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China Communications Services Corporation Limited Annual Report 2015
REPORT OF THE DIRECTORS
COMPLIANCE WITH CORPORATE GOVERNANCE CODE
Please see the “Corporate Governance Report” set out in this annual report for details of our compliance with the Corporate
Governance Code.
MATERIAL LEGAL PROCEEDINGS
As at 31 December 2015, so far as the directors are aware, the Company was not involved in any material litigation or arbitration
and no material litigation or claims had been made against, or were pending or threatened against the Company.
RISK FACTORS
The following section lists out the principal risks and uncertainties faced by the Group. It is a non-exhaustive list and there may
be other risks and uncertainties further to the key risk areas outlined below.
1. The Group’s business may be affected by the economic, political and social conditions as
well as government policies in China
As substantially all businesses, assets and operations of the Group are located in China, and therefore, the Group’s
operating results, financial status and business prospect depend on the economic, political and social developments of
China to a large extent.
In recent years, China is one of the countries with the fastest pace of economic growth around the globe in terms of GDP.
However, the current growth rate may not be sustainable. Moreover, any future disaster, such as natural disaster and
outbreak of epidemics would potentially slow down the level of economic activities, and in turn affect the economic
growth of China, Asia and even the world. If any of the above mentioned reasons causes serious economic downturn in
China, the Group’s financial status, operating results and prospect may be adversely affected.
2. The business of the Group hinges on the investment and operating conditions in the
Chinese telecommunications sector
Demands in the Group’s services will be affected by the level of capital expenditures of the fixed-line, broadband and
mobile telecommunications infrastructure of the telecommunications operators in China. Such decreases in capital
expenditures may have adverse effect to the Group’s revenue and profits.
Moreover, in the event the competition in the Chinese telecommunications sector continues to intensify, the products and
services offered by the telecommunications operator customers of the Group may be exposed to price cutting pressure,
thus leading to the decrease in their revenue. If that happens, such telecommunications customers may reduce the service
fees to our Company in relation to certain businesses for cost cutting, with a view to maintaining their profitability.
3. The business of the Group is working capital intensive in respect of services offered to
customers
During our course of business, the Group shall pay considerable working capital expenditures to make procurements for
goods and services required for the provision of services to the clients of the Group and for the completion of projects. In
the past, the Company has satisfied the working capital needs primarily by cash from operating activities and its own fund.
A deficiency in working capital may affect the Group’s business, financial status and operating results. Moreover, the
Group’s customers may delay payment or default in accounts receivables, which may have adverse effect on the cash flows,
working capital, financial status and operating results of the Company.
