Good morning, and good evening, ladies and gentlemen. Thank you and welcome to 21Vianet Group’s Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. We’ll be hosting a question-and-answer session after management’s prepared remarks. 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 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 this 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 now like to turn this conference call over to Mr. Steve Zhang, CEO of 21Vianet. Please proceed, sir.

Thank you, operator. Good morning and good evening, everyone. Thank you for joining us for the earnings call today. Our core IDC business maintained its steady growth in the third quarter, driven by more demand for computing power in the storage space because of the continuous rights of big data, artificial intelligence, IoT and the mobile Internet. Our self-built cabinets, which have higher gross margins increased by 302 to 21,273. At the same time, we clean up our existing partnered inventory, which have lower gross margins and the reduced partnered cabinets are 239. During the third quarter, several of our large-scale clients further expanded their capacity as our data centers. For example, JD Finance increased its cabinets by around 200 to accommodate its rapid growth in the installment payments or buy that business. Ele.me added around 60 cabinets and Momo added close to 100 cabinets, and Xiaomi remains a larger customer with over 900 cabinets under management, adding over 100 cabinets this past quarter. To give some more color on our customers, we segmented the market into three tiers: start-ups, small to medium-sized business and the large-scale business. We – while we have our diversified base of customers across all three segments, we are seeing some start-ups move to a public cloud service, private providers because of their relatively simple data storage requirements and for increased cost savings. However, as start-ups grow in size, their demands begin to vary and they’re no longer satisfied with one size fits all solutions. Small and the medium-sized business start to migrate our public cloud and consider hybrid cloud solutions. As this occurs, we approach them and start to cultivate clients among small and medium-sized companies, which have the potential to grow. As their accretions grow further, we start to demand customized solutions and…

Thank you, Steve. [Technical Difficulty] and reached RMB135 million, 19.3% in the third quarter last year to 21.4% this past quarter. Moving on to our MNS business, as Steve mentioned, we completed the divestiture of our two businesses in units on September 2017. I would like to reiterate that divestiture of our MNS business represents a milestone in our strategic realignment, which allow us to optimize our business structure of RMB402 million and WiFire Entities. The six companies engaged in CDN hosting area network services and their route optimization businesses, 21Vianet and its joint venture partners are committed to inject up to RMB100 million and RMB200 million, respectively, into this entities within the next 12 months. The injections will be in installments and based on the business need of WiFire Entities. And it can be in the form of an equity or a bridge loan, depending on the timing of the investment by the joint venture partners. As of November 2017, 21Vianet has already injected RMB15 million and one joint venture partner has already injected RMB30 million into WiFire Entities. Now, let’s take a closer look at our quarterly financial results. Our net revenues were RMB886 million, compared to RMB968 million in the prior year period and RMB879 million in the second quarter of 2017. Net revenues declined year-over-year due to the decrease in our revenues from managing network services, which partially offset by the increase in the revenues from hosting and related services. Our revenues from the hosting and a related services increased by 9% to RMB759 million, compared to RMB699 million in the prior year period and RMB743 million in the second quarter of 2017. The increase was mainly due to the increase in revenues from our efficiency lying across the segment. Our total and monthly recurring revenue…

Ladies and gentlemen, we will now begin the question-and-answer session [Operator Instructions]. Your first question comes from the line of Yang Liu of Morgan Stanley. Go ahead. Please ask your question.

Hello, good morning.

Hi, Yang.

Congratulations on each of the EBITDA in the third quarter. I have a question regarding the MRR. We see a sequential improvement for both the hosting and a total MRR. And could you please elaborate more on what is behind that and how about the outlook going into the next year? Thank you.

Thank you. First, let me give you our rough outlook for going forward. We expect the hosting MRR to be stable. There are some little fluctuation between quarter-to-quarter. It depends whether the customers are using up the cabinets with high electricity density, or low your efficiency-based density cabinets. But on average, the hosting MRR has to be stable.

Thank you. I have a second question regarding the next year new cabinet deployment trend. We know that there are some organic addition, some of self-built data center or cabinet, and also there are some clean up in term of the partnered data center. What is the overall data center cabinet deployment plan next year? Thank you.

Let me first talk about our Q4 plan 2017 first. For our Q4 20107, we have two large centers that will go into production. Right now, we are in the process of ramping up the inspection before the final deployment. In quarter four, this year, we’ll have roughly 2,500 cabinets that will go into deployment that to be ready to be used by customers. For 2018, we are still in the budgeting cycle by roughly probably will be somewhere around 4,000 to 5,000 cabinets next year.

