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China Communications Services Corporation Limited Annual Report 2015
REPORT OF THE DIRECTORS
ANCILLARY TELECOMMUNICATIONS SERVICES FRAMEWORK AGREEMENT
Pursuant to the Ancillary Telecommunications Services Framework Agreement, the Company agreed to provide to China Telecom
Group certain ancillary telecommunications services such as maintenance of network facilities including equipment, ducts and
cables, equipment rooms and base stations; distribution of telecommunications products and services; provision of comprehensive
logistics services, including purchasing agent, warehousing, transportation, delivery, testing and inspection, logistics information
management and distribution; provision of application, content and other services such as fixed-line value added services,
wireless value added services, Internet value added services, and development of online gaming, certificate authentication and
value added business platform of Internet cafes (the “Ancillary Telecommunications Services”).
The Ancillary Telecommunications Services Framework Agreement stipulates that the Ancillary Telecommunications Services shall
be provided at:
(1) market price. 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: (i) cost of service; (ii) prices of the same or
similar type of services provided to China Telecom Group by other service providers in the market; (iii) prices of the same or
similar type of services provided to China Telecom Group and independent third parties previously by the Company; or
(2) 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. In
determining such price, the business and financial department of the relevant subsidiary of the Company will 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, take 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, and prepare fee proposals 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 Company will be given priority by China Telecom Group in the provision of the Ancillary Telecommunications Services,
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 services, and in return, the Company has undertaken to China Telecom Group that
the Company and its subsidiaries shall not provide Ancillary Telecommunications Services to it on terms which are less favorable
than those offered by the Company to independent third parties.
