THIS
DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE
ATTENTION
|
CHINA UNICOM
LIMITED
中國聯通股份有限公司
(incorporated in Hong Kong
with limited liability)
(Stock Code:
0762)
|
CHINA NETCOM GROUP
CORPORATION
(HONG
KONG) LIMITED
中國網通集團(香港)有限公司
(incorporated in Hong Kong
with limited liability)
(Stock
Code: 0906)
|
Lead
Financial Adviser to
China Unicom Limited
|
Exclusive
Financial Adviser to
China
Netcom Group Corporation (Hong Kong) Limited
|
Financial
Adviser to
China
Unicom Limited
|
Independent
Financial Adviser to
the Independent Board
Committee of China Netcom Group Corporation (Hong Kong)
Limited
|
ACTIONS
TO BE TAKEN
|
IMPORTANT
NOTICE
|
CONTENTS
|
Actions to be
Taken
|
i
|
||||
Important
Notice
|
iii
|
||||
Definitions
|
1
|
||||
Questions and
Answers
|
8
|
||||
Expected
Timetable
|
12
|
||||
Letter from the
Board
|
15
|
||||
Letter from the Independent
Board Committee
|
21
|
||||
Letter from
Rothschild
|
23
|
||||
Explanatory
Statement
|
57
|
||||
1.
|
Introduction
|
57
|
|||
2.
|
Background
to the Proposals
|
57
|
|||
3.
|
Summary
of the Proposals
|
58
|
|||
4.
|
Conditions
of the Proposals and the Scheme
|
62
|
|||
5.
|
Undertakings
|
65
|
|||
6.
|
Reasons
for and Benefits of the Proposed Merger
|
65
|
|||
7.
|
Business
Strategies of the Enlarged Group
|
68
|
|||
8.
|
Intentions
of Unicom with Regard to Netcom
|
69
|
|||
9.
|
Comparisons
of Value
|
70
|
|||
10.
|
Financial
Effects of the Proposals
|
73
|
|||
11.
|
Effects
of the Proposals on the Shareholding Structures of Netcom and
Unicom
|
73
|
|||
12.
|
Material
Interests of Netcom Directors and Effect of the Scheme on Such
Interests
|
75
|
|||
13.
|
Information
on Netcom
|
76
|
|||
14.
|
Information
on Unicom
|
76
|
|||
15.
|
Possible
Concert Party Agreement
|
80
|
|||
16.
|
Risk
Factors
|
80
|
|||
17.
|
Share
Certificates, Dealings and Listing
|
82
|
|||
18.
|
Registration
and Despatch of Unicom Share Certificates, Unicom ADSs and Option Grant
Letters
|
83
|
19.
|
Trading
of Odd Lots of Unicom Shares
|
84
|
|||
20.
|
Overseas
Netcom Shareholders, Netcom ADS Holders and Netcom
Optionholders
|
84
|
|||
21.
|
Information
for Netcom Shareholders and Netcom ADS Holders in the United
States
|
||||
85
|
|||||
22.
|
Taxtation
|
86
|
|||
23.
|
Court
Meeting and Netcom EGM
|
91
|
|||
24.
|
Procedures
for Demanding a Poll at the Netcom EGM
|
92
|
|||
25.
|
Actions
to be Taken
|
92
|
|||
26.
|
Costs
of the Scheme
|
93
|
|||
27.
|
Further
Information
|
93
|
|||
28.
|
Where
You Can Find Additional Information
|
93
|
|||
29.
|
Language
|
93
|
|||
Appendix
I — Financial Information on the Netcom Group
|
I-1
|
||||
Appendix
II — Financial Information on the Unicom Group
|
II-1
|
||||
Appendix
III — Unaudited Pro Forma Consolidated Financial Information of the
Enlarged
|
|||||
Group
|
III-1
|
||||
Appendix
IV — General Information on Netcom
|
IV-1
|
||||
Appendix
V — General Information on Unicom
|
V-1
|
||||
Appendix
VI — Documents Available for Inspection
|
VI-1
|
||||
Scheme
of Arrangement
|
S-1
|
||||
Notice
of Court Meeting
|
N-1
|
||||
Notice
of Netcom EGM
|
N-3
|
||||
DEFINITIONS
|
“3G”
|
:
|
third
generation mobile system, the next generation of mobile network
infrastructure that utilises the 2GHz spectrum
|
“ABLP”
|
:
|
AllianceBernstein
L.P., a Delaware limited partnership in the United States
|
“acting
in concert”
|
:
|
has
the meaning given to it in the Takeovers Code
|
“ADS
Proposal”
|
:
|
the
proposal to the Netcom ADS Holders for the cancellation of the Scheme
Shares underlying their Netcom ADSs in exchange for 3.016 new Unicom ADSs
for every Netcom ADS cancelled
|
“ADS
Voting Instruction Card”
|
:
|
the
white voting instruction card for use by Netcom ADS Holders for providing
instructions to the Netcom Depositary as to how to vote the Netcom Shares
underlying their Netcom ADSs in connection with the Court Meeting and the
Netcom EGM
|
“ADS
Voting Instruction Deadline”
|
:
|
10:00
a.m. (New York time) on 10 September 2008 (or such other time and date as
shall have been determined by the Netcom Depositary), being the deadline
for the receipt of the ADS Voting Instruction Card by the Netcom
Depositary from the Netcom ADS Holders
|
“ADSs”
|
:
|
American
Depositary Shares
|
“Announcement”
|
:
|
the
announcement dated 2 June 2008 jointly issued by Unicom and Netcom in
relation to, among other things, the proposed merger of Unicom and Netcom
by way of a scheme of arrangement of Netcom under Section 166 of the Hong
Kong Companies Ordinance and the Proposals
|
“Board”
|
:
|
the
board of directors of Netcom
|
“CCASS”
|
:
|
the
Central Clearing and Settlement System established and operated by
HKSCC
|
“CDMA”
|
:
|
Code
Division Multiple Access technology, which is a digital transmission
technology that accommodates higher throughput by using various coding
sequences to mix and separate voice and data signals for wireless
communication
|
“CDMA
Business”
|
:
|
the
CDMA business owned and operated by CUCL together with the relevant assets
of CUCL and the rights and liabilities of CUCL relating to its CDMA
subscribers and the shareholding interests of Unicom in certain
subsidiaries which operate CDMA-related businesses
|
“CDMA
Business Disposal”
|
:
|
the
proposed disposal by CUCL and Unicom of the CDMA Business to China
Telecom
|
“CDMA
Business Disposal Agreement”
|
:
|
the
definitive agreement dated 27 July 2008 entered into between Unicom, CUCL
and China Telecom relating to the CDMA Business Disposal
|
“CDMA
Business Disposal Framework Agreement”
|
:
|
the
framework agreement dated 2 June 2008 entered into between Unicom, CUCL
and China Telecom relating to the CDMA Business Disposal
|
“China
Telecom”
|
:
|
China
Telecom Corporation Limited 中國電信股份有限公司,
a joint stock company incorporated under the laws of the PRC with limited
liability and whose shares and ADSs are listed on the Hong Kong Stock
Exchange and the New York Stock
|
Exchange,
respectively
|
||
“CICC”
|
:
|
China
International Capital Corporation (Hong Kong) Limited, the lead financial
adviser to Unicom in connection with the Proposals
|
“Citigroup”
|
:
|
Citigroup
Global Markets Asia Limited, the exclusive financial adviser to Netcom in
connection with the Proposals
|
“Concert
Party Agreement”
|
:
|
the
agreement which is anticipated to be entered into between Unicom BVI and
Netcom BVI and pursuant to which they will become parties acting in
concert in respect of Unicom only after the completion of the
Scheme
|
“Court
Hearing”
|
:
|
the
hearing of the petition by the High Court for the sanction of the Scheme
and the confirmation of the capital reduction of Netcom
|
“Court
Meeting”
|
:
|
a
meeting of the Netcom Shareholders convened at the direction of the High
Court, notice of which is set out on pages N-1 and N-2 of this document,
and any adjournment thereof
|
“CUCL”
|
:
|
China
Unicom Corporation Limited, a company incorporated under the laws of the
PRC with limited liability and a wholly-owned subsidiary of
Unicom
|
“Disinterested
Netcom Shareholders”
|
:
|
Netcom
Shareholders other than Unicom and those Netcom Shareholders acting in
concert with Unicom
|
“Effective
Date”
|
:
|
the
date on which the Scheme becomes effective in accordance with the Hong
Kong Companies Ordinance, which is expected to be 15 October
2008
|
“Enlarged
Group”
|
:
|
the
Unicom Group and the Netcom Group
|
“Executive”
|
:
|
the
Executive Director of the Corporate Finance Division of the SFC or any
delegate of the Executive Director
|
“Exempt
Principal Traders”
|
:
|
certain
members of the respective group of companies to which JPMorgan and
Citigroup belong holding Netcom Securities in their capacity as exempt
principal traders under the Takeovers Code
|
“Explanatory
Statement”
|
:
|
the
explanatory statement set out on pages 57 to 93 of this document and
issued in compliance with Section 166A of the Hong Kong Companies
Ordinance
|
“Fully
Diluted Netcom Share Capital”
|
:
|
the
total number of Netcom Shares in issue and which would be in issue if all
of the outstanding Netcom Options had been exercised
|
“GHz”
|
:
|
Gigahertz,
a unit of measure of frequency; 1 GHz is equal to 1,000 MHz
|
“GSM”
|
:
|
global
cellular system for mobile communications, being a digital mobile cellular
telephone system operating in the 900 MHz, 1800 MHz and 1900 MHz frequency
band based on digital transmission and cellular network architecture with
roaming
|
“HIBOR”
|
:
|
Hong
Kong Interbank Offered Rate
|
“High
Court”
|
:
|
the
High Court of Hong Kong
|
“HK$”
|
:
|
Hong
Kong dollars, the lawful currency of Hong Kong
|
“HKFRS”
|
:
|
Hong
Kong Financial Reporting Standards
|
“HKSCC”
|
:
|
Hong
Kong Securities Clearing Company Limited
|
“Hong
Kong”
|
:
|
the
Hong Kong Special Administrative Region of the PRC
|
“Hong
Kong Companies Ordinance”
|
:
|
Companies
Ordinance, Chapter 32 of the Laws of Hong Kong
|
“Hong
Kong Stock Exchange”
|
:
|
The
Stock Exchange of Hong Kong Limited
|
“Independent
Board Committee”
|
:
|
the
independent committee of the Board established for the purpose of advising
the Disinterested Netcom Shareholders, the Netcom ADS Holders and the
Netcom Optionholders in respect of the Proposals
|
“Investor
Participant”
|
:
|
a
person admitted to participate in CCASS as an investor
participant
|
“JPMorgan”
|
:
|
J.P.
Morgan Securities (Asia Pacific) Limited, the financial adviser to Unicom
in connection with the Proposals
|
“Last
ADS Trading Date”
|
:
|
22
May 2008, being the last trading day prior to the suspension of trading in
Netcom ADSs and Unicom ADSs on the New York Stock Exchange pending the
issue of the Announcement
|
“Last
Trading Date”
|
:
|
23
May 2008, being the last trading day prior to the suspension of trading in
Netcom Shares and Unicom Shares on the Hong Kong Stock Exchange pending
the issue of the Announcement
|
“Latest
Practicable Date”
|
:
|
the
latest practicable date prior to the printing of this document for the
purpose of ascertaining certain information contained herein, being 11
August 2008 (New York time) for information relating to the Netcom ADSs
and the Unicom ADSs and 12 August 2008 (Hong Kong time) for other
information
|
“Listing
Rules”
|
:
|
Rules
Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited
|
“MHz”
|
:
|
Megahertz,
a unit of measure of frequency; 1 MHz is equal to one million cycles per
second
|
“Netcom”
|
:
|
China
Netcom Group Corporation (Hong Kong) Limited 中國網通集團(香港)有限公司,
a company incorporated under the laws of Hong Kong with limited liability
and whose Netcom Shares and Netcom ADSs are listed on the Hong Kong Stock
Exchange and the New York Stock Exchange, respectively
|
“Netcom
ADS Deposit Agreement”
|
:
|
the
Deposit Agreement dated 9 November 2004 entered into between Netcom, the
Netcom Depositary and all holders and beneficial owners of Netcom
ADSs
|
“Netcom
ADS Holders”
|
:
|
holders
of Netcom ADSs
|
“Netcom
ADSs”
|
:
|
ADSs
which are issued by the Netcom Depositary and traded on the New York Stock
Exchange, each representing ownership of 20 Netcom Shares
|
“Netcom
BVI”
|
:
|
China
Netcom Group Corporation (BVI) Limited 中國網通集團(BVI)有限公司,
a company incorporated under the laws of the British Virgin Islands and
the immediate controlling shareholder of Netcom
|
“Netcom
Depositary”
|
:
|
Citibank,
N.A., a national banking association organised under the laws of the
United States and acting in its capacity as depositary under the Netcom
ADS Deposit Agreement
|
“Netcom
Director(s)”
|
:
|
the
director(s) of Netcom
|
“Netcom
EGM”
|
:
|
the
extraordinary general meeting of Netcom, notice of which is set out on
pages N-3 and N-4 of this document, and any adjournment
thereof
|
“Netcom
Group”
|
:
|
Netcom
and its subsidiaries
|
“Netcom
Optionholders”
|
:
|
holders
of Netcom Options
|
“Netcom
Options”
|
:
|
outstanding
options to acquire Netcom Shares granted under the Netcom Share Option
Scheme
|
“Netcom
Parent”
|
:
|
中國網絡通信集團公司
(China Network Communications Group Corporation), a state-owned enterprise
established under the laws of the PRC
|
“Netcom
Securities”
|
:
|
Netcom
Shares, Netcom ADSs, Netcom Options and any other options, derivatives,
warrants or other securities convertible or exchangeable into Netcom
Shares which are issued by Netcom
|
“Netcom
Share Option Scheme”
|
:
|
the
Share Option Scheme adopted by Netcom on 30 September 2004, as amended
from time to time
|
“Netcom
Shareholders”
|
:
|
holders
of Netcom Shares
|
“Netcom
Shares”
|
:
|
ordinary
shares of US$0.04 each in the capital of Netcom
|
“NYSE
Rules”
|
:
|
the
rules of the New York Stock Exchange governing New York Stock Exchange
listed companies
|
“OFTA”
|
:
|
Office
of the Telecommunications Authority of Hong Kong
|
“Option
Proposal”
|
:
|
the
proposal to all of the Netcom Optionholders whereby they will be granted
Special Unicom Options in consideration for the cancellation of their
outstanding Netcom Options at the Scheme Record Time
|
“Option
Proposal Letter”
|
:
|
the
letter setting out the terms of the Option Proposal and the details of the
Special Purpose Unicom Share Option Scheme sent separately to the Netcom
Optionholders
|
“Options
Exercise Deadline”
|
:
|
4:30
p.m. on Friday, 10 October 2008, being the latest time for Netcom
Optionholders to exercise their Netcom Options in order to qualify for
entitlements under the Scheme
|
“Other
CCASS Participant”
|
:
|
a
broker, custodian, nominee or other relevant person who is, or has
deposited Netcom Shares with, a CCASS participant
|
“PRC”
or “China”
|
:
|
the
People’s Republic of China excluding, for the purpose of this document
only, Hong Kong, the Macau Special Administrative Region of the PRC and
Taiwan
|
“Proposals”
|
:
|
the
Share Proposal, the ADS Proposal and the Option Proposal and the
conditions thereof, as described in this document and, in the case of the
Option Proposal, in the Option Proposal Letter
|
“Relevant
Period”
|
:
|
the
period commencing from 2 December 2007 (being the date falling six months
prior to the date of the Announcement) and ending on the Latest
Practicable Date
|
“RMB”
|
:
|
Renminbi,
the lawful currency of the PRC
|
“Rothschild”
|
:
|
N
M Rothschild & Sons (Hong Kong) Limited, the independent financial
adviser to the Independent Board Committee in respect of the
Proposals
|
“Scheme”
|
:
|
the
scheme of arrangement under Section 166 of the Hong Kong Companies
Ordinance between Netcom and the Scheme Shareholders, details of which are
set out on pages S-1 to S-6 of this document, with or subject to any
modification thereof or addition thereto or condition approved or imposed
by the High Court
|
“Scheme
Record Time”
|
:
|
5:00
p.m. (Hong Kong time) on a trading day of the Hong Kong Stock Exchange and
immediately preceding the Effective Date, which is expected to be 14
October 2008
|
“Scheme
Shareholders”
|
:
|
holders
of the Scheme Shares
|
“Scheme
Shares”
|
:
|
all
the Netcom Shares in issue and such further Netcom Shares as may be issued
prior to the Scheme Record Time
|
“SEC”
|
:
|
the
Securities and Exchange Commission in the United States
|
“See-Through
Price”
|
:
|
the
price of an outstanding Netcom Option determined by deducting the exercise
price of the relevant Netcom Option from the value of HK$27.87 of a Scheme
Share under the Share Proposal, being the closing price of each Netcom
Share of HK$27.05 on the Hong Kong Stock Exchange on the Last Trading Date
plus a 3% premium over such closing price
|
“SFC”
|
:
|
Securities
and Futures Commission in Hong Kong
|
“SFO”
|
:
|
Securities
and Futures Ordinance, Chapter 571 of the Laws of Hong Kong
|
“Share
Exchange Ratio”
|
:
|
the
exchange ratio of 1.508 Unicom Shares for every Scheme Share cancelled
under the Scheme
|
“Share
Proposal”
|
:
|
the
proposal to the Netcom Shareholders for the cancellation of all of the
Scheme Shares pursuant to the Scheme based on the Share Exchange
Ratio
|
“SK
Telecom”
|
:
|
SK
Telecom Co., Ltd., a company incorporated in the Republic of Korea with
limited liability and listed on the Stock Market Division of the Korea
Exchange
|
“Special
Purpose Unicom Share Option Scheme”
|
:
|
a
share option scheme containing substantially the same terms as the Netcom
Share Option Scheme, which is proposed to be adopted by Unicom at the
Unicom EGM
|
“Special
Unicom Options”
|
:
|
options
proposed to be granted by Unicom under the Special Purpose Unicom Share
Option Scheme to Netcom Optionholders pursuant to the Option
Proposal
|
“Takeovers
Code”
|
:
|
The
Code on Takeovers and Mergers issued by the SFC
|
“Telecommunications
Ordinance”
|
:
|
Telecommunications
Ordinance, Chapter 106 of the Laws of Hong Kong
|
“Telefónica”
|
:
|
Telefónica
Internacional, S.A.U., a company incorporated in Spain
|
“trading
day”
|
:
|
a
day on which the Hong Kong Stock Exchange or the New York Stock Exchange
(as the case may be) is open for the business of dealings in
securities
|
“Unicom”
|
:
|
China
Unicom Limited 中國聯通股份有限公司,
a company incorporated under the laws of Hong Kong with limited liability
and whose Unicom Shares and Unicom ADSs are listed on the Hong Kong Stock
Exchange and the New York Stock Exchange, respectively
|
“Unicom
A Share Company”
|
:
|
中國聯合通信股份有限公司
(China United Telecommunications Corporation Limited), a company
incorporated under the laws of the PRC and whose shares are listed on the
Shanghai Stock Exchange
|
“Unicom
ADS Deposit Agreement”
|
:
|
the
Deposit Agreement dated 22 June 2000 entered into between Unicom, the
Unicom Depositary and all holders and beneficial owners of Unicom
ADSs
|
“Unicom
ADSs”
|
:
|
ADSs
which are issued by the Unicom Depositary and traded on the New York Stock
Exchange, each representing ownership of 10 Unicom Shares
|
“Unicom
BVI”
|
:
|
China
Unicom (BVI) Limited 中國聯通(BVI)有限公司,
a company incorporated in the British Virgin Islands and the immediate
controlling shareholder of Unicom
|
“Unicom
CDMA Lease”
|
:
|
the
CDMA lease agreement dated 26 October 2006 entered into between Unicom A
Share Company (whose rights and obligations under that agreement were
subsequently transferred to CUCL), Unicom New Horizon and Unicom Parent,
pursuant to which Unicom New Horizon agreed to lease capacity on its CDMA
network to CUCL
|
“Unicom
Depositary”
|
:
|
The
Bank of New York Mellon, a national banking association organised under
the laws of the United States and acting in its capacity as depositary
under the Unicom ADS Deposit Agreement
|
“Unicom
Director(s)”
|
:
|
the
director(s) of Unicom
|
“Unicom
EGM”
|
:
|
the
extraordinary general meeting of Unicom convened for the purpose of
approving, among other things, the Proposals and the adoption of the
Special Purpose Unicom Share Option Scheme, which will be held on 16
September 2008, and any adjournment thereof
|
“Unicom
Group”
|
:
|
Unicom
and its subsidiaries
|
“Unicom
New Horizon”
|
:
|
Unicom
New Horizon Mobile Telecommunications Company Limited, a company
incorporated in the PRC with limited liability and a wholly-owned
subsidiary of Unicom Parent
|
“Unicom
Options”
|
:
|
outstanding
options to acquire Unicom Shares granted under the Unicom Share Option
Schemes
|
“Unicom
Parent”
|
:
|
中國聯合通信有限公司
(China United Telecommunications Corporation), a state-owned enterprise
established under the laws of the PRC
|
“Unicom
Securities”
|
:
|
Unicom
Shares, Unicom ADSs, Unicom Options and any other options, derivatives,
warrants or other securities convertible or exchangeable into Unicom
Shares which are issued by Unicom
|
“Unicom
Share Option Schemes”
|
:
|
the
Pre-Global Offering Share Option Scheme and the Share Option Scheme, both
of which were adopted by Unicom on 1 June 2000, as amended from time to
time
|
“Unicom
Shareholders”
|
:
|
holders
of Unicom Shares
|
“Unicom
Shares”
|
:
|
ordinary
shares of HK$0.10 each in the capital of Unicom
|
“United
States” or “US”
|
:
|
the
United States of America, its territories and possessions, any State of
the United States, and the District of Columbia
|
“US
GAAP”
|
:
|
generally
accepted accounting principles in the United States
|
“US
Securities Act”
|
:
|
the
US Securities Act of 1933, as amended, including the related rules and
regulations promulgated thereunder
|
“US
Securities Exchange Act”
|
:
|
the
US Securities Exchange Act of 1934, as amended, including the related
rules and regulations promulgated thereunder
|
“US$”
or “US dollars”
|
:
|
United
States dollars, the lawful currency of the United States
|
“%”
|
:
|
per
cent.
|
QUESTIONS
AND ANSWERS
|
1.
|
What
is the purpose of this document? What is the Court Meeting and the Netcom
EGM? What is the Court Hearing?
|
|
•
|
The
purpose of this document is to provide you with further information
regarding the Proposals and, in particular, the Scheme, and the expected
timetable, to give you notices of the Court Meeting and the Netcom EGM and
to inform you of the date and place of the Court
Hearing.
|
|
•
|
At
the Court Meeting, the Scheme will be voted on by the Disinterested Netcom
Shareholders other than the Exempt Principal Traders and at the Netcom
EGM, the capital reduction of Netcom and the issue of the Netcom Shares to
Unicom in connection with the Scheme will be voted on by all of the Netcom
Shareholders.
|
|
•
|
At
the Court Hearing, the High Court will hear the petition for the sanction
of the Scheme and the confirmation of the capital reduction of Netcom. The
Court Hearing will take place on 14 October 2008 after the Court Meeting
and the Netcom EGM. An announcement will also be made of the date and time
of the Court Hearing.
|
2.
|
What
are the Proposals and the Scheme?
|
|
•
|
The
Proposals comprise of the Share Proposal, the ADS Proposal and the Option
Proposal. Please see paragraph 3 headed “Summary of the Proposals” in the
Explanatory Statement for a discussion of the Proposals and the
consideration you will be entitled to receive under the Proposals and
paragraph 4 headed “Conditions of the Proposals and the Scheme” in the
Explanatory Statement for a discussion of the conditions of the Proposals
and the Scheme.
|
|
•
|
The
Scheme is a scheme of arrangement under Section 166 of the Hong Kong
Companies Ordinance between Netcom and the Scheme Shareholders involving
the cancellation of all of the Scheme Shares. Upon the Scheme becoming
effective, the Scheme will be binding on Netcom and all of the Scheme
Shareholders, regardless of whether such Scheme Shareholders attended or
voted at the Court Meeting or the Netcom EGM, and Netcom will become a
wholly-owned subsidiary of Unicom.
|
3.
|
What
is the position of the Independent Board Committee with regard to the
Proposals?
|
|
•
|
The
Independent Board Committee, having considered the terms of the Proposals
and taken into account the advice of Rothschild, considers that the terms
of the Share Proposal, the ADS Proposal and the Option Proposal are fair
and reasonable so far as the Disinterested Netcom Shareholders, the Netcom
ADS Holders and the Netcom Optionholders, respectively, are
concerned.
|
4.
|
What
vote is required from the Netcom Shareholders in order for the Scheme to
be approved?
|
|
•
|
The
Scheme must be approved (by way of poll) by a majority in number
representing not less than three-fourths in value of the Netcom Shares
held by the Disinterested Netcom Shareholders (other than the Exempt
Principal Traders) who are present and voting either in person or by proxy
at the Court Meeting, provided that the number of votes cast against the
resolution to approve the Scheme at the Court Meeting is not more than 10%
of the votes attaching to all of the Netcom Shares held by the
Disinterested Netcom Shareholders, including the Exempt Principal
Traders.
|
|
•
|
In
addition to the vote for approving the Scheme at the Court Meeting, a
special resolution would need to be passed by a majority of not less than
three-fourths of the votes cast by the Netcom Shareholders present and
voting in person or by proxy at the Netcom EGM to (a) approve and give
effect to the reduction of the issued share capital of Netcom by
cancelling and extinguishing the Scheme Shares and (b) approve the issue
of the Netcom Shares to Unicom in connection with the
Scheme.
|
|
•
|
At
the Court Meeting, the Disinterested Netcom Shareholders (other than the
Exempt Principal Traders) who are present and voting either in person or
by proxy will be entitled to vote all of their respective Scheme Shares in
favour of the Scheme or against it. Alternatively, the Disinterested
Netcom Shareholders other than the Exempt Principal Traders may vote some
of their Scheme Shares in favour of the Scheme and any or all of the
balance of their Scheme Shares against the
Scheme.
|
|
•
|
The
“majority in number” requirement will be met if the number of such
Disinterested Netcom Shareholders voting in favour of the Scheme exceeds
the number of such Disinterested Netcom Shareholders voting against the
Scheme. For the purpose of calculating the “majority in number”
requirement, if a Disinterested Netcom Shareholder votes all of his Netcom
Shares in favour of the Scheme (or against the Scheme), he will be counted
as one Disinterested Netcom Shareholder voting in favour of the Scheme (or
against the Scheme) in respect of the number of his Netcom Shares so
voted. If a Disinterested Netcom Shareholder elects to vote a portion of
his Netcom Shares in favour of the Scheme and the balance of his Netcom
Shares against the Scheme, he will be counted as one Disinterested Netcom
Shareholder voting in favour of the Scheme in respect of the number of the
Netcom Shares voted in favour of the Scheme, and one Disinterested Netcom
Shareholder voting against the Scheme in respect of the number of the
Netcom Shares voted against the Scheme. As a result, any Disinterested
Netcom Shareholder voting both in favour of the Scheme and against the
Scheme will cancel himself out in terms of calculating the “majority in
number” requirement.
|
|
•
|
If
a proxy has been appointed to represent more than one Disinterested Netcom
Shareholder at the Court Meeting, for the purpose of calculating the
majority in number requirement, he will be counted as one Disinterested
Netcom Shareholder for each of the Disinterested Netcom Shareholders he
represents.
|
|
•
|
Individual
Netcom ADS Holders who have not become Netcom Shareholders will therefore
not be counted individually for the purposes of calculating the “majority
in number” requirement. Rather, the Netcom Depositary, as the sole
registered holder of the Netcom Shares underlying the Netcom ADSs, will be
counted as one Disinterested Netcom Shareholder for such purposes or if it
votes both for and against the Scheme, as two Disinterested Netcom
Shareholders.
|
|
•
|
At
the Netcom EGM, every Netcom Shareholder present and voting either in
person or by proxy will be entitled to vote all of his Netcom Shares in
favour of the special resolution for the capital reduction of Netcom and
the issue of the Netcom Shares to Unicom in connection with the Scheme or
against it. Alternatively, such Netcom Shareholders may vote some of their
Shares in favour of and some against the special resolution. At the Netcom
EGM, the special resolution will be passed if the value of the Netcom
Shares voted in favour of it is at least three-fourths of the total value
of the Netcom Shares voted at the Netcom
EGM.
|
6.
|
I
am a Netcom Shareholder. How do I vote on the
Proposals?
|
|
•
|
If
you are a Netcom Shareholder, you may, if you are a Disinterested Netcom
Shareholder other than an Exempt Principal Trader, vote in person or by
proxy at the Court Meeting (during which the Scheme will be voted on) and
you may vote in person or by proxy at the Netcom EGM (during which the
capital reduction of Netcom and the issue of Netcom Shares to Unicom in
connection with the Scheme will be voted
on).
|
|
•
|
Whether
or not you are able to attend the Court Meeting or the Netcom EGM, if you
are a Disinterested Netcom Shareholder other than an Exempt Principal
Trader, you are strongly urged to complete and sign the enclosed pink form of proxy in
respect of the Court Meeting, in accordance with the instructions printed
on it, and if you are a Netcom Shareholder, you are strongly urged to
complete and sign the enclosed white form of proxy in
respect of the Netcom EGM, in accordance with the instructions printed on
it, and to deposit them at the Netcom’s registered office at Room 6701,
The Center, 99 Queen’s Road Central, Hong Kong. The pink form of proxy for use
at the Court Meeting should be deposited not later than 4:00 p.m. on 15
September 2008 and, in order to be valid, the white form of proxy for use
at the Netcom EGM should be deposited not later than 4:30 p.m. on 15
September 2008. The pink form of proxy in
respect of the Court Meeting may alternatively be handed to the Chairman
of the Court Meeting at the Court Meeting if it is not so
deposited.
|
|
•
|
The
completion and return of a form of proxy for the Court Meeting or the
Netcom EGM will not preclude you from attending and voting in person at
the Court Meeting or the Netcom EGM. In such event, the relevant form of
proxy
|
will be deemed to have been revoked. |
7.
|
I
am a Netcom ADS Holder. How do I vote on the
Proposals?
|
|
•
|
Since
Netcom ADS Holders are not Netcom Shareholders, you cannot vote at the
Court Meeting or the Netcom EGM directly. However, as a Netcom ADS Holder,
you can instruct the Netcom Depositary to vote the Netcom Shares
underlying your Netcom ADSs by completing and returning the ADS Voting
Instruction Card to the Netcom Depositary by not later than the ADS
Voting Instruction Deadline at its offices located at Citigroup
Shareholder Services, P.O. Box 43099, Providence RI 02940-5000, the United
States of America.
|
|
•
|
If
you hold your Netcom ADSs indirectly through a financial intermediary, you
must follow the relevant procedures provided by the financial intermediary
through which you hold your Netcom ADSs if you wish to vote the Netcom
Shares underlying your Netcom ADSs.
|
|
•
|
If
you wish to attend and vote at the Court Meeting and the Netcom EGM
directly, you must surrender your Netcom ADSs and withdraw the Netcom
Shares represented by such Netcom ADSs in accordance with the terms of the
Netcom ADS Deposit Agreement prior to 3:00 p.m. on 2 September 2008 (New
York time). Netcom will pay to the Netcom Depositary the fees for the
cancellation of your Netcom ADSs, but you may incur taxes and other
charges in connection with such surrender and
withdrawal.
|
8.
|
If
my Netcom Shares or Netcom ADSs are held in “street names” by my financial
intermediary, will my financial intermediary vote my Netcom Shares or
those underlying my Netcom ADSs for
me?
|
|
•
|
Your
financial intermediary should send you directions on how to provide it
with instructions to vote your Netcom Shares or the Netcom Shares
underlying your Netcom ADSs. If you do not provide your financial
intermediary with instructions on how to vote your Netcom Shares (whether
in the form of Netcom Shares or represented by Netcom ADSs), your
financial intermediary will not vote them at the Court Meeting and the
Netcom EGM. You should therefore ensure that your financial intermediary
is provided with instructions on how to vote your Netcom Shares or the
Netcom Shares underlying your Netcom ADSs by the deadlines set by your
financial intermediary. If you do not give voting instructions to your
financial intermediary, you will not be counted as having voted at the
Court Meeting and the Netcom EGM unless you have the Netcom Shares
(including any Netcom Shares underlying your Netcom ADSs) registered in
your name and appear in person or by proxy at the Court Meeting and the
Netcom EGM.
|
9.
|
Can
I change my vote after I have submitted my proxy with voting
instructions?
|
|
•
|
Yes.
