Samuel Shen - Chief Executive Officer, Executive Chairman of Retail IDC Sharon Liu - Chief Financial Officer Rene Jiang - Investor Relations Director.

Good morning and good evening ladies and gentlemen. Thank you and welcome to 21Vianet Group's Fourth Quarter 2020 Earnings Conference Call. With us today are Mr. Samuel Shen, Chief Executive Officer and Executive Chairman of Retail IDC; Ms. Sharon Liu, Chief Financial Officer; and Ms. Rene Jiang, Investor Relations Director of the Company.

I'll now turn the call over to your first speaker today, Ms. Rene Jiang, IR Director of Vianet. Please go ahead, ma'am..

Thank you, operator. Hello everyone! Welcome to our fourth quarter and full year 2020 earnings call. Before we start, please note that this call may contain forward-looking statements made pursuant to the Safe Harbor provisions for the Private Securities Litigation Reform Act of 1995. .

Alright, thank you Rene. Good morning and good evening everyone. Thank you for joining us on our earnings call today. During the fourth quarter of 2020 we exceeded our previous guidance range and grew our net revenues by 28.6% to RMB1.35 billion from RMB1.05 billion a year ago.

In addition, we expanded our adjusted EBITDA margin to 28.9% from 25.2% and grew our adjusted EBITDA to RMB389.8 million from RMB263.8 million during comparable periods. We attributed such solid results to robust market demand, methodical resource expansion, meticulous customer services and strong sales momentum.

2020 was an extraordinary year as we encountered both unprecedented challenges and tremendous opportunities. The challenges brought on by COVID-19 were certainly exceptional. Yes, out of the heap of challenges blossomed the robust demand for data center services.

Since the pandemic outbreak we have witnessed a substantial change in both consumer behaviors and corporate mentalities. Some of those changes were transitory, while others are permanent.

We believe that the migration towards online entertainment, e-commerce, mobile computing, remote collaboration and digitize the services are permanent that’s fueling the tremendous demand for IDC services.

In addition, favorable government policies are also accelerating the digitization trend, which in turn are further stimulating the market demand for our solutions and services. To satisfy such growing market demand, we have been proactively expanding our capacity and resources.

As of December 31, 2020, our capacity reached 53,553 cabinets in total, 93% of which were self-built and the remaining 7% of which were partnered. In the fourth quarter we added 2,077 cabinets on a net basis.

Our compound capacity utilization rate was 60.4% during the fourth quarter, among which our utilization rate was 77.8% for mature IDCs and 31.7% for ramp-up and newly built IDCs. As we ambition unabated market demand for the foreseeable future, we have proactively expanded our resources. .

Thank you, Samuel. Hello everyone! Before we start our detailed financial discussion, please note that we will present non-GAAP matters today. Our non-GAAP results exclude certain non-cash expenses, which are not part of our core operations. The details of these expenses may be found in the reconciliation tables included in our press release.

Please note that unless otherwise stated, all of the financial numbers we are presenting today are for the fourth quarter of 2020 and are in RMB terms and that percentage changes on a year-over-year basis.

We concluded 2020 with strong fourth quarter financial results, mainly attributable to our resource expansion capacities, on-track and efficient cabinet delivery to customers and improved operating efficiency.

Our revenues for the fourth quarter and the full year of 2020 both exceeded the high-end of our guidance ranges, while our adjusted EBITDA for the fourth quarter and full year of 2020 both were within our guidance ranges. Revenue in the fourth quarter increased by 28.6% to RMB1.35 billion from RMB1.05 billion.

This increase continued to be driven by the industry’s ongoing growth as well as our steady capacity expansion, which allowed us to better satisfy the growing demand for a scalable retail cabinet and a carrier-neutral wholesale IDC solutions in the quarter. Retail IDC MRR per cabinet in the first quarter increased to RMB9,131.

