| 33. | RELATED PARTY TRANSACTIONS |
| (a) | Transactions with China Telecom Group |
The Group is a part of companies under China Telecommunications Corporation, a company owned by the PRC government, and has significant transactions and business relationships with members of China Telecom Group.
The principal transactions with China Telecom Group which were carried out in the ordinary course of business are as follows.
| Year ended December 31, | ||||||||||||||||
| Notes | 2015 | 2016 | 2017 | |||||||||||||
| RMB | RMB | RMB | ||||||||||||||
| (restated) | (restated) | |||||||||||||||
|
Purchases of telecommunications equipment and materials |
(i | ) | 5,285 | 5,199 | 4,248 | |||||||||||
|
Sales of telecommunications equipment and materials |
(i | ) | 2,856 | 2,786 | 3,291 | |||||||||||
|
Construction and engineering services |
(ii | ) | 19,885 | 18,936 | 18,672 | |||||||||||
|
Provision of IT services |
(iii | ) | 181 | 312 | 642 | |||||||||||
|
Receiving IT services |
(iii | ) | 1,362 | 1,597 | 1,812 | |||||||||||
|
Receiving community services |
(iv | ) | 2,860 | 2,871 | 3,028 | |||||||||||
|
Receiving ancillary services |
(v | ) | 12,715 | 13,938 | 16,072 | |||||||||||
|
Property lease income |
(vi | ) | 47 | 36 | 53 | |||||||||||
|
Property lease expenses |
(vi | ) | 673 | 559 | 654 | |||||||||||
|
Net transaction amount of centralized services |
(vii | ) | 486 | 523 | 727 | |||||||||||
|
Interconnection revenues |
(viii | ) | 59 | 60 | 48 | |||||||||||
|
Interconnection charges |
(viii | ) | 468 | 232 | 193 | |||||||||||
|
Internet applications channel services |
(ix | ) | 368 | 332 | 344 | |||||||||||
|
Interest on amounts due to and loans from China Telecom Group |
(x | ) | 4,048 | 2,928 | 2,720 | |||||||||||
|
Lease of CDMA network facilities |
(xi | ) | 226 | 154 | 174 | |||||||||||
|
Lease of inter-provincial transmission optic fibres |
(xii | ) | 22 | 16 | 13 | |||||||||||
|
Lease of land use rights |
(xiii | ) | 13 | 6 | 3 | |||||||||||
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Notes:
| (i) | Represent the amount of telecommunications equipment and materials purchased from/sold to China Telecom Group and commission paid and payable for procurement services provided by China Telecom Group. |
| (ii) | Represent construction and engineering as well as design and supervisory services provided by China Telecom Group. |
| (iii) | Represent IT services provided to and received from China Telecom Group. |
| (iv) | Represent amounts paid and payable to China Telecom Group in respect of cultural, educational, health care and other community services. |
| (v) | Represent amounts paid and payable to China Telecom Group in respect of ancillary services such as repairs and maintenance of telecommunications equipment and facilities and certain customer services. |
| (vi) | Represent amounts of property lease fee received and receivable from/paid and payable to China Telecom Group for mutual leasing of properties. |
| (vii) | Represent net amount shared between the Company and China Telecom Group for costs associated with centralized services. The amount represents amounts received or receivable for the net amount of centralized services. |
| (viii) | Represent amounts received and receivable from/paid and payable to China Telecom Group for interconnection of local and domestic long distance calls. |
| (ix) | Represent amounts received and receivable from China Telecom Group in respect of Internet applications channel services, including the provision of telecommunications channel and applications support platform and billing and deduction services, etc. |
| (x) | Represent interest paid and payable to China Telecom Group with respect to the amounts due to China Telecom Group and loans from China Telecom Group (Note 15). |
| (xi) | Represent amounts paid and payable to China Telecom Group primarily for lease of certain CDMA mobile telecommunications network (“CDMA network”) facilities located in Xizang Autonomous Region. |
| (xii) | Represent amounts paid and payable to China Telecom Group for lease of certain inter-provincial transmission optic fibres within its service regions. |
| (xiii) | Represent amounts paid and payable to China Telecom Group for leases of land use rights. |
Amounts due from/to China Telecom Group are summarized as follows:
| December 31, | ||||||||
| 2016 | 2017 | |||||||
| RMB | RMB | |||||||
| (restated) | ||||||||
|
Accounts receivable |
966 | 1,502 | ||||||
|
Prepayments and other current assets |
798 | 774 | ||||||
|
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|
|
|
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Total amounts due from China Telecom Group |
1,764 | 2,276 | ||||||
|
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|
|
|
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Accounts payable |
21,331 | 22,682 | ||||||
|
Accrued expenses and other payables |
1,813 | 1,838 | ||||||
|
Short-term debt |
5,271 | 19,098 | ||||||
|
Long-term debt and payable |
61,710 | 40,000 | ||||||
|
|
|
|
|
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Total amounts due to China Telecom Group |
90,125 | 83,618 | ||||||
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Amounts due from/to China Telecom Group, other than short-term debt and long-term debt and payable, bear no interest, are unsecured and are repayable in accordance with contractual terms which are similar to those terms offered by third parties. The terms and conditions associated with short-term debt and long-term debt and payable due to China Telecom Group are set out in Note 15.