If you are registered as a Netcom Shareholder, there are two ways in which
you may revoke your proxy and change your vote in respect of the
resolutions to be voted on at the Court Meeting or the Netcom
EGM:
|
|
(a)
|
you
may notify Netcom in writing of the revocation of your proxy and deposit a
new form of proxy, provided that such revised form of proxy is deposited
not less than 48 hours before the time for holding the Court Meeting or
the Netcom EGM or, in the case of the pink form of proxy in respect of the
Court Meeting, it may be handed to the Chairman of the Court Meeting at
the Court Meeting; or
|
|
(b)
|
you
may attend and vote at the Court Meeting or the Netcom EGM in person and
in such event, your relevant form of proxy will be deemed to have been
revoked.
|
|
•
|
If
you hold Netcom ADSs, you may not change the voting instructions indicated
on your completed ADS Voting Instruction Card unless you notify the Netcom
Depositary of such change in writing prior to the ADS Voting Instruction
Deadline.
|
|
•
|
If
you have instructed a financial intermediary to vote your Netcom Shares or
the Netcom Shares underlying your Netcom ADSs, you must follow the
directions received from such financial intermediary to change your vote
or revoke your proxy.
|
10.
|
I
am a Netcom ADS Holder. How can I be present in person or be represented
by counsel at the Court Hearing?
|
|
•
|
At
the Court Hearing, which will take place after the approval of the Scheme
at the Court Meeting, the High Court will hear the petition for the
sanction of the Scheme and the confirmation of the capital reduction of
Netcom.
|
|
•
|
Since
Netcom ADS Holders are not Netcom Shareholders, you cannot directly be
present in person or be represented by counsel at the Court Hearing to
support or oppose the petition for the sanction of the Scheme. However, if
you wish to be entitled to be present in person or be represented by
counsel at the Court Hearing to support or oppose the petition, you can do
so by surrendering your Netcom ADSs and withdrawing the Netcom Shares
represented by such Netcom ADSs in accordance with the terms of the Netcom
ADS Deposit Agreement prior to 3:00 p.m. on 9 October 2008 (New York time)
so that you can be registered as a Netcom Shareholder prior to the Court
Hearing. Netcom will pay to the Netcom Depositary the fees for the
cancellation of your Netcom ADSs, but you may incur taxes and other
charges in connection with such surrender and withdrawal. In order to
cancel your Netcom ADSs and withdraw the underlying Netcom Shares, you
should contact the Netcom Depositary at Citigroup Shareholder Services,
P.O. Box 43099, Providence RI 02940-5000, the United States of America or
by telephone at 1-877-248-4237 between 8:30 a.m. and 6:00 p.m. (New York
time) Monday to Friday.
|
11.
|
What
is the location, date and time of the Court Meeting and the Netcom
EGM?
|
|
•
|
The
Court Meeting and the Netcom EGM will be held at The Ballroom, Island
Shangri-La, Hong Kong on 17 September 2008 at respectively 4:00 p.m. and
4:30 p.m. (or immediately after the conclusion or adjournment of the Court
Meeting).
|
12.
|
What
is the location, date and time of the Court
Hearing?
|
|
•
|
The
Court Hearing will be held at the High Court at the High Court Building,
38 Queensway, Hong Kong and is expected to take place on 14 October 2008
at 9:30 a.m. An announcement will be made of the exact date and time of
the Court Hearing.
|
13.
|
Who
should I call if I have additional
questions?
|
|
•
|
If
a registered or beneficial owner of Netcom Shares in Hong Kong has
questions concerning administrative matters, such as dates, documentation
and procedures relating to the Proposals, please call the share registrar
of Netcom, Computershare Hong Kong Investor Services Limited, at (852)
2862 8648 between 9:00 a.m. and 6:00 p.m. (Hong Kong time) Monday to
Friday from 15 August 2008 to 17 September
2008.
|
|
•
|
If
you are a Netcom ADS Holder and have questions concerning administrative
matters, such as dates, documentation and procedures relating to the
Proposals, please call the Netcom Depositary at 1-877-248-4237 between
8:30 a.m. and 6:00 p.m. (New York time) Monday to
Friday.
|
|
•
|
These
helplines cannot and will not provide advice on the merits of the
Proposals or the Scheme or give any financial or legal advice, and will
not be soliciting proxies or votes in respect of the resolutions to be
voted on at the Court Meeting and the Netcom
EGM.
|
|
EXPECTED
TIMETABLE
|
directly
at the Court Meeting and the Netcom EGM(1).
|
3:00
p.m. on Tuesday,
|
2
September 2008
|
|
(New
York time)
|
Instruction
Cards from Netcom ADS Holders(2)
|
10:00
a.m. on Wednesday,
|
10
September 2008
|
|
(New
York time)
|
Court
Meeting and the Netcom EGM
|
before
4:30 p.m. on Thursday,
|
11
September 2008
|
to
attend and vote at the Netcom EGM(3)
|
Friday,
12 September 2008 to
|
Wednesday,
17 September 2008
|
|
(both
days inclusive)
|
Court
Meeting(4)
|
4:00
p.m. on Monday, 15 September 2008
|
Netcom
EGM(4)
|
4:30
p.m. on Monday, 15 September 2008
|
Court
Meeting(5)
|
4:00
p.m. on Wednesday, 17 September 2008
|
Netcom
EGM(5)
|
4:30
p.m. on Wednesday, 17 September 2008
|
(or
immediately after the conclusion or
|
|
adjournment
of the Court Meeting)
|
|
Announcement
of the results of the Court Meeting
and
the Netcom EGM published on the Hong Kong
Stock
Exchange website
|
not
later than 7:00 p.m.
|
on
Wednesday, 17 September 2008
|
and
The Asian Wall Street Journal
|
Thursday,
2 October 2008
|
Last
day for dealings in the Netcom Shares
|
Monday,
6 October 2008
|
Last
day for dealings in the Netcom ADSs.
|
Monday,
6 October 2008
|
appear
at the Court Hearing
|
3:00
p.m. on Thursday, 9 October 2008
|
(New York
time)
|
entitlements
under the Scheme
|
before
4:30 p.m. on Friday, 10 October 2008
|
Court
Hearing(6)
|
Tuesday,
14 October 2008
|
Scheme
Record Time
|
5:00
p.m. on Tuesday, 14 October 2008
|
Exchange
website
|
Tuesday,
14 October 2008
|
Journal
and The Asian Wall Street Journal
|
Wednesday,
15 October 2008
|
Effective
Date(7)
|
Wednesday,
15 October 2008
|
the
Hong Kong Stock Exchange.
|
9:30
a.m. on Wednesday, 15 October 2008
|
Hong
Kong Stock Exchange website
|
Wednesday,
15 October 2008
|
ADSs
on the New York Stock Exchange
|
9:30
a.m. on Wednesday, 15 October 2008
|
pursuant
to the Proposals to be despatched on or before
|
Saturday,
25 October 2008
|
relation
to the Unicom Shares is provided
|
Monday,
27 October 2008 to Friday,
|
(1)
|
Netcom
ADS Holders who wish to surrender their Netcom ADSs and withdraw the
underlying Netcom Shares in order to become Netcom Shareholders should
contact the Netcom Depositary at Citigroup Shareholder Services, P.O. Box
43099, Providence RI 02940-5000, the United States of America or by
telephone at 1-877-248-4237 between 8:30 a.m. and 6:00 p.m. (New York
time) Monday to Friday.
|
(2)
|
ADS
Voting Instruction Cards should be returned to the Netcom Depositary in
accordance with the instructions printed on them as soon as possible and
in any event not later than 10:00 a.m. (New York time) on 10 September
2008.
|
(3)
|
The
closure of the register of members of Netcom is not for the purpose of
determining entitlements under the
Scheme.
|
(4)
|
Forms
of proxy, together with the power of attorney or other authority (if any)
under which it is signed or a notarially certified copy thereof, must be
deposited at Netcom’s registered office at Room 6701, The Center, 99
Queen’s Road Central, Hong Kong, as soon as possible and in any event not
later than the times and dates stated above. The pink form of proxy in
respect of the Court Meeting may alternatively be handed to the Chairman
of the Court Meeting at the Court Meeting if it is not so deposited. In
order to be valid, the white form of proxy for the Netcom EGM must be
deposited by the time and
|
date stated above. Completion and return of a form of proxy for the Court Meeting or the Netcom EGM will not preclude a Disinterested Netcom Shareholder and a Netcom Shareholder, respectively, from attending the relevant meeting and voting in person. In such event, the relevant form of proxy will be deemed to have been revoked. |
(5)
|
The
Court Meeting and the Netcom EGM will be held at The Ballroom, Island
Shangri-La, Hong Kong at the times and dates specified above. Notice of
the Court Meeting is set out on pages N-1 and N-2 of this document and
Notice of the Netcom EGM is set out on pages N-3 and N-4 of this
document.
|
(6)
|
The
Court Hearing will be held at the High Court at the High Court Building,
38 Queensway, Hong Kong.
|
(7)
|
The
Scheme will become effective upon all the conditions set out in paragraph
4 headed “Conditions of the Proposals and the Scheme” in the Explanatory
Statement on pages 62 to 65 of this document having been satisfied or
waived, as applicable.
|
|
LETTER
FROM THE BOARD
|
Executive
Directors:
ZUO
Xunsheng (Chairman)
LI
Jianguo
LI
Fushen
Non-executive
Directors:
YAN
Yixun
Cesareo
ALIERTA IZUEL
José
María ÁLVAREZ-PALLETE
Independent
Non-executive Directors:
John
Lawson THORNTON
QIAN
Yingyi
HOU
Ziqiang
Timpson
CHUNG Shui Ming
|
Registered
Office:
Room
6701, The Center
99
Queen’s Road Central
Hong
Kong
|
15
August 2008
|
Yours
faithfully,
For
and on behalf of the Board of
China Netcom Group Corporation
(Hong Kong) Limited
Zuo
Xunsheng
Chairman
|
QUESTIONS
AND
ANSWERS
|
Yours
faithfully,
Timpson Chung Shui
Ming
John
Lawson Thornton
Qian
Yingyi
Hou
Ziqiang
Independent Board
Committee
|
LETTER
FROM
ROTHSCHILD
|
N
M Rothschild & Sons (Hong Kong) Limited
16th
Floor, Alexandra House
18
Chater Road, Central
Hong
Kong SAR
|
Telephone
Facsimile
|
+852
2525 5333
+852
2868 1728
+852
2810 6997
|
•
|
Each
Scheme Shareholder will be entitled to receive 1.508 new Unicom Shares in
exchange for every Scheme Share (including the Netcom Shares to be issued
pursuant to the exercise of the outstanding Netcom Options prior to the
Options Exercise Deadline) cancelled. The Share Exchange Ratio of 1.508
new Unicom Shares for every Scheme Share cancelled was determined by
Unicom on the basis of the closing price of each Netcom Share of HK$27.05
on the Hong Kong Stock Exchange on the Last Trading Date plus a 3% premium
over such closing price, and the closing price of each Unicom Share of
HK$18.48 on the Hong Kong Stock Exchange on the Last Trading Date;
and
|
•
|
The
Share Proposal will be implemented by way of a scheme of arrangement of
Netcom under Section 166 of the Hong Kong Companies Ordinance, subject to
the satisfaction or waiver, as applicable, of the conditions of the
Proposals and the Scheme as described in the Explanatory Statement on or
before 30 November 2008 (or such later date as Unicom and Netcom may agree
and the High Court may allow), otherwise the Proposals, including the
Scheme, will lapse. Assuming that all of the conditions of the Proposals
and the Scheme are satisfied or waived, as applicable, it is expected that
the Scheme will become effective on or before 31 October
2008.
|
•
|
Each
Netcom ADS Holder will be entitled to receive 3.016 new Unicom ADSs for
every Netcom ADS in exchange for the cancellation of the Scheme Shares
underlying each Netcom ADS (by applying the same Share Exchange Ratio as
the Share Proposal); and
|
•
|
The
ADS Proposal will be conditional upon the Scheme becoming effective. Upon
the Scheme becoming effective, Unicom intends to cause Netcom to apply for
the delisting of the Netcom ADSs from the New York Stock
Exchange.
|
•
|
Pursuant
to the Option Proposal, which is conditional upon the Scheme becoming
effective, Unicom will grant Netcom Optionholders Special Unicom Options
in consideration for the cancellation of their outstanding Netcom Options
at the Scheme Record Time (whether vested or not) using the formula set
out below:
|
|
(a)
|
the
PRC government would deepen the reform of the structure of the
telecommunications sector and encourage the formation of three market
competitors with each having nationwide network resources, relatively
comparable strength and scale, as well as full service operation
capabilities;
|
|
(b)
|
the
allocation of telecommunications resources would be further optimised and
the competition structure would be improved;
and
|
|
(c)
|
three
3G licences would be granted once the contemplated restructuring had been
completed.
|
As
at 31 December
|
|||
2007
|
2006
|
2005
|
|
(million)
|
(million)
|
(million)
|
|
Fixed
line subscribers
|
|||
Netcom
|
110.8
|
114.0
|
114.7
|
Growth
|
-2.8%
|
-0.6%
|
6.6%
|
China
Telecom
|
220.3
|
223.0
|
210.1
|
Growth
|
-1.2%
|
6.1%
|
12.6%
|
Mobile
subscribers
|
|||
Unicom
(GSM)
|
120.6
|
106.9
|
95.9
|
Growth
|
12.8%
|
11.5%
|
n.a.1
|
Unicom
(CDMA)
|
41.9
|
37.3
|
33.5
|
Growth
|
12.3%
|
11.3%
|
n.a.1
|
China
Mobile (Hong Kong) Limited (“China Mobile”)
|
369.3
|
301.2
|
246.7
|
Growth
|
22.6%
|
22.1%
|
20.8%
|
Source:
|
Annual
reports of the respective companies and Form 20-Fs filed by Netcom and
Unicom with the SEC for the fiscal year ended 31 December
2007
|
1.
|
The
respective numbers of Unicom GSM and CDMA subscribers as at 31 December
2004 are not publicly available and the respective growth rates for
|
2005 are therefore not available. | |
2.
|
China
Tietong Telecommunication Corporation (“China Tietong”) is not included in
Table 1 above since it is not listed and has limited public information
available. According to its website, China Tietong’s number of fixed-line
subscribers in 2006 was approximately 18.2
million.
|
For
the year ended 31 December
|
|||
2007
|
2006
|
2005
|
|
(Restated)
|
(Restated)
|
||
(RMB
million)
|
(RMB
million)
|
(RMB
million)
|
|
Revenue
|
84,005
|
84,194
|
83,927
|
Operating
expenses
|
(66,739)
|
(64,643)
|
(62,868)
|
Other
income
|
1,221
|
621
|
—
|
Interest
income
|
113
|
135
|
134
|
Dividend
income
|
—
|
—
|
29
|
Deficit
on revaluation of fixed assets
|
—
|
(1,335)
|
—
|
Finance
costs
|
(3,333)
|
(3,767)
|
(3,346)
|
Profit
before taxation
|
15,267
|
15,205
|
17,876
|
Taxation
|
(3,796)
|
(3,727)
|
(3,526)
|
Profit
for the year from continuing operations
|
11,471
|
11,478
|
14,350
|
Earnings per Netcom Share from
continuing operations attributable to the Netcom
Shareholders (RMB)
|
|||
Basic
|
1.72
|
1.74
|
2.18
|
Diluted
|
1.70
|
1.72
|
2.17
|
Dividend
per Netcom Share (HK$)
|
0.592
|
0.553
|
0.466
|
For
the year ended 31 December
|
||||||
2007
|
2006
|
2005
|
||||
(Restated)
|
(Restated)
|
|||||
(RMB million)
|
(%)
|
(RMB
million)
|
(%)
|
(RMB
million)
|
(%)
|
|
Fixed-line
telephone services
|
59,226
|
70.5%
|
66,462
|
78.9%
|
69,729
|
83.1%
|
Broadband
services
|
13,835
|
16.5%
|
9,916
|
11.8%
|
7,289
|
8.7%
|
Other
Internet-related services
|
532
|
0.6%
|
516
|
0.6%
|
556
|
0.7%
|
Managed
data services
|
1,284
|
1.5%
|
1,413
|
1.7%
|
1,621
|
1.9%
|
Leased
line income
|
2,521
|
3.0%
|
2,540
|
3.0%
|
2,376
|
2.8%
|
ICT
services
|
3,990
|
4.8%
|
855
|
1.0%
|
186
|
0.2%
|
Other
services
|
2,617
|
3.1%
|
2,492
|
3.0%
|
2,170
|
2.6%
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
84,005
|
100.0%
|
84,194
|
100.0%
|
83,927
|
100.0%
|
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
For
the year ended 31 December
|
|||
2007
|
2006
|
2005
|
|
(Restated)
|
(Restated)
|
||
(RMB
million)
|
(RMB
million)
|
(RMB
million)
|
|
Revenue
|
99,539
|
95,348
|
88,038
|
Operating
costs and expenses
|
(83,906)
|
(81,492)
|
(77,306)
|
Cost
of telecommunications products sold
|
(5,032)
|
(4,915)
|
(3,674)
|
Realised/unrealised
loss on changes in fairvalue of derivative component ofconvertible
bonds
|
(569)
|
(2,397)
|
—
|
Other
gains
|
2,923
|
21
|
35
|
Profit
before taxation
|
12,955
|
6,565
|
7,093
|
Income
tax expenses
|
(3,654)
|
(2,764)
|
(2,170)
|
Profit
for the year
|
9,301
|
3,801
|
4,923
|
Attributable
to:
|
|||
Equity holders of
Unicom
|
9,300
|
3,801
|
4,923
|
Minority interest
|
1
|
—
|
—
|
Earnings
per Unicom Share for profitattributable to the equity holders ofUnicom
(RMB)
|
|||
Basic
|
0.713
|
0.302
|
0.392
|
Diluted
|
0.707
|
0.300
|
0.390
|
Dividend
per Unicom Share (RMB)
|
0.20
|
0.18
|
0.11
|
For
the year ended 31 December
|
||||||||
2007
|
2006
|
2005
|
||||||
(Restated)
|
(Restated)
|
|||||||
(RMB million)
|
(%)
|
(RMB
million)
|
(%)
|
(RMB
million)
|
(%)
|
|||
GSM
business
|
62,775
|
63.1%
|
59,882
|
62.8%
|
52,618
|
59.8%
|
||
CDMA
Business
|
27,730
|
27.9%
|
27,877
|
29.2%
|
28,089
|
31.9%
|
||
Data
and Internetbusiness
|
2,626
|
2.6%
|
2,320
|
2.4%
|
3,000
|
3.4%
|
||
Long
distance business
|
1,508
|
1.5%
|
1,015
|
1.1%
|
1,472
|
1.7%
|
||
Sales
of telecommunications products
|
4,900
|
4.9%
|
4,254
|
4.5%
|
2,859
|
3.2%
|
||
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|||
99,539
|
100.0%
|
95,348
|
100.0%
|
88,038
|
100.0%
|
|||
============
|
============
|
============
|
============
|
============
|
============
|
Netcom
Group1
|
Unicom
Group
|
Pro
forma adjustments2
|
Enlarged
Group
|
|||||
(RMB
million)
|
(%)
|
(RMB
million)
|
(%)
|
(RMB
million)
|
(%)
|
(RMB
million)
|
(%)
|
|
Revenue
|
84,081
|
55.84%
|
67,673
|
44.94%
|
(1,178)
|
(0.78)%
|
150,576
|
100.00%
|
EBITDA
|
42,7613
|
58.06%
|
31,2124
|
42.38%
|
(320)
|
(0.44)%
|
73,653
|
100.00%
|
Net
profit
|
10,2503
|
63.18%
|
6,2924
|
38.79%
|
(320)
|
(1.97)%
|
16,222
|
100.00%
|
Net
asset value
|
82,052
|
40.24%
|
122,175
|
59.92%
|
(320)
|
(0.16)%
|
203,907
|
100.00%
|
Net
debt/(cash)
|
56,331
|
n.m.
|
(31,288)
|
n.m.
|
—
|
—
|
25,043
|
n.m.
|
Equity
holdings on the
Effective
Date5
(Shares)
|
10,102,389,377
|
42.51%
|
13,664,951,945
|
57.49%
|
—
|
—
|
23,767,341,322
|
100.00%
|
Netcom
Group1
|
Unicom
Group
|
Pro
forma adjustments6
|
Enlarged
Group
|
|||||
(RMB
million)
|
(%)
|
(RMB
million)
|
(%)
|
(RMB
million)
|
(%)
|
(RMB
million)
|
(%)
|
|
Revenue
|
84,081
|
46.19%
|
99,539
|
54.68%
|
(1,579)
|
(0.87)%
|
182,041
|
100.00%
|
EBITDA
|
42,7613
|
56.57%
|
33,1474
|
43.85%
|
(320)
|
(0.42)%
|
75,588
|
100.00%
|
Net
profit
|
10,2503
|
60.23%
|
7,0894
|
41.65%
|
(320)
|
(1.88)%
|
17,019
|
100.00%
|
Net
asset value
|
82,052
|
45.85%
|
97,213
|
54.33%
|
(320)
|
(0.18)%
|
178,945
|
100.00%
|
Net
debt/(cash)
|
56,331
|
n.m.
|
(3,462)
|
n.m.
|
—
|
—
|
52,869
|
n.m.
|
Equity
holdings on the
Effective
Date5
(Shares)
|
10,102,389,377
|
42.51%
|
13,664,951,945
|
57.49%
|
—
|
—
|
23,767,341,322
|
100.00%
|
1.
|
The
financials of the continuing operations of the Netcom Group
only.
|
2.
|
Please
refer to note 4 to the “Unaudited pro forma consolidated financial
information on the Enlarged Group” set out in Appendix III to the
Explanatory Statement.
|
3.
|
The
EBITDA and net profit from continuing operations of the Netcom Group have
been adjusted to exclude the other income relating to subsidy income
received from reinvestment of the profit distributions received from a
subsidiary in the PRC to that subsidiary of approximately RMB1,221 million
for the year ended 31 December
2007.
|
4.
|
The
EBITDA and net profit of the Unicom Group have been adjusted to exclude
the unrealised loss on changes in fair value of derivative component of
convertible bonds of approximately RMB569 million and the other gains from
tax refund on reinvestment in a subsidiary of approximately RMB2,781
million for the year ended 31 December 2007 and do not include gain from
the CDMA Business Disposal.
|
5.
|
The
shareholding in the Enlarged Group is extracted from paragraph 11 of the
Explanatory Statement assuming the Scheme becomes effective and none of
the outstanding Netcom Options had been exercised. The number of Netcom
Shares shown in this table is the number of new Unicom Share assumed to be
issued pursuant to the Share Proposal (i.e. 6,699,197,200 Netcom Shares in
issue as at the Latest Practicable Date multiplied by the Share Exchange
Ratio).
|
6.
|
Please
refer to note 5 to the “Unaudited pro forma consolidated financial
information on the Enlarged Group” set out in Appendix III to the
Explanatory Statement.
|
7.
|
n.m.
denotes not meaningful.
|
|
(i)
|
following
the telecoms industry restructuring as contemplated in the Telecoms
Restructuring Announcement, it is envisaged that there will be three main
telecommunications operators (of which Unicom (post-merger) will be one of
them) with more comparable resources, strength and scale, and with
capability to offer full telecommunications services which, in turn, is
expected to lead to a more balanced competitive environment
|
and better resource allocation within China’s telecommunications industry. The expected issuance of 3G licences should result in new opportunities for Unicom and other telecommunications operators; | ||
|
(ii)
|
Netcom’s
operational and financial performance in recent years has been affected by
increasingly rapid mobile substitution. An entry into the mobile market
through the Proposals should address Netcom’s needs effectively and is in
line with the stated business direction and objectives of
Netcom;
|
|
(iii)
|
the
synergies anticipated from the proposed merger (as set out in paragraph 6
headed “Reasons for and benefits of the proposed merger” in the
Explanatory Statement) are not reflected in the historical pro forma
consolidated financials of the Enlarged Group. Factoring in the synergies
anticipated from the proposed merger, the Enlarged Group should lead to
greater growth opportunities for the Netcom Shareholders than Netcom would
offer as a standalone entity in its current
structure;
|
|
(iv)
|
as
at 31 December 2007, the Netcom Group had net debt of approximately
RMB56,331 million whilst the Unicom Group had net cash of approximately
RMB3,462 million. The gearing position of the Enlarged Group should,
therefore, reduce as a result of the Proposals (although in a much greater
extent under Scenario A since the Unicom Group will receive cash proceeds
of RMB43.8 billion from the CDMA Business
Disposal).
|
One
year prior to the Last Trading Date (i.e.the One-Year
Period)
|
Netcom
Share
price
|
Unicom
Share
price
|
Historical
exchange ratio1
|
Premium/
(discount) of the Share Exchange Ratio over/to the historical exchange
ratio
|
Implied
Netcom Share price2
|
Increase
|
30-day3
|
HK$23.77
|
HK$16.72
|
1.422
times
|
6.0%
|
HK$25.21
|
HK$1.44
|
60-day3
|
HK$23.33
|
HK$16.88
|
1.382
times
|
9.1%
|
HK$25.46
|
HK$2.13
|
90-day3
|
HK$23.56
|
HK$17.25
|
1.366
times
|
10.4%
|
HK$26.01
|
HK$2.45
|
120-day3
|
HK$23.59
|
HK$17.03
|
1.385
times
|
8.9%
|
HK$25.68
|
HK$2.09
|
Simple
average
|
8.6%
|
HK$2.03
|
Note:
|
Each
Netcom ADS represents 20 Netcom Shares. The closing prices of the Netcom
ADSs as shown in Chart 9 above have been divided by 20 to derive the
closing prices on a per Netcom Share basis and converted from US$ into HK$
by using an exchange rate of HK$7.80 for every
US$1.
|
|
Note:
|
The
opening price of the Unicom Shares and the opening index of the Hang Seng
Index as shown in Chart 11 above were rebased to match the latest closing
price of the Netcom Shares on 24 May 2005, with the subsequent movements
in the Unicom Shares and the Hang Seng Index presented by reference to
such rebased opening position of the Netcom
Shares.
|
As
at the Last Trading Date
|
As
at the Latest Practicable Date
|
||||
Company
|
Listing
|
EV/
EBITDA1
|
PER1
|
EV/
EBITDA1
|
PER1
|
(Times)
|
(Times)
|
(Times)
|
(Times)
|
||
China
Telecom
|
Hong
Kong
|
5.7
|
18.1
|
4.4
|
13.0
|
KT
Corporation
|
Korea
|
4.5
|
13.0
|
4.3
|
12.2
|
Telekom
Malaysia
|
Kuala
Lumpur
|
4.7
|
10.7
|
5.0
|
11.6
|
Simple
average
|
5.0
|
13.9
|
4.6
|
12.3
|
|
Netcom
|
5.1
|
15.7
|
4.5
|
13.4
|
|
1.
|
Based
on the EBITDA and net profit for the year ended 31 December 2007. In
respect of the Netcom Group, the EBITDA and net profit have been adjusted
to exclude the other income relating to subsidy income received from
reinvestment of the profit distributions received from a subsidiary in the
PRC to that subsidiary. EV is defined as the equity value plus net debt
and minority interests less cash and cash equivalents and interests in
associates.
|
|
2.
|
Exchange
rates into HK$ as at the Last Trading Date were
used.
|
As
at the Last Trading Date
|
As
at the Latest Practicable Date
|
||||
Company
|
Listing
|
EV/
EBITDA1
|
PER1
|
EV/
EBITDA1
|
PER1
|
(Times)
|
(Times)
|
(Times)
|
(Times)
|
||
Advanced
Info Service
|
Bangkok
|
7.1
|
17.7
|
6.6
|
16.4
|
China
Mobile
|
Hong
Kong
|
10.7
|
25.6
|
7.9
|
19.3
|
Digi.com
|
Kuala
Lumpur
|
8.6
|
17.4
|
8.6
|
17.4
|
Globe
Telecom
|
Philippines
|
4.7
|
12.6
|
4.5
|
11.8
|
Indosat
|
Indonesia
|
4.7
|
15.8
|
4.8
|
16.2
|
PLDT
|
Philippines
|
5.7
|
12.9
|
5.8
|
13.0
|
PT
Telkom
|
Indonesia
|
5.2
|
13.5
|
4.5
|
11.8
|
Simple
average
|
6.7
|
16.5
|
6.1
|
15.1
|
|
Unicom
|
|||||
—
Scenario A2
|
6.2
|
35.7
|
5.0
|
29.9
|
|
—
Scenario B
|
6.7
|
31.7
|
5.6
|
26.5
|
|
1.
|
Based
on the EBITDA and net profit for the year ended 31 December 2007. In
respect of the Unicom Group, the EBITDA and net profit have been adjusted
to exclude the unrealised loss on changes in fair value of derivative
component of convertible bonds and the other gains from tax refund on
reinvestment in a subsidiary. EV is defined as the equity value plus net
debt and minority interests less cash and cash equivalents and interests
in associates.