We added around 2077 new cabinet during the first quarter. As of December 31, 2020, we operated and managed 53,553 cabinets. Recognizing the ongoing growth in customer demand, we also worked to expand our cabinet capacity while remaining focused on maintaining healthy and stable cabinet utilization rates.

Our compound utilization rate in the first quarter was 60.4%. More specifically, our utilization rate for those mature IDCs delivered prior to 2019 improved to 77.8% compared to 77% in the prior quarter. Our utilization rate for ramp-up IDC and newly built IDCs were 31.7% compared to 35.9% in the prior quarter.

The decrease mainly contributed to a large amount of cabinet delivery at the end of the third quarter. Adjusted cash gross profit in the first quarter, which excludes depreciation, amortization and share-based compensation expenses was RMB581.9 million compared to RMB425.9 million in the same period of 2019.

Adjusted cash gross margin was 43.2% compared to 40.6% in the same period of 2019. .

Ladies and gentlemen, we’ll now begin the question-and-answer session. . Our first question comes from the line of Yang Liu from Morgan Stanley. Please ask your question..

Thanks for the opportunity and firstly, I would like to say congratulations on the strong results and new customer addition. My first question is related with this new wholesale customer. You mentioned social and content company.

Could you please disclose more in term of their current demand outlook and the order size 21Vianet has already got and also share buyback, return profile of the customer? The second question is, I would like to hear management’s comments on the resource at this time.

Is it becoming more and more difficult than before to get the resources maybe in etc., and will this impact your three-year expansion plan? Thank you..

Thank you, Liu Yang. I will take your first question. Regarding to the new logo, actually it’s a public cloud service provider in China with amount of 2,000 cabinets. Those MOU will start to move in from Q1 this year and for the returns of these projects is still at the company’s accepted level. Thank you..

Hi Liu, this is Samuel. Good to see you virtually. I’m taking on the second question. You mentioned about travel in probably metropolitan area and surrounding areas is getting a little bit tough to secure the land together with the current quota and I think the answer is yes, that’s a general situation. .

Thank you..

Our next question comes from the line of Tina Hou from Goldman Sachs. Please ask your question..

Hi! Thank you management for your time and taking my questions. I have two questions; the first one is also regarding the recent M&A in Beijing. I’m wondering what is the deal size or the valuation you did the acquisition at.

And also the second question is in terms of your 25,000 cabinet capacity target in 2021, I am wondering how much of that already has customer commitment this year and also related to the construction pipeline, I saw that in your third quarter presentation there were two projects.

Number one is SH07 and number two is E-JS Campus 02 that had around like 1800 and 3000 cabinets in plan, but then these two projects were missing in the 4Q presentation. So just wondering what has happened there. Thank you..

Thank you, Tina. Good morning. Yeah, for your first question regarding on the M&A, actually we have closed those M&A in Tier 1 cities, which offers to southern cabinet that were ready to use and our commitment to the public cloud customer, our new customer.

Actually as this is a mature data center, we use EBITDA multiple to do the valuation and the valuation is in line with the market price. For our M&A strategy, we can see that the M&A as a supplement of our organic growth and currently in the market there are two kinds of M&A targets; one, is the brownfield one.

In that case we will only provide a premium to the seller or the developer and then to obtain those datacenters. Another one, that’s the mature data center acquisition, which we will use – you could have multiples in the market, yeah that’s our M&A strategy.

Regarding to our 25,000 cabinet target this year, we have disclosed around 22,000 in our investor deck this year. Among that, over 60% of the cabinet we have been received, the pre-commitment from both the wholesale customers, as well as the large-scale retail customers, I want to add more color on our large-scale enterprise customers.

Besides the public cloud companies, we also see great potentials from the large-scale enterprises. For example, a popular content community and the social platform company, a leading e-commerce platform for service.

We’ll deliver the cabinet to the two customers this year and both, the two customers are from our existing retail customer pool and some are already committed. Regarding to the changes of certain projects, I would say for the wholesale data centers, as we sign MOUs, we should deliver based on the commitment to our customers.

