[Key Highlights](index=1&type=section&id=Key%20Highlights) The Group steadily implemented its strategy in H1 2023, achieving positive business development, continuous improvement in operating efficiency metrics (e.g., gross margin, net profit margin, and ROE), and improved free cash flow, driven by domestic telecom operators and strategic emerging industries | Indicator | H1 2023 (RMB million) | YoY Growth (%) | H1 2023 (Ratio) | YoY Increase (percentage points) | | :-------- | :-------------------- | :------------- | :-------------- | :------------------------------- | | Operating Revenue | 73,170 | 5.7 | - | - | | Net Profit | 2,034 | 7.3 | - | - | | Gross Margin | - | - | 10.7% | 0.2 | | Net Profit Margin | - | - | 2.8% | 0.1 | | Annualized ROE | - | - | 10.0% | 0.2 | - Revenue from the domestic telecommunications operator market grew by **7.5%**, and revenue from the domestic non-operator enterprise and government market grew by **3.6%**[2](index=2&type=chunk) - Focusing on strategic emerging industries like digital infrastructure, smart cities, and green low-carbon solutions, new contract value increased by over **30%**, accounting for over **27%** of total new contract value, becoming a major contributor to business growth[2](index=2&type=chunk) [Chairman's Statement](index=2&type=section&id=Chairman's%20Statement) The Chairman's Statement outlines the company's H1 2023 operating strategy, financial performance, market expansion, core capability building, social responsibility, and future outlook, positioning itself as a 'new-generation integrated smart service provider' to achieve steady growth and improved efficiency by seizing digital economy opportunities - The Group is positioned as a 'new-generation integrated smart service provider,' aiming to build a 'first-class smart service innovative enterprise'[3](index=3&type=chunk) - Focusing on future-oriented strategic emerging businesses, the Group aims to become a 'main force in digital infrastructure construction, a leader in smart city services, a top enterprise in industrial digital services, and a trusted expert in smart operations'[3](index=3&type=chunk) [I. Operating Performance Stabilizes and Improves, Quality and Efficiency Continuously Enhance](index=2&type=section&id=I.%20Operating%20Performance%20Stabilizes%20and%20Improves%2C%20Quality%20and%20Efficiency%20Continuously%20Enhance) The Group seized digital China construction opportunities in H1 2023, achieving steady operating revenue growth, continuous improvement in gross and net profit margins, and positive trends in cash flow and shareholder returns | Indicator | H1 2023 (RMB million) | YoY Growth (%) | H1 2023 (Ratio) | YoY Increase (percentage points) | | :-------- | :-------------------- | :------------- | :-------------- | :------------------------------- | | Operating Revenue | 73,170 | 5.7 | - | - | | Service Revenue | 70,713 | 6.3 | - | - | | Operating Gross Profit | 7,834 | 7.4 | - | - | | Gross Margin | - | - | 10.7% | 0.2 | | Net Profit | 2,034 | 7.3 | - | - | | Net Profit Margin | - | - | 2.8% | 0.1 | | Annualized ROE | - | - | 10.0% | 0.2 | | Basic Earnings Per Share (RMB) | 0.294 | 7.3 | - | - | - Free cash flow improved year-on-year, and Return on Equity (ROE) further increased[4](index=4&type=chunk) [1. Adhering to Transformation and Upgrading, Three Major Business Segments Achieve Steady Growth](index=2&type=section&id=1.%20Adhering%20to%20Transformation%20and%20Upgrading%2C%20Three%20Major%20Business%20Segments%20Achieve%20Steady%20Growth) The Group's three major business segments achieved steady growth through transformation and upgrading, with telecommunications infrastructure services growing fastest, applications, content, and other services maintaining good growth, and business process outsourcing services showing stable improvement | Business Segment | H1 2023 Revenue (RMB million) | YoY Growth (%) | % of Operating Revenue | | :--------------- | :---------------------------- | :------------- | :--------------------- | | Telecommunications Infrastructure Services | 37,688 | 7.5 | 51.5 | | Business Process Outsourcing Services | 21,729 | 0.9 | 29.7 | | Applications, Content, and Other Services | 13,753 | 8.6 | 18.8 | - Growth in telecommunications infrastructure services revenue was primarily led by high-value consulting and design services, continuously improving business quality[5](index=5&type=chunk) - Within applications, content, and other services, software development and system support businesses grew rapidly by **31.5%**, demonstrating market recognition for enterprise software and digital service capabilities[6](index=6&type=chunk) [2. Integrating into Customer Ecosystems, Stabilizing Three Major Customer Markets](index=3&type=section&id=2.%20Integrating%20into%20Customer%20Ecosystems%2C%20Stabilizing%20Three%20Major%20Customer%20Markets) The Group achieved stable development in domestic non-operator enterprise and government, domestic telecommunications operator, and overseas markets by focusing on new businesses, responding to changing customer demands, and optimizing its layout, thereby consolidating its market position | Customer Market | H1 2023 Revenue (RMB million) | YoY Growth (%) | % of Operating Revenue | | :-------------- | :---------------------------- | :------------- | :--------------------- | | Domestic Telecommunications Operators Market | 39,977 | 7.5 | 54.7 | | Domestic Non-Operator Enterprise and Government Market | 31,623 | 3.6 | - | | Overseas Market | 1,570 | 1.2 | - | - The domestic non-operator enterprise and government market focused on strategic emerging industries such as digital government, enterprise digital transformation, intelligent computing centers, power infrastructure and support, and photovoltaic construction, solidifying development quality[7](index=7&type=chunk) - The domestic telecommunications operators market actively responded to demands for data centers, computing networks, and industrial digitalization, contributing the most to revenue growth among all customer groups[7](index=7&type=chunk)[8](index=8&type=chunk) - The overseas market expanded high-quality projects in key 'Belt and Road' regions, providing digital infrastructure, photovoltaic, and new energy storage construction services, with a continuous increase in the proportion of high-value businesses[8](index=8&type=chunk) [II. Focusing on New Drivers, Strategic Emerging Businesses Develop Strongly](index=4&type=section&id=II.%20Focusing%20on%20New%20Drivers%2C%20Strategic%20Emerging%20Businesses%20Develop%20Strongly) The Group actively responded to digital China construction by focusing on strategic emerging industries like digital infrastructure, smart cities, green low-carbon, and emergency safety, cultivating new growth drivers, with new contract value increasing by over **30%** year-on-year, becoming the main contributor to contract growth - New contract value in strategic emerging industries grew by over **30%** year-on-year, accounting for over **27%** of total new contract value[9](index=9&type=chunk) - In digital infrastructure, seizing opportunities from the 'East-Data-West-Computing' project and AIGC-driven data center, intelligent computing center, and supercomputing center construction, the Group established a Digital Infrastructure Industry Research Institute and successfully undertook multiple hundred-million-RMB general contracting projects[9](index=9&type=chunk) - In smart cities, guided by top-level design, the Group focused on digital government, enterprise digital transformation, and smart transportation, being shortlisted in the '2023 Digital Government Industry Map' and enhancing brand influence[10](index=10&type=chunk) - In the green low-carbon industry, serving the national 'dual carbon' strategy, the Group deeply cultivated power infrastructure, photovoltaic construction, energy services, and carbon management, engaging in strategic and industry-university-research cooperation with Beijing Green Exchange and 25 research institutions[10](index=10&type=chunk) - In emergency safety, addressing the needs of regulatory authorities and key industry clients, the Group developed core products such as asset mapping, situational awareness, safety production supervision, risk monitoring and early warning, and emergency rescue command, being selected for industry panoramas and potential rankings[10](index=10&type=chunk) [III. Continuously Building Core Capabilities, Constructing a First-Class Smart Service Innovative Enterprise](index=6&type=section&id=III.%20Continuously%20Building%20Core%20Capabilities%2C%20Constructing%20a%20First-Class%20Smart%20Service%20Innovative%20Enterprise) The Group is committed to comprehensively enhancing its core competitiveness by strengthening technological innovation, building integrated service capabilities, accelerating digital transformation, and steadily advancing key reforms, aiming to become a 'first-class smart service innovative enterprise' [1. Strengthening Technology-Driven Innovation, Enhancing Product Competitiveness](index=6&type=section&id=1.%20Strengthening%20Technology-Driven%20Innovation%2C%20Enhancing%20Product%20Competitiveness) The Group continuously increases R&D investment, optimizes its technology innovation system, focuses on industrial digital applications and core professional technologies, creates benchmark solutions and core products, and introduces high-end expert teams and tech talents to drive high-quality development through technological innovation - Continuously increasing R&D investment, focusing on core professional technology areas such as industrial digital applications, IoT, blockchain, dual-carbon energy-saving technologies, and cybersecurity[11](index=11&type=chunk) - Strengthening collaboration among R&D, marketing, and delivery teams to accelerate product market promotion efficiency[11](index=11&type=chunk) - Vigorously introducing high-end expert teams and tech talents to build strong core enterprise competitiveness[11](index=11&type=chunk) [2. Building Strong Integrated Capabilities, Providing High-Level Services to Customers](index=6&type=section&id=2.%20Building%20Strong%20Integrated%20Capabilities%2C%20Providing%20High-Level%20Services%20to%20Customers) The Group integrates 4T capabilities, focusing on customers, leveraging its integrated service advantages in digital general integration, digital infrastructure general contracting, and consulting design leadership, and continuously optimizing its marketing and operation service system to enhance end-to-end delivery capabilities - Integrating CT, IT, DT, and OT (4T) capabilities to build a high-quality service-oriented enterprise[12](index=12&type=chunk) - Leveraging integrated service advantages such as digital general integration, digital infrastructure general contracting, and consulting design leadership[12](index=12&type=chunk) - Continuously optimizing marketing and operation service systems adapted to new businesses and models, enhancing end-to-end, comprehensive delivery capabilities[12](index=12&type=chunk) [3. Accelerating Digital Transformation, Achieving High-Efficiency Operations](index=6&type=section&id=3.