|
|
2.
|
EBITDA
and net profit of the Unicom Group adjusted to exclude contribution from
the CDMA Business and other inter-company transactions between the Netcom
Group and the Unicom Group.
|
|
3.
|
Exchange
rates into HK$ as at the Last Trading Date were
used.
|
|
•
|
the
prices used to determine the Share Exchange Ratio were at historical highs
of the Netcom Shares and the Unicom Shares over the Three-Year
Period;
|
|
•
|
the
Share Exchange Ratio is at approximately 8.6% premium (or an increase of
approximately HK$2.03 in capital value on a per share basis) over the
historical exchange ratio during the One-Year Period using the public
market analysis method; and
|
|
•
|
the
Unicom Shares trade at a premium over the Netcom Shares both in terms of
EV/EBITDA and PER multiples as at the Last Trading Date and the Latest
Practicable Date using the comparable trading companies
analysis,
|
For
the financial year ended 31 December 2007
|
Netcom
|
Unicom
|
Dividend
per share
|
HK$0.592
|
HK$0.2051
|
Dividend
payout ratio2
|
37.5%
|
36.8%
|
Dividend
yield based on the closing price on the Latest Practicable
Date
|
2.6%
|
1.3%
|
Implied
dividend yield based on the closing price on the Last Trading
Date
|
2.2%
|
1.1%
|
1.
|
Converted
from RMB into HK$ by using the exchange rate of RMB0.975 for every
HK$1.
|
2.
|
Dividend
per share divided by basic earnings per share (after excluding the effect
of the other income of approximately RMB1,221 million in the net profit of
Netcom and excluding the effect of the unrealised loss on changes in fair
value of derivative component of convertible bonds of RMB569 million and
the other gains from tax refund of RMB2,781 million in the net profit of
Unicom).
|
Netcom
|
Unicom
|
|||
Monthly
trading volume of the Netcom Shares
|
Monthly
trading volume of the Netcom Shares as a percentage of public float of
Netcom1
|
Monthly
trading volume of the Unicom Shares
|
Monthly
trading volume of the Unicom Shares as a percentage of public float of
Unicom2
|
|
(million
shares)
|
(million
shares)
|
|||
2007
|
||||
May
|
241.6
|
11.8%
|
206.6
|
5.2%
|
June
|
254.1
|
12.4%
|
369.4
|
9.4%
|
July
|
229.8
|
11.2%
|
284.0
|
7.2%
|
August
|
263.1
|
12.8%
|
354.1
|
9.0%
|
September
|
306.4
|
14.9%
|
368.4
|
9.4%
|
October
|
547.9
|
26.7%
|
473.4
|
12.0%
|
November
|
390.3
|
19.0%
|
440.2
|
11.2%
|
December
|
208.1
|
10.1%
|
486.4
|
12.3%
|
Average
monthly trading volume(1 May 2007 to
31 December 2007)
|
305.2
|
14.9%
|
372.8
|
9.5%
|
2008
|
||||
January
|
333.8
|
16.3%
|
585.7
|
14.9%
|
February
|
208.4
|
10.2%
|
504.0
|
12.8%
|
March
|
267.4
|
13.0%
|
490.0
|
12.4%
|
April
|
242.5
|
11.8%
|
494.5
|
12.6%
|
May
|
212.3
|
10.3%
|
377.1
|
9.6%
|
June
|
376.8
|
18.4%
|
1,077.9
|
27.4%
|
July
|
155.4
|
7.6%
|
414.1
|
10.5%
|
Average
monthly trading volume(1 January 2008 to 31 July2008)
|
256.7
|
12.5%
|
563.3
|
14.3%
|
1.
|
Based
on 2,051,748,185 Netcom Shares, being 6,699,197,200 Netcom Shares in issue
as at the Latest Practicable Date less a total of 4,647,449,015 Netcom
Shares held by Netcom BVI.
|
2.
|
Based
on 3,939,951,925 Unicom Shares, being 13,664,951,945 Unicom Shares in
issue as at the Latest Practicable Date less a total of 9,725,000,020
Unicom Shares held by Unicom
Parent.
|
|
(c)
|
Risks
related to the successful integration of Netcom and Unicom and realisation
of potential synergies
|
|
•
|
difficulties
in integrating the operations of Netcom and Unicom, including information
systems, personnel, policies and procedures, and overlapping operations,
subsidiaries and branch networks;
|
|
•
|
unforeseen
contingent risks or latent liabilities relating to the proposed merger
that may become apparent in the
future;
|
|
•
|
difficulties
in managing a much larger business;
|
|
•
|
failure
to complete or to timely complete the CDMA Business Disposal or to achieve
the benefits anticipated from such
disposal;
|
|
•
|
diversion
of management’s attention from day-to-day business as a result of the need
to deal with integration issues;
|
|
•
|
loss
of key personnel; and/or
|
|
•
|
increase
in competition in the PRC telecommunications industry resulting from the
ongoing restructuring of the PRC telecommunications industry which, among
other things, may require an increase in marketing
efforts.
|
|
(a)
|
the
exercise price of a Special Unicom Option granted will be such price as
will result in the value of the Special Unicom Option received by the
Netcom Optionholders being equivalent to the See-Through Price;
and
|
|
(b)
|
other
than the Special Unicom Options to be granted pursuant to the Option
Proposal, no further Special Unicom Options will be granted under the
Special Purpose Unicom Share Option
Scheme.
|
|
(a)
|
Following
the telecommunications industry restructuring as contemplated in the
Telecoms Restructuring Announcement, it is envisaged that there will be
three main telecommunications operators (of which Unicom (post-merger)
will be one of them) with more comparable resources, strength and scale,
and with capability to offer full telecommunications services which, in
turn, is expected to lead to a more balanced competitive environment and
better resource allocation within China’s telecommunications industry. The
expected issuance of 3G licences should result in new opportunities for
Unicom and other telecommunications
operators;
|
|
(b)
|
Netcom’s
operational and financial performance in recent years has been affected by
increasingly rapid mobile substitution. Recognising this, Netcom has been
investing to provide broadband and ICT services using its network but the
increase in revenue from such initiatives has not been enough to
compensate for the loss in revenue from its fixed-line services. The
Proposals offer Netcom immediate access to a mobile platform and are
considered to be in line with the business direction and objectives as
noted from the Chairman’s Statement in Netcom’s annual report for the year
ended 31 December 2007 which stated that Netcom will “persevere in the
pursuit of licenses for mobile services and IPTV services which will pave
the way for the Company to become a comprehensive “broadband
communications and multimedia service
provider””;
|
|
(c)
|
Through
the Proposals, Netcom will become part of a larger group offering a full
spectrum of wireless, fixed, Internet and broadband and data value adding
services. The management of Unicom and Netcom believe that the proposed
merger has strong commercial reasons. After the proposed merger, the
Enlarged Group is expected to take steps to establish a leading position
in the 3G wireless industry, integrate its wireless and fixed-line
businesses, and build a strong market position in the 10 provinces in
Northern China where the Netcom Group has operations, which is expected to
enhance the Enlarged Group’s brand recognition and increase its overall
competitiveness, business scale and shareholder value. The directors of
Unicom and Netcom believe that through effective integration, synergies of
the proposed merger will be realised gradually after completion of the the
Proposals and the CDMA Business Disposal (as discussed in details in
paragraph 1 headed “Reasons for and benefits of the proposed merger”
above);
|
|
(d)
|
We
have discussed the anticipated synergies with representatives of Unicom
and Netcom and in-principle concur that the anticipated synergies as set
out in the Explanatory Statement are feasible (recognising that any
synergies would likely only be realised upon the completion of the
Proposals and potentially after a successful and timely post-merger
integration of Netcom’s and Unicom’s operations). The management of Unicom
and Netcom do not expect the benefits as set out in the Explanatory
Statement would be materially adversely affected if the proposed CDMA
Business Disposal is not completed;
|
|
(e)
|
If
the estimated one-off gain from the CDMA Business Disposal were excluded,
the Netcom Group would, as illustrated in Table 6 above, contribute over
50% of revenue, EBITDA and net profit to the Enlarged Group under both
scenarios (except that the Netcom Group would contribute approximately
46.19% of revenue to the Enlarged Group under Scenario B) whilst the
Netcom Shareholders would get approximately 42.51% of the equity of the
Enlarged Group. This implies that the Proposals (under both scenarios)
would result in a dilution in the revenue, EBITDA and net profit
attributable to the Netcom Shareholders on a pro forma basis. We believe
the dilution to be acceptable after considering the
following:
|
|
•
|
the
synergies anticipated from the proposed merger are not reflected in the
historical pro forma consolidated financials of the Enlarged Group.
Factoring in the synergies anticipated from the proposed merger, the
Enlarged Group should lead to greater growth opportunities for the Netcom
Shareholders than Netcom would offer as a standalone entity in its current
structure; and
|
|
•
|
the
gearing position of the Enlarged Group should reduce as a result of the
Proposals (although in a much greater extent under Scenario A since the
Unicom Group will receive a cash proceed of RMB43.8 billion from the CDMA
Business Disposal);
|
|
(f)
|
The
Share Exchange Ratio of 1.508 new Unicom Shares for every Scheme Share
cancelled was determined by Unicom on the basis of the closing price of
each Netcom Share of HK$27.05 on the Hong Kong Stock Exchange on the Last
Trading Date plus a 3% premium over such closing price, and the closing
price of each Unicom Share of HK$18.48 on the Hong Kong Stock Exchange on
the Last Trading Date:
|
|
•
|
the
prices used to determine the Share Exchange Ratio were at historical highs
of the Netcom Shares and the Unicom Shares over the Three-Year
Period;
|
|
•
|
the
Share Exchange Ratio is at approximately 8.6% premium (or an increase of
approximately HK$2.03 in capital value on a per share basis) over the
historical exchange ratio during the One-Year Period using the public
market analysis method (see Table 8 above);
and
|
|
•
|
the
Unicom Shares trade at a premium over the Netcom Shares both in terms of
EV/EBITDA and PER multiples as at the Last Trading Date and the Latest
Practicable Date using the comparable trading companies
analysis;
|
|
(g)
|
Unicom
had a similar dividend payout ratio as Netcom (both as adjusted to exclude
non-recurring items) for the year ended 31 December 2007 but an investment
in the Netcom Shares had offered a higher dividend yield than the dividend
yield offered by the Unicom Shares. The future dividend payment of the
Enlarged Group will depend on its dividend policy to be determined by the
board of directors of the Enlarged Group;
and
|
|
(h)
|
Both
the Netcom Shares and the Unicom Shares are Hang Seng Index constituents
and have active trading records. The Unicom Shares should continue to have
good trading liquidity after the Scheme becomes
effective.
|
Yours
very truly,
For
and on behalf of
N
M Rothschild & Sons (Hong Kong) Limited
|
Kelvin
Chau
Managing
Director
|
Catherine
Yien
Director
|
EXPLANATORY STATEMENT
|
|
(a)
|
the
exercise price of a Special Unicom Option granted will be such price as
will result in the value of the Special Unicom Options received by the
Netcom Optionholders being equivalent to the See-Through Price;
and
|
|
(b)
|
other
than the Special Unicom Options to be granted pursuant to the Option
Proposal, no further Special Unicom Options will be granted under the
Special Purpose Unicom Share Option
Scheme.
|
|
(a)
|
the
approval of the Unicom Shareholders having been obtained at the Unicom EGM
for the adoption of the Special Purpose Unicom Share Option
Scheme;
|
|
(b)
|
the
Hong Kong Stock Exchange having granted its approval for the listing of,
and permission to deal in, the Unicom Shares to be issued upon the
exercise of the Special Unicom Options;
and
|
|
(c)
|
the
Scheme becoming effective.
|
Special
Unicom Options Granted in Consideration for the
Cancellation
of
|
Approximate Number
of Special Unicom Options to be Granted(1)
|
Exercise
Price of Special Unicom Options to be Granted
|
66,864,360
outstanding Netcom Options granted on 22 October 2004 with an exercise
price of HK$8.40 (“2004 Netcom Options”)(2)
|
100,831,454
|
HK$5.57
|
58,971,900
outstanding Netcom Options granted on 6 December 2005 with an exercise
price of HK$12.45 (“2005 Netcom Options”)(3)
|
88,929,625
|
HK$8.26
|
-------
|
------
|
|
Total
|
189,761,079
|
|
=============
|
=============
|
|
(1)
|
Each
new Special Unicom Option gives the holder the right to subscribe for one
Unicom Share. Fractions of Special Unicom Options will not be granted to
the Netcom Optionholders.
|
|
(2)
|
For
the new Special Unicom Options to be granted in consideration for the
cancellation of the 2004 Netcom Options pursuant to the Option
Proposal:
|
|
(a)
|
100%
of the Special Unicom Options granted in respect of the outstanding 2004
Netcom Options held by the Netcom Optionholders at the Scheme Record Time
which are exercisable from 17 May 2006 to 16 November 2010 may be
exercised at any time from the Effective Date to 16 November
2010;
|
|
(b)
|
100%
of the Special Unicom Options granted in respect of the outstanding 2004
Netcom Options held by the Netcom Optionholders at the Scheme Record Time
which are exercisable from 17 May 2007 to 16 November 2010 may be
exercised at any time from the Effective Date to 16 November
2010;
|
|
(c)
|
100%
of the Special Unicom Options granted in respect of the outstanding 2004
Netcom Options held by the Netcom Optionholders at the Scheme Record Time
which are exercisable from 17 May 2008 to 16 November 2010 may be
exercised at any time from the Effective Date to 16 November 2010;
and
|
|
(d)
|
100%
of the Special Unicom Options granted in respect of the outstanding 2004
Netcom Options held by the Netcom Optionholders at the Scheme Record Time
which are exercisable from 17 May 2009 to 16 November 2010 may be
exercised at any time from 17 May 2009 to 16 November
2010.
|
|
(3)
|
For
the new Special Unicom Options to be granted in consideration for the
cancellation of the 2005 Netcom Options pursuant to the Option
Proposal:
|
|
(a)
|
100%
of the Special Unicom Options granted in respect of the outstanding 2005
Netcom Options held by the Netcom Optionholders at the Scheme Record Time
which are exercisable from 6 December 2007 to 5 December 2011 may be
exercised at any time from the Effective Date to 5 December
2011;
|
|
(b)
|
100%
of the Special Unicom Options granted in respect of the outstanding 2005
Netcom Options held by the Netcom Optionholders at the Scheme Record Time
which are exercisable from 6 December 2008 to 5 December 2011 may be
exercised at any time from 6 December 2008 to 5 December
2011;
|
|
(c)
|
100%
of the Special Unicom Options granted in respect of the outstanding 2005
Netcom Options held by the Netcom Optionholders at the Scheme Record Time
which are exercisable from 6 December 2009 to 5 December 2011 may be
exercised at any time from 6 December 2009 to 5 December 2011;
and
|
|
(d)
|
100%
of the Special Unicom Options granted in respect of the outstanding 2005
Netcom Options held by the Netcom Optionholders at the Scheme Record Time
which are exercisable from 6 December 2010 to 5 December 2011 may be
exercised at any time from 6 December 2010 to 5 December
2011.
|
|
(a)
|
the
approval of the Unicom Shareholders in general meeting having been
obtained in accordance with the Listing Rules and the NYSE Rules for (i)
the Proposals, (ii) the allotment and issue by Unicom of Unicom Shares
pursuant to the Share Proposal and the ADS Proposal and (iii) the adoption
of the Special Purpose Unicom Share Option
Scheme;
|
|
(b)
|
the
approval of the Scheme (by way of poll) by a majority in number
representing not less than three-fourths in value of the Netcom Shares
held by the Disinterested Netcom Shareholders (other than the Exempt
Principal Traders) who are present and voting either in person or by proxy
at the Court Meeting, provided that the number of votes cast against the
resolution to approve the Scheme at the Court Meeting is not more than 10%
of the votes attaching to all of the Netcom Shares held by the
Disinterested Netcom Shareholders, including the Exempt Principal
Traders;
|
|
(c)
|
the
passing of a special resolution by a majority of not less than
three-fourths of the votes cast by the Netcom Shareholders present and
voting in person or by proxy at the Netcom EGM to (i) give effect to the
reduction of the share capital of Netcom by cancelling and extinguishing
the Scheme Shares and (ii) issue the Netcom Shares to
Unicom;
|
|
(d)
|
the
sanction of the Scheme (with or without modifications) and the
confirmation of the reduction of the share capital of Netcom by the High
Court under Sections 166 and 60, respectively, of the Hong Kong Companies
Ordinance (with Netcom having advised the High Court before the Court
Hearing that the Unicom Shares will be issued by Unicom in reliance on the
exemption from the registration requirements of the US Securities Act
provided by Section 3(a)(10) thereof based on the High Court’s sanctioning
of the Scheme, and in reliance on applicable exemptions under US state
securities laws);
|
|
(e)
|
a
copy of the order of the High Court sanctioning the Scheme and confirming
the reduction of the share capital of Netcom, together with a minute
approved by the High Court containing the particulars required by Section
61 of the Hong Kong Companies Ordinance, being delivered to and registered
by the Registrar of Companies in Hong
Kong;
|
|
(f)
|
the
Hong Kong Stock Exchange having granted its approval for the listing of,
and permission to deal in, the Unicom Shares to be issued pursuant to the
Share Proposal and the ADS Proposal and the Unicom Shares which may be
issued upon the exercise of the Special Unicom
Options;
|
|
(g)
|
the
New York Stock Exchange having granted its approval for the listing of the
Unicom ADSs representing the Unicom Shares to be issued pursuant to the
ADS Proposal;
|
|
(h)
|
all
filings with, notices to and waivers from any governmental or regulatory
body in connection with the Proposals having been made or obtained and, if
applicable, any waiting periods under any applicable antitrust or similar
laws and regulations having expired or
terminated;
|
|
(i)
|
all
authorisations, consents and approvals (including approval in-principle)
of any governmental or regulatory body in relation to the Proposals having
been obtained and remaining in full force and effect pursuant to the
provisions of any laws or regulations in Hong Kong, the PRC, the United
States and other relevant
jurisdictions;
|
|
(j)
|
all
third party consents in relation to the Proposals required pursuant to any
agreement to which any member of the Netcom Group is a party (where any
failure to obtain a consent would have a material adverse effect on the
business of the Netcom Group taken as a whole) having been obtained or
waived by the relevant party;
|
|
(k)
|
no
relevant government, governmental, quasi-governmental, statutory or
regulatory body, court or agency having granted any order or made any
decision that would make the Proposals void, unenforceable or illegal, or
restrict or prohibit the implementation of, or impose any additional
material conditions or obligations with respect to, the Proposals (other
than such orders or decisions as would not have a material adverse effect
on the legal ability of Unicom to proceed with or consummate the
Proposals);
|
|
(l)
|
confirmation
from OFTA that the Proposals will not have, or be likely to have, the
effect of substantially lessening competition in a telecommunications
market in Hong Kong as referred to in Section 7P of the Telecommunications
Ordinance, to the extent that such confirmation is reasonably considered
necessary by Unicom and Netcom;
|
|
(m)
|
subject
to Note 2 to Rule 30.1 of the Takeovers Code, no event having occurred
which would make the Proposals or the cancellation of the Scheme Shares or
any of the Netcom Options void, unenforceable or illegal or which would
prohibit the implementation of the Proposals or impose any additional
material conditions or obligations with respect to the Proposals or any
part thereof or on the cancellation of the Scheme Shares or any of the
Netcom Options;
|
|
(n)
|
subject
to Note 2 to Rule 30.1 of the Takeovers Code, since the date of the
Announcement, there having been no material adverse change in the
business, financial or trading position of each of the Unicom Group or the
Netcom Group;
|
|
(o)
|
save
in connection with the implementation of the Proposals, the listing of the
Unicom Shares and the Netcom Shares on the Hong Kong Stock Exchange and
the listing of the Unicom ADSs and the Netcom ADSs on the New York Stock
Exchange not having been withdrawn, and no indication having been received
from the SFC or the Hong Kong Stock Exchange or the SEC or the New York
Stock Exchange to the effect that the listing of the Unicom Shares or the
Netcom Shares on the Hong Kong Stock Exchange or the listing of the Unicom
ADSs or the Netcom ADSs on the New York Stock Exchange will or is likely
to be withdrawn; and
|
|
(p)
|
save
for the payment of a final dividend of HK$0.592 for each Netcom Share as
approved by the Netcom Shareholders at the annual general meeting of
Netcom held on 22 May 2008, since the date of the Announcement and up to
the Effective Date, Netcom not having declared, made or paid any dividend
or distribution of any kind, and not having agreed or proposed to declare,
make or pay any dividend or distribution of any
kind.
|
1
|
Statistics
on transmission pipes, pole lines and PHS base stations as at 31 May 2008.
Wireless base stations include GSM only and GSM and CDMA shared base
stations.
|
|
(a)
|
a
premium of approximately 4.4% over the weighted average traded price of
each Netcom Share of HK$25.66 on the Hong Kong Stock Exchange on the Last
Trading Date;
|
|
(b)
|
a
premium of approximately 9.7% over the average closing price of HK$24.41
of each Netcom Share based on the daily closing prices of Netcom Shares as
quoted on the Hong Kong Stock Exchange for the five trading days
immediately prior to and including the Last Trading
Date;
|
|
(c)
|
a
premium of approximately 8.6% over the average closing price of HK$24.66
of each Netcom Share based on the daily closing prices of Netcom Shares as
quoted on the Hong Kong Stock Exchange for the ten trading days
immediately prior to and including the Last Trading
Date;
|
|
(d)
|
a
premium of approximately 12.7% over the average closing price of HK$23.77
of each Netcom Share based on the daily closing prices of Netcom Shares as
quoted on the Hong Kong Stock Exchange for the 30 trading days immediately
prior to and including the Last Trading
Date;
|
|
(e)
|
a
premium of approximately 14.8% over the average closing price of HK$23.33
of each Netcom Share based on the daily closing prices of Netcom Shares as
quoted on the Hong Kong Stock Exchange for the 60 trading days immediately
prior to and including the Last Trading
Date;
|
|
(f)
|
a
premium of approximately 17.5% over the average closing price of HK$22.80
of each Netcom Share based on the daily closing prices of Netcom Shares as
quoted on the Hong Kong Stock Exchange for the 180 trading days
immediately prior to and including the Last Trading Date;
and
|
|
(g)
|
a
premium of approximately 16.4% over the closing price of each Netcom Share
of HK$23.00 on the Hong Kong Stock Exchange on the Latest Practicable
Date.
|
|
(a)
|
a
discount of approximately 8.2% to the weighted average traded price of
each Netcom Share of HK$25.66 on the Hong Kong Stock Exchange on the Last
Trading Date;
|
|
(b)
|
a
premium of approximately 1.8% over the weighted average traded price of
each Netcom Share of HK$23.14 on the Hong Kong Stock Exchange on the
Latest Practicable Date;
|
|
(c)
|
a
premium of approximately 1.5% over the average closing price of HK$23.20
of each Netcom Share based on the daily closing prices of Netcom Shares as
quoted on the Hong Kong Stock Exchange for the five trading days
immediately prior to and including the Latest Practicable
Date;
|
|
(d)
|
a
premium of approximately 0.3% over the average closing price of HK$23.49
of each Netcom Share based on the daily closing prices of Netcom Shares as
quoted on the Hong Kong Stock Exchange for the ten trading days
immediately prior to and including the Latest Practicable
Date;
|
|
(e)
|
a
premium of approximately 2.6% over the average closing price of HK$22.95
of each Netcom Share based on the daily closing prices of Netcom Shares as
quoted on the Hong Kong Stock Exchange for the 30 trading days immediately
prior to and including the Latest Practicable
Date;
|
|
(f)
|
a
premium of approximately 2.4% over the average closing price of HK$22.99
of each Netcom Share based on the daily closing prices of Netcom Shares as
quoted on the Hong Kong Stock Exchange for the 60 trading days immediately
prior to and including the Latest Practicable Date;
and
|
|
(g)
|
a
premium of approximately 1.7% over the average closing price of HK$23.16
of each Netcom Share based on the daily closing prices of Netcom Shares as
quoted on the Hong Kong Stock Exchange for the 180 trading days
immediately prior to and including the Latest Practicable
Date.
|
|
(a)
|
a
premium of approximately 2.2% over the weighted average traded price of
each Netcom ADS of US$61.88 on the New York Stock Exchange on the Last ADS
Trading Date;
|
|
(b)
|
a
premium of approximately 4.1% over the average closing price of US$60.74
of each Netcom ADS based on the daily closing prices of Netcom ADSs as
quoted on the New York Stock Exchange for the five trading days
immediately prior to and including the Last ADS Trading
Date;
|
|
(c)
|
a
premium of approximately 0.8% over the average closing price of US$62.76
of each Netcom ADS based on the daily closing prices of Netcom ADSs as
quoted on the New York Stock Exchange for the ten trading days immediately
prior to and including the Last ADS Trading
Date;
|
|
(d)
|
a
premium of approximately 3.2% over the average closing price of US$61.28
of each Netcom ADS based on the daily closing prices of Netcom ADSs as
quoted on the New York Stock Exchange for the 30 trading days immediately
prior to and including the Last ADS Trading
Date;
|
|
(e)
|
a
premium of approximately 5.7% over the average closing price of US$59.84
of each Netcom ADS based on the daily closing prices of Netcom ADSs as
quoted on the New York Stock Exchange for the 60 trading days immediately
prior to and including the Last ADS Trading
Date;
|
|
(f)
|
a
premium of approximately 7.1% over the average closing price of US$59.08
of each Netcom ADS based on the daily closing prices of Netcom ADSs as
quoted on the New York Stock Exchange for the 180 trading days immediately
prior to and including the Last ADS Trading Date;
and
|
|
(g)
|
a
premium of approximately 6.2% over the closing price of each Netcom ADS of
US$59.57 on the New York Stock
|
Exchange on the Latest Practicable Date. |
|
(a)
|
a
discount of approximately 2.2% to the weighted average traded price of
each Netcom ADS of US$61.88 on the New York Stock Exchange on the Last ADS
Trading Date;
|
|
(b)
|
a
premium of approximately 1.2% over the weighted average traded price of
each Netcom ADS of US$59.82 on the New York Stock Exchange on the Latest
Practicable Date;
|
|
(c)
|
a
discount of approximately 0.1% to the average closing price of US$60.57 of
each Netcom ADS based on the daily closing prices of Netcom ADSs as quoted
on the New York Stock Exchange for the five trading days immediately prior
to and including the Latest Practicable
Date;
|
|
(d)
|
a
discount of approximately 0.5% to the average closing price of US$60.81 of
each Netcom ADS based on the daily closing prices of Netcom ADSs as quoted
on the New York Stock Exchange for the ten trading days immediately prior
to and including the Latest Practicable
Date;
|
|
(e)
|
a
premium of approximately 2.5% over the average closing price of US$59.03
of each Netcom ADS based on the daily closing prices of Netcom ADSs as
quoted on the New York Stock Exchange for the 30 trading days immediately
prior to and including the Latest Practicable
Date;
|
|
(f)
|
a
premium of approximately 3.0% over the average closing price of US$58.78
of each Netcom ADS based on the daily closing prices of Netcom ADSs as
quoted on the New York Stock Exchange for the 60 trading days immediately
prior to and including the Latest Practicable Date;
and
|
|
(g)
|
a
premium of approximately 1.3% over the average closing price of US$59.73
of each Netcom ADS based on the daily closing prices of Netcom ADSs as
quoted on the New York Stock Exchange for the 180 trading days immediately
prior to and including the Latest Practicable
Date.
|
Name
|
As
at the Latest Practicable Date
|
Following
completion of the Proposals (assuming all of the outstanding
Netcom Options had been exercised)
|
Following
completion of the Proposals (assuming none of the outstanding
Netcom Options had been exercised)
|
|||
Number
of Netcom Shares
|
%
|
Number
of Netcom Shares
|
%
|
Number
of Netcom Shares
|
%
|
|
Disinterested
Netcom
Shareholders
comprising:
|
||||||
Netcom
BVI
|
4,647,449,015(1)
|
69.37%
|
0
|
0.00%
|
0
|
0.00%
|
5
PRC Netcom Shareholders
|
297,698,985(2)
|
4.44%
|
0
|
0.00%
|
0
|
0.00%
|
Telefónica
|
333,971,305
|
4.99%
|
0
|
0.00%
|
0
|
0.00%
|
ABLP
|
397,382,288
|
5.93%
|
0
|
0.00%
|
0
|
0.00%
|
Other
Public Netcom Shareholders
|
1,022,695,607
|
15.27%
|
0
|
0.00%
|
0
|
0.00%
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
6,699,197,200
|
100.00%
|
0
|
0.00%
|
0
|
0.00%
|
|
Unicom
|
0
|
0.00%
|
6,825,033,460
|
100.00%
|
6,699,197,200
|
100.00%
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
|
6,699,197,200
|
100.00%
|
6,825,033,460
|
100.00%
|
6,699,197,200
|
100.00%
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
(1)
|
These
Netcom Shares consisted of 4,647,449,014 Netcom Shares in which Netcom BVI
was legally and beneficially interested and one Netcom Share held by a
wholly-owned subsidiary of Netcom
BVI.
|
(2)
|
These
297,698,985 Netcom Shares were held by Netcom BVI as trustee on behalf of
five PRC Netcom Shareholders.