But for some scale retail and the traditional retail customer, we still have flexibility on the delivery, to have good match from the supply and demand side.

So you can see this quarter, with this closed 22,000 cabinet, while for the gap from the 25,000 cabinet we still have some M&A pipelines and also for the existing disclosed data centers, we still have some expansion phases in the future to match our delivery target and in the following months we will match the -- especially the large-scale customers demand and try to fix our delivery schedule.

Thank you..

Thank you very much, Sharon..

Our next question comes from the line of James Wong from UBS. Please ask your question..

Good morning management. Thank you very much for your time. It's James Wong from UBS. I'd just like to get a follow-on question, on the capacity pipeline. I just want to get a bit more detail around that pipeline for the next three years? I know you've secured 22,000 for this year.

I'm just wondering, for the 75,000 cabinets over the next three years, where are they in terms of the location and proximity to Tier 1 cities and what proportion already have electricity and carbon quotas, so that's the first question. The second question is around the full-year EBITDA guidance.

I remember from the second quarter result, the indication was that you were expecting somewhere around 35% to 40% EBITDA growth for 2021, and I've also noticed that this first quarter you're guiding to 66% EBITDA growth, but the full-year guidance is actually somewhat below.

So I'm just wondering whether you've been potentially conservative in the full year guidance or whether there’s a bit more cost that you expect to spend over the rest of the year? Thank you..

Okay, thank you James. Regarding to our capacity pipelines, actually we have many pipeline in terms in terms of the greenfield, brownfield and the mature data center M&As. So we are very confident to secure more resources for the delivery for the year 2022 and the year beyond.

Internally, for the total 75,000 cabinet, over 60% have been secured, fully secured. Yeah, so we made good progress from the resources side. And regarding your question two about our EBITDA guidance, actually with – the EBITDA guidance is mainly due to the delivery schedule of this year.

As we disclosed in the investor deck, among the 22,000 cabinets we disclosed, around 40% will be delivered in the first half. The majority will be delivered in Q2 this year, and the rest 60% will be delivered in Q4 this year. So from the delivery schedule, the new mean will be heavily weighted in the second half.

That's why we – thought we factor in those, no mean is scheduled in our EBITDA guidance. And currently we are very confident for our new guidance and Tier-1 guidance, both from a revenue and EBITDA perspective. Thank you..

Great, thank you. Thank you, Sharon. And I just – because I think Samuel mentioned that it's getting more difficult to get resources around the Tier-1 city area. So just wondering for next year and the year after, in terms of the resources, how much of it has already been secured, whether you can provide any indication on that? Thank you..

Yes, actually for the cabinets delivered in 2020, majority was in Tier 1 cities, and this year actually the majority will be in the surrounding areas of Tier-1 city for the next two years. The surrounding areas will weight over 50% from the incremental perspective. Thank you..

Thank you..

Our next question comes from the line of Arthur Lai from Citi. Please ask your question..

Hi! Thank you Sharon and Samuel, and I also want to congratulate the company, the presentation. Materials are getting more closure and also more data. On the page 23, my first question is, we saw the lines of a run up and new build capacity and utilization actually increased in the quarter three and then maintained in the quarter four level at 31%.

I wonder if it’s because the capacity build in the quarter three or is it because the demand has changed. And also can you give us some color on the 2021, how this line will go up or maintain flat? This is first question. And then second question is an audit type of question.

I want to ask, under the current – you know the increased price of the material steel and also the – everything. I think everything's price is going up. Will it impact our execution and also the margin profile in the next two years? Thank you..

Thank you, Arthur. Regarding your question on the utilization rate, actually for the existing cabinet we delivered before the year 2019, you can see the gradual increase of utilization rate for those data centers, and we can find the ramp up in the new build data cabinet, and disclose those in another utilization line.

