11:13     CHINA UNICOM<00762> - Announcement (11)                             

    not exceed, in aggregate, the cap amount of RMB5.00 million (HK$4.71      
    million) and RMB6.00 million (HK$5.65 million) respectively.              
                                                                              
    The caps on the mutual provision of premises have been set with           
    reference to:                                                             
                                                                              
    (i)                                                                       
    the Company's historical transactions with Unicom Group;                  
    (ii)                                                                      
    the Company's estimates of the premises that are required to be           
    leased by the Company, or, as the case may be, by Unicom Group; and       
                                                                              
                                                                              
    (iii)                                                                     
    the Company's estimate of market rent at the respective locations         
    for 2005 and 2006.                                                        
                                                                              
    The estimation of the maximum number of premises that may be leased       
    by the Company, or, as the case may be, by Unicom Group in the next       
    two years takes into account the growth potential of the businesses       
    of the Company, or, as the case may be, Unicom Group and the              
    corresponding demand for more premises due to such growth.                
                                                                              
    (6)                                                                       
    Leasing of transmission channels                                          
    Unicom Group will lease fixed line transmission capacity from the         
    New Operating Entity pursuant to the New Comprehensive Services           
    Agreement.                                                                
                                                                              
    Pricing standard                                                          
    Charges for the leasing of transmission capacity are based on             
    tariffs stipulated by the MII from time to time less a discount of up     
    to 10%. The discount given by the New Operating Entity to Unicom          
    Group shall not be more than what the New Operating Entity offers to      
    other third party lessees for a similar lease. The stipulated tariffs     
    vary depending on the type of transmission lines and the transmission     
    distance. If new tariffs are stipulated by the MII, the discount rate     
    will be reviewed.                                                         
                                                                              
    Historical information                                                    
    For the years ended 31 December 2002, 2003 and 2004, the total            
    charges paid to the Group by Unicom Group for the leasing of fixed        
    line transmission capacity amounted to approximately RMB567 million       
    (HK$534 million), RMB185 million (HK$174 million) and RMB39 million       
    (HK$37 million) respectively.                                             
                                                                              
    No Cap Amount                                                             
    The Company considers that the transaction value of the leasing of        
    transmission capacity shall not be subject to any annual cap amount       
    for the following reasons:                                                
                                                                              
    As the lease fees of the long-distance transmission lines contribute      
    to the revenue of the Group, imposing a cap on this transaction will      
    put a limit on the Group's revenue and hamper its ability to conduct      
    its business in the ordinary course. In addition, any expansion of        
    Unicom Group's long-distance telephone business will necessarily          
    result in the increased amount of transmission capacity leased to         
    Unicom Group and in the increased lease fee revenue for the Group.        
    Neither the Group nor Unicom Group will be able to control it as it       
    depends entirely on Unicom Group's subscriber usage.                      
                                                                              
    In addition, the prices for the leasing of transmission lines are         
    based on standardised tariffs set by the MII (which is applicable to      
    other cellular operators in the PRC).                                     
                                                                              
    The Company has applied to the Hong Kong Stock Exchange for waiver        
    from the requirements under Rule 14A.35(2) of the Listing Rules for       
    imposing a cap on the leasing of transmission channels for each of        
    the financial years ending 31 December 2005 and 2006.                     
                                                                              
    (7)                                                                       
    Provision of international telecommunication network gateway              
    Background                                                                
    Pursuant to the New Comprehensive Services Agreement, Unicom Group        
    will provide international access to the New Operating Entity's           
    international long distance call services through its gateways at         
    Shanghai, Guangzhou and Beijing. Unicom Group has undertaken not to       
    provide international telecommunication network gateway services to       
    other third parties.