Okay, thank you. That’s all my questions.

Okay.

[Operator Instructions] Your next question comes from the line of Stella Li of Citigroup. Go ahead. Please ask your question.

Hi, thank you for the opportunity. I have three questions. The first question is, what was our EBITDA be for the second quarter, if we exclude the MNS business?

The second quarter or third quarter 2017?

Second quarter.

Second?

Sorry, sorry, the third quarter of 2017?

It’s about RMB176 million.

Okay, that’s good. So the second question is, we issued U.S. dollar bonds a few months ago. I remember at that time, the company’s guidance was this U.S. dollar bond would be for refinancing purpose. So I wonder, any other short-term debt that we already refinanced with the proceeds of the U.S. dollar bond and what would be – what would we expect to be the short-term debt level maybe currently or by the end of this year?

Yes. We have the short-term. And once we’ve done, paid the balance of the dim sum bonds over RMB400 million in June, we – in August, we renewed about RMB1.6 billion loans, which are the – has been was borrowing –borrowed to pay down. Last year, the part of the majority of the dim sum bond, RMB1.5 billion. And that one has been renewed in August. So we renew about nine months, so that short-term. And recently, just last week, yes, last week, we executed to paid out the RMB1.6 billion loan with our budget U.S. dollars in the merchant bank account. So now in the process to redeem that bond, that loan, but I think that will be done within this week. So with that, we have a benefit of saving approximately RMB70 million interest expense annually.

RMB70 million interest expense.

Right.

You’re saying.

RMB…

RMB70 million, right, okay.

RMBS.

Okay. So you are saying, we are in the process of paying down around RMB1.6 billion note with the proceeds on the U.S. dollar bond, expect to complete this week, right?

Right, because remember we have a – we issued a US$300 million. And as we’re talking about both the proceeds of the bond is aiming to pay down the borrowing RMB1.6 billion loan, that’s our goal for the bond offering.

Sure, very clear. And also in the third quarter in the cash flow statement there, it’s around like a RMB300 million short-term investment, what’s that for – payment for short-term investments RMB337 million?

We did – we have our restricted cash and RMB1.9 million restricted cash. Once we pay out the RMB1.6 million and the short-term investment is the CDE that we deposit. And as a part of the restricted cash to borrow and we deposit, we have the cash flow down domestically.

Okay. So it’s just a kind of a cash management, right?

Right. Cash – the part of the cash management is to be able to support operations and short-term.

Okay, I see. And there’s also another RMB600 million of derivative liability as of September, I wonder, what’s that for?

It’s almost RMB677 million?

Yes, yes that [Multiple Speaker]

Okay. If you look at the balance sheet, the quarter before, you can –you should see we have aligned the cost below these liability. Total liability line is equity section, it’s called a redeemable controlling expense interest, that’s a RMB700 million, yes. So that because of the spin-off and this amount moved to up to the liability section. The reason is, we – once we – you remember, we spin-off the last-mile of business, which this is part of related our last-mile business once the time we have signed an agreement with them. And they have a put option that approximately RMB700 million. And that will be excluded by end of the 2019, which is RMB677 million is recalculated through the discount rate to calculate the present value of that put option. And because of it, we spin-off. We’re not – it’s not – we don’t control that company, so that become a liability.

Okay.

Basically, I think, it’s in 2017, we acquired a 50% interest in the Aipu business. And our original agreement there was a put option that we have granted to the other shareholder, they can accept the put option by end of 2019. But since we spin-off that business, we are right now in the process of discussing with the original shareholder to find a solution for this put option.

Okay, I understand. Thank you very much.

[Operator Instructions] Thank you. [Operator Instructions] Next question comes from the line of Stella Li again of Citigroup. Go ahead. Please ask your question.

Hi, sorry. Follow-up questions from me. So for the impairment that we did in the third quarter, are there related to the MNS business or they have other related other business as well?

Majority come from the – this – the spinoff of the MNS business. Only RMB20 million that related to other small investment impairment.

And this impairment, it sounds like, so that quarter or going forward, we would not be seeing this divestiture?

That’s correct.

Okay, that’s good. Thank you very much.

Thank you.

[Operator Instructions] There are no further question at this time. I would now like to hand the conference back to today’s presenter. Please continue.

Once again, thank you for all – thank you all for joining us today. Please don’t hesitate to contact us if you have any further questions. We look forward to talking with you in the coming quarter. Thank you.

Thank you.

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