The decrease in Q4 was mainly due to the heavy delivery in Q3, around 7,000 cabinets and 2,000 cabinets in Q4. So the new delivery increased the denominator in the formula of utilization rate. Actually, we achieved very good progress in terms of the billable cabinet.

The billable cabinet increased a lot during the whole year of 2020; and in 2021 we will still use the same methodology to disclose the utilization rate; the compound ones, the material cabinet and also the ramp up in built.

For the material cabinet, the utilization rate at the end of this year it will be around 80%, and for the ramp up in the new built, it will increase accordingly. But in certain quarters if we deliver more cabinet, there may be pressure in those quarter, but overall the billable cabinet will increase in this year.

And your second question is about the construction cost, the margin and the construction cost, right?.

Yes..

Actually, we still have room to optimize our construction costs through the centralized procurement, as well as the supply chain management, because we delivered more cabinets in the market. So currently we have not seen any moderate constraint or some pressure from the suppliers. We still can expect average returns from each of the datacenters.

Thank you..

Thank you..

Our next question comes from the line of Edison Lee from Jefferies, Hong Kong. Please ask your question..

Hi, good morning management. Thank you very much for taking my questions. So I have two; number one is that on the wholesale front, I know that you announced that this new wholesale customer together with this acquisition. So this wholesale customer basically is acquired from the acquisition. I just want to confirm that.

Number two is that in Jiangsu, do you expect to gain more local wholesale customers because of the power allocation you previously were able to obtain. And I think maybe a follow-up to that is, what are you seeing in terms of M&A opportunities in terms of asking price and also in terms of locations? Thank you..

Yeah, we will answer your first question. Yes, we added new customers through the acquisition. And your second question regarding to our M&A strategy, actually as I mentioned before, there are two kinds of M&A targets.

For the front Tier 1, the majority will be in the surrounding areas and for the Tier 1 cities we are looking for some mature data center acquisition opportunities currently in our pipelines. Thank you..

Have you seen any increase in asking price or do you think the asking price has become more reasonable because of government policy to threaten to cancel private quota for unbilled projects?.

Yeah, I should say for the mature datacenter acquisition, there is a market price and we should acquire those ones in line with the market price. But for the brownfield ones, we still have bargaining rooms with the seller or developer to provide a reasonable premium to them. Thank you..

Sorry, just one follow-up.

I just want to get some, a few from management that in terms of M&A opportunities, would you focus more on brownfield projects or mature data center projects?.

Well, that's depending on that – sometimes depending on the customer demand and our delivery schedule. If there are some targets, we can easily meet the customers’ timeline when they consider to do the acquisition. So there will be a mix of the customer demand, the location and our strategy. Thank you..

Okay, thank you..

Our next question comes from the line of Kyna Wong from Credit Suisse. Please ask your question..

Thanks for taking my questions. I have two questions; first one is actually regarding the wholesale and service MOU if 180 megawatt.

I would like to ask like, do these cover only 2021 that you addressed, around 60% of the cabinet committed, or is that your multi-year site operations and MOU and which are also covering some of your target in the 2022 to 2023 in terms of your cabinet expansions? This is the first one.

And the second one is like, I would like to check if the company had some kind of like policy or you can say some kind of target to adjust this carbon emission reduction target from the government, and how much of the power consumption will be found like green power or green energy or should we wait for more details once you publish the ESG report? Thanks..

Yeah. Regarding to your questions on the site MOUs, actually the 180 megawatt was delivered in 2020 and will be delivered in this year, so majority will be covered this year.

And currently for the cabinets where we deliver in year 2020 and the year beyond, we have some pre-commitment discussion with the customers, but have not signed the very solid MOUs, but in the following quarter we expect to get very good progress and disclose those progress to the market..

