| (o) | Revenue recognition |
The revenue recognition methods of the Group are as follows:
| (i) | Voice usage fee is recognized as the service is provided. |
| (ii) | Fees received for wireline installation charges for periods prior to January 1, 2012 are deferred and recognized over the expected customer relationship period. The direct costs associated with the installation of wireline services are deferred to the extent of the installation fees and amortized over the same expected customer relationship period. From 2012 onwards, since the amounts of fees received and the associated direct costs incurred are insignificant, the fees and associated direct costs are not deferred, and are recognized in profit or loss when received or incurred. |
| (iii) | Monthly service fees are recognized in the month during which the services are provided to customers. |
| (iv) | Revenue from sale of prepaid calling cards are recognized as the cards are used by customers. |
| (v) | Revenue derived from information and application services are recognized when the services are provided to customers. |
Revenue from information and application services in which no third party service providers are involved, such as caller display and Internet data center services, are presented on a gross basis. Revenues from all other information and application services are presented on either gross or net basis based on the assessment of each individual arrangement with third parties. The following factors indicate that the Group is acting as a principal in the arrangements with third parties:
| i) | The Group is primarily responsible for providing the applications or services desired by customers, and takes responsibility for fulfillment of ordered applications or services, including the acceptability of the applications or services ordered or purchased by customers; |
| ii) | The Group takes title of the inventory of the applications before they are ordered by customers; |
| iii) | The Group has risks and rewards of ownership, such as risks of loss for collection from customers after applications or services are provided to customers; |
| iv) | The Group has latitude in establishing selling prices with customers; |
| v) | The Group can modify the applications or perform part of the services; |
| vi) | The Group has discretion in selecting suppliers used to fulfill an order; and |
| vii) | The Group determines the nature, type, characteristics, or specifications of the applications or services. |
If majority of the indicators of risks and responsibilities exist in the arrangements with third parties, the Group is acting as a principal and have exposure to the significant risks and rewards associated with the rendering of services or the sale of applications, and revenues for these services are recognized on a gross basis. If majority of the indicators of risks and responsibilities do not exist in the arrangements with third parties, the Group is acting as an agent, and revenues for these services are recognized on a net basis.
| (vi) | Revenue from the provision of Internet and telecommunications network resource services are recognized when the services are provided to customers. |
| (vii) | Interconnection fees from domestic and foreign telecommunications operators are recognized when the services are rendered as measured by the minutes of traffic processed. |
| (viii) | Lease income from operating leases is recognized over the term of the lease. |
| (ix) | Sale of equipment is recognized on delivery of the equipment to customers and when the significant risks and rewards of ownership and title have been transferred to the customers. Revenue from repair and maintenance of equipment is recognized when the service is provided to customers. |
The Group offers promotional packages, which involve the bundled sales of terminal equipment (mobile handsets) and telecommunications services, to customers. The total contract consideration of a promotional package is allocated to revenues generated from the provision of telecommunications services and the sales of terminal equipment using the residual method. Under the residual method, the total contract consideration of the arrangement is allocated as follows: The undelivered component, which is the provision of telecommunications services, is measured at fair value, and the remainder of the contract consideration is allocated to the delivered component, which is the sales of terminal equipment. The Group recognizes revenues generated from the delivery and sales of the terminal equipment when the title of the terminal equipment is passed to the customers whereas revenues generated from the provision of telecommunications services are recognized based upon the actual usage of such services. During each of the years in the three-year period ended December 31, 2017, a substantial portion of the total contract consideration is allocated to the provision of telecommunications services since the terminal equipment is typically provided free of charge or at a nominal amount to promote the Group’s core business of the provision of telecommunications services, and the fair value of the telecommunication services approximates the total contract consideration.