China Telecom 2015 Annual Work Conference Highlights

05 Jan 2015

On 16 December 2014, China Telecom held its 2015 annual work conference in Beijing. It was requested in the conference to promote "deepening reform, accelerating transformation and strengthening execution".

The conference summed up the work of 2014, analysed the current situation and planned for mission in 2015. To lay down a strong foundation of "New China Telecom", the Company will mobilise staff members and firm up their confidence in tackling the challenges, striving for deepening reform and accelerating the Internet-oriented transformation. Mr. Shang Bing, Vice Minister of the Ministry of Industry and Information Technology, attended the conference and made important directional pronouncements. Also attending the meeting was Mr. Gao Fengtao, Chairman of China Telecom Supervisory Committee of State Council. Mr. Wang Xiaochu, Chairman of China Telecom, addressed the participants while Mr. Yang Jie, President of China Telecom, presented the work report.

Mr. Shang Bing spoke highly of China Telecom for its work in 2014 in four areas:

First, deepening reform with remarkable success. The Company implemented a total of 20 key reform tasks such as sub-dividing performance evaluation units, initiating outsourcing and constructing an "inverted triangle" service support system, which stimulated the vitality of the frontline operation. It also brought private capital to fund the construction of local access networks and 26 partner companies in mobile resale business.

Second, steady improvement in operating effectiveness which was higher than the industry average, thanks to a paradigm shift of the development model that further enhanced quality and efficiency.

Third, achieving new fruitful result through strategic transformation. The emerging businesses that included data traffic operation, Internet applications and ICT now accounted for nearly 30% of the revenues. The revenue mix was further optimised as wireline voice dropped to around 10% from around 80% ten years ago.

Fourth, the continued improvement in service standard contributed to the information and communications industry development as well as to the social and economic informatisation.

Mr. Shang also made four requests for the work in 2015.

First, accelerating reform, innovation and transformation development to further strengthen core competency. Second, vigorously promoting the corporate governance, operating in compliance with law and jointly developing a harmonious industry ecosystem. Third, further enhancing service standard and effectively protecting the legitimate rights and interests of users. Fourth, actively shouldering the major responsibility of enterprises while enhancing the capabilities to enforce network and information security.

A full review of the work in 2014 were made in the conference

In 2014, China Telecom accelerated "De-telecom", "Market-orientation and Differentiation" and "Three New Roles" and showed an initial success in reshaping a "New China Telecom".

A quick start on deepening comprehensive reform continuously advanced the corporate vitality. China Telecom set up a leadership team that dealt with deepening comprehensive reform and developed a programme with 20 key tasks on deepening corporate transformation. In the area of fundamental business, the Company promoted market-oriented reform with a bottom-up approach by creating self-operating units. It stimulated the vitality of the organisation, staff and business through a series of reform initiatives such as sub-dividing performance evaluation units. In the area of emerging business, the Company implemented a management operating system and incentive mechanism segregated from the fundamental business. It promoted the corporatisation and mixed ownership structure, while paving the way towards the trial operation of the Board of Directors and key employee shareholding scheme.

The effectiveness of "De-telecom" started to bear fruits as the Internet-oriented operation steadily advanced. The fundamental business evolved into product-based as well as Internet based. The launch of "Joy me" provided an entry to smart family. The Company also launched DIY packages, one-SIM-dual-number and encrypted mobile handset services, and achieved free transfer of data usage and free conversion between voice and data.

In the emerging business, the Company accelerated product upgrade and market expansion. It also launched backward monetisation products like "Data Traffic 800" and Liu Liang Bao. These enabled a rapid growth in the data revenue. The Company saw continuous increase in the number of industry application products of million users base. Revenue from ICT service recorded a steady increase, benefiting from the launch of new products like government Cloud service and anti-DDOS. The Company launched Tian Yi Bao, e-Surfing credit and other Internet finance products. Registered users of Best Pay broke 100 million level with a transaction value of over RMB300 billion, up over 150%. Efficiently-centralised online operation enhanced as the average monthly visits for our online stores surpassed 170 million. Monthly active mobile online store users topped 13 million while the total fans for our public accounts on WeChat and YiChat exceeded 39 million. The customer service systems on new media channel served 127 million users through a wide adoption of Internet in delivering customer service.

