Overview

By adhering to the core philosophy of "comprehensive innovation, pursuing truth and pragmatism, people-oriented approach and creating shared value", China Telecom persists to incorporate corporate responsibilities into development strategy, daily operation and management activities. The Company also perseveres in the fulfillment of its responsibilities for the interests of stakeholders including the country, shareholders, customers, employees, suppliers, peers within the same industry and the community, while committing to step on a responsible development path and continuously enhancing corporate comprehensive values.

I. Operating with integrity and in compliance with the laws

China Telecom governs the corporate in accordance with laws and regulations, persists to operate in compliance with the laws and integrity through abidance by relevant laws and regulations and industry regulations. We established an all-rounded and seamless compliance system featuring internal control, audit supervision, anti-corruption and comprehensive risk management. In accordance with Accounting Law of the PRC and other laws and regulations and the regulatory requirements governing internal control of listed companies in capital markets such as USA and Hong Kong, the Company established its Internal Control Manual to ensure that the Company's operation management is in compliance with laws and regulations, assets are secured, and the financial reports and relevant information are valid and complete. The Company established an intellectual property management system and strengthened the protection of intellectual property rights. The Company strictly executed the laws and regulations on integrity governance and anti-corruption, established and improved five major mechanisms including anti-corruption education, system monitoring, discipline and accountability, fault tolerance and correction, and inspection and check; opened and operated a public WeChat account called "China Telecom with Integrity"; set up whistleblowing postal mailbox, emails and hotline to address any report of whistleblowing allegations and relevant complaints on its employees and to provide relevant criticism, opinions and recommendations on integrity construction and anti-corruption work. The Company has set up an effective and standard communication mechanism in order to regulate the disclosure of corporate information, and open to government supervision and public scrutiny.

In 2017, according to the laws and regulations and the requirements of regulatory authorities, in line with the changes in business operations, the Company continuously strengthened its integrity governance and anti-corruption work, reinforced construction of supervised mechanisms, perfected the Internal Control Manual and other rules and regulations, continuously assessed the implementation of rules and regulations, and promptly rectified the problems once being identified.

Our installation and maintenance experts

II. Fulfilling our inherent responsibilities as a telecommunications operator

China Telecom vigorously promoted the network speed upgrade in 2017, provided network assurance characterised with high-speed, safety and reliance, and strove to deliver network information security, universal network services and emergency service network.

Vigorous promotion of speed upgrade and tariff reduction

The Company continuously constructed and optimised 4G network and achieved "refarming" of 800MHz and built FDD 4G full coverage network, with coverage rate over 98% of the population while the network speed reached the industry-leading level. The Company devoted to improving network coverage quality, particularly in traffic-intensive and voice-intensive zones such as high-speed trains, expressways, colleges and universities, high-density residential areas, high-traffic commercial areas and subways, and thus continuously improved customer experience.

The Company continuously extended the promotion of "fibre-to-the-home" (FTTH) with fibre broadband coverage rates reaching 96% in urban cities and 85% in administrative villages. The Company took a lead in upgrading fibre broadband network from Hundred-Mbps to Thousand-Mbps, and provided Thousand-Mbps fibre broadband network as required in provincial capitals and developed cities.

The Company has further reduced data tariff for wireline broadband and handset. In 2017, the unit bandwidth price of wireline broadband reduced by 37% comparing to 2016, and the average tariff price of handset data traffic decreased by 53% compared with that of 2016. Domestic long-distance and roaming fees for handset users have been cancelled. The long-distance tariff for international, Hong Kong, Macau and Taiwan calls and data roaming fee have been substantially reduced, in particular, the long-distance tariff for international calls connecting to 73 areas in Europe, America and countries along "the Belt and Road" has been reduced by 90% on average.

Establishment of wide coverage Narrow Band Internet of things (NB-IoT)

Following the international standards and the 800MHz LTE low-frequency network, the Company became the pioneer in completing its NB-IoT network construction with nearly 300,000 base stations, which is leading globally in terms of wide coverage and network scale. Leveraging on the network advantages of NB-IoT, the Company provided various IoT applications to proactively meet prosperous customer needs on the new generation of Internet of Things with big-connection and low-energy consumption and meanwhile to effectively reduce consumptions on resources and energy.

