Good morning, ladies and gentlemen. Thank you, everyone, and welcome to 21Vianet Group's Fourth Quarter Earnings Conference Call. [Operator Instructions] Before we begin, I will read the Safe Harbor statement. This call may contain forward-looking statements made pursuant to the Safe Harbor provisions for the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and observations that involve known and unknown risks, uncertainties and other factors not under this company's control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or expectations implied by these forward-looking statements. All forward-looking statements are expressly qualified in their entirety by the cautionary statements, risk factors and details of the company's filings with the SEC. 21Vianet undertakes no duty to revise or update any forward-looking statements for selected events or circumstances after the date of this conference call. With us today is Mr. Shang Hsiao, Chief Financial Officer. Following management's prepared remarks, we will conduct the Q&A. At this time, I will now like to turn the conference call over to Mr. Shang Hsiao, 21Vianet's Chief Financial Officer, for opening remarks.

Thank you, operator. Good morning, and good evening, everyone, and welcome to 21Vianet fourth quarter earning conference call. Today, because our President, Frank, is on the road, it will also read the opening remarks and strategic overview. 2013 was a important year for 21Vianet development, as well as the China Internet infrastructure industry. Mobile Internet and cloud computing become increasingly pervasive, both in China and globally. In China, communication infrastructure expanded greatly driven by the surging demand for data traffic, favorable government support and heavy investment by Chinese telecommunication company and Internet company. With this backdrop, we are seeing tremendous growth opportunity on the horizon, and we are committed to capture this emerging opportunity by implementing and executing upon our growth strategies. Now let me take a minute to highlight the achievement and pathways we have made in 2013 before walking you through our detailed financial result. Over the course of 2013, we made great strides in expanding our capacity and market footprint, as well as expanding in our service by establishing new partnership and expanding upon other existing one with several world class global corporation. For our core IDC business, as we remain focused on growing our capacity to meet customer demand, we have at the same time, tried to beef up our marketing effort in strategic region markets and improve our overall utilization. We were very pleased that we're managing a utilization rate of 71.2% and achieved a EBITDA margin of 18.8% in the fourth quarter. We're increasing our capacity in the second half of 2013. This strong performance was powered by the increasing customer demand for our IDC business service and the expanded sale capabilities throughout the China market. For 2014, the core focus of our IDC strategy is to accelerate capacity buildout in our strongest market…

[Operator Instructions] Your first question today comes from the line of James Breen from William Blair.

Shang, I was wondering if you could just talk about the progression of the Microsoft contract and how do you think about that over the course of the next 12 months? And then also, I think in the last quarter call, you talked about some competition that -- of the network side of the business. Just, are you seeing -- just from a competitive standpoint, what are you seeing in terms of competition for both the network and the data center side?

Okay. Thank you, Jim. For the Microsoft, actually, we're started the partial commercialization in late September of the last year. And during the last call, I did mentioned about it. We expect Microsoft will generate USD 1 million revenue, okay, for 21Vianet, okay, in the fourth quarter of the 2013. The number already come out, okay. Actually, the number significantly beat the USD 1 million, so we have a lot more than USD 1 million revenue from the Microsoft in the 4Q. And during the past couple of months, Microsoft and our company, actually, we already signed a lot of we call VIP customer, the customer who will contribute more than RMB 100,000 per year to us. And the signing process, okay, is very encouraging. Like on a daily basis, we are signing a lot of customer. So I also did guide the total revenue, okay, from the Microsoft partnership for us in 2014. So like earlier, I mentioned, okay, right now, the revenue we estimate, should be somewhere around USD 40 million, 4-0, okay, U.S. dollars, okay. Right now, the number should be on track based on the number of the customer we already have, okay. And I also mentioned about it, okay. In March -- actually, this March, Microsoft and 21Vianet, okay, jointly, we will have a event formally announce for the commercialization of the Window Azure, okay, in Shanghai. And that's -- will happen in this month. In the beginning of the April, which is also be very close by now, we will also announce Office 365 for the commercialization. So it's very exciting for us. So far, look like everything will be on track, okay, so we will see, okay. That's for the Microsoft update. And for the network side, if you guys can recall, okay, during the -- our last quarter call, I did mention about the pricing competition from the network side. Because at that time, China Telecom, Unicom did make announcement, they will reduce the bandwidth costs for the 30% during the next 5 years. So we did see impact, but come down to like November, okay, last year and everything become stabilized. Yes, the company did reduce price also. So that impact the revenue. But however, the demand still remain quite good. So everything right now become stabilized. You can see from our number, okay, we still have the Q-by-Q growth. And that's a little bit better than our original expected. So thing look like they are settle down. So for the 2014, we will continue to see the growth from the management network service, okay, probably between 10% to 15%, okay. Okay, Jim?

