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China Communications Services Corporation Limited Annual Report 2015
REPORT OF THE DIRECTORS
CONTINUING CONNECTED TRANSACTIONS AGREEMENTS BETWEEN THE
COMPANY AND CHINA TELECOM
The Company and China Telecom entered into seven continuing connected transactions agreements on 29 September 2015 to
govern the continuing connected transactions between the Group and China Telecom Group. These agreements include the
Engineering Framework Agreement, the Ancillary Telecommunications Services Framework Agreement, the Operation Support
Services Framework Agreement, the IT Application Services Framework Agreement, the Centralized Services Agreement, the
Property Leasing Framework Agreement and the Supplies Procurement Services Framework Agreement (the “2015
Agreements”). Each of the 2015 Agreements had an initial term expired on 31 December 2018 and, subject to approval from
the shareholders (if applicable), the 2015 Agreements would be automatically renewed for a further period of not more than
three years each time, unless terminated by either party by giving a written notice three months in advance. All of the 2015
Agreements (excluding the Centralized Services Agreement and the Property Leasing Framework Agreement that did not require
independent shareholders’ approval under the Listing Rules) were approved by the independent shareholders of the Company at
the extraordinary general meeting held on 11 December 2015.
The Board considers that it is in the interest of the Company to enter into the 2015 Agreements and cooperate with China
Telecom Group to ensure a stable revenue source from one of the largest telecommunications operators in the PRC so as to
benefit the Company’s future growth and development.
Details of each of the 2015 Agreements are set out below.
ENGINEERING FRAMEWORK AGREEMENT
Pursuant to the Engineering Framework Agreement, the Company agreed to provide certain engineering related services, such as
design, construction, project supervision and management for telecommunications infrastructure projects undertaken by China
Telecom Group.
The charges for engineering related services rendered under the Engineering Framework Agreement shall be determined at prices
fixed through tender process or market price. According to the relevant regulations and under the internal policy of China
Telecom Group, whenever the value of any design and/or project supervision and management contracts exceeds RMB0.5
million, or the value of any construction contracts exceeds RMB2 million, the award of the relevant contract must be subject to a
tender process (with a minimum of three parties tendering bids) in accordance with the Bidding Law of the PRC and Regulation
on the Implementation of the Bidding Law of the PRC, except as otherwise provided by related laws and regulations. In
determining the market price, the business and financial department of the relevant subsidiary of the Company shall collect the
relevant market information (including but not limited to the change in price for the same or similar type of services), review and
compare the costs and profits of transactions conducted in the most recent year of the same or similar type entered into with
China Telecom Group or independent third parties, and prepare fee quotes for review by the marketing department of the
relevant subsidiary of the Company, or the marketing department of the relevant subsidiary will further submit the fee quotes to
the management of such subsidiary for review depending on the actual situations (such as the amount and size of the
transaction). The marketing department or management of the relevant subsidiary of the Company shall primarily consider the
following factors: (1) cost of service; (2) prices of the same or similar type of services provided to China Telecom Group by other
service providers in the market; (3) prices of the same or similar type of services provided to China Telecom Group and
independent third parties previously by the Company.
The Company will be given priority by China Telecom Group in the provision of the engineering related services except in the
tender process, provided that the terms and conditions offered by independent third parties to China Telecom Group are no
more favorable than those offered by the Company for the same type of services, and in return, the Company has undertaken to
China Telecom Group that the Company shall not provide services to it on terms which are less favorable than those offered by
the Company to independent third parties.