Maintaining network information security

The Company complies with the Cybersecurity Law of the People's Republic of China and other laws and regulatory requirements in relation to network information security, conscientiously responds to the requirements of the Ministry of Industry and Information Technology, Ministry of Public Security and other authorities on prevention and combating communications frauds, and proactively takes preventative and corrective actions on network and information security risks of different kinds. In 2017, the Company took the initiatives in carrying out investigations and reforms on any potential security flaws in its internal network and system, and enhanced the network security protection capability. The Company continuously improved its administration on network information security, optimised the responding and processing procedures of network information security, introduced anti-fraud technologies and methods, and improved its overall risk management on network information security risks. The Company launched campaigns and interactive activities on communications frauds prevention via various new media channels to raise public awareness on fraud prevention. In accordance with the demands of customers, the Company kept promoting network information security products such as "Cloud Dam".

Promoting universal telecommunication services

The Company continuously promotes the construction of communication networks in rural areas and remote rural villages and strives to improve the broadband access coverage in rural areas. The Company actively participated in the pilot project of universal services initiated by the government in 2016 and proactively assisted in project planning and measures. By the end of 2017, China Telecom bid about 50,000 network construction projects for administrative villages and completed about 40,000 construction tasks of communications network of administrative villages. The Company has set up local service points for rural villages, promoted e-commerce in rural areas, endeavouring to improve informatisation level in rural villages and promote the development of villages.

Assuring emergency communications

The Company is truly committed to the mission of providing safe and smooth assurance communications. In 2017, the Company fought against a number of severe natural disasters such as earthquake, flood and typhoon; successfully provided assurance network services to major events including the Belt and Road Forum for International Cooperation, BRICS Xiamen Summit and the 19th CPC National Congress. In 2017, over 110,000 relief workers, over 25,000 rescue vehicles and over 19,000 emergency communication equipment were deployed.

Telecommunications assurance in the BRICS Xiamen Summit

China Telecom's representative assisted foreign journalists in the BRICS Xiamen Summit

Fully devoted to safeguard service assurance of the "Two Sessions"

III. Fulfilling our responsibilities towards our customers

China Telecom improved the communication with its customers to have a deeper understanding of their needs and actively worked with industrial partners to develop five business ecospheres, namely, Intelligent Connection, Smart Family, New ICT Applications, IoT and Internet Finance. We dedicated to provide customers with high-quality fundamental business such as 4G and fibre broadband and industry information applications of emerging businesses such as HD IPTV, Cloud Computing, Big Data, Mobile Payments, Internet of Things and "Internet +". The Company met information consumption needs of various customers, facilitated the transformational upgrades of various industries and sectors, persisted in construction of service capability, innovated services methods, and endeavoured to improve its service level.

Safeguarding the interests of customers

The Company strictly conforms to the laws and regulations regarding consumer rights and interests such as Law of the People's Republic of China on Protection of Consumer Rights and Interests, dedicates to provide products and services in compliance with laws and regulations, performs compliance checks on advertisement campaigns and continuously standardises the business tariff management. The Company follows the Provisions on Protection of Personal Information of Telecommunications and Internet Users promulgated by the Ministry of Industry and Information Technology, implemented the Regulations of China Telecom on Security Management of Information of Users and any other requirements, standardises the process of collecting, storing, transmitting, using and destroying user information and strictly controls the authorisation permission of sales staff on accessing and editing customer account information in order to pragmatically protect user information.

Provision of FTTH

Introduced new information services to villagers in remote area

The Company sincerely collects and listens to users' opinions via channels like "Hotline 10000" and online and physical stores, and continuously carries out events such as "Customer Rights Day", "General Manager's Service Day" and "Listen to hotline 10000". The Company timely responded to users' claims and complaints. In 2017, the Company responded to hot topics like canceling the long-distance and roaming tariff in a timely manner and improved relevant services. The Company actively cooperated with the industry authorities on junk messages management. In 2017, the Company continuously improved systems and procedures to effectively control the number of complaints on junk messages received from China Telecom.

The customer complaint rate of China Telecom for 2017 was lower than the target set by the Ministry of Industry and Information Technology, which remained at a relatively low level amongst its industry peers.

