Good morning, ladies and gentlemen. Thank you for standing by. Everyone welcome to 21Vianet Group’s First Quarter 2016 Earnings Conference Call. At this time all participants are in a listen-only mode. We will be hosting a question-and-answer session towards the end of this conference call. 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 the company’s control, which may cause the 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 are Mr. Steve Zhang, the company's Chief Executive Officer and Mr. Terry Wang, the company's Chief Financial Officer. At this time I would like now to turn this conference call over to Mr. Steve Zhang. Thank you. Please go ahead.

Thank you. Good day, everyone and thank you for joining us today. First of all, as we recently announced, we are very excited to welcome industry leader, Tus-Holdings as a major strategic investor in our company. Tus-Holdings has built up several industry ecosystems, including a well-established service platform, a financial asset management platform and a research and a consulting platform. They cover broad customer segments including over 30 university science parks. Those science parks also act as incubators for start-ups, which may become future 21Vianet clients. These extensive resources will be highly valuable and complementary to 21Vianet's capabilities and experience, as we further expand our IDC, cloud, CDN, VPN and other infrastructure businesses. We remain fully committed to our cloud neutral, carrier neutral and the customer focused value proposition and are confident that this investment offers significant strategic value in strengthening our core operations and expanding new business opportunities. Now moving on to our first quarter results, our top line growth remains steady as growth in our core hosting business helped to offset continued softness in the network business. Our core IDC business grew by 20% year-over-year primarily driven by the solid growth in billable cabinets, improving utilization rates as well as a continued low churn rate. In addition demand for our cloud services remains solid thanks to the growing popularity for the Windows Azure and Office 365 product offerings. But as expected, this growth was offset by our MNS business, which continued to adversely impact our revenue growth. Even though we continue to experience solid growth in our bandwidth volume, bandwidth pricing continued to be under significant pressure due to intensified market competition. Let’s go over each of our core business in more detail. For our core IDC business our cabinet capacity continued to grow but at a slower…

Thank you, Steve. Now I want to discuss our first quarter financial results. Before I begin, I would like to state that we would present non-GAAP measures today. Our non-GAAP results exclude certain non-cash expenses, which are not a part of our core operations. The details of these expenses maybe found in our reconciliation tables included in our earlier release. Also note that all the financial numbers we are presenting today are RMB amount and the percentage of change is year-over-year unless otherwise noted. Our revenues for the first quarter of 2016 increased by 0.3% to RMB 862 million and net revenues form hosting and relative services increased by 15% to RMB 706 million from RMB 630 million in the comparative period of 2014 primarily due to a year-over-year increase in total number of billable cabinets and improved utilization rate. MRR per cabinet was RMB 9,115 in the first quarter of 2016 compared with RMB 10,030 in the fourth quarter of 2015, primarily due to the bandwidth pricing compression, as well as the addition of several large new customers in the regions where we have a lower pricing power. Net revenues for managed network services were RMB 156 million in the first quarter of 2016 as compared to RMB 247 million in the comparative period in 2015. The decrease was primarily due to the continued industry wide decline in the bandwidth pricing. Adjusted gross profit was RMB 211 million, compared with RMB 273 million in the comparative period in 2015. Adjusted gross margin was 24.5% compared with 31.7% in the comparative period in 2015 and the 26.9% in the fourth quarter of 2015. The decrease in the gross margin was primarily due to higher spending on telecommunication services and the continued softness in company's MNS business. Adjusted operating expenses increased…

Thank you. Ladies and gentlemen we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Colin McCallum of Credit Suisse. Please go ahead.

Hi, there. Thanks for the opportunity. I've couple of question. First of all I think you mentioned in the MD&A that there is a couple of - I think you used the word non-recurring factors. Could you quantify the non-recurring factors in the first quarter? Is that on the cost side and how much are we talking about in RMB million, that's first question. Second question is a related one. You used to generate around about 19% EBITDA margin, adjusted EBITDA margin is now in the first quarter 12%. What exactly has happened to your business? And is 12% now the profitability that you get from your business or is there something - going back to the first question is there something exceptional that's happening to mean that you've lost seven percentage points of your profitability. That's the second question. Third question how much cloud revenue was there in the first quarter of 2016? And fourth question, what will be your intended cabinet build for this year in terms of number of cabinets you think you can build? That was all I had. Thank you.

