1. What are the Target Assets and Business of the Proposed Acquisitions?

The Target Assets and Business of the Proposed Acquisitions comprise the following:

(1) The Telecommunications Business in Southern China: the telecommunications business across the 21 provinces in Southern China currently operated by Netcom Parent, the local access telephone business in Sichuan province and Chongqing Municipality and the local access telephone business and related assets in Tianjin Municipality currently operated by Unicom Parent;

(2) The Backbone Transmission Assets in Northern China: the backbone transmission assets in Northern China owned by Netcom Parent and/or its subsidiaries, which mainly comprise electric cables, fiber-optic cables, pipelines and a number of transmission devices; and

(3) 100% equity interest in Unicom Xingye, CITC, and New Guoxin currently owned by Unicom Parent.

2. Why to lease, instead of purchasing, the telecommunications networks in Southern China?

The Company believes that the operation of the telecommunications business in Southern China by way of leasing will enable the Group to effectively reduce the investment risks involved in developing the telecommunications business in Southern China. The leasing of such assets is also expected to enable the Group to benefit from the growth potential of the telecommunications business in Southern China while being able to operate such business in a more cost effective manner.

3. What is the total consideration of the Target Assets and Business? How was it determined?

Total consideration

The total consideration for the Proposed Acquisitions is RMB6.43 billion (equivalent to HK$7.28 billion).

Determination of Total Consideration

The consideration was determined after arm’s length negotiations with reference to a number of factors, including, among others, the appraised value of the Target Assets and Business (where applicable), the long-term growth prospects, current and future earnings potentials, current financial position and investment needs in respect of the Target Assets and Business, as well as the reasons and benefits described in the Announcement. In addition, the consideration payable for certain Target Assets and Business remains subject to further adjustments (whether upward or downward) pending the approval by relevant regulatory authorities.

4. What are the key terms of the Lease?

Term of Lease

Subject to the satisfaction (or, if applicable, waiver) of the Conditions Precedent described in the Announcement, the Lease is for an initial term of two years effective from 1 January 2009 to 31 December 2010, and is renewable at the option of Unicom China with at least two months’ prior notice on the same terms and conditions, except for the future lease fee which will remain subject to further negotiations between the parties, taking into account, among others, the prevailing market conditions in Southern China.

The Lease Fee

The annual fee payable by Unicom China for the Lease for the two financial years ending 31 December 2009 and 2010 is RMB2.0 billion and RMB2.2 billion (equivalent to HK$2.3 billion and HK$2.5 billion), respectively.

Network Purchase Option

In connection with the Lease, Unicom New Horizon has granted to Unicom China an option, but not an obligation, to purchase the telecommunications networks in Southern China. The purchase option may be exercised, at the discretion of Unicom China, at any time during the term of the Lease. No premium has been paid or will be payable by Unicom China for the grant of such purchase option.

5. How was the Lease Fee determined?

For the six months ended 30 June 2008, the telecommunications business in the 21 provinces in Southern China generated service revenue of RMB5.75 billion (equivalent to HK$6.51 billion). On this basis, and taking into account relevant market precedents, the basic lease fee for the Lease has been determined to be RMB1.8 billion (equivalent to HK$2.0 billion) per annum. Based on such basic lease fee and taking into account the growth potential and the prospects of the telecommunications business in the 21 provinces in Southern China, the annual lease fee for the financial years ending 31 December 2009 and 2010 have been determined to be RMB2.0 billion (equivalent to HK$2.3 billion) and RMB2.2 billion (equivalent to HK$2.5 billion), respectively.