Good morning, and good evening, ladies and gentlemen. Thank you, and welcome to 21Vianet Group's First Quarter 2017 Earnings Conference Call. At this time all participants are in 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 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 the selected events or circumstances after the date of this conference call. With us today are Mr. Steve Zhang, the company's CEO; and Mr. Terry Wang, the company's CFO. At this time, I would now like to turn this conference call over to Mr. Steve Zhang. Please proceed.

Thank you, Operator. Good morning and good evening, everyone. Thank you for joining us for the earnings call today. We have started 2017 with solid execution upon our restructuring plans, which are starting to bear fruit through improved financial and operating results. In particular, our hosting and related service business saw solid growth as revenue grew close to 19% year-over-year. And while our managed network service business continue to face challenges because of increased competition and pricing pressure, we executed on our strategy to optimize this business through cost controls such as reducing excess headcount and contract renegotiations. And we saw a noticeable improvement in our profitability in terms of EBITDA. For hosting and related services, including IDC cloud and the VPN services, we continue to witness strong growth momentum in the first quarter. For the core IDC business, we added 14 cabinets and we ended the quarter with 26,394 cabinets under our management, while improving the utilization rate to 75.8%. We increased the number of self-built cabinets by 224, while reducing the number of partnered cabinets by 210, resulting in higher gross margins. Meanwhile, our hosting churn rate was lower to 0.48% from 0.55% in the first quarter last year. This past quarter we were also able to expand capacity contracts with some of our existing larger customers such as BB, Momo and Xiaomi. Furthermore, we were able to sign contracts with new customers such as Shenzhen Ping An Bank, Realty Shop, Sirius Adaptation and Nocopot. In terms of our partnership with Warburg Pincus, I would like to reiterate that it is a long-term partnership, and everything is progressing on track so far. We are still planning to build a digital real estate platform, which aims to add 80,000 to 100,000 cabinets within the next five to seven years.…

Thanks, Steve. First of all, we like to report that our top line revenues of 862 million outperforms the midpoint of our guidance for the first quarter of 2017. Secondly, I would like to talk about the profitability side of our business. In the first quarter, we witnessed positive signs from our efforts to control costs and improve our operational leverage. As a result, our adjusted EBITDA was 100 million, exceeding the high end of our guidance of 85 million by 18%, and our net loss narrowed by 23% year-over-year from 151 million to 117 million. As we move forward with our businesses restructuring, we remain committed to further driving the top line growth, improving our operating leverage and enhancing our profitability. Now let's take a closer look at our first quarter of 2017 financial results. Before I begin, I'd like to state that we will present non-GAAP measures today. Our non-GAAP results exclude certain noncash expenses which are not a part of our core operations. The detail of these expenses may be found in reconciliation table included in our press release. Also note that all the financial numbers we are presenting today are in RMB, and the percentage change is year-over-year, unless otherwise stated. Our net revenues were 862 million compared with 862 million in the prior period and 901 million in the fourth quarter of 2016. Net revenues remained flat year-over-year due to the increase in revenues from hosting and related services being offset by the decrease in revenues from managed network services. Net worth -- or net revenues from hosting and related services were 707 million compared with 597 million in the prior period and 703 million in the fourth quarter of 2016. The increase year-over-year was primarily due to increase in the total number of billable…

[Operator Instructions] Our first question comes from the line of Yang Liu from Morgan Stanley. Please ask the question.

I have four questions. The first one is that we find that excluding the bad debt provision Vianet cut the MNS-related costs year-on-year by 15 million. Of course, excluding the bad debt, you cut it even more than that. Management just mentioned that it is from reducing headcount and contract renegotiation, but my question is can company continue to further reduce the cost going forward? The second question is that the first quarter has 15 million bad debt. Is this also related with managed network service? I just want to confirm. What is the outlook for the bad debt issue going forward? The third question is could you please share more about the new cabinet pipeline in second quarter and also second half? The last question is can you share more about the recent Microsoft-Tencent-21Vianet partnership? Is it possible to further cooperate with a more domestic account vendor in future? And how can it help to boost 21Vianet's account revenue from Microsoft China?

Thanks for the question. This is Steve. I'll first take a crack on your first question. Can we further reduce the cost in our managed network service going forward? Yes, we are still in the process of negotiating with a lot of suppliers regarding the bandwidth price, and we are seeing some positive progress -- direction and positive progress. And we will continue to drive our costs down and also try to enhance some of the sales contracts for some of the new customers. That's your first question regarding further cost optimization for our managed network services. Terry, you want to take the second question about the bad debt issue?

Sure. Your second question is about the bad debt if it's related to the management network services. And for this couple of quarters, yes, the answer is yes. The last quarter, actually, remember I mentioned that we actually provisioned about 47 million in non-collectible -- or it's -- that related to management network services. This quarter we have much lower, but it's still some uncollectible things we provisioned for the bad debt of approximately less than 15 million that was put there in this quarter.

Your third question is regarding the Q2 new cabinet pipeline. In the second quarter, we'll increase our self-built data center by capacity roughly between 1,200 cabinets to 1,500 cabinets. And we are already in the process of delivering all those numbers in the second quarter. What's your last question?

My last question is, how can the Tencent-Microsoft-Vianet partnership help to boost cloud revenue from Microsoft China and also whether it's possible to further cooperate and include more cloud vendors in future?

As we said, when the Microsoft Office Online usage goes up through all those partnerships, it will require more resources from our side, and this will drive more revenue to 21Vianet. Yes, definitely, we want this for more partnership opportunities with all public cloud vendors in China. And we'll continue to work closely with all those strategic cloud vendors.

Just one follow-up question on the bad debt issue. What's the outlook for this in the second quarter or -- going forward? Is there still any legacy bad debt possible to reclassify as uncollectible in future?

This last -- since last year and we cleaned up some of the legacy -- the bad debt or the account receivable area and found that the agings pretty long, so we've restructured and talked to them to make sure they're collectible. So since then, we -- quarter-by-quarter, we have reviewed and set a provision mark. And we pretty much had done that this couple of quarters. Next quarter, my view, we might have a very small portion. It's not going to be more than 10 million, a few million, in the range. That's where we're looking at right now.

Thank you. [Operator Instructions] Our next question comes from the line of Yang Liu from Morgan Stanley. Please ask the question.

Sorry, I have one more question regarding to the mix between self-owned and partnered cabinets. I noticed that the margin improvement of the hosting business is partly due to the mix change in the cell phone and the partnered data centers. But could you please share with us what is the margin for self-owned and what is the margin for the partnered data center?

For self-build data center, the gross margin is roughly in 30%, 35%. For partnered cabinets, it's mostly rent from other providers' data centers to meet our customers' demand and resell to our customers in locations where we don't have our own data centers. Typically, the partnered data center carries roughly 10% gross margin on the cabinets side. And of course, we also sell our network services, the BTT network, and the network tends to carry higher, roughly in the range of 20% to 25% gross margin range.

[Operator Instructions] There are no further questions at this time. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.

Thank you.

Thank you.