|
Name
|
As
at the Latest Practicable Date
|
Following
completion of the Proposals (assuming all of the outstanding
Unicom Options had been exercised)
|
Following
completion of the Proposals (assuming none of the outstanding
Unicom Options had been exercised)
|
|||
Number
of Unicom Shares
|
%
|
Number
of Unicom Shares
|
%
|
Number
of Unicom Shares
|
%
|
|
Unicom
BVI
|
9,725,000,020
|
71.17%
|
9,725,000,020
|
40.53%
|
9,725,000,020
|
40.92%
|
SK
Telecom
|
899,745,075
|
6.58%
|
899,745,075
|
3.75%
|
899,745,075
|
3.79%
|
Netcom
BVI
|
0
|
0.00%
|
7,008,353,114
|
29.21%
|
7,008,353,114
|
29.49%
|
5
PRC Netcom Shareholders
|
0
|
0.00%
|
448,930,069
|
1.87%
|
448,930,069
|
1.89%
|
Telefónica(1)
|
0
|
0.00%
|
503,628,727
|
2.10%
|
503,628,727
|
2.12%
|
ABLP
|
0
|
0.00%
|
599,252,490
|
2.50%
|
599,252,490
|
2.52%
|
Other
Public Unicom Shareholders
|
3,040,206,850
|
22.25%
|
4,806,979,427
|
20.04%
|
4,582,431,827
|
19.27%
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
|
13,664,951,945
|
100.00%
|
23,991,888,922
|
100.00%
|
23,767,341,322
|
100.00%
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
Name
|
As
at the Latest Practicable Date
|
Following
completion of the Proposals (assuming all of the outstanding
Unicom Options had been exercised)
|
Following
completion of the Proposals (assuming none of the outstanding
Unicom Options had been exercised)
|
|||
Number
of Unicom Shares
|
%
|
Number
of Unicom Shares
|
%
|
Number
of Unicom Shares
|
%
|
|
Unicom
BVI
|
9,725,000,020
|
71.17%
|
9,725,000,020
|
40.22%
|
9,725,000,020
|
40.59%
|
SK
Telecom
|
899,745,075
|
6.58%
|
899,745,075
|
3.72%
|
899,745,075
|
3.76%
|
Netcom
BVI
|
0
|
0.00%
|
7,008,353,114
|
28.98%
|
7,008,353,114
|
29.25%
|
5
PRC Netcom Shareholders
|
0
|
0.00%
|
448,930,069
|
1.86%
|
448,930,069
|
1.87%
|
Telefónica(1)
|
0
|
0.00%
|
503,628,727
|
2.08%
|
503,628,727
|
2.10%
|
ABLP
|
0
|
0.00%
|
599,252,490
|
2.48%
|
599,252,490
|
2.50%
|
Other
Public Unicom Shareholders
|
3,040,206,850
|
22.25%
|
4,996,740,507
|
20.66%
|
4,772,192,907
|
19.93%
|
|
---------
|
---------
|
---------
|
---------
|
---------
|
---------
|
Total
|
13,664,951,945
|
100.00%
|
24,181,650,002
|
100.00%
|
23,957,102,402
|
100.00%
|
===============
|
===============
|
===============
|
===============
|
===============
|
===============
|
Contact
Person
|
Telephone
Number
|
Law,
Pak Hong Passe
Vice
President
|
(852)
2718 9663
|
Retail
Trading Department
|
|
●
|
banks,
insurance companies, trusts and financial
institutions;
|
|
●
|
tax-exempt
organisations;
|
|
●
|
mutual
funds;
|
|
●
|
US
Holders who have a functional currency other than the US
dollar;
|
|
●
|
traders
in securities who elect to apply a mark-to-market method of
accounting;
|
|
●
|
dealers
in securities or foreign currency;
|
|
●
|
US
Holders that are liable for the alternative minimum
tax;
|
|
●
|
US
Holders of Scheme Shares or Netcom ADSs who have received their Scheme
Shares or Netcom ADSs in compensatory
transactions;
|
|
●
|
US
Holders of Scheme Shares or Netcom ADSs who hold their Scheme Shares or
Netcom ADSs as part of a hedge, straddle, constructive sale, conversion
transaction or other integrated
investment;
|
|
●
|
US
Holders who hold Netcom Options;
|
|
●
|
US
Holders of Scheme Shares or Netcom ADSs who own, directly, indirectly
through one or more entities, or as a result of certain constructive
ownership rules of the Code, 10% or more of the equity of
Netcom;
|
|
●
|
except
to the extent discussed below, US Holders of Scheme Shares or Netcom ADSs
who will, following the exchange by such US Holders of Scheme Shares or
Netcom ADSs for Unicom Shares or Unicom ADSs in connection with the Share
Proposal or the ADS Proposal, hold directly, indirectly through one or
more entities, or as a result of certain constructive ownership rules of
the Code, 5% or more of either the total voting power or the total value
of the equity of Unicom (such US Holders will be referred to in this
document as “5% transferee shareholders”);
and
|
|
●
|
US
Holders who will own, directly, indirectly through one or more entities,
or as a result of certain constructive ownership rules of the Code, 10% or
more of the equity of Unicom following the exchange of Scheme Shares or
Netcom ADSs for Unicom Shares or Unicom ADSs,
respectively.
|
|
●
|
an
individual who is a US citizen or resident of the United States for US
federal income tax purposes;
|
|
●
|
a
corporation, or other entity treated as a corporation for US federal
income tax purposes, created or organised under the laws of the United
States, any state thereof, or the District of
Columbia;
|
|
●
|
an
estate that is subject to US federal income tax without regard to its
source; or
|
|
●
|
a
trust if (i) a US court is able to exercise supervision over the
administration of the trust and one or more US persons have the authority
to control all substantial decisions of the trust or (ii) the trust has a
valid election in effect to be treated as a US person for US federal
income tax purposes.
|
|
(i)
|
the
Chairman of the meeting; or
|
|
(ii)
|
at
least three Netcom Shareholders present in person (or in the case of a
Netcom Shareholder being a corporation, by its duly authorised
representative) or by proxy and entitled to vote at the meeting;
or
|
|
(iii)
|
any
Netcom Shareholder or Netcom Shareholders present in person (or in the
case of a Netcom Shareholder being a corporation, by its duly authorised
representative) or by proxy and representing in the aggregate not less
than one-tenth of the total voting rights of all Netcom Shareholders
having the right to attend and vote at the meeting;
or
|
|
(iv)
|
any
Netcom Shareholder or Netcom Shareholders present in person (or in the
case of a Netcom Shareholder being a corporation, by its duly authorised
representative) or by proxy and holding shares conferring a right to
attend and vote at the meeting on which there have been paid-up sums in
the aggregate equal to not less than one-tenth of the total sum paid up on
all shares conferring that right.
|
APPENDIX I FINANCIAL
INFORMATION ON THE NETCOM
GROUP
|
Year
ended 31 December
|
|||
2005
|
2006
|
2007
|
|
(Restated)
|
(Restated)
|
||
(RMB)
|
(RMB)
|
(RMB)
|
|
(in
millions, except per share and
per
ADS information)
|
|||
Continuing
operations:
|
|||
Revenues
|
83,927
|
84,194
|
84,005
|
Local
usage fees
|
24,440
|
22,059
|
19,989
|
Monthly
fees
|
18,170
|
16,546
|
12,387
|
Upfront
installation fees
|
1,433
|
1,364
|
1,283
|
DLD
usage fees
|
9,773
|
9,495
|
8,769
|
ILD
usage fees
|
874
|
819
|
791
|
Value-added
services
|
3,970
|
5,341
|
6,114
|
Interconnection
fees
|
7,664
|
8,432
|
8,376
|
Upfront
connection fees
|
3,405
|
2,406
|
1,517
|
Broadband
service
|
7,289
|
9,916
|
13,835
|
Other
Internet-related service
|
556
|
516
|
532
|
Managed
data service
|
1,621
|
1,413
|
1,284
|
Leased
line income
|
2,376
|
2,540
|
2,521
|
Information
communications technology services
|
186
|
855
|
3,990
|
Other
services
|
2,170
|
2,492
|
2,617
|
|
-------
|
-------
|
-------
|
|
|||
Operating
expense
|
(62,868)
|
(64,643)
|
(66,739)
|
Depreciation
and amortisation
|
(24,328)
|
(24,913)
|
(25,495)
|
Network,
operations and support
|
(12,610)
|
(13,344)
|
(14,145)
|
Staff
cost
|
(11,830)
|
(11,849)
|
(12,223)
|
Year
ended 31 December
|
|||
2005
|
2006
|
2007
|
|
(Restated)
|
(Restated)
|
||
(RMB)
|
(RMB)
|
(RMB)
|
|
(in
millions, except per share and
per
ADS information)
|
|||
Selling,
general and administrative
|
(12,726)
|
(12,607)
|
(10,615)
|
Other
operating expense
|
(1,374)
|
(1,930)
|
(4,261)
|
|
-------
|
-------
|
-------
|
|
|||
Other
income
|
—
|
621
|
1,221
|
Interest
income
|
134
|
135
|
113
|
Dividend
income
|
29
|
—
|
—
|
Deficit
on revaluation of fixed assets
|
—
|
(1,335)
|
—
|
|
-------
|
-------
|
-------
|
|
|||
Profit
from operations
|
21,222
|
18,972
|
18,600
|
Financial
cost
|
(3,346)
|
(3,767)
|
(3,333)
|
|
-------
|
-------
|
-------
|
|
|||
Profit
before taxation
|
17,876
|
15,205
|
15,267
|
Taxation
|
(3,526)
|
(3,727)
|
(3,796)
|
|
-------
|
-------
|
-------
|
|
|||
Profit
for the year from continuing operations
|
14,350
|
11,478
|
11,471
|
|
=============
|
=============
|
=============
|
|
|||
Discontinued
operations:
|
|||
(Loss)/profit
for the year from discontinued operations
|
(400)
|
1,487
|
624
|
|
=============
|
=============
|
=============
|
|
|||
Profit
for the year
|
13,950
|
12,965
|
12,095
|
|
=============
|
=============
|
=============
|
|
|||
Earnings
per share for profit from continuing operations attributable to
shareholders of Netcom for the year
|
|||
Basic
earnings per share
|
2.18
|
1.74
|
1.72
|
|
-------
|
-------
|
-------
|
|
|||
Diluted
earnings per share
|
2.17
|
1.72
|
1.70
|
|
-------
|
-------
|
-------
|
|
|||
(Losses)/earnings
per share for (loss)/profit from discontinued operations attributable to
shareholders of Netcom for the year
|
Year
ended 31 December
|
|||
2005
|
2006
|
2007
|
|
(Restated)
|
(Restated)
|
||
(RMB)
|
(RMB)
|
(RMB)
|
|
(in
millions, except per share and
per
ADS information)
|
|||
Basic
(losses)/earnings per share
|
(0.06)
|
0.22
|
0.09
|
|
-------
|
-------
|
-------
|
|
|||
Diluted
(losses)/earnings per share
|
(0.06)
|
0.22
|
0.09
|
|
-------
|
-------
|
-------
|
|
|||
Earnings
per share from operations attributable to shareholders of Netcom for the
year
|
|||
Basic
earnings per share
|
2.12
|
1.96
|
1.81
|
|
-------
|
-------
|
-------
|
|
|||
Diluted
earnings per share
|
2.11
|
1.94
|
1.79
|
|
-------
|
-------
|
-------
|
|
|||
Basic
earnings per ADS
|
42.40
|
39.20
|
36.20
|
|
-------
|
-------
|
-------
|
|
|||
Diluted
earnings per ADS
|
42.20
|
38.80
|
35.80
|
|
-------
|
-------
|
-------
|
|
|||
Dividend
proposed after balance sheet date (HK$)
|
3,073
|
3,678
|
3,951
|
|
=============
|
=============
|
=============
|
|
|||
Dividend
per ordinary share (HK$)
|
0.466
|
0.553
|
0.592
|
|
=============
|
=============
|
=============
|
As
at 31 December
|
|||
2005
|
2006
|
2007
|
|
(Restated)
|
(Restated)
|
||
(RMB)
|
(RMB)
|
(RMB)
|
|
(in
millions)
|
|||
Fixed
assets
|
168,760
|
168,141
|
156,948
|
Construction
in progress
|
6,822
|
6,335
|
3,990
|
Other
non-current assets
|
12,865
|
11,380
|
9,982
|
Cash
and bank deposits
|
5,065
|
7,728
|
5,395
|
Other
current assets
|
9,610
|
10,498
|
10,113
|
-------
|
-------
|
-------
|
|
Total
assets
|
203,122
|
204,082
|
186,428
|
=============
|
=============
|
=============
|
|
Short-term
bank loans
|
47,341
|
30,980
|
11,850
|
Accounts
payable
|
16,726
|
17,661
|
15,639
|
Other
current liabilities
|
34,337
|
42,192
|
47,104
|
Long-term
bank and other loans
|
18,143
|
23,219
|
14,425
|
Deferred
revenues
|
10,925
|
6,198
|
4,314
|
Other
non-current liabilities
|
12,363
|
9,638
|
11,044
|
-------
|
-------
|
-------
|
|
Total
liabilities
|
139,835
|
129,888
|
104,376
|
=============
|
=============
|
=============
|
|
Shareholders’
equity
|
63,287
|
74,194
|
82,052
|
=============
|
=============
|
=============
|
|
Total
liabilities and shareholders’ equity
|
203,122
|
204,082
|
186,428
|
=============
|
=============
|
=============
|
Note:
|
Due
to the disposal of Guangdong and Shanghai branches of the Netcom Group in
2007, the operating results of Guangdong and Shanghai branches have been
presented as discontinued operations in accordance with HKFRS 5 issued by
HKICPA. Also, the acquisition of Beijing Telecom P&D Institute by the
Netcom Group in 2007 which has been accounted for using merger accounting
according to the Accounting Guideline 5 issued by the HKICPA. The
financial information for 2005 and 2006 of the Netcom Group is restated
accordingly. There were no qualifications in the independent auditor’s
report issued by PricewaterhouseCoopers in respect of the original
financial statements of each of the three financial years ended 31
December 2005, 2006 and 2007.
|
2.
|
AUDITED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER
2007
|
Year
ended 31 December
|
|||
Note
|
2007
|
2006
|
|
RMB
million
|
RMB
million
|
||
Restated Note
2
|
|||
Continuing
operations:
|
|||
Revenues
|
7
|
84,005
|
84,194
|
|
-------
|
-------
|
|
Operating
expenses
|
|||
Depreciation
and amortisation
|
(25,495)
|
(24,913)
|
|
Networks,
operations and support
|
(14,145)
|
(13,344)
|
|
Staff
costs
|
15
|
(12,223)
|
(11,849)
|
Selling,
general and administrative
|
(10,615)
|
(12,607)
|
|
Other
operating expenses
|
(4,261)
|
(1,930)
|
|
|
-------
|
-------
|
|
|
|||
Total
of operating expenses
|
8
|
(66,739)
|
(64,643)
|
|
-------
|
-------
|
|
|
|||
Other
income
|
9
|
1,221
|
621
|
Interest
income
|
113
|
135
|
|
Deficit
on revaluation of fixed assets
|
21(c)
|
—
|
(1,335)
|
|
-------
|
-------
|
|
|
|||
Profit
from operations
|
18,600
|
18,972
|
|
Finance
costs
|
10
|
(3,333)
|
(3,767)
|
|
-------
|
-------
|
|
|
|||
Profit
before taxation
|
15,267
|
15,205
|
|
Taxation
|
11
|
(3,796)
|
(3,727)
|
|
-------
|
-------
|
|
|
|||
Profit
for the year from continuing operations
|
11,471
|
11,478
|
|
|
=============
|
=============
|
|
|
|||
Discontinued
operations:
|
|||
Profit
for the year from discontinued operations
|
26
|
624
|
1,487
|
|
=============
|
=============
|
|
|
|||
Profit
for the year
|
12,095
|
12,965
|
|
|
=============
|
=============
|
|
|
|||
Dividends
proposed after the balance sheet date
|
13
|
3,700
|
3,695
|
|
=============
|
=============
|
|
|
Year
ended 31 December
|
|||
Note
|
2007
|
2006
|
|
RMB
million
|
RMB
million
|
||
Restated Note
2
|
|||
Earnings
per share for profit from continuing operations attributable to Netcom
Shareholders for the year
|
|||
Basic
earnings per Netcom Share
|
14
|
RMB1.72
|
RMB1.74
|
|
=============
|
=============
|
|
|
|||
Diluted
earnings per Netcom Share
|
14
|
RMB1.70
|
RMB1.72
|
|
=============
|
=============
|
|
|
|||
Earnings
per share for profit from discontinued operations attributable to Netcom
Shareholders for the year
|
|||
Basic
earnings per share
|
14
|
RMB0.09
|
RMB0.22
|
|
=============
|
=============
|
|
|
|||
Diluted
earnings per Netcom Share
|
14
|
RMB0.09
|
RMB0.22
|
|
=============
|
=============
|
|
|
|||
Earnings
per share from operations attributable to Netcom Shareholders for the
year
|
|||
Basic
earnings per Netcom Share
|
14
|
RMB1.81
|
RMB1.96
|
|
=============
|
=============
|
|
|
|||
Diluted
earnings per Netcom Share
|
14
|
RMB1.79
|
RMB1.94
|
|
=============
|
=============
|
As
at 31 December
|
|||
Note
|
2007
|
2006
|
|
RMB
million
|
RMB
million
|
||
Restated Note
2
|
|||
Assets
|
|||
Current
assets
|
|||
Cash
and bank deposits
|
17
|
5,395
|
7,728
|
Accounts
receivable
|
18
|
8,458
|
8,283
|
Inventories
and consumables
|
19
|
287
|
416
|
Prepayments,
other receivables and other current assets
|
20
|
1,021
|
1,441
|
Due
from holding companies and fellow subsidiaries
|
31
|
347
|
358
|
-------
|
-------
|
||
Total
current assets
|
15,508
|
18,226
|
|
-------
|
-------
|
||
Non-current
assets
|
|||
Fixed
assets
|
21
|
156,948
|
168,141
|
Construction
in progress
|
22
|
3,990
|
6,335
|
Lease
prepayments
|
23
|
2,494
|
2,364
|
Intangible
assets
|
24
|
1,552
|
1,591
|
Deferred
tax assets
|
34
|
2,693
|
3,459
|
Other
non-current assets
|
25
|
3,243
|
3,966
|
-------
|
-------
|
||
Total
non-current assets
|
170,920
|
185,856
|
|
-------
|
-------
|
||
Total
assets
|
186,428
|
204,082
|
|
=============
|
=============
|
As
at 31 December
|
|||
Note
|
2007
|
2006
|
|
RMB
million
|
RMB
million
|
||
Restated Note
2
|
|||
Liabilities
and equity
|
|||
Current
liabilities
|
|||
Accounts
payable
|
28
|
15,639
|
17,661
|
Accruals
and other payables
|
29
|
2,950
|
3,074
|
Short
term commercial paper
|
30(a)(i)
|
20,000
|
9,811
|
Short
term bank loans
|
30(a)(ii)
|
11,850
|
30,980
|
Current
portion of long term bank and other loans
|
30(b)
|
5,322
|
7,304
|
Due
to holding companies and fellow subsidiaries
|
31
|
4,598
|
7,505
|
Current
portion of deferred revenues
|
32
|
7,103
|
7,733
|
Current
portion of provisions
|
33
|
3,381
|
3,736
|
Taxation
payable
|
3,750
|
3,029
|
|
-------
|
-------
|
||
Total
current liabilities
|
74,593
|
90,833
|
|
-------
|
-------
|
||
Net
current liabilities
|
(59,085)
|
(72,607)
|
|
-------
|
-------
|
||
Total
assets less current liabilities
|
111,835
|
113,249
|
|
-------
|
-------
|
||
Non-current
liabilities
|
|||
Long
term bank and other loans
|
30(b)
|
14,425
|
23,219
|
Corporate
bonds
|
30(c)
|
2,000
|
—
|
Due
to holding companies and fellow subsidiaries
|
31
|
6,169
|
5,880
|
Deferred
revenues
|
32
|
4,314
|
6,198
|
Provisions
|
33
|
2,007
|
2,586
|
Deferred
tax liabilities
|
34
|
856
|
1,156
|
Other
non-current liabilities
|
12
|
16
|
|
-------
|
-------
|
||
Total
non-current liabilities
|
29,783
|
39,055
|
|
|
-------
|
-------
|
|
Total
liabilities
|
104,376
|
129,888
|
|
-------
|
-------
|
||
Financed
by:
|
|||
Share
capital
|
35
|
2,206
|
2,199
|
Reserves
|
79,846
|
71,995
|
|
-------
|
-------
|
||
Shareholders’
equity
|
82,052
|
74,194
|
|
-------
|
-------
|
||
Total
liabilities and equity
|
186,428
|
204,082
|
|
=============
|
=============
|
As
at 31 December
|
|||
Note
|
2007
|
2006
|
|
RMB
million
|
RMB
million
|
||
Assets
|
|||
Current
assets
|
|||
Cash
and bank deposits
|
17
|
113
|
1,772
|
Due
from subsidiaries
|
27
|
10,490
|
9,411
|
Prepayments,
other receivables and other current assets
|
20
|
16
|
268
|
-------
|
-------
|
||
Total
current assets
|
10,619
|
11,451
|
|
-------
|
-------
|
||
Non-current
assets
|
|||
Investments
in subsidiaries
|
27
|
71,000
|
62,937
|
-------
|
-------
|
||
Total
assets
|
81,619
|
74,388
|
|
=============
|
=============
|
||
Liabilities
and equity
|
|||
Current
liabilities
|
|||
Accruals
and other payables
|
29
|
46
|
136
|
Due
to subsidiaries
|
27
|
14,271
|
12,754
|
|
-------
|
-------
|
|
Total
current liabilities
|
14,317
|
12,890
|
|
-------
|
-------
|
||
Net
current liabilities
|
(3,698)
|
(1,439)
|
|
-------
|
-------
|
||
Total
assets less current liabilities
|
67,302
|
61,498
|
|
-------
|
-------
|
||
Non-current
liabilities
|
|||
Long
term bank and other loans
|
9
|
—
|
|
Due
to holding company and fellow subsidiaries
|
31(c)
|
403
|
—
|
-------
|
-------
|
||
Total
non-current liabilities
|
412
|
—
|
|
-------
|
-------
|
||
Total
liabilities
|
14,729
|
12,890
|
|
-------
|
-------
|
||
Financed
by:
|
|||
Share
capital
|
35
|
2,206
|
2,199
|
As
at 31 December
|
|||
Note
|
2007
|
2006
|
|
RMB
million
|
RMB
million
|
||
Reserves
|
37
|
64,684
|
59,299
|
-------
|
-------
|
||
Shareholders’
equity
|
66,890
|
61,498
|
|
-------
|
-------
|
||
Total
liabilities and equity
|
81,619
|
74,388
|
|
=============
|
=============
|
Attributable
to equity holders of Netcom
|
||||||||
Share
capital
|
Share
premium
|
Capital
reserve
|
Statutory
reserve
|
Revaluation
reserve
|
Other
reserve
|
Retained
earnings
|
Total
equity
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
|
(Note
35)
|
||||||||
Balance
as at 1 January 2006
|
2,181
|
42,750
|
387
|
8,550
|
4,101
|
(5,203)
|
10,244
|
63,010
|
Adjustments
for the acquisition (Note 2)
|
—
|
—
|
—
|
—
|
—
|
238
|
39
|
277
|
------
|
------
|
------
|
------
|
------
|
------
|
------
|
------
|
|
Balance
at 1 January 2006, as restated
|
2,181
|
42,750
|
387
|
8,550
|
4,101
|
(4,965)
|
10,283
|
63,287
|
Transfer
to statutory reserve (Note 12)
|
—
|
—
|
—
|
2,406
|
—
|
—
|
(2,406)
|
—
|
Appropriation
to statutory reserve (Note 12)
|
—
|
—
|
—
|
855
|
—
|
—
|
(855)
|
—
|
Transfers
to retained earnings in respect of depreciation differences on revalued
assets
|
—
|
—
|
—
|
—
|
(1,933)
|
(51)
|
1,984
|
—
|
Revaluation
surplus (Note 21)
|
—
|
—
|
—
|
—
|
1,071
|
—
|
—
|
1,071
|
Currency
translation differences (i)
|
—
|
—
|
—
|
—
|
—
|
(79)
|
—
|
(79)
|
Movement
of deferred tax recognised in equity (Note 34)
|
—
|
—
|
—
|
—
|
(353)
|
—
|
—
|
(353)
|
------
|
------
|
------
|
------
|
------
|
------
|
------
|
------
|
|
Net
income/(expense) recognised directly in equity
|
—
|
—
|
—
|
3,261
|
(1,215)
|
(130)
|
(1,277)
|
639
|
Profit
for the year from continuing operations
|
—
|
—
|
—
|
—
|
—
|
—
|
11,478
|
11,478
|
Profit
for the year from discontinued operations
|
—
|
—
|
—
|
—
|
—
|
—
|
1,487
|
1,487
|
------
|
------
|
------
|
------
|
------
|
------
|
------
|
------
|
|
Total
income recognised for 2006
|
—
|
—
|
—
|
3,261
|
(1,215)
|
(130)
|
11,688
|
13,604
|
Dividends
for 2005 distributed during the year (Note13)
|
—
|
—
|
—
|
—
|
—
|
—
|
(3,196)
|
(3,196)
|
Exercise
of Netcom Options (Note 35)
|
18
|
545
|
(73)
|
—
|
—
|
—
|
—
|
490
|
Distributions
to owners
|
—
|
—
|
—
|
—
|
—
|
—
|
(66)
|
(66)
|
Share-based
payments
|
—
|
—
|
75
|
—
|
—
|
—
|
—
|
75
|
------
|
------
|
------
|
------
|
------
|
------
|
------
|
------
|
|
Balance
as at 31 December 2006
|
2,199
|
43,295
|
389
|
11,811
|
2,886
|
(5,095)
|
18,709
|
74,194
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
(i)
|
Including
accumulated currency translation differences realized upon disposal of
Asia Netcom Corporation Limited amounting to RMB29
million.
|
Attributable
to equity holders of Netcom
|
||||||||
Share
capital
|
Share
premium
|
Capital
reserve
|
Statutory
reserve
|
Revaluation
reserve
|
Other
reserve
|
Retained
earnings
|
Total
equity
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
|
(Note
35)
|
||||||||
Balance
as at 1 January 2007
|
2,199
|
43,295
|
389
|
11,811
|
2,886
|
(5,095)
|
18,709
|
74,194
|
Transfer
to statutory reserve (Note 12)
|
—
|
—
|
—
|
1,517
|
—
|
—
|
(1,517)
|
—
|
Appropriation
to statutory reserve (Note 12)
|
—
|
—
|
—
|
868
|
—
|
—
|
(868)
|
—
|
Transfers
to retained earnings in respect of depreciation differences on revalued
assets
|
—
|
—
|
—
|
—
|
(2,031)
|
(104)
|
2,135
|
—
|
Transfers
to retained earnings in respect of revaluation reserve relating to
disposal of Guangdong and Shanghai branches
|
—
|
—
|
—
|
—
|
(69)
|
20
|
49
|
—
|
Currency
translation differences
|
—
|
—
|
—
|
—
|
—
|
(15)
|
—
|
(15)
|
Movement
of deferred tax recognised in equity (Note 34)
|
—
|
—
|
—
|
—
|
111
|
(664)
|
—
|
(553)
|
------
|
------
|
------
|
------
|
------
|
------
|
------
|
------
|
|
Net
income/(expense) recognised directly in equity
|
—
|
—
|
—
|
2,385
|
(1,989)
|
(763)
|
(201)
|
(568)
|
Profit
for the year from continuing operations
|
—
|
—
|
—
|
—
|
—
|
—
|
11,471
|
11,471
|
Profit
for the year from discontinued operations
|
—
|
—
|
—
|
—
|
—
|
—
|
624
|
624
|
------
|
------
|
------
|
------
|
------
|
------
|
------
|
------
|
|
Total
income recognised for 2007
|
—
|
—
|
—
|
2,385
|
(1,989)
|
(763)
|
11,894
|
11,527
|
Dividend
related to 2006 distributed during the year (Note 13)
|
—
|
—
|
—
|
—
|
—
|
—
|
(3,600)
|
(3,600)
|
Distributions
to owners
|
—
|
—
|
—
|
—
|
—
|
—
|
(48)
|
(48)
|
Exercise
of share options (Note 35)
|
7
|
243
|
(31)
|
—
|
—
|
—
|
—
|
219
|
Consideration
for the acquisition (Note 1)
|
—
|
—
|
—
|
—
|
—
|
(299)
|
—
|
(299)
|
Share-based
payments
|
—
|
—
|
59
|
—
|
—
|
—
|
—
|
59
|
------
|
------
|
------
|
------
|
------
|
------
|
------
|
------
|
|
Balance
as at 31 December 2007
|
2,206
|
43,538
|
417
|
14,196
|
897
|
(6,157)
|
26,955
|
82,052
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
Year
ended 31 December
|
|||
Note
|
2007
|
2006
|
|
RMB
million
|
RMB
million
|
||
Restated Note
2
|
|||
Cash
flows from operating activities
|
|||
Net
cash inflows from operations
|
38(a)
|
39,309
|
39,156
|
Interest
received
|
113
|
136
|
|
Interest
paid
|
(2,856)
|
(3,564)
|
|
Profits
tax paid
|
(4,107)
|
(3,678)
|
|
-------
|
-------
|
||
Cash
inflow from operating activities of continuing
operations
|
32,459
|
32,050
|
|
Cash
inflow from operating activities of discontinued
operations
|
26
|
388
|
2,085
|
-------
|
-------
|
||
Net
cash inflow from operating activities
|
32,847
|
34,135
|
|
-------
|
-------
|
||
Cash
flows from investing activities
|
|||
Purchase
of fixed assets and construction in progress
|
(20,488)
|
(24,064)
|
|
Prepayments
for leased network capacity
|
—
|
(318)
|
|
Prepayments
for leased land
|
(196)
|
(178)
|
|
Sale
of fixed assets
|
65
|
127
|
|
Net
decrease in time deposits with maturity over three
months
|
14
|
7
|
|
Other
income
|
1,467
|
375
|
|
-------
|
-------
|
||
Cash
outflow from investing activities of continuing
operations
|
(19,138)
|
(24,051)
|
|
Cash
inflow/(outflow) from investing activities of discontinued
operations
|
26
|
3,103
|
(921)
|
-------
|
-------
|
||
Net
cash outflow from investing activities
|
(16,035)
|
(24,972)
|
|
=============
|
=============
|
Year
ended 31 December
|
|||
Note
|
2007
|
2006
|
|
RMB
million
|
RMB
million
|
||
Restated Note
2
|
Cash
flows from financing activities
|
|||
New
bank loans and other loans
|
66,396
|
89,002
|
|
Issue
of short-term commercial paper
|
20,000
|
9,676
|
|
Issue
of corporate bonds
|
2,000
|
—
|
|
Repayment
of short-term commercial paper
|
(9,676)
|
—
|
|
Repayment
of bank loans
|
(92,390)
|
(98,512)
|
|
Capital
element of finance lease payments
|
(890)
|
(1,347)
|
|
Payment
of prior years distribution to owner
|
(1,180)
|
(630)
|
|
Payment
to ultimate holding company for the acquisition of Beijing Telecom P&D
Institute
|
(299)
|
—
|
|
Payment
to ultimate holding company for the acquisition of New Horizon (Note
1)
|
(1,960)
|
(1,960)
|
|
Dividend
payment
|
(3,600)
|
(3,196)
|
|
Loans
from fellow subsidiaries and holding company
|
2,249
|
—
|
|
Issue
of shares upon exercise of share options
|
219
|
490
|
|
-------
|
-------
|
||
Cash
outflow from financing activities of continuing
operations
|
(19,131)
|
(6,477)
|
|
Cash
inflow from financing activities of discontinued
operations
|
26
|
—
|
—
|
-------
|
-------
|
||
Net
cash outflow from financing activities
|
(19,131)
|
(6,477)
|
|
-------
|
-------
|
||
Cash
flows from continuing operations
|
(5,810)
|
1,522
|
|
Cash
flows from discontinued operations
|
3,491
|
1,164
|
|
-------
|
-------
|
||
Increase/(decrease)
in cash and cash equivalents
|
(2,319)
|
2,686
|
|
=============
|
=============
|
||
Cash
and cash equivalents at beginning of year
|
7,623
|
4,937
|
|
=============
|
=============
|
||
Cash
and cash equivalents at end of year
|
17
|
5,304
|
7,623
|
=============
|
=============
|
|
●
|
Fixed
line voice and value-added services,
comprising:
|
|
(a)
|
Local,
domestic long distance and international long distance
services;
|
|
(b)
|
Value-added
services, including caller identity, personalized ring etc.;
and
|
|
(c)
|
Interconnection
services provided to other domestic telecommunications service providers
including the fellow subsidiaries owned by Netcom Parent operating outside
the ten service regions;
|
|
●
|
Broadband
services and other Internet-related
services;
|
|
●
|
Information
Communications Technology Services, including system integration, software
services, outsourcing services, professional consulting services,
professional services related with network information and disaster
recovery, and other integrated solutions to client based on information
and communications industry;
|
|
●
|
Business
and data communications services, including managed data services and
leased line services; and
|
|
●
|
Advertising
and media services.