Offering customers a better experience

The Company continuously enhances capabilities for core services. In 2017, according to the customer experience and perception, the Company further promoted the dynamic optimisation of 4G network and provided customers with services like 'web history tracking inquiry' and 'getting global roaming service with one click'. For the broadband service, the Company made a commitment of "installation within one day, repairs within one day, compensation in the event of delay", and organised a professional engineering team to provide intelligent Wifi networking service to further facilitate the convenience of customer self-service. The platform processing capability of BestPay was enhanced while the interface process of customer service was optimised, increasing the efficiency of business operation. e-Surfing HD service provided mobile self-troubleshooting service. A service system for Internet of Things was built, in which self-service function was provided to customers through WeChat public account and self-service portal systems. The Cloud Computing and Big Data businesses improved the customer service system so that the self-service capability at the customer end is improved.

The intelligent service capability has been substantially enhanced. In 2017, the Company created the "Smart 10000" and applied the artificial intelligence and Big Data technology to improve the quality and efficiency of "Hotline 10000" service. The "construction and operation of all-media intelligent customer service" was awarded the first prize at the first National Quality Service Competition held by China Association for Quality. The Company persisted in innovation of smart communication means by providing "quick, simple and beautiful"video live customer services. The Company embedded service robots at service points which served more than 50 million customers a month. The Company also continuously enhanced the new media services capability such as WeChat, of which users of new media customers services reached 300 million.

The Company consistently improved customer experience. In 2017, the Company formed a dedicated team focusing on new packages and new services, such as large data traffic packages, BestPay and family cloud to gain customers' experience; for problems identified during the progress, closed-loop system process was in place to implement feedback, rectification and tracking against the issues found, so as to improve the operation services continuously. In self-owned stores and community stores, the Company set up Smart Family demonstration area to enhance customer experience of Smart Family through the physical display of products like e-Surfing HD and intelligent Wifi networking. The user experience platform UE189 developed and operated by the Company worked effectively and won the prize at the China UX Innovation Awards organized by User Experience Alliance China and other organisations.

According to assessment conducted by the Ministry of Industry and Information Technology, in 2017, the customer satisfaction rate on Internet access from both mobile and wireline broadband of China Telecom continued to maintain leading position in the industry.

Customer First Service Foremost

IV. Fulfilling our responsibility towards our employees

China Telecom safeguards the interests of its employees in accordance with the laws, attaches great importance to building harmonious labour relations, supports labour unions in carrying out their functions, encourages the employees to participate in the management and actively helps the employees to improve their capabilities, so that the Company and the employees can grow together.

Safeguarding the rights of employees

The Company strictly complies with and implements the relevant laws and regulations regarding labour and protection of the employees' rights and interests including the Labour Law of the People's Republic of China, the Labour Contract Law of the People's Republic of China and the Trade Union Law of the People's Republic of China, and protects the rights and interests of employees with respect to labour rights, democracy rights and spiritual culture in accordance with the laws. The Company strictly implements the Notice on Standardisation of Labour Management in Strict Compliance with the Labour Contract Law of the People's Republic of China, improves the staff management system, strengthens the labour contract management and employee relationships and conducts workforce employment in accordance with laws and regulations. The Company also ensures that all contract employees have their labour contracts signed and their social insurances paid. The Company strictly implements the Notice on Issues concerning Labour Dispatch Management, improves the business operation models and job role classification, determines the employment form of each role, standardises the agreements signed with contract or agency workers and urges these dispatch units and dispatch works to sign employment contracts, pay social insurance and to protect the rights and interests of contract or agency workers. The Company adheres to principles of gender equality, ethnic equality and equal pay for equal work, protects the privacy of employees in accordance with laws and implements the paid annual leave system. The Company prohibits child labour and forced labour in accordance with laws. In 2017, no child labour or forced labour were found. The Company supports the labour unions in carrying out their functions in accordance with the laws, encourages the employee participation in management and continuously establish a stable and harmonious relations with the employees.