%20Accelerating%20Digital%20Transformation%2C%20Achieving%20High-Efficiency%20Operations) The Group prioritizes digitalization to enhance value creation, deeply integrating digital technology with production, operation, management, and product services to drive model innovation, and continuously advancing internal production and operation digital transformation to improve efficiency and reduce costs - Guided by overall planning, promoting deep integration of digital technology with enterprise production, operation, management, and product services to drive innovation in production models and business products[13](index=13&type=chunk) - Strengthening digital transformation mindset, awareness, and talent cultivation to enhance the source power of innovation[14](index=14&type=chunk) - Continuously advancing internal production and operation digital transformation, promoting tools such as production efficiency platforms and project site management systems to improve operational efficiency and data sharing capabilities[14](index=14&type=chunk) [4. Steadily Advancing Reforms in Key Areas, Building Leading Industry Enterprises](index=7&type=section&id=4.%20Steadily%20Advancing%20Reforms%20in%20Key%20Areas%2C%20Building%20Leading%20Industry%20Enterprises) The Group deepens reforms to continuously optimize enterprise operation and management mechanisms, steadily advances professional integration, completes shareholding reforms and integration of subsidiaries, and accelerates the cultivation of leading enterprises in consulting design and application software to enhance corporate governance and operational efficiency - Deepening reforms to optimize enterprise operation and management mechanisms, stimulating vitality, strengthening momentum, and enhancing capabilities[15](index=15&type=chunk) - Completed the shareholding reform of China Comservice Supply Chain Co., Ltd. and the first-phase integration of China Comservice Smart Property Development Co., Ltd[15](index=15&type=chunk) - Accelerating the cultivation of leading professional enterprises in consulting design and application software to build new competitive advantages in the industrial chain[15](index=15&type=chunk) [IV. Actively Fulfilling Environmental and Social Responsibilities, Maintaining Good Corporate Governance](index=7&type=section&id=IV.%20Actively%20Fulfilling%20Environmental%20and%20Social%20Responsibilities%2C%20Maintaining%20Good%20Corporate%20Governance) The Group actively fulfills its corporate mission and social responsibilities, adheres to standardized operations and green practices, achieving good results in environmental protection, social services, and corporate governance, gaining wide recognition from capital markets and the industry - Upholding green development concepts, established the 'Zero-Carbon Information and Communication Network Joint Laboratory,' participated in national 'dual carbon' research projects, and provided clean, low-carbon, and efficient services to customers[16](index=16&type=chunk)[17](index=17&type=chunk) - Actively undertaking social responsibilities, successfully completing communication guarantees for major events such as the 'China-Central Asia Summit' and the '31st World University Summer Games,' and actively participating in disaster relief during natural disasters[17](index=17&type=chunk) - Corporate governance level recognized by the capital market, ranking **98th** in 'Fortune' China Top 500 Listed Companies and **1,499th** in 'Forbes' Global 2000, and winning multiple 'Best Management Team' and 'Corporate Governance' awards in Asia[17](index=17&type=chunk) [V. Outlook](index=8&type=section&id=V.%20Outlook) Looking ahead, the Group will continue to strengthen its leadership in strategic emerging industries, cultivate new growth curves, enhance consulting design and infrastructure general contracting capabilities, boost brand influence, and leverage capital operations to improve industrial leadership, accelerating its transformation into a 'first-class smart service innovative enterprise' - Digital China construction and new technologies drive industrial development innovation, with broad market prospects for strategic emerging industries[18](index=18&type=chunk) - In the future, the Group will strengthen integrated consulting and design capabilities, accelerate business upgrades, increase R&D investment, introduce high-end expert talents, and advance digital transformation and strategic emerging business layouts[18](index=18&type=chunk) - Building strong infrastructure general contracting capabilities, actively expanding high-value general contracting projects in the industry, cultivating high-efficiency general contracting project manager teams, creating cost advantages, and comprehensively enhancing general contracting project management capabilities[18](index=18&type=chunk) - Strengthening brand-driven capabilities, solidifying its leading position in telecommunications infrastructure, focusing on smart cities, industrial digital services, and smart operations, and building a brand as the main force in digital infrastructure construction[18](index=18&type=chunk)[19](index=19&type=chunk) - Enhancing industrial leadership through capital operations, leveraging the role of capital as a link, actively seeking opportunities for large projects, strengthening the industrial ecosystem through investment, and promoting new business expansion and improved development quality[19](index=19&type=chunk) [Group Performance](index=10&type=section&id=Group%20Performance) This section presents the unaudited consolidated performance of China Communications Services Corporation Limited and its subsidiaries, including the condensed consolidated income statement, statement of comprehensive income, and statement of financial position, reflecting financial performance for the six months ended June 30, 2023, and financial position at period-end [Condensed Consolidated Income Statement](index=10&type=section&id=Condensed%20Consolidated%20Income%20Statement) For the six months ended June 30, 2023, the Group's operating revenue reached **RMB 73,170 million**, net profit was **RMB 2,034 million**, and basic earnings per share were **RMB 0.294**, all showing year-on-year growth Condensed Consolidated Income Statement (For the six months ended June 30) | Indicator | 2023 (RMB thousand) | 2022 (RMB thousand) | | :-------- | :------------------ | :------------------ | | Operating Revenue | 73,169,553 | 69,253,532 | | Operating Costs | (65,335,907) | (61,959,855) | | Gross Profit | 7,833,646 | 7,293,677 | | Other Income | 935,824 | 940,297 | | Selling, General and Administrative Expenses | (6,353,365) | (5,920,470) | | Other Expenses | (76,420) | (76,213) | | Finance Costs | (55,394) | (42,401) | | Share of Profits of Associates and Joint Ventures | 54,320 | 39,125 | | Profit Before Tax | 2,338,611 | 2,234,015 | | Income Tax | (226,337) | (277,051) | | Profit for the Period | 2,112,274 | 1,956,964 | | Profit Attributable to Equity Holders of the Company | 2,034,456 | 1,895,456 | | Profit Attributable to Non-controlling Interests | 77,818 | 61,508 | | Basic/Diluted Earnings Per Share (RMB) | 0.294 | 0.274 | [Condensed Consolidated Statement of Comprehensive Income](index=11&type=section&id=Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income) For the six months ended June 30, 2023, the Group's profit for the period was **RMB 2,112 million**, with total other comprehensive income of **RMB 383 million**, resulting in a total comprehensive income of **RMB 2,495 million** Condensed Consolidated Statement of Comprehensive Income (For the six months ended June 30) | Indicator | 2023 (RMB thousand) | 2022 (RMB thousand) | | :-------- | :------------------ | :------------------ | | Profit for the Period | 2,112,274 | 1,956,964 | | Other Comprehensive Income for the Period (after tax) | 382,931 | 139,371 | | Total Comprehensive Income for the Period | 2,495,205 | 2,096,335 | | Total Comprehensive Income Attributable to Equity Holders of the Company | 2,417,251 | 2,034,624 | | Total Comprehensive Income Attributable to Non-controlling Interests | 77,954 | 61,711 | [Condensed Consolidated Statement of Financial Position](index=12&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2023, the Group's total assets were **RMB 119,040 million**, total liabilities were **RMB 76,330 million**, and total equity was **RMB 42,710 million**, maintaining a stable financial position Condensed Consolidated Statement of Financial Position (As of June 30, 2023) | Indicator | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :-------- | :--------------------------- | :------------------------------- | | Total Non-current Assets | 26,718,340 | 26,065,369 | | Total Current Assets | 92,321,679 | 84,203,229 | | Total Assets | 119,040,019 | 110,268,598 | | Total Current Liabilities | 74,205,950 | 66,596,457 | | Total Non-current Liabilities | 2,123,582 | 2,048,216 | | Total Liabilities | 76,329,532 | 68,644,673 | | Equity Attributable to Equity Holders of the Company | 41,416,480 | 40,360,637 | | Non-controlling Interests | 1,294,007 | 1,263,288 | | Total Equity | 42,710,487 | 41,623,925 | [Notes](index=14&type=section&id=Notes) This section provides detailed notes to the condensed consolidated interim financial information, covering the basis of preparation, significant accounting policies, segment reporting, composition of various revenues and costs, taxation, dividends, and specific information on key balance sheet items, offering essential context and details for understanding the financial statements [1. Basis of Preparation](index=14&type=section&id=1.%20Basis%20of%20Preparation) This condensed consolidated interim financial information is prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' and complies with the disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, also disclosing the impact of business combinations under common control - The condensed consolidated interim financial information is prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' and complies with the disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[25](index=25&type=chunk) [Impact of Business Combinations Under Common Control](index=14&type=section&id=Impact%20of%20Business%20Combinations%20Under%20Common%20Control) On February 28, 2023, the Group acquired 100% equity of China Post and Telecommunications Translation Service Co., Ltd. for **RMB 18.45 million**; as both are under the common control of China Telecom Group Co., Ltd., this acquisition is reflected using the pooling of interests method in the consolidated financial statements, and relevant historical data has been restated - China Comservice acquired 100% equity of China Post and Telecommunications Translation Service Co., Ltd. for **RMB 18.45 million** on February 28, 2023[26](index=26&type=chunk) - This acquisition is considered a business combination under common control, reflected using the pooling of interests method, with the target company's assets and liabilities measured at historical cost, and the consolidated financial statements have been restated[26](index=26&type=chunk) [2. Significant Accounting Policies](index=15&type=section&id=2.%20Significant%20Accounting%20Policies) This condensed consolidated interim financial information is prepared on a historical cost basis and applies newly revised International Financial Reporting Standards, which have no significant impact on the Group's financial information - This condensed consolidated interim financial information is prepared on a historical cost basis, with certain financial instruments measured at fair value[27](index=27&type=chunk) - The Group first applied IFRS 17 'Insurance Contracts' and amendments to IAS 1, IAS 8, and IAS 12, but these had no significant impact on the condensed consolidated interim financial information[28](index=28&type=chunk) [3. Segment Reporting](index=15&type=section&id=3.%20Segment%20Reporting) The Group's primary business segment is providing integrated smart solutions in the information and digitalization fields, thus no other segment information is disclosed - The Group primarily has one business segment, which is providing integrated smart solutions in the information and digitalization fields[29](index=29&type=chunk) [4. Operating Revenue](index=15&type=section&id=4.