|
Year
ended 31 December 2006
|
|||||
Originally
stated
|
Disposal
of Guangdong and Shanghai Branches
|
Acquisition of
Beijing Telecom P&D Institute
|
Elimination
of intercompany transactions
|
Restated
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
|
Continuing
operations:
|
|||||
Revenues
|
86,921
|
(3,222)
|
165
|
330
|
84,194
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Profit
for the year from continuing operation
|
11,141
|
332
|
27
|
(22)
|
11,478
|
=============
|
=============
|
=============
|
=============
|
=============
|
|
Discontinued
operations:
|
|||||
Profit/(loss)
from discontinued operations
|
1,819
|
(332)
|
—
|
—
|
1,487
|
=============
|
=============
|
=============
|
=============
|
=============
|
|
Profit
for the year
|
12,960
|
—
|
27
|
(22)
|
12,965
|
=============
|
=============
|
=============
|
=============
|
=============
|
|
Net
cash inflow from operating activities
|
34,133
|
—
|
20
|
(18)
|
34,135
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Net
cash outflow from investing activities
|
(24,991)
|
—
|
(2)
|
21
|
(24,972)
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Net
cash outflow from financing activities
|
(6,447)
|
—
|
(30)
|
—
|
(6,477)
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
current assets at 31 December 2006
|
18,059
|
—
|
218
|
(51)
|
18,226
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
assets at 31 December 2006
|
203,835
|
—
|
318
|
(71)
|
204,082
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
current liabilities at 31 December 2006
|
90,802
|
—
|
80
|
(49)
|
90,833
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
liabilities at 31 December 2006
|
129,857
|
—
|
80
|
(49)
|
129,888
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Shareholders’
equity at 31 December 2006
|
73,978
|
—
|
238
|
(22)
|
74,194
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
●
|
HK(IFRIC)
— Int 7, ‘Applying the restatement approach under HKAS 29, Financial
reporting in hyper-inflationary
economies’;
|
|
●
|
HK(IFRIC)
— Int 9, ‘Re-assessment of embedded derivatives’;
and
|
|
●
|
HKFRS
4 (revised) — ‘Amendment to ‘Financial guarantee
contracts’.
|
(d)
|
Standards,
amendments and interpretations to existing standards that are not yet
effective and have not been early adopted by the Netcom
Group
|
|
●
|
HK(IFRIC)
— Int 11, ‘HKFRS 2 — Group and treasury share transactions’. HK(IFRIC) —
Int 11 provides guidance on whether share-based transactions involving
treasury shares or involving Group entities (for example, options over a
parent’s shares) should be accounted for as equity-settled or cash-settled
share-based payment transactions in the stand-alone accounts of the parent
and Group companies. This interpretation is not expected to have an impact
on the Netcom Group’s financial
statements.
|
|
●
|
HK(IFRIC)
— Int 12, ‘Service concession arrangement’ (effective from 1 January
2008). IFRIC 12 applies to contractual arrangements whereby a private
sector operator participates in the development, financing, operation and
maintenance of infrastructure for public sector services. IFRIC 12, is not
expected to have an impact on the Netcom Group’s financial
statements.
|
|
●
|
HKAS
23 (Amendment), ‘Borrowing costs’ (effective from 1 January 2009). The
amendment requires an entity to capitalise borrowing costs directly
attributable to the acquisition, construction or production of a
qualifying asset (one that takes a substantial period of time to get ready
for use or sale) as part of the cost of that asset. The option of
immediately expensing those borrowing costs will be removed. Since the
Netcom Group does not expense those borrowing cost under the current
accounting policies, HKAS 23 (Amendment) has no impact on the Netcom
Group.
|
|
●
|
HKFRS
8, ‘Operating segments’ (effective from 1 January 2009). HKFRS 8 replaces
HKAS 14 and aligns segment reporting with the requirements of the US
standard SFAS 131, ‘Disclosures about segments of an enterprise and
related information’. The new standard requires a ‘management approach’,
under which segment information is presented on the same basis as that
used for internal reporting purposes. The financial statements of the
Netcom Group are presented on the same basis as that used for internal
reporting purpose. Adoption of HKFRS 8 will not have significant impact on
the Netcom Group.
|
|
●
|
HK(IFRIC)
— Int 14, ‘HKAS 19 — The limit on a defined benefit asset, minimum funding
requirements and their interaction’ (effective from 1 January 2008).
HK(IFRIC) — Int 14 provides guidance on assessing the limit in IAS/HKAS 19
on the amount of the surplus that can be recognised as an asset. It also
explains how the pension asset or liability may be affected by a statutory
or contractual minimum funding requirement. The Netcom Group will apply
HK(IFRIC) — Int 14 from 1 January 2008, but it is not expected to have any
impact on the Netcom Group’s
accounts.
|
|
●
|
Revenues
derived from local, domestic long distance (“DLD”) and international long
distance (“ILD”) telephone usage, which vary depending on the day, the
time of day, the distance and duration of the call and the tariffs, are
recognised when the services are provided to
customers.
|
|
●
|
Monthly
telephone service fees are recognised in the period during which the
telephone services are provided to
customers.
|
|
●
|
Upfront
connection and installation fees received are deferred and recognised over
the expected customer relationship period of 10 years. With effect from 1
July 2001, no further upfront fees for connection were charged to
customers.
|
|
●
|
Revenues
from the sale of prepaid calling cards are deferred and recognised as the
cards are consumed by customers.
|
|
●
|
Revenues
from value-added communication services such as personalized ring and
caller number display are recognised when the services are provided to
customers.
|
|
●
|
Revenues
from the provision of broadband and other Internet-related services and
managed data services are recognised when the services are provided to
customers.
|
|
●
|
Revenues
from information communications technology services are recognised when
goods are delivered to the customers (which generally coincides with the
time when the customers have accepted the goods and the related risks and
rewards of ownership have been transferred to the customers) or when
services are rendered to the
customers.
|
|
●
|
Interconnection
fees from domestic and foreign telecommunications operators are recognised
when the services are rendered as measured by the minutes of traffic
processed.
|
|
●
|
Lease
income from the leasing of lines and customer-end equipment is recognised
over the term of the lease. Lease income from other domestic
telecommunications operators and business customers for the usage of the
Netcom Group’s fixed line telecommunications networks is measured by the
number of lines leased and the agreed upon rate per line leased. The lease
arrangements are primarily determined on a year to year
basis.
|
|
●
|
Certain
PHS bundled service contracts comprise the provision of PHS services and
handsets to customers, under which customers either prepay a certain
amount of service fee or commit to spend a minimum monthly service fee for
a designated period in order to receive a free handset. When all of the
following criteria are met, PHS handsets and related services are
separately recognised as revenues arising from local, DLD, or ILD services
fees and sales of handsets according to their relative fair values. When
any one of the following criteria is not met, total revenues from PHS
bundled service contracts are recognised on a systematic basis to match
the shorter of the pattern of usage of the PHS services by customers and
the minimum non-cancellable contractual period. See Note 4(u)(ii) for the
policy on accounting for the cost of the
handsets.
|
|
i)
|
PHS
handsets and relative services have value on a stand-alone
basis;
|
|
ii)
|
Objective
and reliable fair value of PHS handsets and relative services
exists;
|
|
iii)
|
In
arrangements that include a general right of refund for the delivered
item, performance of the undelivered item is considered probable and
substantially in the Netcom Group’s
control.
|
|
●
|
Assets
and liabilities for each balance sheet presented are translated at the
closing rate at the date of that balance
sheet;
|
|
●
|
Income
and expenses for each income statement are translated at average exchange
rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the dates of the
transactions); and
|
|
●
|
All
resulting exchange differences are recognised as a separate component of
equity.
|
Buildings
|
8-30
years
|
Telecommunications
networks and equipment
|
5-10
years
|
Furniture,
fixture, motor vehicles and other equipment
|
5-10
years
|
|
(a)
|
Employees
in the PRC are entitled to retirement benefits equal to a fixed proportion
of their salary at their normal retirement age which is paid by the PRC
government. As stipulated by the regulations of the PRC, the subsidiaries
in the PRC make contributions to the basic defined contribution pension
plans organized by their respective municipal governments under which they
are governed. The Netcom Group is required to make such contributions to
these plans at a rate of 20% of the salaries, bonuses and certain
allowances of the employees. The Netcom Group has no other material
obligation for post-retirement benefits beyond these payments as they fall
due. Payments made under these plans are expensed as
incurred.
|
|
(b)
|
The
Netcom Group also operates a mandatory provident fund scheme (“the MPF
scheme”) under the Hong Kong Mandatory Provident Fund Schemes Ordinance
for employees employed under the jurisdiction of the Hong Kong Employment
Ordinance. The MPF scheme is a defined contribution retirement scheme
administered by independent trustees. Under the MPF scheme, the employer
and its employees are each required to make contributions to the scheme at
5% of the employees’ relevant income, subject to a cap of monthly relevant
income of HK$20,000. Payments are expensed as
incurred.
|
Increase/(Decrease)
in annual profit
|
||
31
December 2007
|
31
December 2006
|
|
RMB
million
|
RMB
million
|
|
HK
Dollar exchange rate fluctuation
|
||
5%
appreciation
|
7
|
32
|
5%
depreciation
|
(7)
|
(32)
|
=============
|
=============
|
|
US
Dollar exchange rate fluctuation
|
||
5%
appreciation
|
(21)
|
30
|
5%
depreciation
|
21
|
(30)
|
=============
|
=============
|
Increase/(Decrease)
in annual profit
|
||
31
December 2007
|
31
December 2006
|
|
RMB
million
|
RMB
million
|
|
Change
of interest rate
|
||
2%
increase
|
(476)
|
(454)
|
=============
|
=============
|
|
2%
decrease
|
476
|
454
|
=============
|
=============
|
31
December 2007
|
Total
|
Within
1
year
|
1-2
years
|
2-3
years
|
3-4
years
|
4-5
years
|
Over
5
years
|
RMB million
|
RMB million
|
RMB million
|
RMB million
|
RMB million
|
RMB million
|
RMB million
|
|
Accounts
payable
|
15,639
|
15,639
|
—
|
—
|
—
|
—
|
—
|
Short-term
loans
|
12,134
|
12,134
|
—
|
—
|
—
|
—
|
—
|
Long-term
bank and
other
loans
|
21,616
|
6,407
|
10,272
|
1,887
|
106
|
104
|
2,840
|
Commercial
paper
|
20,629
|
20,629
|
—
|
—
|
—
|
—
|
—
|
Corporate
bonds
|
2,900
|
90
|
90
|
90
|
90
|
90
|
2,450
|
Amounts
due to holding companies and fellow subsidiaries
|
8,870
|
2,319
|
2,214
|
4,337
|
—
|
—
|
—
|
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
|||||||
Total
|
81,788
|
57,218
|
12,576
|
6,314
|
196
|
194
|
5,290
|
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
31
December 2006
|
Total
|
Within
1
year
|
1-2
years
|
2-3
years
|
3-4
years
|
4-5
years
|
Over
5
years
|
|
RMB million
|
RMB million
|
RMB million
|
RMB million
|
RMB million
|
RMB million
|
RMB million
|
|
|||||||
Accounts
payable
|
17,661
|
17,661
|
—
|
—
|
—
|
—
|
—
|
Short-term
loans
|
31,602
|
31,602
|
—
|
—
|
—
|
—
|
—
|
Long-term
bank and
other
loans
|
36,343
|
8,980
|
7,814
|
10,416
|
431
|
430
|
8,272
|
Commercial
paper
|
10,000
|
10,000
|
—
|
—
|
—
|
—
|
—
|
Amounts
due to holding companies and fellow subsidiaries
|
8,781
|
2,352
|
2,248
|
2,143
|
2,038
|
—
|
—
|
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
|||||||
Total
|
104,387
|
70,595
|
10,062
|
12,559
|
2,469
|
430
|
8,272
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
Year
ended 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million Restated
Note
2
|
|
Revenues
|
||
Local
usage fees
|
19,989
|
22,059
|
Monthly
telephone services
|
12,387
|
16,546
|
Upfront
installation fees
|
1,283
|
1,364
|
DLD
usage fees
|
8,769
|
9,495
|
ILD
usage fees
|
791
|
819
|
Value-added
services
|
6,114
|
5,341
|
Interconnection
fees
|
8,376
|
8,432
|
Upfront
connection fees
|
1,517
|
2,406
|
Broadband
services
|
13,835
|
9,916
|
Other
Internet-related services
|
532
|
516
|
Managed
data services
|
1,284
|
1,413
|
Leased
line income
|
2,521
|
2,540
|
Information
communications technology services
|
3,990
|
855
|
Other
services
|
2,617
|
2,492
|
-------
|
-------
|
|
Total
|
84,005
|
84,194
|
=============
|
=============
|
Year
ended 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million Restated
Note
2
|
|
Staff
cost
|
12,223
|
11,849
|
Depreciation
and amortisation
|
25,495
|
24,913
|
Maintenance
cost
|
4,373
|
4,512
|
Miscellaneous
taxes and fees
|
358
|
278
|
Customer
installation cost
|
2,036
|
1,116
|
Interconnection
charges
|
4,014
|
3,915
|
Advertising
and promotion expenses
|
821
|
884
|
Sales
channel cost
|
2,298
|
2,118
|
Subscriber
acquisition and retention cost
|
1,582
|
3,646
|
Auditor’s
remuneration
|
54
|
61
|
Bad
and doubtful debt expenses
|
868
|
1,003
|
Operating
leases
|
1,900
|
1,969
|
Cost
of hardware sold in relation to information communications technology
services
|
2,830
|
598
|
=============
|
=============
|
Year
ended 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million Restated
Note
2
|
|
Interest
expenses on:
|
||
—
Bank and other loans wholly repayable within five years
|
2,875
|
3,185
|
—
Bank and other loans wholly repayable after more than five
years
|
198
|
325
|
—
Deferred consideration related to Acquisition of New
Horizon
|
375
|
479
|
-------
|
-------
|
|
Total
|
3,448
|
3,989
|
-------
|
-------
|
|
Less:
Interest expenses capitalized in construction in progress
|
(165)
|
(233)
|
-------
|
-------
|
|
Exchange
loss/(gain), net
|
25
|
(8)
|
Bank
charges
|
25
|
19
|
-------
|
-------
|
|
3,333
|
3,767
|
|
=============
|
=============
|
|
Interest
expenses were capitalized in construction in progress
using
the following annual interest rates
|
4.75%-5.82%
|
4.71%-5.28%
|
=============
|
=============
|
Year
ended 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million Restated
Note
2
|
|
PRC
enterprise income tax (“EIT”)
|
3,901
|
4,143
|
Overseas
profit tax
|
12
|
20
|
Deferred
taxation — Continuing operations (Note 34)
|
(66)
|
(436)
|
Deferred
taxation — Change in statutory taxation rate (Note 34)
|
(51)
|
—
|
-------
|
-------
|
|
Taxation
charges
|
3,796
|
3,727
|
=============
|
=============
|
Year
ended 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million Restated
Note
2
|
|
Profit
before taxation
|
15,267
|
15,205
|
=============
|
=============
|
|
Weighted
average statutory tax rate
|
33%
|
33%
|
Tax
calculated at the weighted average statutory tax rate
|
5,038
|
5,018
|
Non-taxable
income (Note i)
|
(1,184)
|
(1,216)
|
Expenses
not deductible for tax purposes
|
68
|
64
|
Change
in statutory taxation rate (Note 34)
|
(51)
|
—
|
Others
|
(75)
|
(139)
|
-------
|
-------
|
|
Tax
charge
|
3,796
|
3,727
|
=============
|
=============
|
|
(i)
|
Non-taxable
income comprises primarily of upfront connection fees charged to customers
which are amortized over the customer relationship and the subsidy income
obtained (Note 9).
|
|
(a)
|
For
the year ended 31 December 2007, profit attributable to shareholders
includes current year profit of RMB8,714million (2006: RMB17,475 million),
which has been recognized in Netcom’s financial
statements.
|
|
(b)
|
Netcom’s
subsidiary, CNC China is registered as a foreign investment enterprise in
the PRC. In accordance with the Articles of Association of CNC China, it
is required to provide for certain statutory reserves, namely, general
reserve and staff bonus and welfare fund, which are appropriated from
profits after tax but before any dividend
distribution.
|
|
(c)
|
According
to a PRC tax approval document issued by the Ministry of Finance and State
Administration of Taxation to the Netcom Group, the Netcom Group’s upfront
connection fees are not subject to EIT and an amount equal to the upfront
connection fees recognised in the retained earnings should be transferred
from retained earnings to a statutory reserve. Up to 31 December 2007,
Netcom has made accumulated appropriation of RMB10,706 million to the
statutory reserve (Up to 31 December 2006: RMB9,189
million).
|
Year
ended 31 December
|
||||
2007
|
2006
|
|||
HK$
million
|
RMB
million
|
HK$
million
|
RMB
million
|
|
Final
dividend proposed after balance sheet date of HK$0.592 per share (2006:
HK$0.553 per share)
|
3,951
|
3,700
|
3,678
|
3,695
|
=============
|
=============
|
=============
|
=============
|
|
Dividend
distributed during the year
|
3,678
|
3,600
|
3,073
|
3,196
|
=============
|
=============
|
=============
|
=============
|
Year
ended 31 December
|
||
2007
|
2006
|
|
(in
RMB millions, except share and per share data)
|
||
Restated
Note
2
|
||
Numerator:
|
||
Profit
for the year
|
||
—
Continuing operations
|
11,471
|
11,478
|
—
Discontinued operations
|
624
|
1,487
|
-------
|
-------
|
|
12,095
|
12,965
|
|
=============
|
=============
|
|
Denominator
|
||
Weighted
average number of Netcom Shares outstanding and shares used in
computing basic earnings per Netcom Share
|
6,657,045,212
|
6,615,520,381
|
Diluted
equivalent Netcom Shares arising from Netcom Options
|
80,583,956
|
51,955,496
|
-------
|
-------
|
|
Shares
used in computing diluted earnings per Netcom Share
|
6,737,629,168
|
6,667,475,877
|
-------
|
-------
|
|
Basic
earnings per Netcom Share (RMB)
|
||
—
Continuing operations
|
1.72
|
1.74
|
=============
|
=============
|
|
—
Discontinued operations
|
0.09
|
0.22
|
=============
|
=============
|
|
—
Profit for the year
|
1.81
|
1.96
|
=============
|
=============
|
|
Diluted
earnings per Netcom Share (RMB)
|
||
—
Continuing operations
|
1.70
|
1.72
|
=============
|
=============
|
|
—
Discontinued operations
|
0.09
|
0.22
|
=============
|
=============
|
|
—
Profit for the year
|
1.79
|
1.94
|
=============
|
=============
|
Year
ended 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Restated
Note
2
|
||
Wages,
salaries and welfare
|
10,778
|
10,504
|
Contributions
to pensions
|
1,445
|
1,345
|
-------
|
-------
|
|
Total
|
12,223
|
11,849
|
=============
|
=============
|
Year
ended 31 December 2007
|
||||||
RMB
thousand
|
||||||
Fees
(a)
|
Basic salaries,
housing allowances, other allowances and benefits in
kind
|
Subtotal
|
Netcom Share
based compensation
|
Contributions
to retirement schemes
|
Total
|
|
Zhang
Chunjiang
|
—
|
840
|
840
|
149
|
21
|
1,010
|
Zuo
Xunsheng (i)
|
—
|
824
|
824
|
130
|
21
|
975
|
Li
Jianguo(ii)
|
—
|
344
|
344
|
—
|
9
|
353
|
Zhang
Xiaotie
|
—
|
724
|
724
|
130
|
21
|
875
|
Li
Fushen (iii)
|
—
|
697
|
697
|
130
|
21
|
848
|
Miao
Jianhua (iv)
|
—
|
360
|
360
|
182
|
12
|
554
|
Tian
Suning (v)
|
—
|
—
|
—
|
239
|
—
|
239
|
Li
Liming (vi)
|
—
|
22
|
22
|
114
|
21
|
157
|
Yan
Yixun
|
253
|
—
|
253
|
96
|
—
|
349
|
Cesareo
Alierta Izuel(vii)
|
14
|
—
|
14
|
—
|
—
|
14
|
José
María Álvarez-Pallete
|
318
|
—
|
318
|
—
|
—
|
318
|
Mauricio
Sartorius (viii)
|
239
|
—
|
239
|
—
|
—
|
239
|
John
Lawson Thornton
|
464
|
—
|
464
|
—
|
—
|
464
|
Victor
Cha Mou Zing
|
501
|
—
|
501
|
—
|
—
|
501
|
Qian
Yingyi
|
604
|
—
|
604
|
—
|
—
|
604
|
Hou
Ziqiang
|
506
|
—
|
506
|
—
|
—
|
506
|
Timpson
Chung Shui Ming
|
520
|
—
|
520
|
—
|
—
|
520
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
|
3,419
|
3,811
|
7,230
|
1,170
|
126
|
8,526
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
Year
ended 31 December 2006
|
||||||
RMB
thousand
|
||||||
Fees
(b)
|
Basic
salaries, housing allowances, other allowances and benefits in
kind
|
Subtotal
|
Share
based compensation
|
Contributions
to retirement schemes
|
Total
|
|
Zhang
Chunjiang
|
—
|
763
|
763
|
312
|
19
|
1,094
|
Zuo
Xunsheng (i)
|
—
|
746
|
746
|
272
|
19
|
1,037
|
Zhang
Xiaotie
|
—
|
671
|
671
|
272
|
19
|
962
|
Li
Fushen (iii)
|
—
|
671
|
671
|
272
|
19
|
962
|
Miao
Jianhua (iv)
|
—
|
671
|
671
|
238
|
19
|
928
|
Jiang
Weiping (ix)
|
—
|
453
|
453
|
238
|
19
|
710
|
Li
Liming (vi)
|
—
|
420
|
420
|
238
|
19
|
677
|
Tian
Suning (v)
|
—
|
—
|
—
|
312
|
—
|
312
|
Yan
Yixun
|
251
|
—
|
251
|
200
|
—
|
451
|
John
Lawson Thornton
|
409
|
—
|
409
|
—
|
—
|
409
|
Victor
Cha Mou Zing
|
453
|
—
|
453
|
—
|
—
|
453
|
Qian
Yingyi
|
545
|
—
|
545
|
—
|
—
|
545
|
Hou
Ziqiang
|
483
|
—
|
483
|
—
|
—
|
483
|
Timpson
Chung Shui Ming
|
460
|
—
|
460
|
—
|
—
|
460
|
José
María Álvarez-Pallete
|
317
|
—
|
317
|
—
|
—
|
317
|
Mauricio
Sartorius (viii)
|
9
|
—
|
9
|
—
|
—
|
9
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
Total
|
2,927
|
4,395
|
7,322
|
2,354
|
133
|
9,809
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
|
(a)
|
According
to the ordinary resolution passed at the Second Extraordinary General
Meetings held on 14 February 2007, the director’s fee for the Netcom
Directors shall be revised as follows: all non-executive Directors
nominated by Netcom Parent and all executive Directors shall not be
entitled to any director’s fee. This revision shall apply in respect of
each financial year commencing from the 2007 financial
year.
|
|
(b)
|
On
6 December 2006, according to the Netcom Directors’ discretion, Zhang
Chunjiang, Zuo Xunsheng, Zhang Xiaotie, Miao Jianhua, Li Liming, Jiang
Weiping and Tian Suning waived their emoluments for the years ended 31
December 2006 totalling RMB1,526 thousand. Details of the waivers are as
follows: Zhang Chunjiang RMB251 thousand, Zuo Xunsheng RMB158 thousand,
Zhang Xiaotie RMB251 thousand, Miao Jianhua RMB251 thousand, Jiang Weiping
RMB94 thousand, Li Liming RMB270 thousand, Tian Suning RMB251
thousand.
|
|
(i)
|
Appointed
in May 2006
|
|
(ii)
|
Appointed
in July 2007
|
|
(iii)
|
Appointed
in January 2007
|
|
(iv)
|
Resigned
in July 2007
|
|
(v)
|
Re-designated
as non-executive Directors in May 2006, resigned in July
2007
|
|
(vi)
|
Resigned
in January 2007
|
|
(vii)
|
Appointed
in December 2007
|
|
(viii)
|
Appointed
in December 2006, resigned in December
2007
|
|
(ix)
|
Resigned
in May 2006
|
Year
ended 31 December
|
||
2007
|
2006
|
|
RMB
thousand
|
RMB
thousand
|
|
Basic
salaries, housing allowances, other allowances and benefits in
kind
|
1,450
|
2,013
|
Share
based compensation
|
260
|
816
|
Contributions
to retirement schemes
|
42
|
57
|
-------
|
-------
|
|
Total
|
1,752
|
2,886
|
=============
|
=============
|
Year
ended 31 December
|
||
2007
|
2006
|
|
Nil
- RMB936,400 (equivalent of Nil — HK$1,000,000)
|
2
|
3
|
-------
|
-------
|
Netcom
Group
|
Netcom
|
|||
As
at 31 December
|
As
at 31 December
|
|||
2007
|
2006
|
2007
|
2006
|
|
RMB
million
|
RMB
million Restated
Note
2
|
RMB
million
|
RMB
million
|
|
Cash
and cash equivalents
|
5,304
|
7,623
|
113
|
1,772
|
Time
deposits with original maturities over three
months
|
91
|
105
|
—
|
—
|
-------
|
-------
|
-------
|
-------
|
Total
cash and bank deposits
|
5,395
|
7,728
|
113
|
1,772
|
=============
|
=============
|
=============
|
=============
|
|
Effective
interest rate of time deposits with original maturities over three months
(% per annum)
|
0.72
|
0.72
|
—
|
—
|
=============
|
=============
|
=============
|
=============
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million Restated
Note
2
|
|
0-30
days
|
5,682
|
5,744
|
31-90
days
|
1,866
|
1,557
|
Over
90 days
|
2,308
|
2,326
|
-------
|
-------
|
|
Total
|
9,856
|
9,627
|
-------
|
-------
|
|
Less:
Allowance for doubtful debts
|
(1,398)
|
(1,344)
|
-------
|
-------
|
|
Net
carrying amounts
|
8,458
|
8,283
|
=============
|
=============
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million Restated
Note
2
|
|
Balance
at beginning of year
|
1,344
|
1,654
|
Additional
provisions
|
844
|
1,002
|
Less:
Write-offs
|
(750)
|
(1,246)
|
Disposal
of ANC Group
|
—
|
(66)
|
Disposal
of Guangdong and Shanghai Branches
|
(40)
|
—
|
-------
|
-------
|
|
Balance
at end of year
|
1,398
|
1,344
|
=============
|
=============
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million Restated
Note
2
|
Telephone
handsets and other customer end-products held for resale, at
cost
|
125
|
155
|
Consumables,
at cost
|
162
|
261
|
-------
|
-------
|
|
Total
|
287
|
416
|
=============
|
=============
|
Netcom
Group
|
Netcom
|
|||
As
at 31 December
|
As
at 31 December
|
|||
2007
|
2006
|
2007
|
2006
|
|
RMB
million
|
RMB
million Restated
Note
2
|
RMB
million
|
RMB
million
|
|
Prepaid
expenses, deposits and other current assets
|
605
|
812
|
8
|
15
|
Other
receivables
|
416
|
629
|
8
|
253
|
-------
|
-------
|
-------
|
-------
|
|
Total
|
1,021
|
1,441
|
16
|
268
|
=============
|
=============
|
=============
|
=============
|
Buildings
|
Telecommunications
networks and equipment
|
Furniture,
fixture, motor vehicles and other equipment
|
Total
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
|
Cost/valuation:
|
||||
Balance
at 1 January 2006, as restated (Note 2)
|
27,149
|
280,301
|
19,796
|
327,246
|
Additions
|
52
|
755
|
639
|
1,446
|
Transferred
from construction in progress
|
688
|
21,449
|
2,621
|
24,758
|
Disposals/write
off
|
(6)
|
(1,947)
|
(524)
|
(2,477)
|
Disposal
of ANC Group
|
(172)
|
(636)
|
(45)
|
(853)
|
Fixed
assets revaluation deficit, net
|
—
|
(10,659)
|
(3,588)
|
(14,247)
|
-------
|
-------
|
-------
|
-------
|
|
Balance
at 31 December 2006
|
27,711
|
289,263
|
18,899
|
335,873
|
-------
|
-------
|
-------
|
-------
|
|
Accumulated
depreciation:
|
||||
Balance
at 1 January 2006, as restated (Note 2)
|
(6,215)
|
(142,639)
|
(9,628)
|
(158,482)
|
Depreciation
charge for the year
|
(999)
|
(21,842)
|
(2,286)
|
(25,127)
|
Disposals/write
off
|
4
|
1,315
|
424
|
1,743
|
Disposal
of ANC Group
|
51
|
261
|
28
|
340
|
Fixed
assets revaluation deficit, net
|
—
|
11,778
|
2,016
|
13,794
|
-------
|
-------
|
-------
|
-------
|
|
Balance
at 31 December 2006
|
(7,159)
|
(151,127)
|
(9,446)
|
(167,732)
|
-------
|
-------
|
-------
|
-------
|
|
Net
book value at 31 December 2006
|
20,552
|
138,136
|
9,453
|
168,141
|
=============
|
=============
|
=============
|
=============
|
|
Net
book value at 1 January 2006, as restated (Note
2)
|
20,934
|
137,662
|
10,168
|
168,764
|
=============
|
=============
|
=============
|
=============
|
Buildings
|
Telecommunications
networks and equipment
|
Furniture,
fixture, motor vehicles and other equipment
|
Total
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
|
Cost/valuation:
|
||||
Balance
at 1 January 2007
|
27,711
|
289,263
|
18,899
|
335,873
|
Additions
|
56
|
797
|
725
|
1,578
|
Transferred
from construction in progress
|
971
|
15,540
|
2,595
|
19,106
|
Disposals/write
off
|
(33)
|
(1,749)
|
(441)
|
(2,223)
|
Disposal
of Guangdong and Shanghai Branches
|
(550)
|
(7,635)
|
(344)
|
(8,529)
|
-------
|
-------
|
-------
|
-------
|
|
Balance
at 31 December 2007
|
28,155
|
296,216
|
21,434
|
345,805
|
-------
|
-------
|
-------
|
-------
|
|
Accumulated
depreciation:
|
||||
Balance
at 1 January 2007
|
(7,159)
|
(151,127)
|
(9,446)
|
(167,732)
|
Depreciation
charge for the year
|
(1,030)
|
(21,977)
|
(2,004)
|
(25,011)
|
Disposals/write
off
|
16
|
1,337
|
395
|
1,748
|
Disposal
of Guangdong and
Shanghai
Branches
|
134
|
1,867
|
137
|
2,138
|
|
-------
|
-------
|
-------
|
-------
|
|
||||
Balance
at 31 December 2007
|
(8,039)
|
(169,900)
|
(10,918)
|
(188,857)
|
|
-------
|
-------
|
-------
|
-------
|
|
||||
Net
book value at 31 December 2007
|
20,116
|
126,316
|
10,516
|
156,948
|
=============
|
=============
|
=============
|
=============
|
|
Net
book value at 1 January 2007
|
20,552
|
138,136
|
9,453
|
168,141
|
=============
|
=============
|
=============
|
=============
|
Buildings
|
Telecommunications
networks and equipment
|
Furniture,
fixture, motor vehicles and other equipment
|
Total
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
|
As
at 31 December 2007
|
—
|
217
|
2
|
219
|
=============
|
=============
|
=============
|
=============
|
|
As
at 31 December 2006
|
—
|
2,000
|
62
|
2,062
|
=============
|
=============
|
=============
|
=============
|
Buildings
|
Telecommunications
networks and equipment
|
Furniture,
fixture, motor vehicles and other equipment
|
Total
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
|
31
December 2007
|
||||
Cost
|
28,155
|
—
|
—
|
28,155
|
Valuation
|
—
|
296,216
|
21,434
|
317,650
|
-------
|
-------
|
-------
|
-------
|
|
28,155
|
296,216
|
21,434
|
345,805
|
|
=============
|
=============
|
=============
|
=============
|
|
31
December 2006
|
||||
Cost
|
27,711
|
—
|
—
|
27,711
|
Valuation
|
—
|
289,263
|
18,899
|
308,162
|
-------
|
-------
|
-------
|
-------
|
|
27,711
|
289,263
|
18,899
|
335,873
|
|
============
|
=============
|
=============
|
=============
|
|
(c)
|
As
required by the PRC rules and regulations relevant to the Listing
Reorganisation, each class of fixed assets other than lease prepayments
for land and buildings as at 31 December 2003 was valued by Beijing China
Enterprise Appraisal Co. Ltd. (the “PRC valuer”), an independent valuer
registered in the PRC, on a depreciated replacement cost basis. The value
of such assets in the PRC injected into the Netcom Group was determined at
RMB122,456 million. Such revalued amounts served as the tax base of the
assets with immediate effect. The surplus on revaluation of certain fixed
assets of RMB2,982 million was credited to the revaluation reserve while
the deficit arising from the revaluation of certain fixed assets of
RMB25,778 million was recognised as an expense for the year ended 31
December 2003.