Hey Kyna, this is Samuel. Let me address your second question, that's more around the ESG. As you probably know the ESG stands for Environmental Social and Governance. And then so starting from this year, we're going to publish our annual ESG report. If we break down the ESG by each of the buckets, we pay a lot of attention on gas emission.

You know the datacenters definitely consume a lot of power. So we have a responsibility to drive up the renewable energy use, that's number one. Other than the gas emissions, we also pay a lot of attention on the water use and also waste and pollution, and also because we're a big customer from a land use point of view.

So how do we better utilize the land, protect the earth, that's going to be very, very important. Aside from the environmental, we also pay a lot of attention on the social, definitely from the workforce diversity inclusion point of view.

And safety management; last year COVID-19 pandemic basically tells every one of us on the planet that we have to keep up the safety management for our taskforce and things like that. And also the way to engage with customers and to interact with the communities is also our focus.

And then from a governance point of view, the way we structure the board, the amount of the independent board members and how do we guide in the company moving forward, making decisions and things like that, and business conduct and also the value system; how do we keep up being transparent from a reporting point of view and also keep up the – from the cyber-attack and things like that.

And so those are the areas that we are – luckily, because we have been in the industry for 25 years, so we have a lot of patent and practices that we want to share and report out.

So my suggestion would be, please stay tuned for our coming update and that we're going to share more data, first of all, not just from the annual report point of view, but on a quarterly basis, we’re reporting out our progress. Thanks..

Our next question comes from the line of John Choi from Daiwa Capital Markets. Please ask your question..

Good morning, Samuel, Sharon and Rene; thanks for taking my question. I have two questions. First of all, on your guidance for 2021, can you kind of elaborate you know like for the CapEx side; you already said about RMB5 billion to RMB6 billion. You know presumably, this does not factor in the M&A side.

So if it does, you know I guess this would imply that there will be more upside for both CapEx and M&A capacity. And my second question is about your future financing, because I know that in your – on one of the slide decks, I think its slide six, you also talked about your debt structure and also your cash position.

With the very aggressive cash expansion for the next few years down the road. Can you kind of imagine or elaborate a bit more detail, how are you guys planning to do so? Thank you..

Thank you James for our – oh sorry, thank you John. Yeah, for our CapEx guidance amounting RMB5 billion to RMB6 billion, actually around 80% were before the construction of the datacenter for the IT and the power and 20% were before the land and building and M&As we have bought up.

So in the future, if we secure more resources for the delivery of the year 2022 or the year beyond, we have some sizable M&As, we may increase those CapEx guidance. And for our financing strategy, as we mentioned before, we are very prudent. We are aiming to preserve more capital to support our future expansion plans.

As we have disclosed, the 25,000 cabinet delivery plan each year, we will reserve more capital for those plans. In this January we have completed the CB issuance and raising more capital.

In the future at the company level we’ll have diversified from the China, from the -- both equity and the debt side, and also on the project financing level, we have made very good progress with the local banks. For example, in the year 2020, we have signed project financing contracts amounting $315 million.

That will support our datacenter construction in the future. So from the future, there will be a mix of the financings from both the listed company level as well as the project financing level. Thank you..

Our next question comes from the line of Hong Jin Lee from CICC. Please ask your question..

Thanks management for taking my question. So my first question is, I see we introduced Tencent Cloud as the new logo.

So how is your outlook or cooperation with Tencent in future? And second question is more in terms of the strategy side, because you have carried out the dual core strategy in 2020 and we have made significant progress, including multiple cloud companies. So is there any change on our strategy focus placed on wholesale and retail.

In terms of the proportion, what's the focus weight on wholesale and retail respectively? Thank you..

Yeah, actually as we mentioned regarding to the potential wholesale customers, they are the public cloud service provider, as well as the top Internet companies. So now for the new logo we have very good progress with them and we also have good talks with other potential customers to capture their future demand.

So once we have very significant progress, we will disclose to the market. Regarding to the strategy, I would look to Samuel..

