I. SUMMARY

In 2007, the Company committed to the rational, practical and proactive growth strategy and achieved steady and sustainable business development through deepening the transformation of development model, implementing specialized operations and brandcentric marketing practice and establishing differentiated and brandoriented customer service system.

(Note: the Company completed the acquisition of the mobile businesses and GSM network assets in Guizhou Province on 31 December 2007, thereby expanded its operations to all 31 provinces, municipalities and autonomous regions in the PRC. All the data quoted in this Business Overview related to 2006 have been restated as if Guizhou business had always been part of the Group in the relevant comparative periods.)

Cellular business maintained steady growth. As of 31 December 2007, the Company had a total number of 162.491 million cellular subscribers, representing an annual growth rate of 12.7%, and the Company's subscriber market share in the service areas was 29.7%. The total number of GSM subscribers amounted to 120.564 million; the total number of CDMA subscribers amounted to 41.927 million.

Mobile value-added services ("VAS") continued to grow rapidly. In 2007, SMS volume reached 92.11 billion messages, representing an annual growth rate of 20.7%. The total number of "Cool Ringtone" subscribers reached 50.134 million, representing an annual growth rate of 39.7%. The total number of CDMA 1X wireless data service subscribers reached 21.418 million, and GPRS service subscribers reached over 8.0 million.

Long distance, Data and Internet businesses maintained stable growth. In 2007, the total minutes of outgoing international and domestic long distance calls reached 23.28 billion minutes, representing a decrease of 4.4% from 2006. The total minutes of incoming international long distance calls reached 3.80 billion minutes, representing an increase of 45.3% from 2006. The total leased bandwidths were 69,500 x 2Mbps, representing an increase of 20.3% from 2006.

II. BUSINESS REVIEW

1. GSM Business

The Company offers quality GSM mobile telecommunication services in 31 provinces, municipalities and autonomous regions in the PRC as well as international GSM roaming services through 283 operators in 179 countries and regions.

a) Subscribers

As of 31 December 2007, the total number of the Company's GSM subscribers was 120.564 million. Of this total, the postpaid subscribers reached 62.474 million, and the pre-paid subscribers amounted to 58.090 million. In total, GSM subscribers' net additions reached 13.627 million, representing a 23.2% increase from 2006. In 2007, the average monthly churn rate for the Company's GSM service was 2.76%, slightly higher than 2.47% of 2006.

b) Minutes of usage

In 2007, the total minutes of usage for the Company's GSM subscribers were 341.41 billion minutes, representing an increase of 17.9% from 289.47 billion minutes in 2006.

c) Monthly average minutes of

usage (MOU) and average revenue per user (ARPU) MOU per subscriber per month for GSM service maintained moderate growth. In 2007, the average MOU per subscriber per month for GSM services were 250.1 minutes, representing an increase of 12.3 minutes from the 237.8 minutes in 2006. The ARPU for GSM service in 2007 decreased to RMB46.0 from RMB49.2 in 2006.

2. CDMA Business

The Company is currently the only provider of quality CDMA cellular services in 31 provinces, municipalities and autonomous regions in the PRC and offers CDMA international roaming services through 25 operators in 17 countries and regions.

a) Subscribers

As of 31 December 2007, the total number of the Company's CDMA subscribers was 41.927 million. Of this total, the post-paid subscribers reached 38.622 million, and the pre-paid subscribers amounted to 3.305 million. In total, CDMA subscribers' net additions reached 4.624 million, representing a 20.5% increase from 2006. In 2007, the average monthly churn rate for CDMA service was 2.04%, up from the churn rate of 1.62% in 2006.

b) Minutes of usage

In 2007, the total minutes of usage for CDMA subscribers were 125.43 billion minutes, representing an increase of 6.9% from 117.32 billion minutes in 2006.

c) MOU and ARPU

In 2007, the average MOU per subscriber per month for CDMA service were 263.0 minutes, a decrease of 13.7 minutes from 276.7 minutes in 2006. The ARPU for CDMA service was RMB58.1, representing a decrease of RMB7.7 from RMB65.8 in 2006.

3. Mobile Value-added Services

Through "Unimax", an integrated media portal, the Company provides its CDMA and GSM subscribers with mobile valueadded services covering communications, contents and Internet access services. In 2007, the Company made effort to increase the penetration rates of SMS, "Cool Ringtone" service, continuously enlarged the competitive edge of "U-Net" Internet access service, and actively promoted services such as "Stock in Palm" stock trading, mobile music and instant messages. The applications of mobile value-added services have been increasingly diversified.