Actively promoting employee growth

The Company strengthens the construction of high-level professional talents team. In 2017, the Company implemented China Telecom high-level professional talent management measures and continuously optimised various systems and procedures for talent "selection, cultivation, utilisation and retention"; supported by the group professional workstation, the Company experimentally implemented the talent cultivating and sharing plan which combined research, education and production, established professional workstations in two key areas namely, industry applications and network operation. According to the needs of major projects, a professional talent pool for these projects was created. The Company fully leveraged on the functions of professional talents and enhanced their capabilities via on-the-job training.

"Young cadre e-Surfing training camp" for the growth of thousands of young employee

In line with the needs of corporate transformation and development and employees' needs, the Company implemented the tailored training program. The Company continuously built up the training capabilities of China Telecom College and China Telecom Online College and developed courses focusing on various job levels and skill needs of each role, initiating differentiated training courses. In 2017, the Company allocated resources tiltered towards training for frontline employees, strengthened the on-the-job practical training for "Unit CEO", including frontline employees like frontline sales personnel, back-end maintenance personnel and network system support staff, which was much appreciated by the frontline staff. The Company was awarded the "Excellence in Practice Awards" by the Association for Talent Development (ATD) and the "Award of Excellence" by International Society for Performance Improvement (ISPI) for the "Unit CEO" training.

The Company actively urges the employees to develop and improve their skills and enhance their values concurrently. In 2017, the Company consistently held various staff skill competitions and knowledge contests, fully mobilised the function of innovation workshops, guided the staff to improve their capabilities and quality and encouraged them to strive for innovations in their daily job, enabling employees to attain value enhancement and pursue personal development.

Enhancing production safety and health and safety management

The Company sincerely implements the Work Safety Law of the People's Republic of China, effectively fulfills the core responsibilities for corporate safety production, continuously perfected safety production management system, clearly defined safety production duties, and strengthened performance evaluation. The Company establishes and improves its 'dual preventive mechanism' of risk management, including identified risk matrix and early elimination of hidden dangers, continuously checks safety production, strengthens supervision on the construction units and on-site inspection, and timely eliminate hazards; conducts safety production spot checks at the branches in 20 provinces (autonomous regions, municipalities) during the year, issues the assessment reports and list of questions identified, and promptly pushes forward the rectification. The Company carries out the activity of "safety production month", widely promotes relevant laws and regulations as well as internal policies and rules on production safety, persistently increases the employee awareness on safety, sense of self-protection and self-check, and enhances the training of special operation employees, ensuring all of them obtain licences to operate. By the end of 2017, there was no occurrence of severe casualties and accidents.

The Company attaches great attention to occupational health and safety by regularly organising the employee medical examination and continuously improving workplace environment, thus effectively eliminating the occurrences of occupational diseases. The Company continuously conducts employees assessment programs ("EAP") and other counselling activities concerning mental health of the employees, and proactively helps the employees reduce their physical stress.

Caring employees' lives

The Company perfects the closed-loop management mechanism from gathering, analysis, processing and feedback to understand employee grievances and establishes communication channels with combination of traditional approaches like seminars, enquiries and interview, face-to-face activity, employee forum and online platform, striving to enhance the communication. The Company proactively responds to staff requests, promotes normal sympathy, express cares to employees such as special help for vulnerable employees, medical care consultation service and the provision of medicine cabinet, to offer practical solutions to the employees with needs. In 2017, the Company insisted to offer employees routine care and visits frontline employees with needs, proactively built and promoted 'Four-Smalls' namely small canteens, small bathrooms, small washroom and small activity rooms, continuously built 'Mummy Cabins' responding to the special needs of female employees, organised cultural and sports activities in which the employees were interested, to assist the employees in achieving work-life-balance and to increase the sense of blessings.

V. Fulfilling the responsibility for environment

China Telecom complies with the Environmental Protection Law of the People's Republic of China, the Energy Conservation Law of the People's Republic of China and other laws and regulations related to environmental protection, practises the concept of green development, endeavours to build a green network, pushes forward green operation to effectively protect the environment. The Company sets up environmental indicators, releases collected performance data on a regular basis, proactively communicates with the society of its environmental protection actions and effectiveness and willingly opens to public scrutiny. There was no violation of environmental protection laws and regulations as well as no material impact on the environment caused by the Company in 2017.