Okay. Hey Hong Jin , nice meeting you virtually. Yeah, last year we mentioned about we have a dual-core engine and we continue to execute on that.

As a matter of fact, one of the good progress that you have seen from the earnings release is we signed the wholesale MOU with a popular content community and social platform company, and also the online entertainment company and things like that. Some of them are, I would say grew up from the retail segment point of view.

So if you look at our two growth engines, basically it goes hand-in-hand, you know support each other and things like that. From the retail side, I mentioned last year the pandemic. Most of the companies have started to accelerate their digital transformation.

Therefore, a lot of the add-on services that would require, and those add-on services in the past considered to be competitive, but advantage; now is like competitive requirements.

So we'll continue to partner with our ecosystem providing more, and part of the indicator you can see is we maintain the previous steady, the monthly recurring revenue from a retail side point of view.

And this quarter we still maintained output for roughly about 9,000 per month, and so that's a good indicator, so that should help to answer your question. Thank you..

Thank you..

Our next question comes from the line of Chris Ko from DBS. Please ask your question..

Good morning management team. Congratulations on the strong results and thanks for taking my questions. Two questions from me. First, when I multiply your utilization rates with total capacity, the implied utilized cabinets for 4Q '20 dropped slightly Q-on-Q.

Could you share with us the reasons behind? And as we further expand our capacity, how should we look at the utilization rate in FY '21? And my second question is wholesale customers, incorporating more carbon-neutral related requirements in the datacenter specifications, and would there be any impact to our margin due to this? Thank you..

Thank you, Chris. Regarding to the utilization rates for the ramp up and the new build, actually the decrease in Q4 was due to the delivery, 9,000 delivery in Q3 and Q4, which will increase the denominator in the formula. But from the billable cabinet perspective, we still have very good progress in the whole year of 2020.

We captured the demand from both wholesale and retail customers and we sell more cabinet, as well as more value added service to them. So that's a formulary question, so maybe we can clarify offline with you. Thank you..

Hey Chris, this is Samuel. To answer your question again, that's more like – that's more around the ESG. As I said previously, starting from this year we are going to provide our annual ESG report.

Other than environmental, we are also going to pay equal attention on the social and governance, and specifically around the environmental, because you probably know, first of all from the carbon emission point of view, China has attributed roughly about a 10% for the entire world, and then datacenters specifically in China, it's a big portion of that, roughly about a 2.4% of our total power consumption.

So we have the responsibility as a market leader for carrier-neutral data center providers.

We have the responsibility to continue increase our renewable energy utilization mix, and also we have to continue to improve the effectiveness of our power and water usage, and so with that we are going to publish our progress and also our commitments from an annual point of view.

Having said that, every single quarter we like to provide a more granular data to share with all the institutional investors and the industries. Thank you..

Okay, thank you..

Our next question comes from the line of Ethan Zhang from Nomura. Please ask your question..

Hi management, thanks for taking my question. My question is about the operating expenses. As for some OpEx for example, sales and marketing and SG&A increase – for the fourth quarter of last year it increased quarter-over-quarter and year-over-year.

Just wondering what the future trend of this OpEx to sales ratio is and another quick question is this new item of impairment of long lived asset. Just wondering whether this is just only a year-end review of some prudent accounting reviews or if there is some specific reason for this item? Thank you..

Thank you, Ethan. Regarding to the operating expenses, we will use the adjusted operating expenses to validate our operating efficiency.

Actually for the whole year of 2020 we achieved good progress in operating efficiency, the overall total adjusted operating expenses as a percentage of revenue was 15.7% compared to 17.5% in 2019, and this year we will still try to improve our operations in all aspect.

So this year, we aim to achieve the operating – adjusted operating expenses as a percentage of revenue. The OpEx rate will be around 15%, nearly 1 percentage point from last year. Regarding to the impairment of long-lived assets, you are right, we take a very prudent accounting treatment for that and this was a one-off charges in our income statement.