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Restated
Note
2
|
||
Balance
at beginning of year
|
6,335
|
6,822
|
Additions
|
18,294
|
24,843
|
Transferred
to fixed assets
|
(19,106)
|
(24,758)
|
Transferred
to intangible assets
|
(399)
|
(572)
|
Disposal
of Guangdong and Shanghai Branches
|
(1,134)
|
—
|
-------
|
-------
|
|
Balance
at end of year
|
3,990
|
6,335
|
=============
|
=============
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Lease
prepayments for land (i)
|
2,183
|
2,046
|
Lease
prepayments for network capacity (ii)
|
311
|
318
|
-------
|
-------
|
|
2,494
|
2,364
|
|
=============
|
=============
|
As
at 31 December
|
||
2007
|
2006
|
RMB
million
|
RMB
million
|
|
Held
for
|
||
Lease
of between 10 to 50 years
|
2,162
|
2,024
|
Lease
of less than 10 years
|
21
|
22
|
-------
|
-------
|
|
2,183
|
2,046
|
|
=============
|
=============
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Balance
at beginning of year
|
2,046
|
1,949
|
Additions
|
232
|
165
|
Amortisation
for the year
|
(87)
|
(68)
|
Disposal
of Guangdong and Shanghai Branches
|
(8)
|
—
|
-------
|
-------
|
|
Balance
at end of year
|
2,183
|
2,046
|
=============
|
=============
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Held
for
|
||
Lease
of between 10 to 50 years
|
311
|
318
|
=============
|
=============
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Balance
at beginning of year
|
318
|
—
|
Additions
|
—
|
318
|
Amortisation
for the year
|
(7)
|
—
|
-------
|
-------
|
|
Balance
at end of year
|
311
|
318
|
=============
|
=============
|
Purchased
software
|
Sponsorship
fees
|
Others
|
Total
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
|
Cost:
|
||||
Balance
at 1 January 2006, as restated (Note 2)
|
1,919
|
540
|
3
|
2,462
|
Additions
|
95
|
—
|
—
|
95
|
Transferred
from construction in progress
|
572
|
—
|
—
|
572
|
Disposals/write
off
|
(692)
|
—
|
(3)
|
(695)
|
-------
|
-------
|
-------
|
-------
|
|
Balance
at 31 December 2006
|
1,894
|
540
|
—
|
2,434
|
-------
|
-------
|
-------
|
-------
|
|
Accumulated
amortisation:
|
||||
Balance
at 1 January 2006, as restated (Note 2)
|
(927)
|
(135)
|
(3)
|
(1,065)
|
Amortisation
for the year
|
(338)
|
(135)
|
—
|
(473)
|
Disposals/write
off
|
692
|
—
|
3
|
695
|
-------
|
-------
|
-------
|
-------
|
|
Balance
at 31 December 2006
|
(573)
|
(270)
|
—
|
(843)
|
-------
|
-------
|
-------
|
-------
|
|
Net
book value at 1 January 2006, as restated (Note 2)
|
992
|
405
|
—
|
1,397
|
=============
|
=============
|
=============
|
=============
|
|
Net
book value at 31 December 2006
|
1,321
|
270
|
—
|
1,591
|
=============
|
=============
|
=============
|
=============
|
Purchased
software
|
Sponsorship fees
|
Total
|
|
RMB
million
|
RMB
million
|
RMB
million
|
|
Cost:
|
|||
Balance
at 1 January 2007
|
1,894
|
540
|
2,434
|
Additions
|
150
|
—
|
150
|
Transferred
from construction in progress
|
399
|
—
|
399
|
Disposals/write
off
|
(73)
|
—
|
(73)
|
Disposal
of Guangdong and Shanghai Branches
|
(75)
|
—
|
(75)
|
-------
|
-------
|
-------
|
|
Balance
at 31 December 2007
|
2,295
|
540
|
2,835
|
-------
|
-------
|
-------
|
|
Accumulated
amortisation:
|
|||
Balance
at 1 January 2007
|
(573)
|
(270)
|
(843)
|
Amortisation
for the year
|
(394)
|
(135)
|
(529)
|
Disposals/write
off
|
69
|
—
|
69
|
Disposal
of Guangdong and Shanghai Branches
|
20
|
—
|
20
|
-------
|
-------
|
-------
|
|
Balance
at 31 December 2007
|
(878)
|
(405)
|
(1,283)
|
-------
|
-------
|
-------
|
|
Net
book value at 1 January 2007
|
1,321
|
270
|
1,591
|
=============
|
=============
|
=============
|
|
Net
book value at 31 December 2007
|
1,417
|
135
|
1,552
|
=============
|
=============
|
=============
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Installation
costs
|
2,847
|
3,525
|
Others
|
396
|
441
|
-------
|
-------
|
|
3,243
|
3,966
|
|
=============
|
=============
|
Disposal
of Guangdong and Shanghai Branches
|
Disposal
of ANC Group
|
Total
|
||||
For
the
period
from
1
January 2007 to
28
February 2007
|
For
the
year
ended
31
December 2006
|
For
the
year
ended
31
December 2007
|
For
the
period
from
1
January 2006 to
22
August 2006
|
For
the
year
ended
31
December 2007
|
For
the
year
ended
31
December 2006
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
|
Discontinued
operations
|
||||||
Revenues
|
615
|
3,222
|
—
|
980
|
615
|
4,202
|
Expenses
|
(618)
|
(3,717)
|
—
|
(1,038)
|
(618)
|
(4,755)
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Loss
before taxation of discontinued operations
|
(3)
|
(495)
|
—
|
(58)
|
(3)
|
(553)
|
Taxation
|
1
|
163
|
—
|
(1)
|
1
|
162
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Loss
for the period of discontinued operations
|
(2)
|
(332)
|
—
|
(59)
|
(2)
|
(391)
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Gain
on disposal of discontinued operations before taxation
|
927
|
—
|
—
|
1,878
|
927
|
1,878
|
Taxation
|
(301)
|
—
|
—
|
—
|
(301)
|
—
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Gain
on discontinued operations after taxation
|
626
|
—
|
—
|
1,878
|
626
|
1,878
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Profit/(loss)
for the period/year from discontinued operations
|
624
|
(332)
|
—
|
1,819
|
624
|
1,487
|
=======
|
=======
|
=======
|
=======
|
=======
|
=======
|
Disposal
of Guangdong and Shanghai Branches
|
Disposal
of ANC Group
|
Total
|
||||
For
the
period
from
1
January 2007 to
28
February 2007
|
For
the
year
ended
31
December 2006
|
For
the
year
ended
31
December 2007
|
For
the
period
from
1
January 2006 to
22
August 2006
|
For
the
year
ended
31
December 2007
|
For
the
year
ended
31
December 2006
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
|
Discontinued
operations
|
||||||
Net
cash inflow from operating activities
|
388
|
1,902
|
—
|
183
|
388
|
2,085
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Cash
outflow from investing activities
|
(374)
|
(1,903)
|
—
|
(182)
|
(374)
|
(2,085)
|
Cash
inflow from disposal of discontinued operations
|
3,477
|
—
|
—
|
1,164
|
3,477
|
1,164
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Net
cash inflow/(outflow) from investing activities
|
3,103
|
(1,903)
|
—
|
982
|
3,103
|
(921)
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Net
cash inflow from financing activities
|
—
|
—
|
—
|
—
|
—
|
—
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
Cash
flow from discontinued operations
|
3,491
|
(1)
|
—
|
1,165
|
3,491
|
1,164
|
=======
|
=======
|
=======
|
=======
|
=======
|
=======
|
Netcom
|
||
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Investment
cost in subsidiaries
|
71,000
|
62,937
|
Due
from subsidiaries (Note (b))
|
10,490
|
9,411
|
Due
to subsidiaries (Note (c))
|
(14,271)
|
(12,754)
|
-------
|
-------
|
|
67,219
|
59,594
|
|
=============
|
=============
|
Company
name
|
Place
and date
of incorporation/ establishment
|
Registered
capital
|
Percentage
of equity interest attributable to Netcom
|
Principal
activities and place of operation
|
Directly
held:
|
||||
China
Netcom (Group) Company Limited (Note (i))
|
PRC
6
August 1999
|
RMB73,371
million
|
100%
|
Provision
of network communications services in the PRC
|
China
Netcom Corporation International Limited
|
Bermuda
15
October 2002
|
USD12,000
|
100%
|
Provision
of Investing Service in Bermuda
|
Indirect
held:
|
||||
China
Netcom Group System Integration Limited Corporation (Note
(ii))
|
PRC
30
April 2006
|
RMB50
million
|
100%
|
Provision
of Information Communications Technology Services in
PRC
|
China
Netcom Broadband Online Limited Corporation (Note (ii))
|
PRC
29
March 2006
|
RMB30
million
|
100%
|
Provision
of Internet Information services and value-added
telecommunications services in PRC
|
Beijing
Telecommunications Planning and Designing Institute Corporation Limited
(Note (iii))
|
PRC
1
June 2007
|
RMB264,227,115
|
100%
|
Provision
of telecommunications network construction, planning and technical
consulting services in
PRC
|
|
(i)
|
The
company is a wholly owned foreign enterprise established in the PRC. The
accounts of the company for the years ended 31 December 2006 and 2007 were
audited by PricewaterhouseCoopers Zhong Tian CPAs Limited
Company.
|
|
(ii)
|
These
companies are wholly owned domestic enterprises established in the PRC.
The accounts of these companies for the years ended 31 December 2006 and
2007 were audited by PricewaterhouseCoopers Zhong Tian CPAs Limited
Company, respectively.
|
|
(iii)
|
The
company is a wholly owned domestic enterprise established in the PRC. The
accounts of the company for the year ended 31 December 2007 were audited
by PricewaterhouseCoopers Zhong Tian CPAs Limited
Company.
|
|
(b)
|
The
balances are unsecured, non-interest bearing and have no fixed repayment
terms.
|
|
(c)
|
The
balances mainly represent deferred payments arising from the Acquisition
of New Horizon which have been transferred to CNC China at the carrying
amount. The balances are unsecured, non-interest bearing and have no fixed
repayment terms
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Restated
Note
2
|
||
0-30
days
|
6,214
|
5,763
|
31-60
days
|
1,462
|
2,236
|
61-90
days
|
1,266
|
1,449
|
91-180
days
|
2,251
|
2,990
|
Over
180 days
|
4,446
|
5,223
|
-------
|
-------
|
|
Total
|
15,639
|
17,661
|
=============
|
=============
|
Netcom
Group
|
Netcom
|
|||
As
at 31 December
|
As
at 31 December
|
|||
2007
|
2006
|
2007
|
2006
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
|
Restated
Note
2
|
||||
Interest
payable
|
441
|
106
|
—
|
—
|
Payroll
payable
|
493
|
588
|
—
|
—
|
Accruals
and other payables
|
2,016
|
2,380
|
46
|
136
|
-------
|
-------
|
-------
|
-------
|
|
2,950
|
3,074
|
46
|
136
|
|
=============
|
=============
|
=============
|
=============
|
|
(a)
|
(i)
|
CNC
China issued two lots of RMB10 billion unsecured commercial paper with
repayment periods of 1 year and 270 days on 30 April 2007 and 18 September
2007 in the PRC capital market respectively. The effective interest rates
are 3.34% and 3.93% respectively. The aggregated net cash proceeds raised
in these exercises is RMB20
billion.
|
As
at 31 December
|
|||
Currency
|
Interest
rate and final maturity
|
2007
|
2006
|
RMB
million
|
RMB
million
|
||
RMB
denominated
|
Interest
rates ranging from 4.86% to 6.72% per annum with maturity through 11
December 2008
|
11,850
|
30,980
|
=============
|
=============
|
As
at 31 December
|
|||
2007
|
2006
|
||
Note
|
RMB
million
|
RMB
million
|
|
Long
term bank loans
|
(i)
|
19,645
|
29,560
|
Finance
lease obligations
|
(ii)
|
102
|
963
|
-------
|
-------
|
||
19,747
|
30,523
|
||
-------
|
-------
|
||
Less:
Current portion
|
(5,322)
|
(7,304)
|
|
-------
|
-------
|
||
14,425
|
23,219
|
||
=============
|
=============
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Loans
|
||
Unsecured
|
19,433
|
29,220
|
Secured
|
212
|
340
|
-------
|
-------
|
|
Total
|
19,645
|
29,560
|
-------
|
-------
|
|
Less:
Current portion
|
(5,220)
|
(6,446)
|
-------
|
-------
|
|
Long
term loans
|
14,425
|
23,114
|
=============
|
=============
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Within
one year
|
5,220
|
6,446
|
In
the second year
|
9,671
|
6,491
|
In
the third to fifth year, inclusive
|
1,952
|
9,723
|
After
the fifth year
|
2,802
|
6,900
|
-------
|
-------
|
|
19,645
|
29,560
|
|
=============
|
=============
|
As
at 31 December
|
|||
Currency
|
Interest
rate and final maturity
|
2007
|
2006
|
RMB
million
|
RMB
million
|
||
Bank
loan
|
|||
Renminbi
denominated
|
Interest
rates ranging from 2.4% to 10.08% per annum with maturity through 29
January 2022
|
18,399
|
28,128
|
US
Dollar denominated
|
Interest
rates ranging from 1.5% to 6.15% per annum with maturity through 31
October 2039
|
588
|
721
|
Japanese
Yen denominated
|
Interest
rate is 2.12% per annum with maturity through 7 January
2014
|
234
|
276
|
Euro
denominated
|
Interest
rates ranging from 1.10% to 7.85% per annum with maturity through 15 March
2034
|
415
|
435
|
Hong
Kong Dollar denominated
|
Interest
rates is 3.75% per annum with maturity through 31 December
2010
|
9
|
—
|
-------
|
-------
|
||
19,645
|
29,560
|
||
=============
|
=============
|
|
●
|
Corporate
guarantees granted by Netcom Parent to the extent of RMB49 million (31
December 2006: RMB65 million); and
|
|
●
|
Corporate
guarantees granted by third parties to the extent of RMB163 million (31
December 2006: RMB275 million).
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Obligation
under finance leases
|
102
|
963
|
Less:
current portion
|
(102)
|
(858)
|
-------
|
-------
|
|
—
|
105
|
|
=============
|
=============
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Within
one year
|
105
|
888
|
In
the second year
|
—
|
106
|
-------
|
-------
|
|
105
|
994
|
|
Less:
future finance charges on finance leases
|
(3)
|
(31)
|
-------
|
-------
|
|
Present
value of finance lease liabilities
|
102
|
963
|
=============
|
=============
|
|
The
present value of finance lease liabilities is as follows:
|
||
Within
one year
|
102
|
858
|
In
the second year
|
—
|
105
|
-------
|
-------
|
|
102
|
963
|
|
=============
|
=============
|
|
(d)
|
The
fair value of the Netcom Group’s non-current portion of long term bank and
other loans at 31 December 2007 and 2006 were as
follows:
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Long
term bank loans
|
12,320
|
21,209
|
Finance
lease obligations
|
—
|
85
|
-------
|
-------
|
|
12,320
|
21,294
|
|
=============
|
=============
|
Netcom
Group
|
Netcom
|
||||
As
at 31 December
|
As
at 31 December
|
||||
Note
|
2007
|
2006
|
2007
|
2006
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
||
Restated
Note
2
|
|||||
Current:
|
|||||
Due
from ultimate holding company
|
(a)
|
245
|
174
|
—
|
—
|
Due
from intermediate holding companies
|
(a)
|
6
|
3
|
—
|
—
|
Due
from fellow subsidiaries
|
(a)
|
96
|
181
|
—
|
—
|
-------
|
-------
|
-------
|
-------
|
||
Total
|
347
|
358
|
—
|
—
|
|
=============
|
=============
|
=============
|
=============
|
||
Due
to ultimate holding company
|
|||||
—
Deferred consideration
|
(b)
|
1,960
|
1,960
|
—
|
—
|
—
Others
|
(a)
|
1,371
|
3,282
|
—
|
—
|
Due
to fellow subsidiaries
|
(a)
|
1,267
|
2,263
|
—
|
—
|
-------
|
-------
|
-------
|
-------
|
||
Total
|
4,598
|
7,505
|
—
|
—
|
|
=============
|
=============
|
=============
|
=============
|
||
Non-current:
|
|||||
Due
to ultimate holding company
|
|||||
—
Deferred consideration
|
(b)
|
3,920
|
5,880
|
—
|
—
|
Due
to intermediate holding companies
|
(c)
|
78
|
—
|
78
|
—
|
Due
to fellow subsidiaries
|
(c)
|
2,171
|
—
|
325
|
—
|
-------
|
-------
|
-------
|
-------
|
||
Total
|
6,169
|
5,880
|
403
|
—
|
|
=============
|
=============
|
=============
|
=============
|
|
(a)
|
These
are interest free, unsecured and have no fixed terms of
repayment.
|
|
(b)
|
Balance
represents the deferred payments arising from the Acquisition of New
Horizon outstanding at year end. The balance is charged at interest rate
of 5.265% per annum with final maturity through 30 June 2010. The deferred
payment is analysed as follows:
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Within
one year
|
1,960
|
1,960
|
In
the second year
|
1,960
|
1,960
|
In
the third to fifth year, inclusive
|
1,960
|
3,920
|
-------
|
-------
|
|
Total
|
5,880
|
7,840
|
=============
|
=============
|
|
(c)
|
The
balances bear interest rates ranged from 3.0% to 3.8% per annum, unsecured
and have repayment terms of 3 years. The fair value of the balances is
RMB1,918 million.
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Balance
at beginning of year:
|
||
—
upfront connection fees
|
3,099
|
5,505
|
—
upfront installation fees
|
5,767
|
6,769
|
—
advances from network capacity sales
|
—
|
2,354
|
—
prepaid telephony services
|
5,065
|
4,272
|
—
others
|
—
|
—
|
-------
|
-------
|
|
13,931
|
18,900
|
|
-------
|
-------
|
|
Additions
for the year:
|
||
—
upfront connection fees
|
—
|
—
|
—
upfront installation fees
|
226
|
357
|
—
advances from network capacity sales
|
—
|
236
|
—
prepaid telephony services
|
31,749
|
30,360
|
—
others
|
86
|
—
|
-------
|
-------
|
|
32,061
|
30,953
|
|
-------
|
-------
|
|
Reductions
for the year:
|
||
—
upfront connection fees
|
(1,517)
|
(2,406)
|
—
upfront installation fees
|
(1,279)
|
(1,359)
|
—
advances from network capacity sales
|
—
|
(2,590)
|
—
prepaid telephony services
|
(31,777)
|
(29,567)
|
—
others
|
(2)
|
—
|
-------
|
-------
|
|
(34,575)
|
(35,922)
|
|
-------
|
-------
|
|
Included:
Disposal of discontinued operations
|
||
—
advances from network capacity sales
|
—
|
(2,450)
|
—
prepaid telephony services
|
(183)
|
(144)
|
-------
|
-------
|
|
(183)
|
(2,594)
|
|
-------
|
-------
|
|
Balance
at end of year:
|
||
—
upfront connection fees
|
1,582
|
3,099
|
—
upfront installation fees
|
4,714
|
5,767
|
—
advances from network capacity sales
|
—
|
—
|
—
prepaid telephony services
|
5,037
|
5,065
|
—
others
|
84
|
—
|
-------
|
-------
|
|
11,417
|
13,931
|
|
=============
|
=============
|
|
Representing:
|
||
—
Current portion
|
7,103
|
7,733
|
—
Non-current portion
|
4,314
|
6,198
|
-------
|
-------
|
|
11,417
|
13,931
|
|
=============
|
=============
|
Early
retirement benefits
|
One-off
cash housing subsidies
|
Total
|
|
RMB
million
|
RMB
million
|
RMB
million
|
|
Note
b
|
Note
a & b
|
||
As
at 1 January 2007
|
3,137
|
3,185
|
6,322
|
Additional
provisions
|
—
|
—
|
—
|
Payments
during the year
|
(605)
|
(329)
|
(934)
|
-------
|
-------
|
-------
|
|
As
at 31 December 2007
|
2,532
|
2,856
|
5,388
|
=============
|
=============
|
=============
|
|
Analysis
of total provisions:
|
|||
—
Current portion
|
525
|
2,856
|
3,381
|
—
Non-current portion
|
2,007
|
—
|
2,007
|
-------
|
-------
|
-------
|
|
2,532
|
2,856
|
5,388
|
|
=============
|
=============
|
=============
|
|
As
at 1 January 2006
|
3,763
|
3,440
|
7,203
|
Payments
during the year
|
(626)
|
(255)
|
(881)
|
-------
|
-------
|
-------
|
|
As
at 31 December 2006
|
3,137
|
3,185
|
6,322
|
=============
|
=============
|
=============
|
|
Analysis
of total provisions:
|
|||
—
Current portion
|
551
|
3,185
|
3,736
|
—
Non-current portion
|
2,586
|
—
|
2,586
|
-------
|
-------
|
-------
|
|
3,137
|
3,185
|
6,322
|
|
=============
|
=============
|
=============
|
|
(a)
|
Certain
staff quarters, prior to 1998, have been sold to the Netcom Group’s
employees at preferential prices, subject to a number of eligibility
requirements. In 1998, the State Council issued a circular which
stipulated that the sale of quarters to employees at preferential prices
should be terminated. In 2000, the State Council issued a further circular
stating that cash subsidies should be made to certain eligible employees
following the withdrawal of the allocation of staff quarters. However, the
specific timetable and procedures for the implementation of these policies
were to be determined by individual provincial or municipal government
based on the particular situation of the provinces or
municipality.
|
|
(b)
|
Pursuant
to the Listing Reorganisation and the Acquisition of New Horizon, if the
actual payments required for these subsidies and early retirement benefits
differ from the amount provided as at 30 June 2004 and 30 June 2005,
Netcom Parent will bear any additional payments required or will be paid
the difference if the actual payments are lower than the amount
provided.
|
Recognised
in Income Statement
|
|||||||
Balance
at 31 December 2006
|
Discontinued
operations — Disposed Guangdong and Shanghai
Branches
|
Continuing
operations Note 11
|
Change
in statutory tax rate Note 11
|
Change
in statutory Tax rate and recognised in
equity Note 11
|
Disposal
of Guangdong and Shanghai Branches
|
Balance
at 31 December 2007
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
|
Restated Note
2
|
Deferred
tax assets:
|
|||||||
Deferred
revenue, primarily advances from customers
|
127
|
—
|
(11)
|
(24)
|
—
|
—
|
92
|
Temporary
differences from allowance for doubtful debts
|
314
|
(5)
|
73
|
(38)
|
—
|
(13)
|
331
|
Unrecognised
revaluation surplus/(deficit)
|
2,810
|
—
|
(104)
|
—
|
(664)
|
20
|
2,062
|
Others
|
208
|
—
|
53
|
(49)
|
—
|
(4)
|
208
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Balance
at end of year
|
3,459
|
(5)
|
11
|
(111)
|
(664)
|
3
|
2,693
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
|
Deferred
tax liabilities:
|
|||||||
Interest
capitalized
|
(789)
|
—
|
109
|
168
|
—
|
—
|
(512)
|
Fixed
assets depreciation
|
(301)
|
—
|
(55)
|
(15)
|
111
|
(28)
|
(288)
|
Others
|
(66)
|
—
|
1
|
9
|
—
|
—
|
(56)
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Balance
at end of year
|
(1,156)
|
—
|
55
|
162
|
111
|
(28)
|
(856)
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
|
The
amounts in the consolidated balance sheet are as follows:
|
|||||||
Deferred
tax assets to be recovered after more than 12 months
|
2,860
|
2,038
|
|||||
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
|
Deferred
tax liabilities to be settled after more than 12 months
|
(1,014)
|
(740)
|
|||||
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
Recognised
in Income Statement
|
|||||
Balance
at 31 December 2005
|
Discontinued
operations
|
Continuing
operations
|
Balance
Recognised in Equity
|
Balance
at 31 December 2006
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
|
Restated Note
2
|
Restated Note
2
|
||||
Deferred
tax assets:
|
|||||
Deferred
revenue, primarily advances from customers
|
170
|
—
|
(43)
|
—
|
127
|
Temporary
differences from allowance for doubtful debts
|
350
|
(4)
|
(32)
|
—
|
314
|
Unrecognised
revaluation surplus and deficit (Note iii)
|
2,861
|
2
|
(53)
|
—
|
2,810
|
Others
|
99
|
4
|
105
|
—
|
208
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Balance
at end of year
|
3,480
|
2
|
(23)
|
—
|
3,459
|
=============
|
=============
|
=============
|
=============
|
=============
|
|
Deferred
tax liabilities:
|
|||||
Interest
capitalized
|
(1,261)
|
—
|
472
|
—
|
(789)
|
Revaluation
surplus/deficit of fixed assets (Note i)
|
—
|
62
|
(10)
|
(353)
|
(301)
|
Others
|
(63)
|
—
|
(3)
|
—
|
(66)
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Balance
at end of year
|
(1,324)
|
62
|
459
|
(353)
|
(1,156)
|
=============
|
=============
|
=============
|
=============
|
=============
|
|
The
amounts in the consolidated balance sheet are as follows:
|
|||||
Deferred
tax assets to be recovered after more than 12
months
|
2,906
|
2,860
|
|||
=============
|
=============
|
=============
|
=============
|
=============
|
|
Deferred
tax liabilities to be settled after more than 12
months
|
(1,190)
|
(1,014)
|
|||
=============
|
=============
|
=============
|
=============
|
=============
|
|
Notes:
|
|
(i)
|
According
to the Netcom Group’s accounting policy as set out in note 4(k), the fixed
assets other than the lease prepayments for land and buildings of the
Netcom Group were revalued by the PRC valuer on a depreciated replacement
cost basis on 31 December 2006, as disclosed in note 21. The revalued
amounts are not used to determine the tax bases of these assets in the
future years. Accordingly, the Netcom Group’s deferred tax liabilities on
the balance sheet as at 31 December 2006, decreased by RMB150 million. The
net reduction comprised RMB353 million, being the deferred tax liabilities
originated from the revaluation surplus of fixed assets which was debited
to revaluation reserves, offset by RMB503 million, being the deferred tax
assets originated from the revaluation deficit of fixed assets which was
credited to the income statement for the year ended 31 December
2006.
|
|
(ii)
|
In
connection with the Listing Reorganisation and the Acquisition of New
Horizon, certain of the Netcom Group’s telecommunication networks and
equipment and furniture, fixtures, motor vehicles and other equipment were
revalued as at 31 December 2003 and 2004. Such revalued amounts determine
the tax bases for these assets for future years. In addition, except for
the item described in Note (iii) below, the tax bases of certain assets
and liabilities have been adjusted to the revalued amounts incorporated as
the carrying values in the balance
sheet.
|
|
In
connection with the Acquisition of New Horizon, the Netcom Group’s net
deferred tax assets were subsequently reduced by RMB1,077 million
(comprising deferred tax assets of RMB1,273 million and deferred tax
liabilities of RMB196 million), and this decrease was recorded as a debit
to owners’ equity upon the date of the Reorganisation on 30 June 2005. The
RMB1,077 million deduction comprises RMB1,097 million, being deferred tax
liabilities originating from the revaluation surplus of fixed assets
recorded and credited to revaluation reserves offset by RMB2,174 million
deferred tax assets debited to retained
earnings.