%20Operating%20Revenue) For the six months ended June 30, 2023, the Group's total operating revenue from providing integrated smart solutions was **RMB 73,170 million**, primarily from telecommunications infrastructure services, business process outsourcing services, and applications, content, and other services, with detailed breakdowns by major customers and geographical contributions Operating Revenue by Business Nature (For the six months ended June 30) | Business Nature | 2023 (RMB thousand) | 2022 (RMB thousand) | | :-------------- | :------------------ | :------------------ | | Telecommunications Infrastructure Services Revenue | 37,687,865 | 35,049,501 | | Business Process Outsourcing Services Revenue | 21,728,657 | 21,536,968 | | Applications, Content, and Other Services Revenue | 13,753,031 | 12,667,063 | | **Total** | **73,169,553** | **69,253,532** | Operating Revenue by Major Customers (For the six months ended June 30) | Customer | 2023 (RMB million) | % of Total Operating Revenue | 2022 (RMB million) | % of Total Operating Revenue | | :------- | :----------------- | :--------------------------- | :----------------- | :--------------------------- | | China Telecom Group | 25,823 | 35.3 | 22,725 | 32.8 | | China Mobile Group | 8,301 | 11.3 | 8,978 | 13.0 | | Regions outside Mainland China | 1,570 | - | 1,551 | - | - Effective January 1, 2023, the Group reclassified China Broadcasting Network Group Co., Ltd. and its subsidiaries from non-telecommunications operators to telecommunications operators, and comparative data has been reclassified[31](index=31&type=chunk) [5. Operating Costs](index=16&type=section&id=5.%20Operating%20Costs) For the six months ended June 30, 2023, the Group's operating costs were **RMB 65,336 million**, primarily comprising subcontracting costs, material costs, and direct staff costs Composition of Operating Costs (For the six months ended June 30) | Cost Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :-------- | :------------------ | :------------------ | | Subcontracting Costs | 40,303,014 | 38,063,019 | | Material Costs | 11,885,948 | 10,896,460 | | Direct Staff Costs | 3,871,293 | 4,029,976 | | Direct Costs of Goods for Distribution | 1,682,870 | 2,032,762 | | Short-term Lease and Low-value Asset Lease Expenses | 581,799 | 580,360 | | Depreciation and Amortization | 482,139 | 469,638 | | Others | 6,528,844 | 5,887,640 | | **Total** | **65,335,907** | **61,959,855** | [6. Other Income](index=17&type=section&id=6.%20Other%20Income) For the six months ended June 30, 2023, the Group's other income totaled **RMB 936 million**, primarily from interest income, dividend income, management fee income, government grants, and additional input VAT deductions Composition of Other Income (For the six months ended June 30) | Income Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :---------- | :------------------ | :------------------ | | Interest Income | 317,534 | 247,019 | | Dividend Income from Equity Instruments | 176,610 | 176,683 | | Management Fee Income | 149,716 | 151,853 | | Government Grants | 111,838 | 124,169 | | Additional Input VAT Deductions | 94,655 | 129,156 | | Gains on Disposal of Property, Plant and Equipment, Intangible Assets and Right-of-use Assets | 3,391 | 7,067 | | Penalty Income | 1,698 | 4,852 | | Investment Income and Fair Value Changes from Wealth Management Products and Structured Deposits | — | 44,185 | | Others | 80,382 | 55,313 | | **Total** | **935,824** | **940,297** | [7. Finance Costs](index=17&type=section&id=7.%20Finance%20Costs) For the six months ended June 30, 2023, the Group's finance costs were **RMB 55 million**, mainly comprising interest on bank and other borrowings and lease liabilities, with no borrowing costs capitalized into construction in progress during the period Composition of Finance Costs (For the six months ended June 30) | Expense Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :----------- | :------------------ | :------------------ | | Interest on Bank and Other Borrowings | 28,402 | 13,126 | | Interest on Lease Liabilities | 26,992 | 29,275 | | **Total** | **55,394** | **42,401** | - No borrowing costs were capitalized into construction in progress for the six months ended June 30, 2023[35](index=35&type=chunk) [8. Profit Before Tax](index=18&type=section&id=8.%20Profit%20Before%20Tax) For the six months ended June 30, 2023, the Group's profit before tax was **RMB 2,339 million**, after deducting employee costs, amortization, depreciation, material costs, direct distribution costs of goods, impairment losses, and selling, general and administrative expenses Deductions from Profit Before Tax (For the six months ended June 30) | Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :--- | :------------------ | :------------------ | | Employee Costs | 8,239,454 | 8,128,702 | | Amortization | 98,229 | 82,822 | | Depreciation | 714,914 | 704,556 | | Auditor's Remuneration | 7,009 | 6,623 | | Material Costs | 11,885,948 | 10,896,460 | | Direct Costs of Goods for Distribution | 1,682,870 | 2,032,762 | | Impairment Losses and Reversals of Inventories, Net | 19,296 | 21,575 | | Impairment Losses Recognized and Reversals for Accounts Receivable, Other Receivables, Contract Assets and Others, Net | 165,852 | 118,247 | | Short-term Lease and Low-value Asset Lease Expenses | 665,716 | 663,808 | Major Expense Categories (For the six months ended June 30) | Expense Item | 2023 (RMB million) | 2022 (RMB million) | | :----------- | :----------------- | :----------------- | | Selling and Marketing Expenses | 1,180 | 1,119 | | Administrative Expenses | 2,748 | 2,576 | | Research and Development Costs | 2,082 | 1,924 | | Other Expenses | 343 | 301 | [9. Income Tax](index=18&type=section&id=9.%20Income%20Tax) For the six months ended June 30, 2023, the Group's total income tax was **RMB 226 million**, with differences between actual tax expense and estimated income tax at statutory rates primarily due to subsidiary tax incentives, non-deductible expenses, non-taxable income, and additional R&D expense deductions Composition of Income Tax (For the six months ended June 30) | Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :--- | :------------------ | :------------------ | | Current Tax | 252,167 | 439,393 | | Deferred Tax | (25,830) | (162,342) | | **Total Income Tax** | **226,337** | **277,051** | - The Group's PRC subsidiaries calculate income tax at a statutory rate of **25%**, with eligible high-tech enterprises, Western Development, and small-profit enterprises enjoying preferential tax rates of **15%** or **20%**[38](index=38&type=chunk)[39](index=39&type=chunk) - Certain R&D costs are eligible for an additional **100%** deduction (compared to **75%** in 2022)[39](index=39&type=chunk) [10. Earnings Per Share](index=20&type=section&id=10.%20Earnings%20Per%20Share) For the six months ended June 30, 2023, the Group's basic earnings per share were **RMB 0.294**, which was the same as diluted earnings per share due to the absence of outstanding potentially dilutive ordinary shares Earnings Per Share (For the six months ended June 30) | Indicator | 2023 (RMB) | 2022 (RMB) | | :-------- | :--------- | :--------- | | Basic/Diluted Earnings Per Share | 0.294 | 0.274 | - Basic earnings per share are calculated by dividing profit attributable to equity holders of the Company of **RMB 2,034 million** by **6,926,018 thousand** shares[40](index=40&type=chunk) [11. Other Comprehensive Income](index=20&type=section&id=11.%20Other%20Comprehensive%20Income) For the six months ended June 30, 2023, the Group's total other comprehensive income was **RMB 383 million**, primarily from fair value changes of equity instruments measured at fair value through other comprehensive income, and exchange differences on translation of financial statements Composition of Other Comprehensive Income (For the six months ended June 30) | Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :--- | :------------------ | :------------------ | | Fair Value Changes of Equity Instruments Measured at Fair Value Through Other Comprehensive Income Recognized During the Period | 498,426 | 162,028 | | Net Deferred Tax Credited to Other Comprehensive Income | (126,265) | (39,932) | | Exchange Differences on Translation of Financial Statements | 10,770 | 17,275 | | **Other Comprehensive Income for the Period** | **382,931** | **139,371** | [12. Dividends](index=20&type=section&id=12.%20Dividends) The Board of Directors resolved not to declare an interim dividend for the six months ended June 30, 2023, while also disclosing the final dividend pertaining to the previous financial year approved during this period - The Board of Directors resolved not to declare an interim dividend for the six months ended June 30, 2023[42](index=42&type=chunk) Final Dividend Pertaining to the Previous Financial Year Approved During the Period | Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :--- | :------------------ | :------------------ | | Final Dividend (RMB per share) | 0.1939 | 0.1732 | | **Total** | **1,342,955** | **1,199,587** | [13. Accounts Receivable and Bills Receivable, Net](index=21&type=section&id=13.%20Accounts%20Receivable%20and%20Bills%20Receivable%2C%20Net) As of June 30, 2023, the Group's net accounts receivable and bills receivable totaled **RMB 26,014 million**, after deducting credit loss provisions, with a detailed aging analysis provided Accounts Receivable and Bills Receivable, Net (As of June 30, 2023) | Item | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :--- | :--------------------------- | :------------------------------- | | Bills Receivable | 441,536 | 508,294 | | Accounts Receivable | 27,647,258 | 21,748,457 | | Provision for Credit Losses | (2,075,072) | (1,946,486) | | **Total** | **26,013,722** | **20,310,265** | Aging Analysis of Accounts Receivable and Bills Receivable (As of June 30, 2023) | Aging | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :---- | :--------------------------- | :------------------------------- | | Current | 1,619,305 | 1,897,638 | | Within One Year | 20,960,356 | 15,651,051 | | Over One Year but Less Than Two Years | 2,569,742 | 2,026,546 | | Over Two Years but Less Than Three Years | 627,570 | 513,913 | | Over Three Years but Less Than Four Years | 144,017 | 139,131 | | Over Four Years but Less Than Five Years | 44,258 | 33,512 | | Over Five Years | 48,474 | 48,474 | | **Total** | **26,013,722** | **20,310,265** | [14. Contract Assets, Net](index=22&type=section&id=14.%20Contract%20Assets%2C%20Net) As of June 30, 2023, the Group's net contract assets totaled **RMB 29,456 million**, primarily from telecommunications infrastructure services, after deducting credit loss provisions; these are unbilled amounts due for services provided, expected to be transferred to accounts receivable within one year Contract Assets, Net (As of June 30, 2023) | Item | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :--- | :--------------------------- | :------------------------------- | | Telecommunications Infrastructure Services | 24,486,094 | 21,099,704 | | Business Process Outsourcing Services | 1,596,019 | 1,114,789 | | Applications, Content, and Other Services | 3,678,669 | 3,337,797 | | Provision for Credit Losses | (304,349) | (283,469) | | **Total** | **29,456,433** | **25,268,821** | - Contract assets are unbilled amounts due to the Group for construction, design, and other services provided, where the right to consideration is conditional[47](index=47&type=chunk) - The Group typically transfers contract assets that reach specific milestones to accounts receivable no later than one year after the reporting period[47](index=47&type=chunk) [15. Accounts Payable and Bills Payable](index=22&type=section&id=15.