Let me take the question that number two. Number one about our merger acquisition, for the first quarter I think that the non-recurring things that we had last quarter, we have pretty much around about RMB 30 million, which includes some of the let up on [ph] the account receivables and some of the compensation related warrants and that stood out for the year. And this quarter relatively and we didn't have the major M&A activities in the first quarter. So I think that's there. Going forward, we might have from the activities going up, that's first question. The second question, I think that you mentioned that the EBITDA get impacted from the year-over-year comparative period from 19% down to 12%. I think that the major reason as we stated is driven mainly because of the continuously and very rapid decline in the pricing and from the bandwidth area. So it's been an environment, market environment for last four year, and it's because competition and some sort of [ph] reclamation changes. So that triggered the bandwidth pricing erosion for quite a long time. That's the major reason. The other reason is I think that even though we control our cost, but on the purchase side, the cost, the pricing, the purchase price relatively its drop is not as fast as revenue and pricing drop. So that's why the margin being squeezed and the EBITDA is being mainly impacted. But going forward then I think that we see we have some measures we take. And we will see the results come out especially in the second half of the year and we will see the improvement in margin side and also the other businesses we become reenergize our business in top line and to see the most profitable business that we will expand and the profitability shrinking area we will watch carefully and we will control in the level…

Could I just come back a little bit there. So I think I understood what you said. Are you saying basically that your MNS business you have locked in some pricing with your customers and you have locked in some pricing with your suppliers, I guess telcos and you are saying that the price that you give to customer come down very quickly on MNS. But you are locked in to paying more to your suppliers and therefore are you saying there is a mismatch in timing that you haven’t been able to renegotiate down the pricing of the bandwidth as quickly as the pricing on your services has come down. Is that what you are saying? And is that something that you can change overtime or is it something that is structurally you can’t change?

Let me take this question. Yes, you are right for the first quarter we definitely still have the old cost structure with our suppliers and we are optimizing that in the second quarter and we expect that we will reduce our cost structure with our suppliers in the second quarter. Hello.

Yes, [indiscernible] per cabinet.

Let me take the fourth question. Yeah, the cabinet build for this year our plan is roughly 6,000 new cabinets. The majority will come in, in the third quarter and fourth quarter this year. We have roughly 400 new cabinets coming in the second quarter as well.

Got it. And just quickly on cloud revenue can you give us a number for that in the first quarter?

Cloud revenue, I think based on our agreement with Microsoft we cannot really disclose the cloud revenue. But we can talk about the growth. We have a growth of quarter-over-quarter about at least between 10% to 15% growth from last quarter in Q4.

Got it. Okay, thanks very much.

Thank you.

[Operator Instructions] Our next question comes from the line of Stella Lee of Citigroup. Please go ahead.

Hi, thank you very much for taking my questions. I want to understand a bit more about the potential strategic investment from Tus-Holdings, given that if the transaction is completed they will hold around 51% of our voting power. Just wonder that does that mean - and my understanding is right that this 51% voting right will trigger the change of control of the CNH bond of our company and that investors, bond holder may have the right to require the company to call back the bonds? This is my first question. And the second question is if the transaction is complete do we expect any change on the board of the company as well? That’s it from me, thanks.

Let me take that one. Yes, the 51% can trigger the change of control. That will trigger the call back, the [indiscernible] bonds given the agreement with our bond holder. But the timing we have the timing difference so that basically we would take a couple of weeks to get the transaction complete and afterwards we would take another 30 days and give the bond a notice and to call notice to notify the change of control, that's one. The other second question that we have, we will somehow have minor changes in a board seat. Tus-Holdings will have the right to nominate one Board Member and they'll also have the rights to nominate one Independent Board Member.

Okay. Just one follow up question from me, if the early redemption of the bond is triggered, what kind of financial resources we have to prepare for that?

Given that we - remember we have the convertible bond that we sign agreement a couple of weeks ago. That's one of the source we prepare. And the other one is that we have some money outside, offshore and plus that US$288 million from the top 40 [ph] for the equity investment. So we do have the money for them if they want the early - call back the early redemption of the bond.

Okay, understand. Thank you very much.

Thank you.

[Operator Instructions] Our next question comes from the line of Liu Young [ph] of Morgan Stanley. Please go ahead.

Good morning, management. I have a question about the privatization deal given the change of the majority voting power after the investments from Tus-Holding. Do you expect any change in this privatization transaction? Thank you.

As of today we have not being informed by the buyer groups or the special committee of any change under going private transaction deal.

Okay, thank you.

Thank you.

[Operator Instructions] There are no further question at this time. I would like to hand the conference back to our presenters. Please go ahead.

Thank you everyone and if anyone have a follow-up call then please contact us and we will take that call as we can. Thank you.

Okay, thank you.

Ladies and gentlemen, that does conclude our conference call for today. Thank you for participating. You may all disconnect.