China Communications Services Corporation Limited Annual Report 2015
159
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2015
42. RELATED PARTIES
(continued)
(a) Transactions with CTC Group and other related parties
(continued)
(ii) The Group has entered into facilities leasing agreements with CTC pursuant to which the Group leases certain
premises and other facilities to CTC Group, and vice versa. The rental charges are based on market rate, with
reference to amounts stipulated by local price bureau.
(iii) The Group has entered into operation support services agreements for facilities management, advertising,
conferencing, logistics, cultural, educational, hygiene and other community services with CTC. In addition, the
Group has entered into ancillary services agreements with CTC. The ancillary services provided to CTC Group
include repairs and maintenance of telecommunications equipment and facilities and certain customer services.
Pursuant to these agreements, the Group charges CTC Group, and vice versa, for these services in accordance
with the following terms:
— market price. In determining the market price, the Group primarily considers the following factors: (i) cost
of service; (ii) prices of the same or similar type of services provided to CTC Group by other service
providers in the market;(iii) prices of the same or similar type of services provided to CTC Group and
independent third parties previously by the Group.
— in the absence of market price or where the market price cannot be determined, the price shall be agreed
between both parties, which shall be the aggregate amount of reasonable costs, the relevant taxes in
sales and reasonable profits. “Reasonable costs” means the costs confirmed by both parties after
negotiations, and “reasonable profit” means a profit ratio confirmed by both parties during the course of
normal commercial negotiation, taking into account factors such as historical price, transaction size,
average profit ratio within the relevant industry, supply and demand, labor cost, local commodity prices
and economic development levels.
(iv) The Group has entered into agreement with CTC pursuant to which the Group takes up the role as headquarter
management function to manage assets of the telecommunications support business of provinces,
municipalities and autonomous regions (“Centralised Services”) including Ningxia, Tibet and any assets retained
by CTC after the Restructuring and acquisition of Target Business. The aggregate administrative costs incurred
by the Group for the provision of the Centralised Services are apportioned pro rata between the Group and
CTC Group according to the net asset ratio of each of the relevant party.
(v) The Group has entered into Supplies Procurement Services Framework agreement for procurement of
telecommunication and non-telecommunication supplies, agency services of supplies procurement, sales of
telecommunication supplies and management of biddings, verification of technical specifications, warehousing
transportation and installation service. Pursuant to the agreement, the Group charges CTC Group for these
services in accordance with the following terms:
— maximum 1% of the contract value for procurement services on imported telecommunication supplies;
— maximum 3% of the contract value for procurement services on domestic telecommunication and non-
telecommunication supplies and materials;
— market price. In determining the market price, the Group primarily considers the following factors: (i) cost
of service; (ii) prices of the same or similar type of services provided to CTC Group or the Group by other
service providers in the market; (iii) prices of the same or similar type of services provided to CTC Group
and independent third parties by the Group, or prices of the same or similar type of services provided to
the Group by CTC Group and independent third parties.
— in the absence of market price or where the market price cannot be determined, the price shall be agreed
between both parties, which shall be the aggregate amount of reasonable costs, the taxes in sales and
reasonable profits. “Reasonable costs” means the costs confirmed by both parties after negotiations, and
“reasonable profit” means a profit ratio confirmed by both parties during the course of normal
commercial negotiation, taking into account factors such as historical price, transaction size, average
profit ratio within the relevant industry, supply and demand, labor cost, local commodity prices and
economic development levels.