%20Accounts%20Payable%20and%20Bills%20Payable) As of June 30, 2023, the Group's total accounts payable and bills payable amounted to **RMB 52,915 million**, with most due within one year, and a detailed aging analysis is provided Accounts Payable and Bills Payable (As of June 30, 2023) | Item | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :--- | :--------------------------- | :------------------------------- | | Accounts Payable | 49,130,212 | 40,985,965 | | Bills Payable | 3,784,630 | 3,625,330 | | **Total** | **52,914,842** | **44,611,295** | Aging Analysis of Accounts Payable and Bills Payable (As of June 30, 2023) | Aging | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :---- | :--------------------------- | :------------------------------- | | Within One Year | 50,368,332 | 42,062,776 | | Over One Year but Less Than Two Years | 1,514,246 | 1,414,963 | | Over Two Years but Less Than Three Years | 454,736 | 450,309 | | Over Three Years | 577,528 | 683,247 | | **Total** | **52,914,842** | **44,611,295** | - Amounts due to China Telecom Group, the Group's associates, and associates of China Telecom Group are unsecured, interest-free, and expected to be settled within one year[48](index=48&type=chunk) [16. Contract Liabilities](index=23&type=section&id=16.%20Contract%20Liabilities) As of June 30, 2023, the Group's contract liabilities totaled **RMB 8,193 million**, primarily from telecommunications infrastructure services and other services; these represent customer prepayments received before fulfilling performance obligations Contract Liabilities (As of June 30, 2023) | Item | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :--- | :--------------------------- | :------------------------------- | | Telecommunications Infrastructure Services | 5,870,883 | 8,526,663 | | Other Services | 2,321,773 | 2,341,312 | | **Total** | **8,192,656** | **10,867,975** | - Contract liabilities are customer prepayments received by the Group before fulfilling performance obligations, recognized as contract liabilities until the related contract performance obligations are completed[49](index=49&type=chunk) [Financial Review](index=24&type=section&id=Financial%20Review) This section provides a detailed review of the Group's financial performance for H1 2023, including operating revenue, operating costs, gross profit, selling, general and administrative expenses, profit attributable to equity holders, cash flow, and asset and liability status, highlighting the company's steady growth and improved efficiency amidst digital economy opportunities [Operating Revenue](index=24&type=section&id=Operating%20Revenue) The Group's operating revenue for H1 2023 reached **RMB 73,170 million**, a **5.7%** year-on-year increase, driven by its strategy of 'value leadership, steady progress, and high-quality development,' and seizing opportunities in the digital economy and new infrastructure construction Operating Revenue (For the six months ended June 30) | Indicator | H1 2023 (RMB million) | H1 2022 (RMB million) | YoY Growth (%) | | :-------- | :-------------------- | :-------------------- | :------------- | | Operating Revenue | 73,170 | 69,254 | 5.7 | - The Group is positioned as a 'new-generation integrated smart service provider,' aiming to become a 'main force in digital infrastructure construction, a leader in smart city services, a top enterprise in industrial digital services, and a trusted expert in smart operations'[50](index=50&type=chunk) [Revenue by Business Segment](index=24&type=section&id=Revenue%20by%20Business%20Segment) All three of the Group's business segments achieved revenue growth, with telecommunications infrastructure services being the primary driver, and design services, software development, and system support services performing particularly well, demonstrating the company's enhanced capabilities in digital transformation Revenue by Business Segment (For the six months ended June 30) | Business Segment | H1 2023 Revenue (RMB million) | YoY Growth (%) | | :--------------- | :---------------------------- | :------------- | | Telecommunications Infrastructure Services | 37,688 | 7.5 | | Business Process Outsourcing Services | 21,729 | 0.9 | | Applications, Content, and Other Services | 13,753 | 8.6 | - Telecommunications infrastructure services were the primary driver of business growth, with design services revenue reaching **RMB 5,200 million**, a **15.3%** year-on-year increase[51](index=51&type=chunk) - Within applications, content, and other services, software development and system support services revenue reached **RMB 2,613 million**, growing by **31.5%** year-on-year, maintaining over **20%** growth for several consecutive years[51](index=51&type=chunk) [Revenue by Market Segment](index=24&type=section&id=Revenue%20by%20Market%20Segment) The Group achieved revenue growth in domestic telecommunications operator, domestic non-operator enterprise and government, and overseas markets, with the domestic telecommunications operator market making significant contributions, and the non-operator enterprise and government market maintaining stable growth through optimized business structure and expansion of high-value businesses Revenue by Market Segment (For the six months ended June 30) | Customer Market | H1 2023 Revenue (RMB million) | YoY Growth (%) | | :-------------- | :---------------------------- | :------------- | | Domestic Telecommunications Operators Market | 39,977 | 7.5 | | Domestic Non-Operator Enterprise and Government Market | 31,623 | 3.6 | | Overseas Market | 1,570 | 1.2 | - The domestic telecommunications operator market adhered to the 'CAPEX + OPEX + Smart Applications' development strategy, actively responding to demands for data center and computing network construction and industrial digitalization, making significant contributions to performance growth[53](index=53&type=chunk) - The domestic non-operator enterprise and government market focused on strategic opportunities in the digital economy and industrial digitalization, deeply exploring business demands such as data centers, digital government, and enterprise digital transformation, and expanding high-value businesses[53](index=53&type=chunk) [Operating Costs](index=25&type=section&id=Operating%20Costs) The Group's operating costs increased by **5.4%** year-on-year in H1 2023, with a decrease in direct staff costs, effective control over the increase in subcontracting costs, and a significant slowdown in the increase in material costs, demonstrating the company's efforts in cost management Operating Cost Changes (For the six months ended June 30) | Cost Item | H1 2023 (RMB million) | H1 2022 (RMB million) | YoY Change (%) | | :-------- | :-------------------- | :-------------------- | :------------- | | Total Operating Costs | 65,336 | 61,960 | 5.4 (Increase) | | Direct Staff Costs | 3,871 | 4,030 | (3.9) (Decrease) | | Subcontracting Costs | 40,303 | 38,063 | 5.9 (Increase) | | Material Costs | 11,886 | 10,896 | 9.1 (Increase) | - The Group reasonably controlled total headcount and optimized employment structure, leading to a continuous decrease in direct staff costs[54](index=54&type=chunk) - Strengthened subcontracting management and enhanced self-delivery capabilities, effectively controlling the increase in subcontracting costs[54](index=54&type=chunk) - Strengthened general contracting project management, enhancing material cost control through optimized internal procurement systems and centralized procurement, significantly slowing down the increase in material costs[54](index=54&type=chunk) [Gross Profit](index=25&type=section&id=Gross%20Profit) The Group's gross profit increased by **7.4%** year-on-year in H1 2023, with gross margin rising by **0.2** percentage points to **10.7%**, continuing to stabilize and recover, primarily due to the company's focus on quality and efficiency, strengthened project and cost management, and a steady increase in the proportion of high-value businesses Gross Profit and Gross Margin (For the six months ended June 30) | Indicator | H1 2023 (RMB million) | H1 2022 (RMB million) | YoY Growth (%) | Gross Margin (%) | | :-------- | :-------------------- | :-------------------- | :------------- | :--------------- | | Gross Profit | 7,834 | 7,294 | 7.4 | - | | Gross Margin | - | - | - | 10.7 | - Gross margin increased by **0.2** percentage points year-on-year to **10.7%**, continuing to stabilize and recover[55](index=55&type=chunk) - Through performance-based incentives, subsidiaries selected and expanded high-margin projects, strengthened project management and cost control, and enhanced business value creation capabilities[55](index=55&type=chunk) - With deeper penetration into the digital economy, new infrastructure construction, and industrial digitalization, the proportion of high-value businesses will steadily increase, driving a positive trend in overall gross margin[55](index=55&type=chunk) [Selling, General and Administrative Expenses](index=26&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses) The Group's selling, general and administrative expenses for H1 2023 were **RMB 6,353 million**, a **7.3%** year-on-year increase, with its proportion of operating revenue slightly rising to **8.7%**, mainly due to the normalization of economic activities Selling, General and Administrative Expenses (For the six months ended June 30) | Indicator | H1 2023 (RMB million) | H1 2022 (RMB million) | YoY Growth (%) | % of Operating Revenue | | :-------- | :-------------------- | :-------------------- | :------------- | :--------------------- | | Selling, General and Administrative Expenses | 6,353 | 5,920 | 7.3 | 8.7 | - Selling, general and administrative expenses as a percentage of operating revenue increased by **0.2** percentage points year-on-year, primarily due to the normalization of economic activities[56](index=56&type=chunk) [Profit Attributable to Equity Holders of the Company](index=26&type=section&id=Profit%20Attributable%20to%20Equity%20Holders%20of%20the%20Company) The Group's profit attributable to equity holders of the Company for H1 2023 was **RMB 2,034 million**, a **7.3%** year-on-year increase Profit Attributable to Equity Holders of the Company (For the six months ended June 30) | Indicator | H1 2023 (RMB million) | H1 2022 (RMB million) | YoY Growth (%) | | :-------- | :-------------------- | :-------------------- | :------------- | | Profit Attributable to Equity Holders of the Company | 2,034 | 1,895 | 7.3 | [Cash Flow](index=26&type=section&id=Cash%20Flow) The Group's net cash outflow for H1 2023 was **RMB 2,323 million**, an improvement from **RMB 3,170 million** in the prior year, primarily due to strengthened working capital management Net Cash Flow (For the six months ended June 30) | Indicator | H1 2023 (RMB million) | H1 2022 (RMB million) | | :-------- | :-------------------- | :-------------------- | | Net Cash Flow | (2,323) | (3,170) | - Net cash outflow improved year-on-year, primarily because the Group adhered to value leadership, strengthened working capital management, and improved net operating cash flow[57](index=57&type=chunk) [Assets and Liabilities](index=26&type=section&id=Assets%20and%20Liabilities) As of June 30, 2023, the Group's total assets and total liabilities both increased, with the asset-liability ratio slightly rising, yet maintaining a stable financial position Assets and Liabilities Status (As of June 30, 2023) | Indicator | June 30, 2023 (RMB million) | December 31, 2022 (RMB million) | Change (RMB