Your next question today comes from the line of Chad Bartley from Pacific Crest.

So in terms of your hosting revenue, if you exclude cloud, which was better than expected, and then you just indicated that network was better than expected, does that imply that the core hosting business was maybe a little weaker than you thought? So you can you comment on that? And then separately, in terms of self-built cabinet additions, that was lower than we had been forecasting. So what drove that, and can you give us any help in terms of the expected additions in Q1 and maybe after that this year?

Okay. Well, we saw -- yes, thank you, Chad. Okay, with additional revenue from the cloud business, okay, if you exclude that, okay, you will see our data center business, our core business. Okay, right now we forecast we are going to have a growth somewhere around 32%, 31% to 32%, okay, if you exclude that. But overall, the company will have a growth of 40% in term of the revenue. Because according to the IDC report, okay, the data center business, okay, for the next 5 years, should have a CAGR growth, okay, around 31%. At this moment, okay, we take a very conservative view, okay, for our hosting business because this is the first time the company provides any revenue guidance, okay, to the Street. So we tried to be conservative a little bit. But the management remain strong confidence, okay. We may, okay, have a better number for our hosting business. And if we look at the last year, okay, 2013 over the 2012, our hosting business actually increased by 40%. Okay, we have more than 40% growth. Hopefully, we can replicate, okay, the last year performance. And like I say, okay, it's the first time we provide the annual guidance. We try to take a conservative approach on this one. So that's your first question. And second question, regarding to the deployment, okay, of the data center, okay. And yes, okay, we postponed some of the deployment, okay, from the 2013 to 2014. Particularly, okay, for some of the big data center, okay, in order to maintain, okay, the utilization rate and then stable gross margin, et cetera. And we did mention, okay, earlier, this year, we will deploy 10,000 cabinets. Actually, that 10,000 cabinet come out from 13, 1-3, 13 different data center, and --…

Your next question today comes from the line of Lucy Liu from JPMorgan.

I have 3 questions. One is on your utilization rate. I noticed that in fourth quarter, you added 700 [ph] cabinets, but utilization rate seems like you've extended [ph] over from 74% in the third quarter to 71%. So just to wonder, what's the reason behind that? And also, how should we read the utilization rate guidance for this year, given quite much of capacity you're going to add? So this is number one. Number two, we wonder in terms of your agreement with Huawei, can you explain a bit further in terms of what kind of cooperational -- what kind of the business we can really benefit from this agreement? You said earlier that it can help us to accelerate the construction and also shorten the lead [ph]. Just wonder how that's going to work? And then lastly, just in terms of the enterprise market, I remember from the previous conversation, you mentioned that some initiative have been done there. So wondering what's going on? How much of the additional revenue we can expect from enterprise market?

Okay. Thank you, Lucy. Okay, utilization for the fourth quarter of 27, okay, at 2013, okay, was 71% -- more than 71%. It's like this, the company in the last day of the Q3, okay, actually on September 30, the company released a lot of cabinet, particularly for the M6 data center. At that time, I believe we released close to 900 cabinet, okay. That's our release on the last day of Q3, okay. So in terms of utilization, their impact at Q3 is not that big, okay. But in Q4, okay, it's not 900 cabinet. Actually, it will be 40, in term of the weighted, okay, when we calculate the weighted utilization rate. But that 900 cabinets, actually have been all sold out, okay. So you are -- they contribute some of the revenue in the Q4, and you will see the -- they will contribute a lot of revenue in the Q1, okay. So we use a weighted average to calculate the utilization rates, that's why you see some of the decreased utilization rate over there. But in term of the reality, okay, we increased and saw [ph] more cabinet, okay in the Q4, okay. In terms of the utilization rate guidance for the 2014, like I say, okay, each quarter we will only deploy 1,000 to 2,000 cabinets. So the management goal is to maintain more than -- in any cases, more than 70%, 7-0, 70% of the utilization rate for the -- through the 4 year after 2014. Okay, that's our goal. And the second question is regarding to the Huawei strategic partnership, okay. As you guys are aware, okay, typically, will take the company 16 -- let's say 12 to 18 months, okay, to complete a data center construction, okay. Huawei have a certain technology,…

[Operator Instructions] Your next question today comes from the line of Colin McCallum from Crédit Suisse.