Promoting energy conservation and emission reduction

The Company implements rules on energy conservation and emission reduction, through means like rules and regulations, work plans, assessment evaluation etc., applies energy conservation and emission reduction requirement to link through various operation activities such as procurement, construction, operation and office administration. China Telecom endeavours to reduce energy consumption of all kinds as well as greenhouse gas emission.

The Company consistently reduces energy consumption in network operation. The Company prefers low energy and environmentally friendly products when purchasing new equipments and proactively brings in new technologies to build the fibre network which is enabled to be more energy savings. In 2017, the Company persistently replaced the obsolete equipment with high energy consumption, and completed the exiting of traditional TDM program-controlled exchange end office from the network; constantly promoted the integration of our business platforms with 'cloud resource pool', actively applied energy-saving technologies in the construction of machine rooms and base stations, further extended the coverage of the energy-saving technological application coverage for fundamental ancillary facilities and actively promoted the optimisation and redundancy reduction of such facilities, further advanced energy consumption in sub-divisions evaluation, to further enhance precision management of energy conservation and emission reduction. In 2017, the unit energy consumption per information flow was 7.1 kgce/TB.

The Company proactively promotes energy efficiency approaches in the fields of operations, office administration and trainings. The Company accelerates the development of e-channel and constantly promotes the usage of e-channel in order to expand the proportion of e-channel amongst all channels. The Company advocates and encourages conferences or trainings by video, standardise and establishes the KPIs on the proportion of video conferences and trainings applied throughout the year as an assessment tool. The Company actively induces employees to learn and attend trainings via online channel by online college.

"Love with e-Surfing" volunteer service team participated in the tree planting day

China Telecom employees took part in social welfare activity

Energy saving and go green

Conservation of natural resources

The Company promotes water conservation. The Company strengthens the management on water usage, actively carries out sewage disposal and treatment work, and promotes reuse of waste water, popularises water-saving appliances, and performs regularly checks and repairs on each section of the water supply system to prevent occurrence of "water runs all the time" and "water runs without being used". The major source of water is municipal water and reclaimed water is also used to certain extent. Within the reporting period, no water originated from its source has constituted major material impact.

The Company encourages paper saving. The Company actively pushes forward measurements on its paper use. According to the preliminary estimates, the amount of paper used in 2017 was approximately 2,000 tons. The Company, from the perspectives of technical and procedures, proactively reduces paper use in operation sites and office facilities, and popularises electronic VAT invoice, electronic bills and paperless operation. In 2017, the Company connected its financial system in alignment with the system of the tax bureau, achieving automatic check of invoice authenticity and ceasing to provide the original paperwork for authentication checks.

The Company deepens reverse logistics by implementation of measures on reverse logistics, enhances the recycling, disposal and utilisation of waste and used materials, to effectively save resources and to reduce environmental pollution. In 2017, the Company constantly promoted the recycling, utilisation and harmless disposal of such waste and old materials as batteries, copper cable and wireline devices. Since the traditional lead-acid battery contains large amount of heavy metal, waste acid, waste alkali and other electrolyte solution, discarding battery carelessly will create water pollution and damage the crops and land. The Company, on one hand, conducts overall on-site evaluation on the environmental protection practices of the battery supplier, and constantly purchases green and energy-saving products such as high temperature resistant lead-acid battery and lithium iron phosphate battery, and on the other hand, the Company gradually establishes a complete management system for battery recycling and disposal, and complies with relevant state laws and regulations in terms of recycling, transportation, storage and transfer, to prevent pollution. The Company centralises the trade and transfer of waste copper cables generated from the 'Fibre roll-out' campaign, through public auction, etc., to ensure openness, justice and fairness. The Company constantly enhances the recycling and reuse of equipments like wireline terminals through measures such as refurbishment and cross-provincial re-allocation, etc., to improve resources efficiency and to mitigate the risk of environmental pollution. Waste and used materials without recovery value are properly disposed in strict accordance with state regulations after taking full account of the environmental impact.

Emphasising environmental protection in engineering construction

The Company has taken proactive environmental protection measures regarding issues in telecommunications engineering construction concerned by the government and the public, such as farmland protection, equipment pollution, construction impact and electromagnetic radiation.

In the aspect of farmland protection, the occupied lands for residential use and other used lands will be preferred in site selection for base stations, to the greatest extent that no additional farmland will be occupied.