million) | | :-------- | :-------------------------- | :------------------------------ | :------------------- | | Total Assets | 119,040 | 110,269 | 8,771 (Increase) | | Total Liabilities | 76,330 | 68,645 | 7,685 (Increase) | | Asset-Liability Ratio | 64.1% | - | Slightly Increased | [Other Information](index=27&type=section&id=Other%20Information) This section covers other important information regarding the company's corporate governance, compliance, securities trading, interim report publication, and forward-looking statements, and lists Board members, ensuring transparency and adherence to regulatory requirements [Audit Committee](index=27&type=section&id=Audit%20Committee) The Audit Committee has reviewed the Group's accounting principles, risk management, internal controls, and financial reporting matters, including the interim results for the six months ended June 30, 2023, with management and international auditors - The Audit Committee has reviewed the accounting principles and practices adopted by the Group and discussed risk management, internal controls, and financial reporting matters, including the interim results[59](index=59&type=chunk) [Compliance with Corporate Governance Code](index=27&type=section&id=Compliance%20with%20Corporate%20Governance%20Code) The Company has complied with the code provisions set out in the Corporate Governance Code in Appendix 14 to the Listing Rules, using the 'Company Law of the People's Republic of China' and applicable laws and regulations in both regions as fundamental guidelines for corporate governance - The Company has complied with the code provisions set out in the Corporate Governance Code in Appendix 14 to the Listing Rules[60](index=60&type=chunk) - The 'Company Law of the People's Republic of China' and applicable laws, regulations, and regulatory requirements in both regions serve as fundamental guidelines for the Company's corporate governance[60](index=60&type=chunk) [Compliance with the Model Code for Securities Transactions by Directors of Listed Issuers](index=27&type=section&id=Compliance%20with%20the%20Model%20Code%20for%20Securities%20Transactions%20by%20Directors%20of%20Listed%20Issuers) The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules, and after specific inquiry, all Directors and Supervisors confirmed compliance with the Code - The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules[61](index=61&type=chunk) - All Directors and Supervisors confirmed compliance with the Model Code for securities transactions of the Company for the six months ended June 30, 2023[61](index=61&type=chunk) [Compliance with Appendix 16 to the Listing Rules](index=27&type=section&id=Compliance%20with%20Appendix%2016%20to%20the%20Listing%20Rules) The Company confirms that, apart from matters already disclosed, there have been no material changes to the existing company information listed in paragraph 32 of Appendix 16 to the Listing Rules compared to the information disclosed in the 2022 Annual Report - The Company confirms that there have been no material changes to the existing company information listed in paragraph 32 of Appendix 16 to the Listing Rules compared to the information disclosed in the 2022 Annual Report[62](index=62&type=chunk) [Purchase, Sale or Redemption of the Company's Listed Securities](index=27&type=section&id=Purchase%2C%20Sale%20or%20Redemption%20of%20the%20Company's%20Listed%20Securities) For the six months ended June 30, 2023, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - For the six months ended June 30, 2023, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[63](index=63&type=chunk) [Interim Report](index=27&type=section&id=Interim%20Report) The interim report for the six months ended June 30, 2023, will be dispatched to shareholders at a later date and published on the HKEXnews website and the Company's website - The interim report for the six months ended June 30, 2023, will be dispatched to shareholders at a later date and published on the HKEXnews website (www.hkexnews.hk) and the Company's website (www.chinaccs.com.hk)[63](index=63&type=chunk) [Forward-Looking Statements](index=28&type=section&id=Forward-Looking%20Statements) The Company reminds readers that certain statements in the report are forward-looking, subject to risks, uncertainties, and assumptions such as changes in macroeconomic environment, natural disasters, industry growth, regulatory environment, and business strategy execution, where actual results may differ materially, and the Company undertakes no obligation to update these statements - Forward-looking statements are subject to risks, uncertainties, and assumptions such as changes in the macroeconomic environment, natural disasters, relevant industry growth, changes in the regulatory environment, and execution of business strategies[64](index=64&type=chunk) - The Company's actual results may differ materially from those described in forward-looking statements, and the Company will not update these forward-looking statements[64](index=64&type=chunk) [Board of Directors](index=28&type=section&id=Board%20of%20Directors) The Company's Board of Directors includes Executive Directors Mr. Liu Guiqing, Mr. Yan Dong, and Ms. Zhang Xu; Non-executive Directors Mr. Gao Tongqing, Mr. Tang Yongbo, and Mr. Huang Zhen; and Independent Non-executive Directors Mr. Xiao Weiqiang, Mr. Lu Tingjie, Mr. Wang Qi, and Mr. Wang Chungge - Executive Directors: Mr. Liu Guiqing, Mr. Yan Dong, and Ms. Zhang Xu[64](index=64&type=chunk) - Non-executive Directors: Mr. Gao Tongqing, Mr. Tang Yongbo, and Mr. Huang Zhen[64](index=64&type=chunk) - Independent Non-executive Directors: Mr. Xiao Weiqiang, Mr. Lu Tingjie, Mr. Wang Qi, and Mr. Wang Chungge[64](index=64&type=chunk)

Financial Performance - Revenue growth of 5.0% and net profit growth of 6.4% for 2022, indicating strong financial performance [8] - Operating revenue for 2022 reached RMB 140,746 million, representing a 5.0% increase from RMB 133,991 million in 2021 [13] - Profit attributable to shareholders for 2022 was RMB 3,358 million, up 6.4% from RMB 3,157 million in 2021 [13] - Free cash flow for 2022 was RMB 4,353 million, reflecting a 7.2% increase compared to RMB 4,060 million in 2021 [13] - Basic earnings per share for 2022 were RMB 0.485, a 6.4% rise from RMB 0.456 in 2021 [13] - Total dividend per share for 2022 was RMB 0.1939, marking a 12.0% increase from RMB 0.1732 in 2021 [13] - The return on equity (ROE) was 8.5%, an increase of 0.1 percentage points year-on-year [23] - The company reported a decrease in operational costs by L%, contributing to improved profit margins [9] Revenue Breakdown - Revenue from telecommunications infrastructure services was RMB 72,907 million, accounting for 51.8% of total revenue, with a year-on-year growth of 1.4% [24] - Business process outsourcing services generated RMB 43,072 million, representing 30.6% of total revenue, with a year-on-year increase of 6.0% [24] - Revenue from application, content, and other services grew by 15.3% year-on-year to RMB 24,767 million, making it the largest driver of revenue growth [24] - Revenue from domestic non-telecom operator customers was RMB 60,583 million, representing a year-on-year growth of 5.5% [28] - Revenue from domestic telecom operator market reached RMB 77,165 million, with a year-on-year increase of 4.6%, becoming a key driver for overall revenue growth [29] - The overseas market revenue reached RMB 2,998 million, showing a year-on-year growth of 9.3% [29] Strategic Focus and Initiatives - The company aims to leverage digital economy opportunities to enhance core competitiveness and develop a second growth curve [5] - Focus on strategic emerging industries such as digital infrastructure, smart cities, and green low-carbon initiatives [5] - Continuous internal digital transformation is being implemented to improve operational efficiency [1] - The company is committed to high-quality development and creating new growth curves through integrated smart solutions [1] - The group is focusing on digital infrastructure construction, targeting key areas such as data centers, 5G, and industrial internet [32] - The group aims to enhance its smart city service capabilities, aligning with national strategies for urbanization and community development [33] Research and Development - The group's R&D expenditure was RMB 4,952 million, reflecting a year-on-year increase of 17.0% [30] - The company invested approximately RMB 50 billion in R&D in 2022, with cumulative R&D investment since the 13th Five-Year Plan reaching RMB 250 billion [65] - The company continues to invest in R&D to support digital transformation opportunities and enhance system integration and software development capabilities [79] Awards and Recognition - The company ranked fourth in the "2022 Top 100 Software and Information Technology Service Competitiveness" for the second consecutive year [20] - The company was recognized with multiple awards in 2022, including "Best CEO" and "Best CFO" in the Asia region [19] - The group received a total of 28 provincial and ministerial-level awards for its technological achievements throughout the year [30] Market Expansion and Customer Base - The first major customer group now consists of non-telecom operators, indicating a shift in customer base [11] - The company has expanded its services globally, covering dozens of countries and regions [17] - The company is expanding its overseas market presence, particularly in the Middle East and Southeast Asia, focusing on digital infrastructure and data center projects [54] Governance and Management - The company’s management team includes experienced professionals with over 30 years in the telecommunications industry [110][115] - The financial management team has over 20 years of experience in telecommunications and finance, ensuring robust financial oversight [113] - The company’s board of directors is responsible for formulating the dividend distribution plan, which will be executed following relevant legal and regulatory procedures [136] Related Party Transactions - The company has established seven continuous connected transaction agreements with China Telecom to manage related transactions, which were approved by independent shareholders [171] - The company ensures that the terms offered to China Telecom Group are not less favorable than those provided to independent third parties for similar services [177] - The agreements with China Telecom are expected to provide a stable revenue source, benefiting the company's future growth and development [173] Financial Commitments and Liabilities - Total contractual commitments as of December 31, 2022, amount to RMB 1,235,997,000, with RMB 1,023,431,000 due in 2023 [107] - Short-term borrowings total RMB 752,001,000, while long-term loans amount to RMB 129,120,000, with scheduled repayments of RMB 20,058,000 in 2023 [107] - The company has committed capital expenditures of RMB 217,583,000 that are contracted but not yet executed [107] Risks and Challenges - The company faces risks related to China's economic, political, and social conditions, which could significantly impact its business performance and financial condition [200] - The company anticipates potential economic downturns or disasters that could affect its operations and financial performance [200]

香港交易及結算所有限公司及香港聯合交易所有限公司對本公告的內容概不負責，對其準確性或完整性亦不 發表任何聲明，並明確表示，概不對因本公告全部或任何部份內容而產生或因倚賴該等內容而引致的任何損 失承擔任何責任。 中 國 通 信 服 務 股 份 有 限 公 司 CHINA COMMUNICATIONS SERVICES CORPORATION LIMITED （於中華人民共和國註冊成立之股份有限公司） （股份編號：552） 截至二零二二年十二月三十一日止之年度業績公佈 要點 . 本集團攻堅克難，整體業績再創新高，主要的經營業績、效益和股東回報指標全面 向好，實現高質量發展。 . 經營收入達到人民幣140,746百萬元，增長5.0%。 . 淨利潤達到人民幣3,358百萬元，增長6.4%，實現了淨利潤增速快於經營收入增 速的良好勢頭。 . 毛利率為11.4%，提升0.4個百分點，扭轉了近十多年以來的下降趨勢，實現企穩 ...