Actually it was caused by a devaluation of assets related to the MVNO and fixed wireless business in Hong Kong, and were acquired back in 2012. So this was a one-off impairment. Thank you..

Alright, thanks..

Our next question comes from the line of Tina Hou from Goldman Sachs. Please ask your question..

Hi, thank you very much for taking our questions again. I have a follow-up question. Could you remind us what is the exact definition of a wholesale customer, in terms of like their cabinet size or any other measures? And then a related one on that is that now you have more than one wholesale customer.

Wondering if we could get more details in terms of wholesale versus retail for your customer mix or cabinet mix and also your – potentially your wholesale MRR versus retail? Thank you..

Tina, this is Samuel, let me try to address your questions. So first of all, if you look at the datacenter definition, honestly from a worldwide perspective, it's going to be super hard to define – from a global, I would say practice, there are five different categories if you will.

Number one being hyperscaler and hyperscaler tend to be, I would say in the past and probably today tend to refer to those party cloud service providers. And number two category will be wholesale colocation, and then the wholesale colocation in the past tend to be referring to more than 10,000 racks as a ballpark number.

But again, that number may not be accurate year-over-year. And the third one being a retail colocation, and the fourth one being the carrier specific ones, and the fifth one being an enterprise datacenter. So these five buckets were sort of defined in the IDC industry in the past.

So today, if you look at the hyperscale and wholesale colocation on one hand versus the retail colocation and our fore tax services on the other hand, actually in our investor presentation deck that we have a specific page, page seven and tried to provide more granular information from our dual-core growth strategy point of view.

So if I have to use our, I would say pattern and practice point of view to give you a better view, the wholesale customers that we're trying to target in on those hyperscalers again in the past tend to be more public cloud service providers, but we're seeing a lot of big data internet companies.

It could be categorized as the hyperscalers and these set of customers tend to require a huge amount of space and power and also, first of all to support their massive scaling needs, but they also require some of the customization, tailor-made solutions, things like that.

On the retail side, you know these are the set of customers going through a digital transformation. They may not have a one bulky datacenter, but probably have multiple datacenters.

By requiring the active business continuity, disaster recovery purposes, they probably need more than the pure colo, by requiring the connection services bare-metal and also the other value added services to support their multi-cloud management and things like that. So these are two very distinct segments.

So that's the reason internally we carefully separate them and then provide the services to meet their needs. So hope that answers your question, Tina..

Yeah, thank you very much Samuel.

Just a very quick follow-up then, so when you disclose your retail MRR right, how many customers or what are the customers that you exclude when you calculate the retail MRR?.

Okay. My understanding, we have not provided the detailed numbers of our datacenter customers, but what I can say is we basically exclude roughly about a dozen customers. Those are the wholesale customers out of the total data center customers..

Okay.

So in other words, they don't have to be getting like least 1,000 cabinets from VNET? Just maybe for example, some of the logos that you have shown on slide seven under wholesale, and then may be a number of other big Internet customers, is that like a reasonable understanding?.

Yeah, I think that's, that's a reasonable understanding. But again, I want to make sure that the line is not very distinct, it could be blurred, because some of the retail customers when they continue to grow up, it becomes more, first of all demanding. They have a lot of customization needs.

They can easily grow from the 5,000 racks to 10,000 racks, so it could basically grow from retail to wholesale, so that's possible, so it's not black and white. These two – first of all, the way we define the wholesale versus retail, there are fundamental differences.

The cost structure differences, the skillset differences, the niches are different, so that's the reason we have two sets of sales force to look after the two segments. So it's not purely either/or.

You know it could be grow up from a retail to become the wholesale customers and we're starting to see more, I would say support or synergy between the two segments, just in case..

I would now like to hand the conference back to the management for closing. Please go ahead..

Thank you once again for joining the call today. If you have further questions, feel free to contact the company's IR. Bye-bye..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..