|
|
(iii)
|
In
addition, in order to determine the tax bases used for future years after
the Listing Reorganisation and the Acquisition of New Horizon, the Netcom
Group’s prepayments for the leasehold land and buildings were revalued for
PRC tax purposes as at 31 December 2003 and 2004. However, the resulting
revaluations of the prepayments for the leasehold land and buildings were
not incorporated into the consolidated financial statements. As a result,
deferred tax assets were subsequently recorded with corresponding
increases in owners’ equity upon the Listing Reorganisation on 30 June
2004 and the Acquisition of New Horizon on 30 June 2005. In the opinion of
the Board, it is more likely than not that the Netcom Group will realize
the benefits of the deferred tax asset after making reference to the
historical taxable income of the Netcom Group. The amount is to be
transferred to retained earnings upon the corresponding realization of the
underlying deferred tax assets.
|
Authorised
|
||||||||
Ordinary
shares of US$0.04 each
|
Convertible
preference shares of US$0.04 each
|
Total
|
||||||
No.
of shares
|
US$
|
RMB
million
|
No.
of shares
|
US$
|
RMB
million
|
US$
|
RMB
million
|
|
As
at 1 January 2006, 2007 and 31 December 2007
|
25,000,000,000
|
1,000,000,000
|
8,277
|
7,741,782
|
309,671
|
3
|
1,000,309,671
|
8,280
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
Issued
|
||||||||
Ordinary
shares of US$0.04 each
|
Convertible
preference shares of US$0.04 each
|
Total
|
||||||
No.
of shares
|
US$
|
RMB
million
|
No.
of shares
|
US$
|
RMB
million
|
US$
|
RMB
million
|
|
As
at 1 January 2006
|
6,593,529,000
|
263,741,160
|
2,181
|
—
|
—
|
—
|
263,741,160
|
2,181
|
Exercise
of share options (Note)
|
57,114,500
|
2,284,580
|
18
|
—
|
—
|
—
|
2,284,580
|
18
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
As
at 31 December 2006
|
6,650,643,500
|
266,025,740
|
2,199
|
—
|
—
|
—
|
266,025,740
|
2,199
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
As
at 1 January 2007
|
6,650,643,500
|
266,025,740
|
2,199
|
—
|
—
|
—
|
266,025,740
|
2,199
|
Exercise
of share options (Note)
|
23,684,900
|
947,396
|
7
|
—
|
—
|
—
|
947,396
|
7
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
As
at 31 December 2007
|
6,674,328,400
|
266,973,136
|
2,206
|
—
|
—
|
—
|
266,973,136
|
2,206
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
|
Note:
|
The
Netcom Group issued new shares for the options exercised during this
period. During the year ended 31 December 2007, Netcom issued 16,231,400
shares (2006: 57,114,500 shares) upon exercise of options by participants
in the First Grant Share Option Scheme, and issued 7,453,500 shares (2006:
0 shares) upon exercise of options by participants in the Second Grant
Share Option Scheme. The total consideration received amounted to RMB219
million and the portion that exceeds the nominal value of the shares
issued was recorded as share premium of
Netcom.
|
Exercise price
|
Weighted
average closing price per Netcom Share at respective days immediately
before the exercises of Netcom Options
|
No.
of Netcom Option exercisable as at 31 December
2006
|
||||||
No.
of Netcom Options
|
||||||||
As
at 1 January 2006
|
Granted
|
Exercised
|
Lapsed
and forfeited
|
As
at 31 December 2006
|
||||
HK$
|
HK$
|
|||||||
First
Grant
|
156,703,000
|
—
|
57,114,500
|
1,975,800
|
97,612,700
|
8.40
|
14.46
|
5,670,084
|
Second
Grant
|
79,320,000
|
—
|
—
|
285,800
|
79,034,200
|
12.45
|
—
|
—
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|||
Total
|
236,023,000
|
—
|
57,114,500
|
2,261,600
|
176,646,900
|
5,670,084
|
||
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
Exercise
price
|
Weighted
average closing price per Netcom Share at respective days immediately
before the exercises of Netcom Options
|
No.
of Netcom Option exercisable as at 31
December 2007
|
||||||
No.
of Netcom Options
|
||||||||
As
at 1 January 2007
|
Granted
|
Exercised
|
Lapsed
and forfeited
|
As
at 31 December 2007
|
||||
HK$
|
HK$
|
|||||||
First
Grant
|
97,612,700
|
—
|
16,231,400
|
2,117,440
|
79,263,860
|
8.40
|
22.23
|
20,728,290
|
Second
Grant
|
79,034,200
|
—
|
7,453,500
|
—
|
71,580,700
|
12.45
|
23.92
|
24,490,320
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|||
Total
|
176,646,900
|
—
|
23,684,900
|
2,117,440
|
150,844,560
|
45,218,610
|
||
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
Share premium
|
Capital reserve
|
Retained
earnings
|
Total
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
|
As
at 1 January 2006
|
42,750
|
3,104
|
(1,381)
|
44,473
|
Profit
for the year
|
—
|
—
|
17,475
|
17,475
|
Dividends
distributed during the year (Note 13)
|
—
|
—
|
(3,196)
|
(3,196)
|
Share
based payments
|
545
|
(73)
|
—
|
472
|
Exercise
of share options
|
—
|
75
|
—
|
75
|
-------
|
-------
|
-------
|
-------
|
|
As
at 31 December 2006
|
43,295
|
3,106
|
12,898
|
59,299
|
=============
|
=============
|
=============
|
=============
|
|
Profit
for the year
|
—
|
—
|
8,714
|
8,714
|
Dividends
distributed during the year (Note 13)
|
—
|
—
|
(3,600)
|
(3,600)
|
Share
based payments
|
243
|
(31)
|
—
|
212
|
Exercise
of Netcom Options
|
—
|
59
|
—
|
59
|
-------
|
-------
|
-------
|
-------
|
|
As
at 31 December 2007
|
43,538
|
3,134
|
18,012
|
64,684
|
=============
|
=============
|
=============
|
=============
|
Year
ended 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Restated Note
2
|
||
Profit
before taxation
|
15,267
|
15,205
|
Adjusted
by:
|
||
Depreciation
of fixed assets and amortisation of intangible assets
|
25,402
|
24,845
|
Lease
prepayments for land
|
52
|
68
|
Lease
prepayments for network capacity
|
6
|
—
|
Deferred
costs charged to the income statement
|
876
|
996
|
Deficit
on revaluation of fixed assets
|
—
|
1,335
|
Bad
and doubtful debts
|
868
|
1,003
|
(Gain)/loss
on disposal of fixed assets
|
(357)
|
432
|
Share-based
payments
|
59
|
75
|
Other
income
|
(1,221)
|
(621)
|
Interest
income
|
(113)
|
(136)
|
Interest
expense
|
3,162
|
3,757
|
Foreign
exchange net loss/(gain)
|
25
|
(8)
|
Changes
in working capital
|
||
Increase
in accounts receivable
|
(1,357)
|
(1,944)
|
Decrease
in inventories and consumables
|
120
|
56
|
Decrease
in prepayments, other receivables and other current assets
|
142
|
229
|
Increase
in other non-current assets
|
(201)
|
(339)
|
Increase
in accounts payable
|
1,285
|
1,142
|
Decrease
in accruals and other payables
|
(2,384)
|
(4,308)
|
Decrease
in deferred revenues
|
(2,322)
|
(2,631)
|
-------
|
-------
|
|
Net
cash inflow generated from operating activities of continuing
operations
|
39,309
|
39,156
|
=============
|
=============
|
As
at 28 February 2007
|
|
RMB
million
|
|
Net
assets disposed of (excluding the cash and cash
equivalents):
|
|
Accounts
receivable and other current assets
|
416
|
Fixed
assets and other non-current assets
|
7,630
|
Current
portion of deferred income
|
(183)
|
Accounts
payable
|
(2,046)
|
Long-term
loans
|
(3,000)
|
Other
liabilities
|
(267)
|
-------
|
|
2,550
|
|
Gain
on disposal recognised in the income statement
|
927
|
-------
|
|
Net
cash inflow from disposal of Guangdong and Shanghai
Branches
|
3,477
|
=============
|
|
Analysis
of cash inflow from disposal of Guangdong and Shanghai
Branches
|
|
Cash
consideration
|
3,500
|
Less:
Cash and cash equivalents of Disposed Guangdong and Shanghai
Branches
|
(23)
|
-------
|
|
Net
cash inflow
|
3,477
|
=============
|
Netcom
Group
|
Netcom
|
|||
As
at 31 December
|
As
at 31 December
|
|||
2007
|
2006
|
2007
|
2006
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
|
Amount
utilized
|
31,495
|
60,541
|
9
|
—
|
Amount
unutilized
|
106,824
|
115,588
|
2,238
|
—
|
-------
|
-------
|
-------
|
-------
|
|
Aggregate
banking facilities
|
138,319
|
176,129
|
2,247
|
—
|
=============
|
=============
|
=============
|
=============
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Contracted
but not provided for
|
||
—
Leasehold land and buildings
|
10
|
26
|
—
Telecommunication networks and equipment
|
530
|
2,502
|
—
Others
|
9
|
5
|
-------
|
-------
|
|
Total
|
549
|
2,533
|
=============
|
=============
|
|
Authorised
but not contracted for
|
||
—
Leasehold land and buildings
|
21
|
—
|
—
Telecommunication networks and equipment
|
106
|
300
|
—
Others
|
1
|
—
|
-------
|
-------
|
|
128
|
300
|
|
=============
|
=============
|
As
at 31 December
|
||
2007
|
2006
|
|
RMB
million
|
RMB
million
|
|
Not
later than one year
|
579
|
734
|
Later
than one year and not later than five years
|
1,134
|
1,102
|
Later
than five years
|
291
|
517
|
-------
|
-------
|
|
Total
|
2,004
|
2,353
|
=============
|
=============
|
For
the year ended 31 December
|
|||
2007
|
2006
|
||
Note
|
RMB
million
|
RMB
million
|
|
Restated
Note
2
|
|||
Emolument
of key management
|
|||
—
salaries and welfare and contributions to retirement
scheme
|
(i)
|
13
|
13
|
=============
|
=============
|
||
Interconnection
fees
|
|||
—
from fellow subsidiaries
|
(iv)(b)
|
602
|
381
|
—
from other state-owned telecommunications operators
|
(iv)(b)
|
6,333
|
6,726
|
-------
|
-------
|
||
Subtotal
|
6,935
|
7,107
|
|
=============
|
=============
|
||
Interconnection
charges
|
|||
—
to fellow subsidiaries
|
(iv)(b)
|
687
|
820
|
—
to other state-owned telecommunications operators
|
(iv)(b)
|
1,595
|
1,758
|
-------
|
-------
|
||
Subtotal
|
2,282
|
2,578
|
|
=============
|
=============
|
||
Rental
income from properties leased to fellow subsidiaries
|
(iv)(a),(iv)(c)
|
1
|
2
|
=============
|
=============
|
||
Purchase
of materials
|
|||
—
from fellow subsidiaries
|
(iv)(a),(iv)(c)
|
569
|
1,170
|
—
from other related companies
|
(iv)(a),(iv)(c)
|
99
|
122
|
-------
|
-------
|
||
Subtotal
|
668
|
1,292
|
|
=============
|
=============
|
||
Receipt
of engineering, project planning, design, construction and
information technology services
|
|||
—
from fellow subsidiaries
|
(iv)(a),(iv)(b)
|
1,629
|
2,084
|
—
from other related companies
|
(iv)(a),(iv)(b)
|
317
|
368
|
-------
|
-------
|
||
Subtotal
|
1,946
|
2,452
|
|
=============
|
=============
|
||
Provision
of engineering, project planning, design, construction and
information technology services — from other state-owned
telecommunications operators
|
(iv)(a)
|
54
|
45
|
=============
|
=============
|
||
Ancillary
telecommunications support services
|
|||
—
from fellow subsidiaries
|
(v),(iv)(a)
|
373
|
350
|
—
from other related companies
|
(v),(iv)(a)
|
75
|
58
|
-------
|
-------
|
||
Subtotal
|
448
|
408
|
|
=============
|
=============
|
||
Payment
of operating lease rentals of premises
|
|||
—
to fellow subsidiaries
|
(iv)(a),(iv)(c)
|
636
|
680
|
=============
|
=============
|
||
Property
sub-lease rentals to fellow subsidiaries
|
(iv)(a),(iv)(c)
|
11
|
15
|
=============
|
=============
|
||
Common
corporate services income from ultimate holding
company
|
(vi)
|
125
|
121
|
=============
|
=============
|
||
Common
corporate services expenditure paid to ultimate holding
company
|
(vi)
|
477
|
448
|
=============
|
=============
|
||
Support
services received
|
|||
—
from ultimate holding company
|
(vii),(iv)(a)
|
—
|
2
|
—
from fellow subsidiaries
|
(vii),(iv)(a)
|
496
|
712
|
—
from other related companies
|
(vii),(iv)(a)
|
40
|
23
|
-------
|
-------
|
||
Subtotal
|
536
|
737
|
|
=============
|
=============
|
||
Telecommunications
rental income from other state-owned telecommunications
operators
|
(iv)(b)
|
723
|
1,327
|
=============
|
=============
|
||
Payment
for lease of telecommunications facility
|
|||
—
to ultimate holding company
|
(viii)
|
66
|
75
|
—
to fellow subsidiaries
|
(viii)
|
243
|
307
|
-------
|
-------
|
||
Subtotal
|
309
|
382
|
|
=============
|
=============
|
||
Payment
for purchase of long-term telecommunications capacity to fellow
subsidiaries
|
(ix),(xii)
|
—
|
36
|
=============
|
=============
|
||
Payment
for lease of long-term telecommunications capacity to fellow
subsidiaries
|
(x),(xii)
|
—
|
65
|
=============
|
=============
|
||
Management
fee received from fellow subsidiaries
|
(xi),(xii)
|
—
|
23
|
=============
|
=============
|
||
Information
communication technologies service income received
|
|||
—
from ultimate holding company
|
(xix),(iv)(a)
|
71
|
2
|
—
from fellow subsidiaries
|
(xix),(iv)(a)
|
61
|
60
|
-------
|
-------
|
||
Subtotal
|
132
|
62
|
|
=============
|
=============
|
|
Notes:
|
|
(i)
|
Represents
the emoluments paid to all of the Netcom Directors and the top management
of the Netcom Group, who are considered as the related parties of the
Netcom Group.
|
|
(ii)
|
The
Netcom Group entered into finance lease arrangements with a related party,
details have been set out in Note
30(b).
|
|
(iii)
|
Related
party represents the non-listed investors of the fellow
subsidiaries.
|
|
(iv)
|
Priced
based on one of the following three
criteria:
|
|
(a)
|
market
price;
|
|
(b)
|
prices
based on government guidance; or
|
|
(c)
|
cost
plus basis.
|
|
(v)
|
Represents
provision of ancillary telecommunications support services to the Netcom
Group by the fellow subsidiaries and the related companies. These services
include certain telecommunications pre-sale, on-sale and after-sale
services, certain sales agency services, the printing and delivery of
invoice services, the maintenance of certain air-conditioning, fire alarm
equipment and telephone booths and other customer
services.
|
|
(vi)
|
The
Netcom Group entered into a Master Service Sharing Agreement with the
Netcom Parent pursuant to which expenses associated with common corporate
services is allocated between the Netcom Group and Netcom Parent based on
total assets as appropriate.
|
|
(vii)
|
Represents
the support services provided to the Netcom Group by the fellow
subsidiaries and the related companies. These support services include
equipment leasing services, motor vehicles services, safety and security
services, conference services, basic construction agency services,
equipment maintenance services, employee training services, advertising
services, printing services and other support
services.
|
|
(viii)
|
The
Netcom Group entered into a Telecommunications Facilities Leasing
Agreement with Netcom Parent pursuant to which the Netcom Group leases the
international telecommunications facilities and inter-provincial
transmission optic fibers from Netcom Parent. The lease payment is based
on the depreciation charge of the
assets.
|
|
(ix)
|
The
Netcom Group entered into a Capacity Purchase Agreement with East Asia
Netcom Limited (“EANL”), a wholly owned subsidiary of Netcom Parent,
pursuant to which the Netcom Group receives certain amounts of long-term
telecommunications capacity from Netcom Parent at market prices as set out
in the Capacity Purchase Agreement.
|
|
(x)
|
The
Netcom Group entered into a Capacity Lease Agreement with EANL, pursuant
to which the Netcom Group leases certain amount of capacity of Netcom
Parent’s telecommunications network at market rates as set out in the
Capacity Lease Agreement.
|
|
(xi)
|
The
Netcom Group entered into a Management Services Agreement with EANL,
pursuant to which the Netcom Group provides certain management services to
Netcom Parent either on a cost reimbursement basis or on the basis of cost
plus reasonable profits not exceeding the market price as set out in the
Management Service Agreement.
|
|
(xii)
|
Due
to the disposal of ANC Group on 22 August 2006, the Capacity Purchase
Agreement, the Capacity Lease Agreement and the Management Services
Agreement between the Netcom Group and East Asia Netcom Ltd (a formerly
wholly owned subsidiary of Netcom Parent) were no longer related party
transactions to the Netcom Group after 22 August
2006.
|
|
(xiii)
|
In
addition, pursuant to the Listing Reorganisation and the Acquisition of
New Horizon, Netcom Parent has agreed to hold and maintain, for the Netcom
Group’s benefit, all licenses received from the MII in connection with the
Restructured Businesses transferred to the Netcom Group. The licenses
maintained by Netcom Parent were granted by the MII at nil or nominal
costs. To the extent that Netcom Parent incurs a cost to maintain or
obtain licenses in the future, Netcom has agreed to reimburse Netcom
Parent for any such expense.
|
|
(xiv)
|
Netcom
Parent has also agreed to indemnify the Netcom Group in connection with
any tax and deferred tax liabilities not recognised in the financial
statements of the Netcom Group arising from transactions prior to the date
of Listing Reorganisation and the Acquisition in relation to the business
of the Netcom Group prior to the Listing and the business of the newly
required four provinces/autonomous region
respectively.
|
|
(xv)
|
As
at 31 December 2007, Netcom Parent granted corporate guarantees to the
Netcom Group as set out in Note
30(b).
|
|
(xvi)
|
Netcom
Parent, the Netcom Group’s ultimate holding company, entered into an
agreement (the “Sponsorship Agreement”) with Beijing Organization
Committee (“BOCOG”) which designated Netcom Parent as the exclusive
fixed-line telecommunications services partner in the PRC to sponsor the
2008 Beijing Olympic Games. Netcom Parent allocated the sponsorship fee to
its members based on the estimated future benefits derived from the
Sponsorship Agreement to respective members and the Netcom Group has
contributed a portion of the required support under the Sponsorship
Agreement through cash payment and provision of services to BOCOG
amounting to RMB0.54 billion. Accordingly, an intangible asset and a
payable to the ultimate holding company of the said amount have been
recognised on the Netcom Group’s balance
sheet.
|
|
(xvii)
|
As
at 31 December 2007, the Netcom Group has balances with other state-owned
telecommunication service providers, cash deposited in and loans granted
from state-owned banks as set out in Notes 18, 28, 17 and 30
respectively.
|
|
(xviii)
|
Up
to 31 December 2007, the deferred consideration in respect of the
Acquisition of New Horizon paid to Netcom Parent amounted to RMB3,920
million, and the balance of the deferred consideration amounted to
RMB5,880 million (2006: RMB7,840 million). The accumulated related
interest charged to income statement up to 31 December 2007 amounted to
RMB942 million (2006: RMB567
million).
|
|
(xix)
|
China
Netcom System Integration, an indirect wholly owned subsidiary of Netcom,
entered into an Information and Communications Technology Agreement on 7
November 2006 with Netcom Parent. Pursuant to the Information and
Communications Technology Agreement, China Netcom System Integration (and
its subsidiaries) will provide Information Communications Technology
Services to Netcom Parent. China Netcom System Integration will also
subcontract services ancillary to the provision of Information
Communications Technology Services, namely the System Installation and
Configuration Services to the subsidiaries and branches of Netcom Parent
in Netcom Parent’s southern service region in
PRC.
|
|
(xx)
|
On
31 December 2006, the Netcom Group acquired some assets from Netcom Parent
at an agreed price of RMB81
million.
|
|
(xxi)
|
On
15 January 2007, CNC China entered into an assets transfer agreement with
its ultimate holding company, Netcom Parent. Pursuant to the agreement,
CNC China agreed to dispose of its assets and liabilities in relation to
its telecommunications operations in Guangdong Province and Shanghai
Municipality branches in the PRC for consideration of RMB3.5 billion. On
14 February 2007, the independent shareholders passed an ordinary
resolution to approve the disposal. The disposal was completed on 28
February 2007 upon the approval granted from the MII. For details, please
refer to Note 26.
|
|
(xxii)
|
On
5 December 2007, System Integration Corporation, a directly wholly owned
subsidiary of CNC China, entered into an equity interest transfer
agreement and agreed to acquire the entire equity interest of Beijing
Telecom P&D Institute from China Netcom Group Beijing Communications
Corporation at a consideration of RMB298.9 million. The acquisition was
completed on 31 December 2007. The difference of the consideration paid
and the net assets value of the Beijing Telecom P&D Institute is RMB61
million and recognised directly in the other reserve. For details, please
refer to Note 2.
|
|
(xxiii)
|
In
2007, the Netcom Group borrowed loans from fellow subsidiaries and other
holding companies. For the related terms, please refer to Note
31(c).
|
|
(i)
|
After
the balance sheet date the Board proposed a final dividend. Further
details are disclosed in Note 13.
|
|
(ii)
|
The
Netcom Group borrowed two foreign currency loans of HK$1 billion each from
a bank in Hong Kong on 1 February and 4 February 2008 respectively. Both
of the loans will mature on 31 December 2008. The actual annual interest
rates charged are 2.53% and 2.557%.
|
Year
ended 31 December 2005
|
|||||
Originally
stated
|
Disposal
of the southern service region of the Netcom
Group
|
Acquisition of
Beijing Telecom P&D Institute
|
Elimination
of intercompany transactions
|
Restated
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
|
Continuing
operations:
|
|||||
Revenues
|
85,861
|
(2,120)
|
186
|
—
|
83,927
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Profit
for the year from continuing operation
|
14,114
|
174
|
62
|
—
|
14,350
|
=============
|
=============
|
=============
|
=============
|
=============
|
|
Discontinued
operations:
|
|||||
Profit/(loss)
from discontinued operations
|
(226)
|
(174)
|
—
|
—
|
(400)
|
=============
|
=============
|
=============
|
=============
|
=============
|
|
Profit
for the year
|
13,888
|
—
|
62
|
—
|
13,950
|
=============
|
=============
|
=============
|
=============
|
=============
|
|
Net
cash inflow from operating activities
|
33,557
|
—
|
(22)
|
—
|
33,535
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Net
cash outflow from investing activities
|
(24,608)
|
—
|
31
|
—
|
(24,577)
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Net
cash outflow from financing activities
|
(14,656)
|
—
|
18
|
—
|
(14,638)
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
current assets at 31 December 2005
|
14,499
|
—
|
176
|
—
|
14,675
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
assets at 31 December 2005
|
202,840
|
—
|
282
|
—
|
203,122
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
current liabilities at 31 December 2005
|
98,399
|
—
|
5
|
—
|
98,404
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
liabilities at 31 December 2005
|
139,830
|
—
|
5
|
—
|
139,835
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Shareholders’
equity at 31 December 2005
|
63,010
|
—
|
277
|
—
|
63,287
|
-------
|
-------
|
-------
|
-------
|
-------
|
Year
ended 31 December 2006
|
|||||
Originally
stated
|
Disposal
of the southern service region of the Netcom
Group
|
Acquisition of
Beijing Telecom P&D Institute
|
Elimination
of intercompany transactions
|
Restated
|
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
RMB
million
|
|
Continuing
operations:
|
|||||
Revenues
|
86,921
|
(3,222)
|
165
|
330
|
84,194
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Profit
for the year from continuing operation
|
11,141
|
332
|
27
|
(22)
|
11,478
|
=============
|
=============
|
=============
|
=============
|
=============
|
|
Discontinued
operations:
|
|||||
Profit/(loss)
from discontinued operations
|
1,819
|
(332)
|
—
|
—
|
1,487
|
=============
|
=============
|
=============
|
=============
|
=============
|
|
Profit
for the year
|
12,960
|
—
|
27
|
(22)
|
12,965
|
=============
|
=============
|
=============
|
=============
|
=============
|
|
Net
cash inflow from operating activities
|
34,133
|
—
|
20
|
(18)
|
34,135
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Net
cash outflow from investing activities
|
(24,991)
|
—
|
(2)
|
21
|
(24,972)
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Net
cash outflow from financing activities
|
(6,447)
|
—
|
(30)
|
—
|
(6,477)
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
current assets at 31 December 2006
|
18,059
|
—
|
218
|
(51)
|
18,226
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
assets at 31 December 2006
|
203,835
|
—
|
318
|
(71)
|
204,082
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
current liabilities at 31 December 2006
|
90,802
|
—
|
80
|
(49)
|
90,833
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
liabilities at 31 December 2006
|
129,857
|
—
|
80
|
(49)
|
129,888
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Shareholders’
equity at 31 December 2006
|
73,978
|
—
|
238
|
(22)
|
74,194
|
-------
|
-------
|
-------
|
-------
|
-------
|
For
the Year Ended 31 December
|
||||||
2005
|
2006
|
2007
|
||||
Amount
|
Percentage of
Revenues
|
Amount
|
Percentage of
Revenues
|
Amount
|
Percentage of
Revenues
|
|
(Restated)
|
(Restated)
|
|||||
(millions
of RMB, except percentage data)
|
||||||
CONTINUING
OPERATIONS
|
||||||
Revenues:
|
||||||
Fixed-line
telephone services (1):
|
||||||
Local:
|
||||||
Local
usage fees
|
24,440
|
29.1%
|
22,059
|
26.2%
|
19,989
|
23.8%
|
Monthly
fees
|
18,170
|
21.7%
|
16,546
|
19.6%
|
12,387
|
14.8%
|
Upfront
installation fees
|
1,433
|
1.7%
|
1,364
|
1.6%
|
1,283
|
1.5%
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Subtotal
|
44,043
|
52.5%
|
39,969
|
47.4%
|
33,659
|
40.1%
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Domestic
long distance(2)
|
9,773
|
11.7%
|
9,495
|
11.3%
|
8,769
|
10.4%
|
International
long distance(2)
(3)
|
874
|
1.0%
|
819
|
1.0%
|
791
|
0.9%
|
Value-added
services
|
3,970
|
4.7%
|
5,341
|
6.3%
|
6,114
|
7.3%
|
Interconnection
fees
|
7,664
|
9.1%
|
8,432
|
10.0%
|
8,376
|
10.0%
|
Upfront
connection fees(4)
|
3,405
|
4.1%
|
2,406
|
2.9%
|
1,517
|
1.8%
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Subtotal
|
69,729
|
83.1%
|
66,462
|
78.9%
|
59,226
|
70.5%
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Broadband
services
|
7,289
|
8.7%
|
9,916
|
11.8%
|
13,835
|
16.5%
|
Other
Internet-related services
|
556
|
0.7%
|
516
|
0.6%
|
532
|
0.6%
|
Managed
data services
|
1,621
|
1.9%
|
1,413
|
1.7%
|
1,284
|
1.5%
|
Leased
line income
|
2,376
|
2.8%
|
2,540
|
3.0%
|
2,521
|
3.0%
|
ICT
services
|
186
|
0.2%
|
855
|
1.0%
|
3,990
|
4.8%
|
Other
services
|
2,170
|
2.6%
|
2,492
|
3.0%
|
2,617
|
3.1%
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
|
83,927
|
100.0%
|
84,194
|
100.0%
|
84,005
|
100.0%
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Operating
Expenses:
|
||||||
Depreciation
and amortization
|
(24,328)
|
(29.0%)
|
(24,913)
|
(29.6%)
|
(25,495)
|
(30.3%)
|
Network,
operations and support
|
(12,610)
|
(15.0%)
|
(13,344)
|
(15.8%)
|
(14,145)
|
(16.8%)
|
Staff
costs
|
(11,830)
|
(14.1%)
|
(11,849)
|
(14.1%)
|
(12,223)
|
(14.6%)
|
Selling,
general and administrative
|
(12,726)
|
(15.2%)
|
(12,607)
|
(15.0%)
|
(10,615)
|
(12.6%)
|
Other
operating expenses
|
(1,374)
|
(1.6%)
|
(1,930)
|
(2.3%)
|
(4,261)
|
(5.1%)
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
|
(62,868)
|
(74.9%)
|
(64,643)
|
(76.8%)
|
(66,739)
|
(79.4%)
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
Other
income
|
—
|
0.0%
|
621
|
0.7%
|
1,221
|
1.4%
|
Interest
income
|
134
|
0.2%
|
135
|
0.2%
|
113
|
0.1%
|
Dividend
income
|
29
|
0.0%
|
—
|
0.0%
|
—
|
0.0%
|
Deficit
on revaluation of fixed assets
|
—
|
0.0%
|
(1,335)
|
(1.6%)
|
—
|
0.0%
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Profit
from operations
|
21,222
|
25.3%
|
18,972
|
22.5%
|
18,600
|
22.1%
|
Finance
costs
|
(3,346)
|
(4.0%)
|
(3,767)
|
(4.4%)
|
(3,333)
|
(3.9%)
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Profit
before taxation
|
17,876
|
21.3%
|
15,205
|
18.1%
|
15,267
|
18.2%
|
Taxation
|
(3,526)
|
(4.2%)
|
(3,727)
|
(4.5%)
|
(3,796)
|
(4.5%)
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Profit for the year from
continuing operations
|
14,350
|
17.1%
|
11,478
|
13.6%
|
11,471
|
13.7%
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
DISCONTINUED
OPERATIONS
|
||||||
Loss/(profit) for the year from
discontinued operations
|
(400)
|
(0.5%)
|
1,487
|
1.8%
|
624
|
0.7%
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Profit
for the year
|
13,950
|
16.6%
|
12,965
|
15.4%
|
12,095
|
14.4%
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
CONTINUING
OPERATIONS
|
||||||
Cash inflow from operating
activities of continuing operation
|
32,191
|
38.4%
|
32,050
|
38.1%
|
32,459
|
38.6%
|
Cash outflow from investing
activities of continuing operations
|
(22,993)
|
(27.4%)
|
(24,051)
|
(28.6%)
|
(19,138)
|
(22.8%)
|
Cash outflow from financing
activities of continuing operations
|
(14,746)
|
(17.6%)
|
(6,477)
|
(7.7%)
|
(19,131)
|
(22.8%)
|
Cash flows from continuing
operations
|
(5,548)
|
(6.6%)
|
1,522
|
1.8%
|
(5,810)
|
(7.0%)
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
DISCONTINUED
OPERATIONS
|
||||||
Cash
(outflow)/inflow from operating activities of discontinued
operations
|
1,344
|
1.6%
|
2,085
|
2.5%
|
388
|
0.5%
|
Cash (outflow)/inflow from
investing activities of discontinued operations
|
(1,584)
|
(1.9%)
|
(921)
|
(1.1%)
|
3,103
|
3.7%
|
Cash inflow from financing
activities of discontinued operations
|
108
|
0.1%
|
—
|
0.0%
|
—
|
0.0%
|
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
Cash flows from discontinued
operations
|
(132)
|
(0.2%)
|
1,164
|
1.4%
|
3,491
|
4.2%
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Increase/(decrease) in cash and
cash equivalents
|
(5,680)
|
(6.8%)
|
2,686
|
3.2%
|
(2,319)
|
(2.8%)
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
*
|
Upfront
connection fee represents the amortization of deferred upfront connection
fee received from the customers before 1 July 2001. No upfront connection
fee was received from the customers since then. Therefore, the Netcom
Group considers that analyses of its operating results excluding upfront
connection fee is more relevant to the readers of this
report.