Financial Performance - Operating revenue reached RMB 69,253 million, an increase of 8.0% year-on-year[7] - Profit attributable to shareholders was RMB 1,896 million, up 4.6% compared to the previous year[8] - The group achieved a gross profit of RMB 7,293 million, reflecting a growth of 6.7% year-on-year, with a gross margin of 10.5%[13] - The group reported a basic earnings per share of RMB 0.274, an increase of 4.6% year-on-year[8] - Free cash flow was reported at RMB (2,607) million, indicating a decline from RMB (1,515) million in the previous year[8] - Total comprehensive income for the period was RMB 2,096,455, compared to RMB 1,656,164, marking a significant increase of 26.3%[52] - The company's net profit attributable to shareholders was RMB 1,896 million, representing a 4.6% increase from RMB 1,811 million in the previous year[40] Revenue Breakdown - Revenue from domestic telecom operators increased by 9.2%, contributing RMB 36,529 million, which accounted for 52.8% of total operating revenue[14] - Revenue from the domestic non-telecom operator market grew by 6.5%, totaling RMB 31,173 million, representing 45.0% of total operating revenue[14] - The overseas market achieved revenue of RMB 1,551 million, a year-on-year increase of 12.7%, accounting for 2.2% of total operating income[17] - Telecommunications infrastructure service revenue reached RMB 35,049 million, a year-on-year growth of 1.5%, representing 50.6% of total operating income[18] - Application, content, and other services revenue grew rapidly to RMB 12,667 million, with a year-on-year increase of 29.7%, contributing 18.3% to total operating income[18] - Revenue from business process outsourcing services reached RMB 21,537 million, a year-on-year increase of 8.8%, accounting for 31.1% of total operating income[18] Strategic Focus and Initiatives - The group is focusing on digital infrastructure construction and the integration of digital economy and real economy, seizing strategic opportunities[12] - The company is committed to enhancing its market competitiveness and technological innovation capabilities to drive high-quality development[12] - The group is actively involved in projects related to the Beijing 2022 Winter Olympics, contributing to national carbon neutrality goals[12] - The company is focusing on the "East Data West Calculation" strategy to enhance integrated service capabilities and expand market presence[24] - The company is actively responding to the national "dual carbon" strategy, implementing green and low-carbon plans, and is expected to save over 20% in energy consumption for the Beijing Yongfeng Data Center[30] Research and Development - R&D investment increased by over 18% year-on-year, becoming a key driver for revenue growth[24] - The company is committed to increasing R&D investment, particularly in original technologies in digital applications, aiming to transform into a technology-driven enterprise[31] Risk Management and Governance - The company has strengthened its risk control measures to mitigate impacts from changes in the operating environment, including pandemic outbreaks and regional instability, ensuring stable development[31] - The company has adhered to the corporate governance code as per the Hong Kong Stock Exchange regulations, ensuring compliance throughout the reporting period[158] - The company has not granted any share options to directors or their immediate family members as of June 30, 2022, maintaining a clear governance structure[160] Market Position and Client Relationships - Major clients include China Telecom Group and China Mobile Group, contributing RMB 22,725 million and RMB 8,978 million to total revenue, respectively, accounting for 32.8% and 13.0% of total operating revenue[73] - The company continues to engage in transactions with government-related enterprises under normal business terms, including telecommunications services and asset leasing[151] Financial Position - The total assets of the group as of June 30, 2022, were RMB 107,005 million, an increase of RMB 6,977 million from the end of 2021[44] - The total liabilities increased to RMB 66,497 million, up RMB 6,079 million from December 31, 2021[44] - Cash and cash equivalents decreased to RMB 18,039,422 from RMB 21,171,025, a decline of 14.3%[55] - The total accounts receivable, net of credit loss provisions, increased to RMB 23,154 million as of June 30, 2022, from RMB 18,254 million as of December 31, 2021, representing a growth of approximately 27.5%[92] Shareholder Information - China Telecom Group holds 3,393,362,496 shares, representing 74.83% of the class issued shares and 48.99% of the total issued shares[162] - China Mobile Communications Group owns 608,256,000 shares, accounting for 13.41% of the class issued shares and 8.78% of the total issued shares[162] - The company did not declare an interim dividend for the six months ended June 30, 2022, consistent with the previous year[88]

Innovation and Reform - The company emphasizes innovation and reform as key themes for 2021, focusing on value creation through technological advancements[3] - In 2021, the company implemented several reform measures, including introducing State Grid Information and Communication Industry Group as a strategic shareholder and four strategic investors at the subsidiary level[5] - The company is committed to deepening reforms to enhance competitiveness, development momentum, and employee creativity[5] - The company established a strategic partnership with SAP to provide cloud products and services[10] - The company plans to expand its market presence through new product development and strategic investments in digital infrastructure[10] - The company is focused on developing a blockchain product platform named "China Tongfu Chain," certified by the China Academy of Information and Communications Technology[67] - The company is enhancing its digital sports technology offerings, targeting government and industry clients to improve the digitalization of the sports sector[69] - The integration of IoT, big data, and digital twin technologies is being utilized to build comprehensive digital management platforms for towns, promoting rural revitalization[70] - The company is committed to smart city solutions, leveraging 5G, AI, and cloud computing to enhance urban management and services[69] Financial Performance - Operating revenue for 2021 reached RMB 133,991 million, representing a 9.2% increase from RMB 122,649 million in 2020[12] - Profit attributable to shareholders was RMB 3,157 million, up 2.5% from RMB 3,081 million in the previous year[12] - Free cash flow increased significantly by 54.4% to RMB 4,060 million from RMB 2,630 million in 2020[12] - Basic earnings per share rose to RMB 0.456, a 2.5% increase compared to RMB 0.445 in 2020[12] - Total dividend per share increased by 8.1% to RMB 0.1732 from RMB 0.1602 in the previous year[12] - The final dividend per share was RMB 0.1641, up from RMB 0.1335 in 2020[12] - Special dividend per share decreased to RMB 0.0091 from RMB 0.0267 in the previous year[12] - The gross profit margin was reported at 11.0%, with a gradual stabilization in the decline of the margin[22] - The company achieved a reduction in subcontracting costs, which accounted for 53.2% of operating revenue, down 1.6 percentage points year-on-year[28] - The accounts receivable turnover ratio improved to 29.7%, the lowest level in the past five years[28] Market and Revenue Growth - The focus is on high-value industries, expanding high-value businesses, and positioning in high-value regions to drive quality development[6] - The company focused on the domestic non-telecom operator market, which became the primary driver of revenue growth[22] - Revenue from the domestic non-operator customer market reached RMB 57,446 million, a year-on-year increase of 15.9%, accounting for 42.9% of operating revenue, up 2.5 percentage points[24] - Revenue from domestic telecom operator market was RMB 73,803 million, a year-on-year increase of 5.5%, reversing a decline of 5% in the previous year, accounting for 55.1% of operating revenue[25] - Overseas market revenue decreased to RMB 2,742 million, down 11.4% year-on-year, accounting for 2.0% of operating revenue[25] - Revenue from telecom infrastructure services was RMB 71,889 million, a year-on-year increase of 7.0%, accounting for 53.7% of operating revenue[26] - Business process outsourcing service revenue reached RMB 40,624 million, a year-on-year increase of 9.0%, accounting for 30.3% of operating revenue[26] - The revenue from applications, content, and other services reached RMB 21,478 million, up 18.0% year-on-year[56] - The company is actively expanding its market presence in 5G, data centers, smart cities, and other sectors to meet digital transformation demands[58] Corporate Governance and Compliance - The company received multiple awards for its corporate governance and ESG efforts, including "Best CEO" and "Best CFO" recognitions[30] - The company’s board of directors includes experienced professionals with extensive backgrounds in telecommunications and finance, ensuring strong governance[110] - The board proposed a final dividend payout ratio increase from 30% to 36%, with a final dividend of RMB 0.1641 per share, representing a year-on-year growth of 22.9%[23] - The company adheres to the Hong Kong Stock Exchange listing rules regarding the independence of its non-executive directors[127] - The company is committed to ensuring compliance with tax regulations for both domestic and foreign shareholders regarding dividend distributions[125] - The company’s board and supervisors have service contracts with a term of three years, which can be renewed upon expiration[137] - The company has established multiple communication channels with shareholders to keep them informed of business developments[180] - The board consists of nine directors, including two executive directors and four independent non-executive directors[183] - The company has adopted a standard code to regulate securities trading by directors and supervisors[189] Strategic Partnerships and Investments - The company completed the acquisition of 100% equity in China Communication Construction Group for RMB 4.63 billion[10] - The company successfully introduced State Grid Information Communication Industry Group as a strategic shareholder, holding 2.40% of the total issued share capital[27] - The supply chain management subsidiary attracted strategic investors with a total investment of RMB 900 million, resulting in a 26.015% stake for the investors[27] - The company plans to leverage its "Consultant + Employee + Steward" service model to capture opportunities in the digital infrastructure market, focusing on key regions and industries[31] - The company will continue to expand its overseas business under the principles of safety and effectiveness, participating in the "Belt and Road" initiative[31] Risk Management and Challenges - The company is facing risks related to the economic, political, and social conditions in China, which could impact its business performance[166] - The company is strategically expanding its overseas business, which involves various operational risks[169] - The company plans to continue enhancing internal management and risk prevention measures in 2022, focusing on protecting shareholder interests[172] Future Outlook - The company has set a future outlook with a revenue growth target of 10-15% for the upcoming fiscal year[108] - New product launches are expected to contribute an additional $500 million in revenue over the next year[109] - The company is expanding its market presence in Southeast Asia, aiming for a 20% market share by 2025[110] - A strategic acquisition of a local telecom firm is anticipated to enhance service offerings and customer base[106] - The management team emphasized a focus on improving operational efficiency, targeting a 5% reduction in costs[108] - The company plans to enhance customer engagement through digital platforms, aiming for a 30% increase in user interaction[109]

