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Report of the Directors
/ Annual Report 2011 /
1
Operation Support Services Framework Agreement
Pursuant to the Operation Support Services Framework Agreement, the Company agreed to provide to China
Telecom Group operation support services, including but not limited to facilities management and renovation,
network facilities management in relation to buildings used for telecommunications purposes, human resources
management, equipment maintenance, advertisements, conferencing services, vehicles and certain repair and
leasing of equipment. Under the same Operation Support Services Framework Agreement, China Telecom Group has
agreed to provide operation support services such as logistic services, warehouse, medical care, food and beverage,
educational, hotel and travel services, labour services and other services to us. Each of the parties will accord priority
to the other party in the provision of the operation support services, provided that the terms and conditions offered
by independent third parties to the relevant party are no more favourable than those offered by the other party for
the same services. In return, each of the parties has undertaken to the other that it shall not provide services to the
other on terms which are less favourable than those offered to independent third parties. The operation support
services under the Operation Support Services Framework Agreement are provided in accordance with the same
pricing policy as that of the Ancillary Telecommunications Services Framework Agreement.
IT Application Services Framework Agreement
Pursuant to the IT Application Services Framework Agreement, the Company agreed to provide China Telecom
Group with telecommunications network support services, software and hardware development and other related IT
services. China Telecom Group has also agreed to provide to the Company certain IT application services, including
voice and data, value-added services and information application services. The charges payable for such IT application
services under the IT Application Services Framework Agreement shall be determined by reference to market rates,
for example, rates as reflected by prices obtained through the tender process (with a minimum of three parties
tendering bids). The party receiving the relevant services will accord priority to the party providing such services,
provided that the terms and conditions offered by independent third parties to the relevant party are no more
favourable than those offered by the other party for the same services. In return, each of the parties has undertaken
to the other that it shall not provide services to the other on terms which are less favourable than those offered to
independent third parties.
Centralized Services Agreement
Pursuant to the Centralized Services Agreement, the centralized services to be provided by the Company to China
Telecom Group include:
1.
the corporate headquarters management function to manage assets and specialized telecommunications
support businesses retained by China Telecom in the PRC other than the Group’s primary service areas and
any remaining assets of China Telecom in the Group’s primary service areas, such as hotels, manufacturing
plants, schools and hospitals that are not in association with the specialized telecommunications support
businesses; and
2.
the provincial headquarters management function to manage remaining assets of China Telecom in the
primary service areas of the Group.
Except as otherwise agreed by the parties, the aggregate administrative expenses incurred by us for the provision
of the centralized services referred to above (all expenses incurred in connection with the above-mentioned
headquarters management functions except remuneration for Directors, share appreciation rights and provision
of bad debts) will be apportioned pro rata between the Company and China Telecom Group according to the
proportional net asset value of each of the relevant parties.