As of December 31, 2016 and 2017, no material allowance for doubtful debts was recognized in respect of amounts due from China Telecom Group.
| (b) | Transactions with China Tower |
The principal transactions with China Tower are as follows:
| Year ended December 31, | ||||||||||||||||
| Notes | 2015 | 2016 | 2017 | |||||||||||||
| RMB | RMB | RMB | ||||||||||||||
|
Tower Assets Disposal |
30,131 | — | — | |||||||||||||
|
Tower Assets lease fee |
(i | ) | 2,742 | 11,657 | 15,389 | |||||||||||
|
Provision of IT services |
(ii | ) | — | 12 | 49 | |||||||||||
Notes:
| (i) | Represent amounts paid and payable to China Tower for the lease of the Tower Assets. |
The Company and China Tower entered into agreement on July 8, 2016 and a supplemental agreement on February 1,2018 to confirm the pricing and related arrangements in relation to the leases of the Tower Assets.
| (ii) | Represent IT services provided to China Tower. |
Amounts due from/to China Tower are summarized as follows:
| 2016 | 2017 | |||||||
| RMB | RMB | |||||||
|
Accounts receivable |
10 | 5 | ||||||
|
Prepayments and other current assets |
2,278 | 2,152 | ||||||
|
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|
|
|
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|
Total amounts due from China Tower |
2,288 | 2,157 | ||||||
|
|
|
|
|
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Accounts payable |
3,697 | 2,611 | ||||||
|
Accrued expenses and other payables |
807 | 1,374 | ||||||
|
|
|
|
|
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|
Total amounts due to China Tower |
4,504 | 3,985 | ||||||
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Amounts due from/to China Tower bear no interest, are unsecured and are repayable in accordance with contractual terms which are similar to those terms offered by third parties.
As of December 31, 2016 and 2017, no material allowance for doubtful debts was recognized in respect of amounts due from China Tower.
| (c) | Key management personnel compensation |
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including directors and supervisors of the Group.
Key management personnel compensation of the Group is summarized as follows:
| Year ended December 31, | ||||||||||||
| 2015 | 2016 | 2017 | ||||||||||
| RMB | RMB | RMB | ||||||||||
| thousands | thousands | thousands | ||||||||||
|
Short-term employee benefits |
9,859 | 9,886 | 7,804 | |||||||||
|
Post-employment benefits |
916 | 801 | 816 | |||||||||
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| 10,775 | 10,687 | 8,620 | ||||||||||
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The above remuneration is included in personnel expenses.
| (d) | Contributions to post-employment benefit plans |
The Group participates in various defined contribution post-employment benefit plans organized by municipal, autonomous regional and provincial governments for its employees. Further details of the Group’s post-employment benefit plans are disclosed in Note 34.
| (e) | Transactions with other government-related entities in the PRC |
The Group is a government-related enterprise and operates in an economic regime currently dominated by entities directly or indirectly controlled by the People’s Republic of China through government authorities, agencies, affiliations and other organizations (collectively referred to as “government-related entities”).
Apart from transactions with parent company and its fellow subsidiaries(Note 33(a)), the Group has transactions that are collectively but not individually significant with other government-related entities, which include but not limited to the following:
| • |
rendering and receiving services, including but not limited to telecommunications services |
| • |
sales and purchases of goods, properties and other assets |
| • |
lease of assets |
| • |
depositing and borrowing |
| • |
use of public utilities |
These transactions are conducted in the ordinary course of the Group’s business on terms comparable to the terms of transactions with other entities that are not government-related. The Group prices its telecommunications services and products based on government-regulated tariff rates, where applicable, or based on commercial negotiations. The Group has also established procurement policies and approval processes for purchases of products and services, which do not depend on whether the counterparties are government-related entities or not.
The directors of the Company believe the above information provides appropriate disclosure of related party transactions.