Incident 1 In the first three quarters of 2016, the company achieved operating income of 1,691 billion yuan, a year-on-year decrease of 38.98%, net profit of 30.65 million yuan, a year-on-year decrease of 50.24%, and EPS of 0.05 yuan, a year-on-year decrease of 50.24%. 2. Revenue declined, net profit declined, sales revenue declined, and total operating income declined; net profit was 24.84 million yuan, a decrease of 50% over the previous year. The main reason was differences in revenue recognition for wealth management products from different types of banks and differences in financial subsidies received. The company expects net profit to fall by more than 50% year on year in 2016. 3. We are optimistic that the industrial chain advantages and telecom shareholders' resource advantages asset restructuring after the integration of “Internet +” is progressing in an orderly manner. After integrating high-quality assets in the Telecom Group's business, it is expected to bring about improvements in business revenue. At the same time, based on the “Internet +” layout, covering aspects such as entertainment and tourism, it will build a pan-entertainment industry ecological chain. As China Telecom's only A-share listed company, it still has huge potential to be tapped in the Telecom Group's full range of channels, marketing, and communication portal resources, product sales, business travel reservations, hotels, and credit operations. 4. Profit forecasts and investment suggestions The short-term merger of high-quality assets will drive a significant increase in performance, and performance growth over the next two years will also be sustainable. We forecast the company's 16/17/18EPS (after dilution) to be 0.35, 0.42, and 0.50, and the corresponding PE is about 61.7/50.8/43.0 times, maintaining the “highly recommended” rating. 5. Risks indicate the risk of intense market competition; new business development falls short of expectations; and progress in state-owned enterprise reform falls short of expectations.