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Report of the Directors
/ Annual Report 2011 /
1
On 5 September 2011, Tianxun Ruida Communications Technology Company Limited (“Tianxun Ruida”), an
indirectly wholly-owned subsidiary of the Company, entered into the Asset and Business Acquisition Agreement
with E-Surfing Electronic Commerce Company Limited (“E-Surfing Electronic”), an indirectly wholly-owned
subsidiary of China Telecom. Pursuant to the Asset and Business Acquisition Agreement, Tianxun Ruida will sell, and
E-Surfing Electronic will acquire the target payment business and asset of Tianxun Ruida, for a total consideration of
RMB14,624,200 payable in cash, subject to adjustment. Tianxun Ruida is an indirectly wholly-owned subsidiary of the
Company and mainly engaged in supplying BOSS system to telecommunications operators. As the major customers
of the Company have recently established their own payment businesses, the Company expects the profitability
of the payment business would become limited. As part of the Group’s development strategy, by disposing the
payment business which is the non-core business of Tianxun Ruida, Tianxun Ruida could be more focused on
operating its core business and be providing better service to its customers in the future. E-Surfing Electronic is an
indirectly wholly-owned subsidiary of China Telecom which is the controlling shareholder of the Company, so E-Surfing
Electronic is a connected person of the Company under the Listing Rules. Accordingly, the disposal constituted a
connected transaction of the Company. The Company has complied with the relevant Listing Rules requirements in
respect of such connected transaction and made corresponding announcement on 5 September 2011.
On 29 November 2011, Hongbo Information Company Limited (“Hongbo Information”), an indirectly wholly-owned
subsidiary of the Company, entered into the Video Business and Asset Acquisition Agreement with E-Surfing Video
Media Company Limited (“E-Surfing Video”), an indirect subsidiary of China Telecom, pursuant to which, Hongbo
Information has agreed to sell, and E-Surfing Video has agreed to acquire, the target video business and asset for
a total consideration of RMB32 million, subject to adjustment. The video business of Hongbo Information mainly
includes the provision of internet video programmes and the relevant content and service support, and China
Telecom is the major customer of such video business. As E-Surfing Video has been established by China Telecom as
a strategic platform to manage and further develop its own video business, the Company expects the profitability of
the video business of Hongbo Information would become limited. As part of the Group’s development strategy, by
disposing the video business, Hongbo Information could be more focused on its informatisation support businesses
and provide better service to its customers in the future. E-Surfing Video is an indirectly wholly-owned subsidiary of
China Telecom which is the controlling shareholder of the Company, so E-Surfing Video is a connected person of the
Company under the Listing Rules. Accordingly, the disposal constituted a connected transaction of the Company.
The Company has complied with the relevant Listing Rules requirements in respect of such connected transaction
and made corresponding announcement on 29 November 2011.
On 8 December 2011, the Company entered into the Equity Transfer Agreement with Hunan Telecommunications
Industrial (Group) Company Limited (“Hunan Industrial”), a wholly-owned subsidiary of China Telecom pursuant
to which, the Company has agreed to sell, and Hunan Industrial has agreed to acquire 100% equity interest in
the Hunan New Nantian Real Property Company Limited, a wholly-owned subsidiary of the Company, for a total
consideration of RMB39,897,400. Since real property development is not the core business of the Company,
pursuant to the applicable laws and policies and the regulatory requirement of the PRC authorities and as part of
the Company’s development strategy, the Company could be more focused on its principal businesses and provide
better service to its customers by disposing the real property business. Hunan Industrial is an indirectly wholly-owned
subsidiary of China Telecom which is the controlling shareholder of the Company, so Hunan Industrial is a connected
person of the Company under the Listing Rules. Accordingly, the disposal constituted a connected transaction of the
Company. The Company has complied with the relevant Listing Rules requirements in respect of such connected
transaction and made corresponding announcement on 8 December 2011.