Financial Performance - The company's operating revenue reached RMB 64,099 million, an increase of 19.1% year-on-year[5] - Profit attributable to shareholders was RMB 1,811 million, reflecting a growth of 14.1%[5] - The gross profit was RMB 6,833 million, up 15.8% year-on-year, with a gross margin of 10.7%[12] - Basic earnings per share were RMB 0.262, an increase of 14.1% compared to the previous year[12] - The net profit margin was 2.8%, a slight decrease of 0.1 percentage points year-on-year[12] - Free cash flow for the first half of 2021 was RMB -1,515 million, showing improvement compared to the previous year[12] - The company's operating costs for the first half of 2021 were RMB 57,266 million, a 19.5% increase compared to the same period in 2020[34] - Profit before tax increased to RMB 2,114,242 thousand, up from RMB 1,827,851 thousand, representing a growth of 15.7%[43] - Total comprehensive income for the period was RMB 1,656,164 thousand, compared to RMB 1,250,414 thousand, indicating a growth of 32.4%[45] Revenue Breakdown - Revenue from the domestic non-operator customer market grew significantly by 34.0%[5] - Revenue from the domestic operator market showed a recovery with a growth of 9.5%[5] - The revenue from telecommunications infrastructure services amounted to RMB 34,547 million, with a year-on-year increase of 19.0%, contributing 53.9% to total operating income[16] - The company achieved a revenue of RMB 19,787 million from business process outsourcing services, reflecting a year-on-year growth of 16.7% and representing 30.9% of total operating income[16] - Revenue from application, content, and other services reached RMB 9,765 million, showing a rapid year-on-year growth of 24.6%, and accounting for 15.2% of total operating income[16] - The revenue from domestic telecommunications operators increased to RMB 33,452 million, with a year-on-year growth of 9.5%, making up 52.2% of total operating income[14] - The company’s overseas market revenue was RMB 1,377 million, a year-on-year decline of 4.2%, which accounted for 2.1% of total operating income[14] Investment and Innovation - The company continued to increase investment in technological innovation, driving rapid growth in applications, content, and other services[5] - The company has increased its R&D investment, focusing on network security, IoT, and innovative platforms to support business expansion and digital transformation[18] - In 2021, the company plans to increase R&D investment in digital economy and smart services, aiming for high-quality development through both internal and external growth strategies[26] - The company’s IoT platform was selected as a demonstration project by the Ministry of Industry and Information Technology for the 2020-2021 period, highlighting its influence in the industry[18] Strategic Partnerships and Governance - The company successfully introduced strategic investors, advancing comprehensive reforms and high-quality development[5] - The company introduced State Grid Information Communication Industry Group as a strategic shareholder, acquiring 166,000,000 shares, representing 2.40% of the total issued share capital[19] - The strategic partnership with State Grid is expected to optimize the company's governance structure and enhance its operational capabilities[21] - The company emphasizes the importance of corporate governance, having received multiple awards for its ESG practices and management team[22] - The company ranked 87th in the "2021 Fortune China 500" and 1,337th in the "2021 Forbes Global 2000" list, reflecting strong corporate governance recognition[22] Social Responsibility and Community Engagement - The company actively participated in disaster relief efforts during severe flooding in Henan, ensuring communication networks remained operational[25] - The company is committed to fulfilling its social responsibilities, providing emergency communication support during the pandemic and other crises[23] Market Expansion and Future Outlook - The company plans to leverage digital transformation by launching a digital procurement platform to enhance transparency and customer satisfaction[28] - The company aims to strengthen collaboration with strategic investors to support its reform and sustainable development initiatives[28] - The company is focusing on expanding its overseas market presence while managing risks associated with international operations[28] - The company aims to enhance its service offerings in the telecommunications market by leveraging 5G, big data, and cloud-network integration strategies[26] - The company expects continued growth in telecommunications infrastructure and IT application services, driven by increasing demand for digital transformation[117] - The company is focused on expanding its market presence and enhancing service offerings through strategic partnerships and technological advancements[117]

Financial Performance - Operating revenue for 2020 was RMB 122,649 million, representing a 4.5% increase from RMB 117,413 million in 2019[60]. - Profit attributable to shareholders for 2020 was RMB 3,081 million, a 1.1% increase from RMB 3,049 million in 2019[60]. - Free cash flow decreased by 38.0% to RMB 2,630 million in 2020, down from RMB 4,243 million in 2019; excluding property purchases, free cash flow would have increased by 21.5% to RMB 5,157 million[63]. - Basic earnings per share for 2020 were RMB 0.445, up 1.1% from RMB 0.440 in 2019[63]. - The company's total operating revenue for 2020 reached RMB 122,649 million, an increase of 4.5% compared to 2019[159]. - The profit attributable to shareholders was RMB 3,081 million, up 1.1% from RMB 3,049 million in 2019[159]. - Free cash flow stood at RMB 2,630 million, with a cash profit ratio of 177.0%, indicating a healthy financial position[159][164]. Revenue Breakdown - Revenue from domestic non-telecom operator customers accounted for 40.4% of total operating revenue, an increase of 12.1 percentage points compared to 2015[79]. - Revenue from the domestic non-telecom operator market grew by 18.8% year-on-year, maintaining over 18% growth for three consecutive years[82]. - Revenue from domestic telecom operators decreased by 3.4% year-on-year, accounting for 57.1% of total operating revenue[82]. - Revenue from telecommunications infrastructure services amounted to RMB 67,165 million, up 3.8% year-on-year, accounting for 54.8% of total operating revenue[103]. - Revenue from application, content, and other services reached RMB 18,207 million, with a rapid year-on-year growth of 13.2%[104]. - Revenue from domestic non-operator customers was RMB 49,578 million, an increase of 18.8% year-on-year[122]. - Revenue from domestic telecommunications operators decreased to RMB 69,976 million, down 3.4% year-on-year[122]. - Revenue from overseas customers was RMB 3,095 million, reflecting a decline of 5.2% year-on-year[122]. Strategic Initiatives - The company aims to enhance its service capabilities and quality through continuous R&D investment and strategic partnerships, focusing on digital transformation and new infrastructure development[14]. - The company is positioned as a "new generation comprehensive intelligent service provider," emphasizing integrated and customized solutions to meet evolving customer needs in the digital economy[17]. - The company plans to leverage opportunities from the rapid development of new infrastructure and the digital economy to drive sustainable growth[14]. - The company is committed to enhancing its information technology and software service capabilities through collaborative resource integration and innovation[12]. - The company is focusing on the integration of traditional infrastructure with new infrastructure, including big data centers and industrial internet[16]. - The company aims to meet new demands for infrastructure upgrades and service model enhancements driven by the development of 5G technology[17]. - The company is committed to strategic collaboration and exploring partnerships to strengthen its business ecosystem[95]. Research and Development - The company established a new research institute, the China Communication Service Research Institute, to enhance R&D capabilities[57]. - Research and development expenses for 2020 amounted to RMB 3,782 million, representing 3.1% of total operating income[110]. - The company established a research institute and integrated a two-tier R&D structure, focusing on cloud and IoT platform development[110]. - The company is developing a unified standardized R&D innovation platform to enhance R&D capabilities and digital transformation for enterprises[151]. - The company aims to continue enhancing R&D in key areas such as IoT, big data, and information security to meet customer needs for digital transformation[149]. Market Position and Recognition - The company ranked fifth in the "Top 100 Software and Information Technology Service Competitiveness" by the China Electronic Information Industry Association for two consecutive years[66]. - The company was recognized as an advanced collective in the fight against COVID-19 by the Ministry of Industry and Information Technology[57]. - The company received multiple awards in 2020, including ranking 86th in the "Fortune" China 500 and 1,488th in the "Forbes" Global 2000 list[92]. Operational Efficiency - The company's selling, general and administrative expenses were RMB 11,826 million in 2020, up 2.9% from RMB 11,494 million in 2019, accounting for 9.6% of operating revenue, a decrease of 0.2 percentage points[185]. - The group’s operating costs for 2020 were RMB 108,911 million, a 5.0% increase from RMB 103,726 million in 2019, representing 88.8% of operating revenue[174]. - Direct employee costs decreased by 8.9% to RMB 8,300 million in 2020, accounting for 6.8% of operating revenue, down 1.0 percentage points from 2019[178]. - Material costs increased by 17.3% to RMB 15,057 million in 2020, accounting for 12.3% of operating revenue, up 1.4 percentage points year-on-year[180]. - Subcontracting costs rose by 4.2% to RMB 67,166 million in 2020, making up 54.8% of operating revenue, a slight decrease of 0.1 percentage points from 2019[182]. Future Outlook - The company plans to focus on expanding its presence in Southeast Asia, the Middle East, and Africa, leveraging the "Belt and Road" initiative[95]. - The company aims to leverage opportunities in the digital economy and new infrastructure during the "14th Five-Year Plan" period, focusing on key industries and regions[93]. - The domestic non-operator customer market is expected to be a major driver for the group's sustainable development, with a focus on smart city and smart government projects[93]. - The company plans to deepen market penetration in 5G and data center investments, aiming for stable growth from domestic telecom operators[142].

