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Report of the Directors
/ Annual Report 2011 /
1
The Company shall offer at least 5% discount for the engineering-related services to be provided to the relevant
wholly-owned provincial subsidiaries (and their successors) of China Telecom Corporation Limited based on the
applicable standard prices. Such discount is on normal commercial terms and it is in-line with market practice to give
a discount as favourable treatment offered to large enterprise customers which are able to commit to a minimum
purchase volume per annum. The percentage discount depends on a number of factors, such as the committed
minimum purchase volume, competition and so on. In relation to our provision of maintenance and management
services including but not limited to our network maintenance and facilities management businesses, we have
undertaken to fully utilize our competitive edge on having established professional operation with economies of
scales to assist China Telecom Corporation Limited in achieving the goals of lowering its costs and expenditure.
In relation to the Company’s provision of business process outsourcing services, integrated information solutions, call
centre and other services such as system integration and value-added services, China Telecom Corporation Limited
has undertaken to use its best endeavours to grant us business opportunities, provided that our terms and conditions
for the provision of such services are no less favourable than those offered by any independent third parties. In
return, the Company will utilize its capacities and resources to support the strategic transformation of China Telecom
Corporation Limited into an integrated information service provider. The annual caps for the provision of the relevant
services contemplated under the Strategic Cooperation Agreement have already been subsumed respectively under
the Engineering Framework Agreement, the Ancillary Telecommunications Services Framework Agreement, the
Operation Support Services Framework Agreement and the IT Application Services Framework Agreement described
above and therefore no separate annual caps shall be applied to the Strategic Cooperation Agreement.
The Company entered into a supplementary agreement to the Strategic Cooperation Agreement (the “2009
Supplementary Strategic Agreement) with China Telecom Corporation Limited on 29 October 2009 to extend the
period of the Strategic Cooperation Agreement to 31 December 2012.
The independent non-executive directors of the Company have confirmed that all continuing connected transactions
for the year ended 31 December 2011 to which the Group was a party:
1.
had been entered into, and that the agreements governing those transactions had been entered into, by the
Group in the ordinary and usual course of business;
2.
had been entered into either:
(i)
on normal commercial terms; or
(ii)
where there was no available comparison to judge whether they are on normal commercial terms, are
on terms no less favourable than those available to or (if applicable) from independent third parties; and
3.
had been entered into on terms that are fair and reasonable so far as the overall interests of the independent
shareholders of the Company are concerned.
The independent non-executive directors have further confirmed that:
The values of continuing connected transactions entered into between the Group and its connected persons which
are subject to annual caps have not exceeded their respective annual caps or revised annual caps.