The SMS service continued to grow. In 2007, SMS volume reached 92.11 billion messages, representing an increase of 20.7% from 76.29 billion messages in 2006. Of this total, GSM SMS volume was 72.94 billion messages, representing an increase of 23.1% from 59.26 billion messages in 2006; and CDMA SMS volume was 19.17 billion messages, representing an increase of 12.6% from 17.03 billion messages in 2006.

The "Cool Ringtone" service maintained rapid development. In 2007, the net additions of "Cool Ringtone" subscribers were 14.254 million and the total number of subscribers reached 50.134 million. Of this total, the GSM "Cool Ringtone" subscribers reached 37.951 million, accounting for 31.5% of the total GSM subscribers, and the CDMA "Cool Ringtone" subscribers amounted to 12.183 million, accounting for 29.1% of the total CDMA subscribers.

As of 31 December 2007, the number of CDMA 1X wireless data subscribers reached 21.418 million. Of this total, the number of "U-Net" was 2.217 million, representing an increase of 57.1% from 2006; the number of "Stock in Palm" was over 500 thousand. With the official launch of GPRS in 2007, the Company provided GPRS-based WAP, JAVA and point-to-point "Color Mail" multimedia message services, which effectively promoted rapid growth of GPRS services. By the end of 2007, GPRS subscribers exceeded 8 million.

4. Long Distance, Data and Internet Businesses

With the focus on profitability, the Company exerted the potential of existing resource, proactively developed high-end customers in the financial sector, speeded up to promote the Internet application and voice value-added service. As a result, the Company achieved stable growth of its Long Distance, Data and Internet businesses.

a) International and domestic long distance service

In 2007, the total minutes of the Company's outgoing international and domestic long distance calls were 23.28 billion minutes, representing a year-on-year decrease of 4.4%. Of this total, Public Switched Telephone Network (PSTN) outgoing international and domestic long distance calls were 11.16 billion minutes, slight lower than 11.23 billion minutes in 2006, and IP outgoing international and domestic long distance calls were 12.12 billion minutes, lower than 13.13 billion minutes in 2006.

In 2007, the total minutes of incoming calls from international destinations, including Hong Kong, Macau and Taiwan, were 3.80 billion minutes, representing a year-on-year increase of 45.3%. Of this total, the total minutes of PSTN incoming calls were 3.38 billion minutes, representing a yearon-year increase of 41.1%, and the total minutes of IP incoming calls were 0.42 billion minutes, representing a year-on-year increase of 90.6%.

b) Network lease and video telephony services

The Company offers a variety of leased line, Asynchronous Transfer Mode (ATM) and Frame Relay (FR) services to meet customers' different bandwidth requirements. As of 31 December 2007, the total leased bandwidths were 69,500 x 2Mbps, and the total subscribers of "Uni-Video" broadband videotelephony service reached 450 thousand.

c) Internet and fixed-line valueadded services

As of 31 December 2007, the number of the Company's broadband Internet service subscribers was 795 thousand, the number of "Ruyi" mailbox service subscribers reached 11.975 million, the number of voice valueadded service subscribers was over 3 million, and the number of "Ruyi" fax and "Ruyi" viruskilling service subscribers were 520 thousand and 310 thousand, respectively.

III. NETWORK INFRASTRUCTURE

In 2007, the Company committed to the investment-return principle, and enhanced the overall network capacities as well as the capabilities for evolution to the next generation network by integrating network infrastructure, improving network utilization and strengthening the construction of key projects such as IP network, soft-switch network and long distance network. To meet market demand, the Company speeded up the upgrade of GPRS network and expanded its GPRS network to cover 221 key cities in China, which provided strong support to the Company's business development.

The Company proactively established an operation and maintenance system by focusing on centralized operation, maintenance and management, thoroughly implemented programs to meet AAA high standards in operation and maintenance, optimized the network structure and improved the response system, which resulted in the further improvement in the network quality. By the end of 2007, the wireless connection rate of GSM network reached 98.43% and calldrop rate was lower than 0.70%; the wireless connection rate of CDMA network reached 99.76% and call-drop rate was lower than 0.34%.

The Company proactively pushed forward the construction of its IT supporting system. By unifying business processes and optimizing system structure across all branches in 31 provinces, municipalities and autonomous regions in the PRC, the Company greatly improved the capacity and efficiency of the management system on customer relationship, billing and operational analysis. By providing flexible packages and enhancing product management, the Company enhanced the response capability of the core system to marketing and customer service activities. The Company further improved the efficiency and timeliness of its roaming settlement system to support the Company's domestic and international roaming business.