In the area of equipment pollution, non-polluted equipment with low noise and electromagnetic and free of pollutants will be preferred.

In the aspect of construction impact, mineral reserves, forest, grasslands, wildlife habitats, natural and cultural relics, natural reserves, scenery areas, etc. are intentionally avoided when conducting routing roll-out deployment for fibre cables, so that the surrounding environment will not be changed.

In regard to electromagnetic radiation, the Company monitors and assesses the electromagnetic radiation around the base station, opens to public scrutiny, enhances communication with the community and respects voices from the community, strictly controls the quality of network equipment by imposing controls from the source, actively takes advanced technical means to refine the layout of base station, so that the emission is lower than the national standards.

Promoting co-construction and co-sharing of communication infrastructure

The Company closely worked with other telecommunications operators and China Tower Corporation Limited, actively pushing forward the co-construction and co-sharing of such infrastructures as base stations, channels and pole lines, to effectively reduce repeated construction, to protect the natural environment and landscape, and to reduce the land use and energy and raw materials consumption. In 2017, the Company provided more than 22,000 kilometers of shared pole line, more than 1,500 kilometers of shared pipeline, and more than 1,200 sets of shared indoor distribution system.

VI. Promoting obligation performance by the supply chain

China Telecom strictly follows the purchase-related state laws and regulations as well as its internal management rules on purchase, consistently adheres to the management concepts focusing on value-added, sunshine and green procurement, commits to a trusted relationship with suppliers to achieve win-wins, and actively communicates with and encourages its suppliers to fulfill social responsibilities together.

Regarding value-added procurement, the Company implements requirements on quality of the purchased materials, expands the scope of quality inspection, improves supplier performance management, reviews the supplier evaluation system, enhances the application of data from above-mentioned supplier management activities in purchase bidding evaluation, and facilitates the supplier to improve the delivery performance.

Regarding sunshine procurement, the Company strictly complies with requirements of regulations on management of the purchase bidding and tendering, and constantly promotes open bidding and transparent sourcing. In 2017, the Company organised its first competition on purchase regulations knowledge, in which over 8,700 personnel from 40 business units participated, promoting the standardisation of purchasing activities; released 85,000 sourcing notices, which increased by over 3 times over 2016.

Regarding green procurement, the Company constantly promotes the application of green procurement index in the sourcing process, increasing the purchase of energy-saving products. DC power modules purchased in 2017 accounted for 94% of the high efficient power modules and the unit energy consumption of the sourced key specialised equipment was 2.8% lower than that in 2016.

VII. Participation in social welfare activities

China Telecom voluntarily participates in social welfare activities. The Company implements the measures on donation, under the principles of 'voluntariness, clear accountability, action within capabilities, being honest and trustworthy', supports the development of technology, education, culture, sports and health care through multiple ways, and helps the vulnerable, disabled and disadvantaged. The Company encourages its employees to carry forward the spirit of volunteerism, and actively participate in volunteering activities of various types.

In 2017, the Company constantly assisted the parent company to carry out fixed-point poverty alleviation and supported the allocated area, The Company sponsored projects in fields like infrastructure, digitalisation, educational training, agriculture, sanitation and technology in 5 counties, including Banbar County of Tibet Autonomous Region, Yanyuan and Muli Counties of Sichuan Province, Shufu County of Xinjiang Uygur Autonomous Region and Tianlin County of Guangxi Zhuang Autonomous Region.

The Company constantly promotes the application of the Big Data Management platform for targeted poverty alleviation to all regions which makes it possible for the poverty alleviation administration authority to manage at village, household and individual level and to facilitate the measurement implementation. By the end of 2017, the management platform was deployed to 718 counties in 15 provinces (autonomous regions, municipalities), benefiting more than 31 million population living in poverty. The Company actively promotes information construction in rural areas to relieve poverty, constantly builds online platform for farmers, improves network services in rural areas and facilitates the market entry of agricultural products to the city. By the end of 2017, the number of farmer cooperation reached 65,000, covering 579 counties (districts) in 23 provinces (autonomous regions, municipalities) and benefited over 9 million farming households.

"multi-mode" handsets gained popularity in Tushan temple fair

Introduced emergency communications to schoolchildren