Shang, just a question on VAT reform in China, supposed to go ahead in April, I think. What impact will that have on you in terms of, first of all, will you be expected to pay VAT? Will you have to pay more for bandwidth from China Telecom, Unicom? Would you be able to pass that on to your customers? How does that whole thing work for Vianet, please?

Thank you, Colin. Okay, you asked a very good question, okay. This one is coming. And when we say VAT, okay, it is, we call value-added tax. That's because for our business, normally, before the VAT reform -- actually, even including currently, we are paying the business tax. And the revenue we provided to the Street, actually, it's a net sales. It's already after the business tax, okay. So the China is under a reforming, okay, because our headquarter is located in Beijing. And right now, Beijing tax bureau still ask the company, okay, to do the -- to pay the business tax. And we are not sure when that will be changed, okay, but nationwide, based on the National Tax Bureau in China, they say they're not going to ask other company to do that, okay. But for 21Vianet, normally, like value-added tax for something like that, typically, we will just pass through to our customer, because this is a national policy. And for the telecommunication industry, actually, we -- before when we are paying the business tax, okay, our business tax average in China actually is around, between 5% to 6% of the turnover. But for telecommunication industry, it's only 3% because this is a restrictive, encouraging industry by the Chinese government. So we always paying 3% versus 5%, okay, for other industry, okay. So for the value-added tax, what that mean is the company, okay, the service provider, need to pay the value-added portion, okay, for the tax, okay. And -- but the normal value-added tax, okay, in China is 17%, okay. But for 21Vianet, okay, at this moment for the value-added tax, we only need to pay the 6%. But at this moment, we really don't know when that was started, okay. But for us, I don't think that tax impact okay, will be that big compared to the industry. Okay, because telecommunication industry, okay, with the value-added tax, we only need to pay 6% on the value-added portion. So original business tax, we paid the whole thing for the 3%, okay. So we are not sure whether or not it would be a benefit to us or it's a loss to us. But in any given case, those tax costs, eventually, will be included in the price that we'll pass through our customer, okay. Thank you, Colin. Okay.

Your next question today comes from the line of Kai Qian from CICC.

The first question is about how is the operating cash flow for the last year, 2013. And then my second question is about the preorder or the demand side for the 2014. And Shang just mentioned that we will increase the 10,000 cabinets in this year. And I just want to know how preorder and the pre-sales? And the next question which is about the process of the Dongguan, and the management mentioned that the company negotiated with [indiscernible] for the C2C [ph] license, maybe in Dongguan as [indiscernible]. So how is going on, and any expectation from this? And the last 2 questions is, how about the EBITDA -- adjusted EBITDA margin? And for the 2014, how we're to focus on this adjusted EBITDA margin?

Okay. Thank you, Kai. Okay, the CapEx spending for the 2013, okay, we spent around RMB 550 million, okay. Original, we guide the Street, okay, that would be around RMB 600 million, okay. But we only spent RMB 550 million, because maybe we delay some of the cabinet to be deployed from 2013 to 2014. Okay, so that's your first question. Second question, regarding to the preorder for the 10,000 cabinets, okay. Because some of the cabinet will be deploying the second half, but I can give you some preorder, some of them, they are not legal binding, okay. This is a indication, depend on the -- subject to inspection of the new data center. But at this moment, we already have more than 2,500, okay, cabinets, okay, have been reserve by many Internet company and also, the enterprise and also our cloud partner, including from the Microsoft and IBM, okay. So that one already more than 2,500 cabinets we can see, okay. So -- but the total amount will be deployed will be 10,000 cabinets. So we do expect this number will continue to go up, preorder one, okay, quarter-by-quarter. So that's the number two. Number three is Dongguan JV. Yes, okay, as you are aware, okay, the company say at the Dongguan joint venture, okay, and joint venture, actually already started the operation. One of the major tax, okay, for the Dongguan joint venture is, okay, to capture the opportunity, okay, which state by the central government, okay, which there is official partnership come out from the central government of China last year. One of the most important policy for us is the central government actually like to encourage the domestic company to engage in the basic telecommunication, okay, industry in China. Okay, that's a great thing though.…

[Operator Instructions] We have no further questions on the line today. I would now like to hand the call back to Mr. Hsiao for closing remarks.

Okay. Thank you, everyone, okay, to share our remark, okay, for 2013 and the outlook for 2014. 2014 should be a very exciting year for the 21Vianet. So thank you so much for your time today. Thank you. Bye-bye.

Ladies and gentlemen, that does conclude the call for today. Thank you, all, for your participation. You may now disconnect.