IV. SALES ANDMARKETING

In 2007, the Company fully carried out the segregation of GSM and CDMA marketing operations. By optimizing organization structure, clarifying job responsibilities, streamlining core work processes, expanding marketing force and refining development responsibilities, the Company further improved its capability in the marketing management and ensured the effectiveness of all kinds of its marketing activities.

1. Branding Strategy

The Company further implemented its branding strategy through enhancing the customer segmentation, enriching service contents and increasing brand recognition and image. By offering more products, more dedicated customer services and more "dualmode, dual-standby" handsets, the Company improved the satisfaction of "Worldwind" high-end customer as well as the brand value. By establishing campus sales channels and launching campus promotion activities, the Company increased the recognition and market share of "U-Power" in youth market. By intensive marketing efforts during holidays and in rural market, the Company expanded the subscriber base of "Ruyi Tong". The brand of "Unicom Horizon" insisted on development driven by application. By focusing on key industries, the Company continued to expand its group customer base. By the end of 2007, the number of group customers of "Unicom Horizon" reached 363 thousand.

2. Distribution Channels

In 2007, the Company enhanced its distribution in channel planning, construction and management aspects to proactively build up the core competitiveness of its distribution system. By opening more flagship sales outlets, the Company strengthened its own sales outlets' leading role in sales and customer services. By flattening distribution channels and establishing innovative channels such as Internet channel, the Company further optimized the structure of its distribution system.

3. Customer Service

In 2007, the Company continued to promote the "Unicom 10010" service brand. By proactively launching a series of customer service campaigns such as "Service Year of China Unicom", "Good Faith Services, No Hassle Consumption" and strictly following the service commitment, the Company enhanced its social image. The Company further implemented differentiated and brand-centric customer services and strengthened customer retention through centralizing quality service resources and creating featured members service. In 2007, "Unicom 10010" was awarded as one of the "Top Ten Most Influential Brands of Customer Services in China".

4. Tariff Strategy

In 2007, the Company continued to adjust and optimize its tariff structure and streamlined its service packages. In addition, the Company adhered to brandoriented service and tariff package design, reacted rationally to the implementation of the callingparty-pay tariff policy, and managed to maintain stable revenue and subscribers growth through appropriate customer segmentation and targeting right service and tariff packages on right market segment.

V. BUSINESS STRATEGIES FOR 2008

In 2008, the Company will continue the brand-centric marketing strategy, accelerate the growth with quality, balance operations between customers acquisition and retention, improve marketing capabilities, and strengthen network support, so as to further increase overall business efficiency.

For the GSM business, the Company will expand the promotion of "WorldWind 156" brand to mid-to-high-end customers so as to raise the image of its GSM business. The Company will strengthen the marketing activities of "U Power" and "Ruyi Tong" services and proactively expand rural market and valueadded services so as to increase GSM subscribers and revenue. The Company will endeavor to further grow the GSM business effectively through enhancing channel management and increasing the selling capability of its own distribution channels.

For the CDMA business, the Company will fully leverage its data advantages to enhance the competitiveness, and increase marketing efforts to expand the subscriber base. The Company will increase retention efforts with a focus on mid-to-high-end subscribers to raise customer retention rate. The Company will greatly expand coverage of sales outlets and increase the selling capability of sales outlets.

For mobile value-added services, the Company will enhance product planning and management of value-added services. While increasing the penetration rates and revenues of SMS and "Cool Ringtone", the Company will proactively market GPRS and CDMA 1X based wireless data services such as "U-Net", "Stock in Palm", mobile paper, mobile music and mobile instant message, and explore the way to grow new services such as mobile mailbox and mobile search.

For Long Distance, Data and Internet businesses, the Company will target on key industries, groups and small and medium enterprises ("SME"), and satisfy their comprehensive telecommunication needs by fully utilizing existing resources. The Company will further expand data, Internet application and voice value-added services.

The Company aims to improve the quality and scale of its group clients. The Company will improve product applications, implement cross-provincial marketing practice, and expand the market share in SME market to add values to group clients. The Company will strengthen its cooperation with service integrators to develop application solutions for industrial and corporate clients so as to expand revenues contribution from industry applications.

The Company will continue to promote its international business, deepen its strategic cooperation with overseas operators, innovate business model, proactively expand the international roaming market, and increase promotion effort on roaming services, so as to further increase the revenue from international business.