Revenue Growth and Financial Performance - The company has achieved continuous revenue growth for 13 years, driven by strategic foresight and efficient execution[7]. - The company's operating revenue for 2019 was RMB 117,413 million, representing a growth of 10.6% compared to RMB 106,177 million in 2018[73]. - The profit attributable to shareholders for 2019 was RMB 3,049 million, an increase of 5.1% from RMB 2,901 million in 2018[73]. - Free cash flow for 2019 reached RMB 4,243 million, marking a 17.4% increase from RMB 3,613 million in 2018[73]. - Basic earnings per share for 2019 were RMB 0.440, up 5.1% from RMB 0.419 in 2018[73]. - The total dividend per share for 2019 was RMB 0.1585, reflecting a 5.1% increase from RMB 0.1508 in 2018[73]. - The company has achieved stable growth in revenue, profit, and free cash flow, with an overall solid performance level[92]. - In 2019, the company's operating revenue reached RMB 117,413 million, representing a year-on-year growth of 10.6%[122]. - The gross profit for 2019 was RMB 13,687 million, with a gross margin of 11.7%, a decrease of 0.4 percentage points compared to the previous year[122]. - The profit attributable to shareholders was RMB 3,049 million, reflecting a year-on-year increase of 5.1%, with a net profit margin of 2.6%[122]. Strategic Positioning and Market Focus - The company is positioned as a "new generation integrated smart service provider," leveraging its 4T capabilities: Communications Technology, Information Technology, Data Technology, and Operational Technology[11]. - The company aims to capitalize on new opportunities arising from the digital economy and the government's push for new infrastructure, including 5G[4][12]. - The company announced a new strategic positioning as a "new generation integrated smart service provider" to meet customer demands[36]. - The company aims to provide comprehensive integrated smart solutions that meet clients' new demands across platforms, connections, applications, regions, and vendors[33]. - The company has positioned itself as a "new generation integrated smart service provider," focusing on opportunities in "network power," "digital China," and "smart society"[92]. - The company aims to transform into a "new generation comprehensive intelligent service provider," focusing on digital infrastructure and smart product development in 2020[136]. Research and Development - The company has over 20 smart product R&D centers and more than 30 smart product solutions, enhancing its competitive edge in the digital economy[26]. - The company has over 20,000 consulting and R&D talents, which supports its innovation and product development efforts[26]. - The company has established various research institutes and ecological alliances to enhance its R&D capabilities and foster innovation[135]. - The company is increasing R&D investment in 5G, big data, and IoT to enhance the quality and quantity of smart products[118]. - The company has established over 70 R&D teams and more than 500 R&D specialists, enhancing its integrated service capabilities in cloud computing, IoT, smart cities, and other areas[196]. Customer and Market Development - The company's domestic non-telecom operator group customers became the largest customer group for the first time[70]. - Revenue from the domestic non-telecom operator market grew by 25.2%, accounting for 35.5% of total operating revenue[98]. - The core business revenue from the domestic non-telecom operator market increased by 29.8%, contributing 92.4% to that market's total revenue[98]. - Revenue from the domestic telecom operator market rose by 3.9%, making up 61.7% of total operating revenue[99]. - The overseas market revenue grew by 3.6%, representing 2.8% of total operating revenue[99]. - The company is focusing on expanding its overseas market presence through partnerships and leveraging the "Belt and Road" initiative[118]. - The company is focusing on expanding its overseas business through the "EPC+F+I+O+S" model, targeting large projects and digital needs of overseas clients[139]. Corporate Governance and Recognition - The company was ranked fifth in the "Top 100 Software and Information Technology Service Competitiveness" in 2019 and received the "Leading Enterprise" title in the electronic information industry[22][26]. - The company received multiple awards in 2019, including recognition for corporate governance and investor relations, highlighting its commitment to high-quality development[83]. - The company is committed to maintaining a high level of corporate governance and transparency, which has been recognized by the capital market[106]. - The company has been recognized as a leader in cybersecurity, being included in the "Top 100 Cybersecurity Companies in China" report[196]. Social Responsibility and Community Engagement - The company invested RMB 14.79 million in poverty alleviation efforts, focusing on employment, training, and public welfare initiatives[110]. - The company provided emergency communication support for various hospitals during the COVID-19 pandemic, completing network planning and construction for Wuhan's Huoshenshan and Leishenshan hospitals within three days[108]. - The company developed and promoted over 40 smart epidemic prevention applications, which were implemented in several regions, including Sichuan and Chongqing[110]. - The company is committed to modernizing national governance systems through its integrated emergency solutions[196]. Business Structure and Optimization - The customer and business structure has been further optimized, supporting the company's transition towards smart and digital solutions[92]. - The company will continue to optimize its business structure while reducing low-profit distribution services to maintain high-quality development[147]. - The company continued to reduce low-margin distribution business, with revenue declining by 11.5%, now accounting for 3.7% of total operating revenue[103].

Financial Performance - The company's operating revenue for the first half of 2019 reached RMB 56,049 million, representing a year-on-year growth of 10.4%[17] - Gross profit amounted to RMB 6,300 million, with a year-on-year increase of 2.0%, resulting in a gross margin of 11.2%, down 1.0 percentage points from the previous year[17] - Profit attributable to shareholders was RMB 1,712 million, reflecting a year-on-year growth of 7.3%, with a net profit margin of 3.1%[17] - Revenue from non-telecom group customers reached RMB 21,065 million, showing a rapid growth of 28.5% and accounting for 37.6% of total operating revenue[19] - Core business revenue, excluding product distribution, grew by 11.8% year-on-year, indicating strong growth momentum[17] - Revenue from domestic telecom operators was RMB 33,645 million, with a year-on-year increase of 2.1%, representing 60.0% of total operating revenue[19] - The operating revenue for the six months ended June 30, 2019, was RMB 56,049,087 thousand, an increase from RMB 50,792,100 thousand in the same period of 2018, representing a growth of approximately 10.8%[34] - The gross profit for the same period was RMB 6,300,096 thousand, compared to RMB 6,175,604 thousand in 2018, indicating a year-on-year increase of about 2.0%[34] - The net profit attributable to shareholders for the six months ended June 30, 2019, was RMB 1,711,578 thousand, up from RMB 1,595,476 thousand in 2018, reflecting an increase of approximately 7.3%[34] - The basic earnings per share for the period was RMB 0.247, compared to RMB 0.230 in the previous year, marking a growth of about 7.4%[34] Cash Flow and Investments - Free cash flow was negative at RMB 425 million, primarily impacted by changes in the timing of collections and payments[17] - For the six months ended June 30, 2019, the net cash used in operating activities was RMB (293,543) thousand, a decrease from RMB 891,607 thousand in the same period of 2018[46] - The net cash used in investing activities was RMB (2,049,225) thousand, compared to RMB (1,157,530) thousand in the prior year[46] - Cash and cash equivalents decreased to RMB 13,614,960,000 from RMB 16,106,246,000, a decline of approximately 15.4%[38] - The cash inflow from the sale of financial products and structured deposits was RMB 4,200,000 thousand, up from RMB 2,800,000 thousand in the previous year[46] - The company reported a cash outflow of RMB (5,450,000) thousand for the purchase of financial products and structured deposits, an increase from RMB (4,300,000) thousand in the previous year[46] Business Strategy and Market Focus - The company is focusing on sectors such as government, transportation, and smart buildings, increasing R&D investment and developing smart products[19] - The company aims to leverage opportunities from the "Belt and Road" initiative to expand its overseas market presence[19] - The company is committed to a dual-driven development strategy of CAPEX and OPEX to support the transformation and upgrade of domestic telecom operators[19] - The company plans to leverage opportunities in the domestic non-telecom operator market, focusing on key industries such as government, transportation, and power, to drive future business growth[28] - The company aims to enhance its core service capabilities across platforms, connections, applications, regions, and vendors, while increasing investment in research and development[28] - The company anticipates new demands arising from the rollout of 6G licenses, which will create opportunities in network infrastructure construction and digital transformation[26] - The company emphasizes the importance of high-quality development and innovation to ensure sustainable growth in the face of economic transformation and industry changes[28] Social Responsibility and Governance - The group has actively engaged in social responsibility initiatives, with total donations exceeding RMB 4 million in the first half of 2019[24] - The company contributed between 10% to 20% of employee salaries, bonuses, and certain allowances to various defined contribution retirement plans organized by local governments[24] - As of June 30, 2019, there were no significant unpaid contributions related to retirement benefits for retired employees[24] - The company complied with the Corporate Governance Code as per the Hong Kong Listing Rules during the six months ending June 30, 2019[144] Assets and Liabilities - Non-current assets total RMB 13,117,993,000, up from RMB 12,412,167,000, reflecting a growth of approximately 5.7%[38] - Current assets amount to RMB 72,616,431,000, an increase from RMB 68,513,833,000, which is a growth of about 6.5%[38] - The total liabilities have risen to RMB 51,921,111,000 from RMB 48,097,139,000, marking an increase of approximately 5.9%[40] - The equity attributable to the company's shareholders is RMB 33,326,529,000, up from RMB 32,331,323,000, representing a growth of about 3.1%[40] - The total assets of the company as of June 30, 2019, were 33,813,313 thousand RMB, compared to 34,828,861 thousand RMB at the end of 2018[42] - The total liabilities, including accounts payable and notes payable, reached RMB 31,776,704 thousand as of June 30, 2019, compared to RMB 28,279,533 thousand at the end of 2018, indicating an increase of about 8.83%[108] Accounting Policies and Standards - The company adopted IFRS 16 on January 1, 2019, recognizing lease liabilities amounting to RMB 950,908 thousand[71] - The weighted average incremental borrowing rate for lease liabilities was 3.6%[71] - The carrying amount of right-of-use assets recognized under IFRS 16 was RMB 1,659,581 thousand, including land leases and buildings[74] - The initial impact of adopting IFRS 16 resulted in a reduction of retained earnings by approximately RMB 33 million[77] - The company has adopted IFRS 16 Leases, which has resulted in changes to accounting policies and reporting amounts[51] Major Shareholders - Major shareholders include China Telecom Group with 3,559,362,496 shares (78.49%) and China Mobile Communications Group with 608,256,000 shares (13.41%) as of June 30, 2019[159] - BlackRock, Inc. held 182,048,125 shares (7.61%) as a controlled corporation interest as of June 30, 2019[159] - Citigroup Inc. and JPMorgan Chase & Co. also held significant shares, with Citigroup having 179,122,689 shares (7.49%) and JPMorgan holding 140,992,527 shares (5.89%) as of June 30, 2019[160]