The Company stepped up effort for open co-operation, allowing new breakthrough in constructing new ecosystem. That included introduction of private capital for local broadband access network construction and 26 enterprise partners to carry out pilot scheme for mobile resale business; aggregating the downstream and upstream enterprises in constructing smart cities; carrying out co-operation with 29 provincial (region or directly-administered cities) governments on information services benefitting farmers; setting up the smart family industry alliance to gather more than 300 software and hardware enterprises and over 1,000 information service companies, and joining hands with 44 enterprises to set up Chinese Enterprises Big Data Alliance; promoting the co-operation among Hisilicon, VIA Technologies and MediaTek on mobile chipsets; supporting the establishment of the Tower Company to promote the joint construction and sharing of basic communication infrastructure.

4G development made a wonderful debut while hybrid network trial kicked off orderly. That included carrying out LTE hybrid network trial in accordance with the overall planning and deployment of the nation; deploying TD-LTE network in scale and hybrid network in trial cities. Through capital and market resources initiatives, collaborating with the foreign and domestic enterprises, 4G terminal portfolio was further enriched. Price performance was enhanced and over seventy 4G terminal models were available in the market. New co-operation model was established among terminal manufacturers and channels covering 40,000 open outlets.

Implementing the quality and return enhancement in depth allowed further improvement of operating efficiency and effectiveness. These included implementing replacement of business tax with value-added tax (VAT) and establishing the VAT system and infrastructure that allowed a smooth transition of the VAT reform; enhancing the assets efficiency by retiring the old network equipment and relocation of surplus network assets across provinces; conducting efficiently-centralised sales co-operation with TOP 100 e-commerce merchants; redeploying under-utilised base stations to the high data traffic areas; promoting Cloud-based platforms aggregation; increasing centralised procurement efforts, IT integration and adoption of Cloud-based infrastructure; and completing centralisation of sub-dividing performance evaluation data in 31 provinces.

Nurturing a culture of integrity was thoroughly commenced while new achievement in corporate management was made. The Company fulfilled its universal service obligations by continuously promoting the infrastructure connections to villages. It also successfully completed the mission to provide secure communication services for events such as APEC Summit, Nanjing Youth Olympic Games and communication assurance services for disaster relief.

The meeting reaffirmed key tasks in 2015: Deepen reform and accelerate transformation

As noted in the meeting, China's economy has entered the "new normal" of "mid-to-high-speed" growth. The economic slowdown has brought uncertainties to the scale of corporate development, but also a favourable environment for our restructuring. Entering the "new normal", the major forces of China economic growth will be driven by innovation and consumption, instead of investment and demographic dividend. The government will continuously implement active fiscal policy and prudent monetary policy, vigorously promoting sector structure rationalisation and consumption upgrade, while enhancing the support for strategic emerging industries and service industry. At the same time, the government will fully promote the rule of law and develop the mixed-ownership economy. The government will strengthen reform initiatives in the aspects such as simplifying administration with more authority delegation, taxation system and the household registration system. All these will further stimulate market vitality and the informatisation consumption demand, creating a favourable environment for corporate development.

In the wake of the new situation, it is necessary not only to fully assess the challenges and pressures, but also make enough mental preparation to firmly grasp the valuable opportunities and seize the favourable condition to enhance the confidence for development. At present and in future, we shall stick to the "Three New Roles" strategy and the principles of "De-telecom", "Market-orientation and Differentiation", using reform as the driving force to push for the new breakthrough for Internet-oriented transformation while laying a strong foundation for the "New China Telecom". First, we must continue to deepen comprehensive reform and further enhance the innovation and entrepreneurial spirit. Second, to accelerate the Internet-oriented transformation to inject the new DNA for corporate development. Third, to unswervingly and effectively implement the group strategy at all levels.

It was emphasized in the conference that in 2015, we shall adhere to the proposition of "De-telecom", "Market-orientation and Differentiation" and "Three New Roles". We shall further change the development model with differentiation as the key, innovate the structure and mechanism. We shall deepen comprehensive reform and achieve Internet-oriented transformation in deep, detailed, concrete and thorough manners to drive dual enhancement in corporate scale and return.

Focus for the year ahead should be placed on the following five aspects. First, transform the development model to accelerate the scale development. Second, create breakthrough in core products to develop differentiated and competitive advantages. Third, promote the Internet-oriented transformation to enhance efficiently-centralised operation capability. Fourth, deepen comprehensive reform to motivate organisation and staff vitality. Fifth, accomplish support and assurance while actively honouring social responsibility.

The conference called for all staff to tackle toughness and forge ahead to continuously achieve new success in corporate restructuring and Internet-oriented transformation, and make a greater contribution to the informatisation development of the nation.