agreement to the Internet Applications Channel Services Framework Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾

4.70		Supplemental Agreement to the Optic Fiber Leasing Agreement, dated September 23, 2015, between the Registrant and China Telecommunications Corporation (English summary)⁽¹⁸⁾

4.71		Lease Agreement, dated July 8, 2016, between the Registrant and the Tower Company (English translation)⁽¹⁹⁾

4.72		Supplemental Lease Agreement, dated February 1, 2018, between the Registrant and the Tower Company (English translation)⁽²⁰⁾

4.73		Supplemental Agreement to the Centralized Services Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾

4.74		Supplemental Agreement to the Interconnection Settlement Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾

4.75		Supplemental Agreement to the Property Leasing Framework Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾


Exhibits		Description

4.76		Supplemental Agreement to the IT Services Framework Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾

4.77		Supplemental Agreement to the Community Services Framework Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾

4.78		Supplemental Agreement to the Supplies Procurement Services Framework Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾

4.79		Supplemental Agreement to the Engineering Framework Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾


~~Exhibits~~		~~Description~~

4.80		Supplemental Agreement to the Ancillary Telecommunications Services Framework Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾

4.81		Supplemental Agreement to the Internet Applications Channel Services Framework Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾

4.82		Supplemental Agreement to the Optic Fiber Leasing Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾

4.83		Supplemental Agreement to the Trademark License Agreement, dated August 20, 2018, between the Registrant and China Telecommunications Corporation (English summary)⁽²¹⁾

4.84		China Telecommunications Corporation Financial Services Framework Agreement, dated February 1, 2019, between China Telecommunications Corporation and China Telecom Group Finance Co., Ltd. (English summary)⁽²¹⁾

4.85		China Telecom Financial Services Framework Agreement, dated February 1, 2019, between the Registrant and China Telecom Group Finance Co., Ltd. (English summary)⁽²¹⁾

4.86		CCS Financial Services Framework Agreement, dated February 1, 2019, between China Communications Services Corporation Limited and China Telecom Group Finance Co., Ltd. (English summary)⁽²¹⁾

4.87		5G Network Co-Build and Co-Share Framework Cooperation Agreement, dated September 9, 2019, between the Registrant and China United Network Communications Corporation Limited (English translation)⁽²²⁾

4.88		Agreement on the Disposal of Equity Interest in E-surfing Pay Co., Ltd, dated March 26, 2021, between the Registrant and China Telecommunications Corporation (English Summary)

4.89		Agreements on the Disposal of Equity Interest in China Telecom Leasing Corporation Limited, dated March 26, 2021, among the Registrant, China Telecom Global Limited, China Telecommunications Corporation and Guang Hua Properties Limited (English Summary)

8.1		List of ~~subsidiaries~~Significant Subsidiaries of the Registrant as of December 31, 2020

11.1		Code of Ethics (English translation).⁽³⁾

12.1		Certification of CEO pursuant to Rule13a-14(a)

12.2		Certification of CFO pursuant to Rule13a-14(a)

13.1		Certification of CEO pursuant to Rule13a-14(b)

13.2		Certification of CFO pursuant to Rule13a-14(b)

15.1		Letter to SEC from Deloitte


Exhibits		Description

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document


CHINA TELECOM CORPORATION LIMITED

By:		/s/ Ke Ruiwen
Name:		Ke Ruiwen
Title:		Executive Director, ~~President and Chief Operating Officer (performing the functions of the~~ Chairman and Chief Executive ~~Officer)~~Officer


	Pages

Report of independent registered public accounting firm		F-2

Consolidated statements of financial position as of December 31, ~~2017~~2019 and ~~2018~~2020		~~F-3~~F-5

Consolidated statements of comprehensive income for the years ended December 31, ~~2016, 2017~~2018, 2019 and ~~2018~~2020		~~F-4~~F-6

Consolidated statements of changes in equity for the years ended December 31, ~~2016, 2017~~2018, 2019 and ~~2018~~2020		~~F-5~~F-7

Consolidated statements of cash flows for the years ended December 31, ~~2016, 2017~~2018, 2019 and ~~2018~~2020		~~F-6~~

~~Notes to the consolidated financial statements~~		F-8

Notes to the consolidated financial statements		F-10