|
For
the Year Ended 31 December
|
||||
2006
|
2007
|
|||
Amount
|
Percentage
of revenues
|
Amount
|
Percentage
of revenues
|
|
(in
millions of RMB, except percentage data)
|
||||
Depreciation
and amortization
|
24,913
|
29.6%
|
25,495
|
30.3%
|
Network,
operations and support
|
13,344
|
15.8%
|
14,145
|
16.8%
|
Staff
costs
|
11,849
|
14.1%
|
12,223
|
14.6%
|
Selling,
general and administrative
|
12,607
|
15.0%
|
10,615
|
12.6%
|
Other
operating expenses
|
1,930
|
2.3%
|
4,261
|
5.1%
|
-------
|
-------
|
-------
|
-------
|
|
Total
operating expenses
|
64,643
|
76.8%
|
66,739
|
79.4%
|
=============
|
=============
|
=============
|
=============
|
For
the Year Ended 31 December
|
||||
2005
|
2006
|
|||
Amount
|
Percentage
of revenues
|
Amount
|
Percentage
of revenues
|
|
(in
millions of RMB, except percentage data)
|
||||
Depreciation
and amortization
|
24,328
|
29.0%
|
24,913
|
29.6%
|
Network,
operations and support
|
12,610
|
15.0%
|
13,344
|
15.8%
|
Staff
costs
|
11,830
|
14.1%
|
11,849
|
14.1%
|
Selling,
general and administrative
|
12,726
|
15.2%
|
12,607
|
15.0%
|
Other
operating expenses
|
1,374
|
1.6%
|
1,930
|
2.3%
|
-------
|
-------
|
-------
|
-------
|
|
Total
operating expenses
|
62,868
|
74.9%
|
64,643
|
76.8%
|
=============
|
=============
|
=============
|
=============
|
For
the Year Ended 31 December
|
|||
2005
|
2006
|
2007
|
|
(in
millions of RMB)
|
|||
Net
cash inflow from operating activities from continuing
operations
|
32,191
|
32,050
|
32,459
|
Net
cash outflow for investing activities from continuing
operations
|
(22,993)
|
(24,051)
|
(19,138)
|
Net
cash outflow from financing activities from continuing
operations
|
(14,746)
|
(6,477)
|
(19,131)
|
-------
|
-------
|
-------
|
|
Increase/(decrease)
in cash from continuing operations
|
(5,548)
|
1,522
|
(5,810)
|
Increase/(decrease)
in cash from discontinued operations
|
(132)
|
1,164
|
3,491
|
-------
|
-------
|
-------
|
|
Increase/(decrease)
in cash and cash equivalents
|
(5,680)
|
2,686
|
(2,319)
|
=============
|
=============
|
=============
|
Year
Ended 31 December
|
|||
2005
|
2006
|
2007
|
|
(RMB
millions)
|
|||
Net
cash inflows generated from operations
|
39,303
|
39,156
|
39,309
|
Interest
received
|
131
|
136
|
113
|
Dividends
received
|
29
|
—
|
—
|
Interest
paid
|
(3,244)
|
(3,564)
|
(2,856)
|
Profits
tax paid
|
(4,028)
|
(3,678)
|
(4,107)
|
Cash
inflow from operating activities of continuing
operations
|
32,191
|
32,050
|
32,459
|
Cash
inflow from operating activities of discontinued
operations
|
1,344
|
2,085
|
388
|
-------
|
-------
|
-------
|
|
Net
cash inflow from operating activities
|
33,535
|
34,135
|
32,847
|
=============
|
=============
|
=============
|
|
●
|
an
increase of RMB11,429 million in new bank loans and other loans from 2005
to 2006;
|
|
●
|
an
increase of RMB9,676 million in proceeds from the issuance of short-term
commercial papers from 2005 to 2006;
and
|
|
●
|
an
increase of RMB13,223 million in repayment of bank loans from 2005 to
2006.
|
As
of 31 December
|
|||
2005
|
2006
|
2007
|
|
(in
millions of RMB)
|
|||
Short
term bank loans
|
47,341
|
30,980
|
11,850
|
Current
portion of long term bank and other loans
|
6,846
|
7,304
|
5,322
|
Long
term bank and other loans net of current portion
|
18,143
|
23,219
|
14,425
|
Short
term commercial paper
|
—
|
9,811
|
20,000
|
Corporate
bonds
|
—
|
—
|
2,000
|
Current
portion of amounts due to holding companies and fellow
subsidiaries
|
1,960
|
1,960
|
1,960
|
Amounts
due to holding companies and fellow subsidiaries net of current
portion
|
7,840
|
5,880
|
6,169
|
-------
|
-------
|
-------
|
|
Total
|
82,130
|
79,154
|
61,726
|
=============
|
=============
|
=============
|
As
at 31 December
|
|||
2005
|
2006
|
2007
|
|
RMB
million
|
RMB
million
|
RMB
million
|
|
Balances
denominated in RMB
|
|||
Cash
and bank deposits
|
3,967
|
5,782
|
5,054
|
Bank
and other loans
|
70,332
|
60,071
|
30,351
|
Short-term
commercial paper
|
—
|
9,811
|
20,000
|
Amounts
due to holding companies and fellow subsidiaries
|
7,840
|
5,880
|
5,766
|
Corporate
bonds
|
—
|
—
|
2,000
|
-------
|
-------
|
-------
|
|
Subtotal
|
82,139
|
81,544
|
63,171
|
-------
|
-------
|
-------
|
|
Balances
denominated in currencies other than RMB
|
|||
Cash
and bank deposits
|
1,098
|
1,946
|
341
|
Bank
and other loans
|
1,998
|
1,432
|
1,246
|
Amounts
due to holding companies and fellow subsidiaries
|
—
|
—
|
403
|
-------
|
-------
|
-------
|
|
Subtotal
|
3,096
|
3,378
|
1,990
|
-------
|
-------
|
-------
|
|
Total
|
85,235
|
84,922
|
65,161
|
=============
|
=============
|
=============
|
Payments
Due (by stages as indicated)
|
|||||||
Total
|
2008
|
2009
|
2010
|
2011
|
2012
|
Thereafter
|
|
(RMB
millions)
|
|||||||
Short-term
bank loans
|
12,134
|
12,134
|
—
|
—
|
—
|
—
|
—
|
Long-term
bank and other loans
|
21,616
|
6,407
|
10,272
|
1,887
|
106
|
104
|
2,840
|
Short-term
commercial paper
|
20,629
|
20,629
|
—
|
—
|
—
|
—
|
—
|
Corporate
bonds
|
2,900
|
90
|
90
|
90
|
90
|
90
|
2,450
|
Amounts
due to holding companies and fellow subsidiaries
|
8,870
|
2,319
|
2,214
|
4,337
|
—
|
—
|
—
|
Operating
lease commitments
|
2,004
|
579
|
346
|
305
|
247
|
236
|
291
|
Capital
commitments
|
677
|
661
|
—
|
16
|
—
|
—
|
—
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
|
68,830
|
42,819
|
12,922
|
6,635
|
443
|
430
|
5,581
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
Payments
Due in the Period
|
|||||||
Total
|
2007
|
2008
|
2009
|
2010
|
2011
|
Thereafter
|
|
(RMB
in millions)
|
|||||||
Short-term
bank loans
|
31,563
|
31,563
|
—
|
—
|
—
|
—
|
—
|
Long-term
bank and other loans
|
36,224
|
8,860
|
7,814
|
10,416
|
431
|
430
|
8,273
|
Short-term
commercial paper
|
10,000
|
10,000
|
—
|
—
|
—
|
—
|
—
|
Amounts
due to holding companies and fellow subsidiaries
|
8,781
|
2,352
|
2,248
|
2,143
|
2,038
|
—
|
—
|
Operating
lease commitments
|
2,353
|
734
|
313
|
283
|
261
|
245
|
517
|
Capital
commitments
|
2,833
|
2,746
|
86
|
1
|
—
|
—
|
—
|
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
Total
|
91,754
|
56,255
|
10,461
|
12,843
|
2,730
|
675
|
8,790
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
Payments
Due in the Period
|
|||||||
Total
|
2006
|
2007
|
2008
|
2009
|
2010
|
Thereafter
|
|
(RMB
in millions)
|
|||||||
Short-term
bank loans
|
48,200
|
48,200
|
—
|
—
|
—
|
—
|
—
|
Long-term
bank and other loans
|
28,652
|
7,874
|
9,461
|
6,124
|
249
|
246
|
4,698
|
Amounts
due to holding companies and fellow subsidiaries
|
11,133
|
2,433
|
2,330
|
2,227
|
2,123
|
2,020
|
—
|
Operating
lease commitments
|
4,066
|
994
|
434
|
333
|
308
|
298
|
1,699
|
Capital
commitments
|
1,854
|
1,678
|
170
|
6
|
—
|
—
|
—
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
-------
|
|
Total
|
93,905
|
61,179
|
12,395
|
8,690
|
2,680
|
2,564
|
6,397
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
=============
|
(1)
|
The
amounts shown include interest charged for each year and the amounts of
interest charged on variable rate debt have been calculated using the
interest rate as of 31 December 2007, 2006 and
2005.
|
Capital
Expenditures
|
|
(in
millions of RMB)
|
|
2005
|
25,964
|
2006
|
24,560
|
2007
|
20,684
|
2008
(planned)
|
19,600
|
RMB
million
|
|
Short-term
bank loans
|
30,328
|
Current
portion of long-term bank and other loans
|
4,723
|
Long-term
bank and other loans net of current portion
|
12,861
|
Corporate
bonds
|
2,000
|
Current
portion of amounts due to holding companies and fellow
subsidiaries
|
1,960
|
Amounts
due to holding companies and fellow subsidiaries net of current
portion
|
3,318
|
-------
|
|
Total
|
55,190
|
=============
|
For
the year ended 31 December
|
|||
2006
|
2005
|
||
2007
|
(As
restated)
|
(As
restated)
|
|
(All
amounts in RMB thousands except per Unicom Share
data)
|
Revenue
(Turnover)
|
||||||||||||
GSM
Business
|
62,775,304 | 59,882,238 | 52,618,111 | |||||||||
CDMA
Business
|
27,730,240 | 27,876,475 | 28,088,642 | |||||||||
Data
and Internet Business
|
2,625,853 | 2,320,392 | 3,000,107 | |||||||||
Long
Distance Business
|
1,507,501 | 1,014,550 | 1,471,773 | |||||||||
----
|
----
|
----
|
||||||||||
Total
service revenue
|
94,638,898 | 91,093,655 | 85,178,633 | |||||||||
Sales
of telecommunications products
|
4,900,489 | 4,253,660 | 2,859,300 | |||||||||
----
|
----
|
----
|
||||||||||
Total
revenue
|
99,539,387 | 95,347,315 | 88,037,933 | |||||||||
========
|
========
|
========
|
||||||||||
Profit
before income tax
|
12,955,027 | 6,564,912 | 7,092,732 | |||||||||
Income
tax expenses
|
(3,654,170 | ) | (2,763,885 | ) | (2,170,411 | ) | ||||||
----
|
----
|
----
|
||||||||||
Profit
for the year
|
9,300,857 | 3,801,027 | 4,922,321 | |||||||||
========
|
========
|
========
|
For
the year ended 31 December
|
||||||||||||
2006
|
2005
|
|||||||||||
2007
|
(As
restated)
|
(As
restated)
|
||||||||||
(All amounts in RMB
thousands except per Unicom Share data)
|
||||||||||||
Attributable
to:
|
||||||||||||
Equity
holders of Unicom
|
9,299,784 | 3,800,920 | 4,922,087 | |||||||||
Minority
interest
|
1,073 | 107 | 234 | |||||||||
----
|
----
|
----
|
||||||||||
9,300,857 | 3,801,027 | 4,922,321 | ||||||||||
========
|
========
|
========
|
||||||||||
Proposed
final dividend
|
2,726,858 | 2,282,578 | 1,383,169 | |||||||||
========
|
========
|
========
|
||||||||||
Dividend
paid during the year
|
2,284,942 | 1,384,146 | 1,256,924 | |||||||||
========
|
========
|
========
|
||||||||||
Dividend
per Unicom Share (RMB)
|
0.20 | 0.18 | 0.11 | |||||||||
========
|
========
|
========
|
||||||||||
Earnings
per Unicom Share attributable to the equity holders of Unicom during the
year
|
||||||||||||
Basic
earnings per Unicom Share (RMB)
|
0.713 | 0.302 | 0.392 | |||||||||
========
|
========
|
========
|
||||||||||
Diluted
earnings per Unicom Share (RMB)
|
0.707 | 0.300 | 0.390 | |||||||||
========
|
========
|
========
|
||||||||||
Basic
earnings per Unicom ADS (RMB)
|
7.134 | 3.017 | 3.916 | |||||||||
========
|
========
|
========
|
||||||||||
Diluted
earnings per Unicom ADS (RMB)
|
7.066 | 3.005 | 3.904 | |||||||||
========
|
========
|
========
|
As
at 31 December
|
||||||||||||
2006
|
2005
|
|||||||||||
2007
|
(As
restated)
|
(As
restated)
|
||||||||||
(All
amounts in RMB thousands)
|
||||||||||||
Total
assets
|
149,422,370 | 148,296,714 | 144,621,319 | |||||||||
Total
liabilities
|
52,205,276 | 68,432,549 | 67,950,829 | |||||||||
----
|
----
|
----
|
||||||||||
Total
equity
|
97,217,094 | 79,864,165 | 76,670,490 | |||||||||
========
|
========
|
==========
|
As
at 31 December
|
||||||||||||
2006
|
||||||||||||
Note
|
2007
|
As
restated (Note
2.1)
|
||||||||||
ASSETS
|
||||||||||||
Non-current
assets
|
||||||||||||
Property,
plant and equipment
|
6 | 116,162,165 | 112,795,627 | |||||||||
Goodwill
|
7 | 3,143,983 | 3,143,983 | |||||||||
Other
assets
|
8 | 12,855,199 | 11,356,812 | |||||||||
Deferred
income tax assets
|
9 | 426,902 | 309,668 | |||||||||
-----
|
-----
|
|||||||||||
132,588,249 | 127,606,090 | |||||||||||
-----
|
-----
|
|||||||||||
Current
assets
|
||||||||||||
Inventories
|
10 | 2,528,364 | 2,373,871 | |||||||||
Accounts
receivable, net
|
11 | 3,211,154 | 3,442,211 | |||||||||
Prepayments
and other current assets
|
12 | 3,516,279 | 2,039,840 | |||||||||
Amounts
due from related parties
|
33.1 | 109,096 | 257,170 | |||||||||
Amounts
due from Domestic Carriers
|
33.2 | 149,736 | 138,521 | |||||||||
Short-term
bank deposits
|
13 | 644,016 | 195,820 | |||||||||
Cash
and cash equivalents
|
14 | 6,675,476 | 12,243,191 | |||||||||
-----
|
-----
|
|||||||||||
16,834,121 | 20,690,624 | |||||||||||
-----
|
-----
|
|||||||||||
Total
assets
|
149,422,370 | 148,296,714 | ||||||||||
===========
|
===========
|
|||||||||||
EQUITY
|
||||||||||||
Capital
and reserves attributable to Unicom’s equity holders
|
||||||||||||
Share
capital
|
15 | 1,436,908 | 1,344,440 | |||||||||
Share
premium
|
15 | 64,320,066 | 53,222,976 | |||||||||
Reserves
|
16 | 3,968,515 | 4,007,437 | |||||||||
Retained
profits
|
||||||||||||
—
Proposed final dividend
|
31 | 2,726,858 | 2,282,578 | |||||||||
—
Others
|
24,760,833 | 19,003,893 | ||||||||||
----
|
-----
|
|||||||||||
97,213,180 | 79,861,324 | |||||||||||
-----
|
-----
|
|||||||||||
Minority
interest in equity
|
22 | (a) | 3,914 | 2,841 | ||||||||
-----
|
-----
|
Total
equity
|
97,217,094 | 79,864,165 | ||||||||||
==========
|
==========
|
|||||||||||
LIABILITIES
|
||||||||||||
Non-current
liabilities
|
||||||||||||
Long-term
bank loans
|
17 | 1,660,921 | 4,139,349 | |||||||||
Convertible
bonds
|
18 | — | 10,324,949 | |||||||||
Obligations
under finance leases
|
19 | 3,882 | 10,230 | |||||||||
Deferred
income tax liabilities
|
9 | 5,864 | 5,879 | |||||||||
Deferred
revenue
|
4.2 | (b) | 1,303,015 | 2,260,728 | ||||||||
----
|
----
|
|||||||||||
2,973,682 | 16,741,135 | |||||||||||
----
|
----
|
|||||||||||
Current
liabilities
|
||||||||||||
Payables
and accrued liabilities
|
20 | 32,031,307 | 26,543,904 | |||||||||
Taxes
payable
|
1,239,512 | 1,634,316 | ||||||||||
Amounts
due to Unicom Parent
|
33.1 | 820,699 | 1,088,297 | |||||||||
Amounts
due to related parties
|
33.1 | 769,558 | 328,702 | |||||||||
Amounts
due to Domestic Carriers
|
33.2 | 600,283 | 854,885 | |||||||||
Short-term
bonds
|
21 | — | 7,087,217 | |||||||||
Current
portion of long-term bank loans
|
17 | 2,191,382 | 3,984,350 | |||||||||
Current
portion of obligations under finance leases
|
19 | 1,448 | 100,004 | |||||||||
Advances
from customers
|
11,577,405 | 10,069,739 | ||||||||||
----
|
----
|
|||||||||||
49,231,594 | 51,691,414 | |||||||||||
----
|
----
|
|||||||||||
Total
liabilities
|
52,205,276 | 68,432,549 | ||||||||||
----
|
----
|
|||||||||||
Total
equity and liabilities
|
149,422,370 | 148,296,714 | ||||||||||
=========
|
=========
|
|||||||||||
Net
current liabilities
|
(32,397,473 | ) | (31,000,790 | ) | ||||||||
=========
|
=========
|
|||||||||||
Total
assets less current liabilities
|
100,190,776 | 96,605,300 | ||||||||||
=========
|
=========
|
Year
ended 31 December
|
|||
2006
|
|||
Note
|
2007
|
As
restated (Note
2.1)
|
|
Revenue
(Turnover)
|
|||
GSM
Business
|
5,
23, 33
|
62,775,304
|
59,882,238
|
CDMA
Business
|
5,
23, 33
|
27,730,240
|
27,876,475
|
Data
and Internet Business
|
5,
23, 33
|
2,625,853
|
2,320,392
|
Long
Distance Business
|
5,
23, 33
|
1,507,501
|
1,014,550
|
-------
|
-------
|
||
Total
service revenue
|
94,638,898
|
91,093,655
|
|
Sales
of telecommunications products
|
5,
23
|
4,900,489
|
4,253,660
|
-------
|
-------
|
||
Total
revenue
|
5,
23
|
99,539,387
|
95,347,315
|
Leased
lines and network capacities
|
25,
33
|
(9,135,497)
|
(8,942,999)
|
Interconnection
charges
|
33
|
(10,906,819)
|
(9,671,225)
|
Depreciation
and amortisation
|
25
|
(22,677,167)
|
(22,686,568)
|
Employee
benefit expenses
|
26,
27, 28
|
(7,139,988)
|
(6,680,679)
|
Selling
and marketing
|
25,
33
|
(19,681,372)
|
(19,571,330)
|
General,
administrative and other expenses
|
25,
33
|
(14,639,362)
|
(13,543,391)
|
Cost
of telecommunications products sold
|
25
|
(5,031,706)
|
(4,914,876)
|
Financial
gains/(costs)
|
25
|
87,008
|
(659,632)
|
Interest
income
|
186,243
|
263,542
|
|
Realised/unrealised
loss on changes in fair value of derivative component of convertible
bonds
|
18
|
(568,860)
|
(2,396,592)
|
Other
gains — net
|
24
|
2,923,160
|
21,347
|
-------
|
-------
|
||
Profit
before income tax
|
12,955,027
|
6,564,912
|
|
Income
tax expenses
|
9
|
(3,654,170)
|
(2,763,885)
|
-------
|
-------
|
||
Profit
for the year
|
9,300,857
|
3,801,027
|
|
=============
|
=============
|
||
Attributable
to:
|
|||
Equity
holders of Unicom
|
9,299,784
|
3,800,920
|
|
Minority
interest
|
1,073
|
107
|
|
-------
|
-------
|
||
9,300,857
|
3,801,027
|
||
=============
|
=============
|
||
Proposed
final dividend
|
31
|
2,726,858
|
2,282,578
|
=============
|
=============
|
||
Dividend
paid during the year
|
31
|
2,284,942
|
1,384,146
|
=============
|
=============
|
Earnings
per Unicom Share for profit attributable to the equity holders of Unicom
during the year
|
|||
Basic
earnings per Unicom Share (RMB)
|
30
|
0.713
|
0.302
|
=============
|
=============
|
||
Diluted
earnings per Unicom Share (RMB)
|
30
|
0.707
|
0.300
|
=============
|
=============
|
||
Number
of Unicom Shares outstanding for basic earnings (in
thousands)
|
30
|
13,036,566
|
12,599,018
|
=============
|
=============
|
||
Number
of Unicom Shares outstanding for diluted earnings (in
thousands)
|
30
|
13,161,089
|
12,649,306
|
=============
|
=============
|
||
Basic
earnings per Unicom ADS (RMB)
|
30
|
7.134
|
3.017
|
=============
|
=============
|
||
Diluted
earnings per Unicom ADS (RMB)
|
30
|
7.066
|
3.005
|
=============
|
=============
|
||
Number
of Unicom ADSs outstanding for basic earnings (in
thousands)
|
30
|
1,303,657
|
1,259,902
|
=============
|
=============
|
||
Number
of Unicom ADSs outstanding for diluted earnings (in
thousands)
|
30
|
1,316,109
|
1,264,931
|
=============
|
=============
|
The
Unicom Group
|
||||||||||||||||||||||||||||||||||||||||
Share
capital
|
Share
premium
|
Employee
share-based compensation reserve
|
Revaluation
reserve
|
Statutory
reserves
|
Other
reserve
|
Retained
profits
|
Total
|
Minority
interest
|
Total
equity
|
|||||||||||||||||||||||||||||||
Balance
at 1 January 2006 (As previously reported)
|
1,333,621 | 52,601,014 | 215,361 | 176,853 | 2,435,117 | — | 19,522,379 | 76,284,345 | 2,734 | 76,287,079 | ||||||||||||||||||||||||||||||
Adjusted
for Business Combination under common control (Note
1)
|
— | — | — | — | — | 383,411 | — | 383,411 | — | 383,411 | ||||||||||||||||||||||||||||||
-----
|
-----
|
-----
|
------
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
|||||||||||||||||||||||||||||||
Balance
at 1 January 2006 (As restated)
|
1,333,621 | 52,601,014 | 215,361 | 176,853 | 2,435,117 | 383,411 | 19,522,379 | 76,667,756 | 2,734 | 76,670,490 | ||||||||||||||||||||||||||||||
Revaluation
of buildings — gross (Note
6)
|
— | — | — | 200,330 | — | — | — | 200,330 | — | 200,330 | ||||||||||||||||||||||||||||||
Revaluation
of buildings — tax (Note
6)
|
— | — | — | (105,129 | ) | — | — | — | (105,129 | ) | — | (105,129 | ) | |||||||||||||||||||||||||||
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
|||||||||||||||||||||||||||||||
Net
income and expense recognised directly in equity
|
— | — | — | 95,201 | — | — | — | 95,201 | — | 95,201 | ||||||||||||||||||||||||||||||
Profit
for the year
|
— | — | — | — | — | — | 3,800,920 | 3,800,920 | 107 | 3,801,027 | ||||||||||||||||||||||||||||||
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
|||||||||||||||||||||||||||||||
Total
recognised income and expense for 2006
|
— | — | — | 95,201 | — | — | 3,800,920 | 3,896,121 | 107 | 3,896,228 | ||||||||||||||||||||||||||||||
Employee
share option scheme:
|
||||||||||||||||||||||||||||||||||||||||
—
Value of employee services
|
— | — | 146,294 | — | — | — | — | 146,294 | — | 146,294 | ||||||||||||||||||||||||||||||
—
Recognition of share issued on exercise of options (Note
29)
|
10,819 | 621,962 | (97,482 | ) | — | — | — | — | 535,299 | — | 535,299 | |||||||||||||||||||||||||||||
Transfer
of retained profits to other reserve due to Business Combination under
common control (Note
1)
|
— | — | — | — | — | 69,096 | (69,096 | ) | — | — | — | |||||||||||||||||||||||||||||
Appropriation
to statutory reserve (Note
16)
|
— | — | — | — | 583,586 | — | (583,586 | ) | — | — | — | |||||||||||||||||||||||||||||
Dividends
relating to 2005 (Note 31)
|
— | — | — | — | — | — | (1,384,146 | ) | (1,384,146 | ) | — | (1,384,146 | ) | |||||||||||||||||||||||||||
-----
|
-----
|
-----
|
------
|
------
|
-----
|
-----
|
------
|
-----
|
-----
|
|||||||||||||||||||||||||||||||
Balance
at 31 December 2006 (As restated)
|
1,344,440 | 53,222,976 | 264,173 | 272,054 | 3,018,703 | 452,507 | 21,286,471 | 79,861,324 | 2,841 | 79,864,165 | ||||||||||||||||||||||||||||||
==========
|
==========
|
==========
|
==========
|
===========
|
===========
|
===========
|
===========
|
===========
|
===========
|
|||||||||||||||||||||||||||||||
Balance
at 1 January 2007 (As previously reported)
|
1,344,440 | 53,222,976 | 264,173 | 272,054 | 3,018,703 | — | 21,286,471 | 79,408,817 | 2,841 | 79,411,658 | ||||||||||||||||||||||||||||||
Adjusted
for Business Combination under common control (Note
1)
|
— | — | — | — | — | 452,507 | — | 452,507 | — | 452,507 | ||||||||||||||||||||||||||||||
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
------
|
-----
|
-----
|
-----
|
Balance
at 1 January 2007 (As restated)
|
1,344,440 | 53,222,976 | 264,173 | 272,054 | 3,018,703 | 452,507 | 21,286,471 | 79,861,324 | 2,841 | 79,864,165 | ||||||||||||||||||||||||||||||
Revaluation
of buildings — tax (Note 6)
|
— | — | — | 29,482 | — | — | — | 29,482 | — | 29,482 | ||||||||||||||||||||||||||||||
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
|||||||||||||||||||||||||||||||
Net
income and expense recognised directly in equity
|
— | — | — | 29,482 | — | — | — | 29,482 | — | 29,482 | ||||||||||||||||||||||||||||||
Profit
for the year
|
— | — | — | — | — | — | 9,299,784 | 9,299,784 | 1,073 | 9,300,857 | ||||||||||||||||||||||||||||||
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
------
|
------
|
|||||||||||||||||||||||||||||||
Total
recognised income and expense for 2007
|
— | — | — | 29,482 | — | — | 9,299,784 | 9,329,266 | 1,073 | 9,330,339 | ||||||||||||||||||||||||||||||
Employee
share option scheme:
|
||||||||||||||||||||||||||||||||||||||||
— Value
of employee services
|
— | — | 157,262 | — | — | — | — | 157,262 | — | 157,262 | ||||||||||||||||||||||||||||||
—
Recognition of share issued on exercise of options (Note
29)
|
5,206 | 366,324 | (58,268 | ) | — | — | — | — | 313,262 | — | 313,262 | |||||||||||||||||||||||||||||
Conversion
of convertible bonds (Note 18)
|
87,262 | 10,730,766 | — | — | — | — | — | 10,818,028 | — | 10,818,028 | ||||||||||||||||||||||||||||||
Consideration
for purchase of entity under common control (Note 1)
|
— | — | — | — | — | (880,000 | ) | — | (880,000 | ) | — | (880,000 | ) | |||||||||||||||||||||||||||
Transfer
of retained profits to other reserve due to Business Combination under
common control (Note 1)
|
— | — | — | — | — | 95,277 | (95,277 | ) | — | — | — | |||||||||||||||||||||||||||||
Transfer
of profit of entity under common control to Unicom Parent (Note
1)
|
— | — | — | — | — | (101,020 | ) | — | (101,020 | ) | — | (101,020 | ) | |||||||||||||||||||||||||||
Appropriation
to statutory reserve (Note 16)
|
— | — | — | — | 718,345 | — | (718,345 | ) | — | — | — | |||||||||||||||||||||||||||||
Dividends
relating to 2006 (Note 31)
|
— | — | — | — | — | — | (2,284,942 | ) | (2,284,942 | ) | — | (2,284,942 | ) | |||||||||||||||||||||||||||
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
|||||||||||||||||||||||||||||||
Balance
at 31 December 2007
|
1,436,908 | 64,320,066 | 363,167 | 301,536 | 3,737,048 | (433,236 | ) | 27,487,691 | 97,213,180 | 3,914 | 97,217,094 | |||||||||||||||||||||||||||||
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
Year
ended 31 December
|
|||
2006
|
|||
Note
|
2007
|
As
restated (Note
2.1)
|
|
Cash
flows from operating activities
|
|||
Cash
generated from operations
|
(a)
|
36,836,129
|
39,217,031
|
Interest
received
|
188,555
|
251,222
|
|
Interest
paid
|
(498,080)
|
(1,212,745)
|
Income
tax paid
|
(4,195,111)
|
(2,113,144)
|
|
----
|
----
|
||
Net
cash generated from operating activities
|
32,331,493
|
36,142,364
|
|
----
|
----
|
||
Cash
flows from investing activities
|
|||
Purchase
of property, plant and equipment
|
(21,501,863)
|
(16,977,370)
|
|
Proceeds
from sale of property, plant and equipment
|
82,029
|
59,455
|
|
Consideration
for purchase of entity under common control
|
1
|
(880,000)
|
—
|
(Increase)/decrease
in short-term bank deposits
|
(448,196)
|
86,637
|
|
Purchase
of other assets
|
(2,218,552)
|
(743,336)
|
|
----
|
----
|
||
Net
cash used in investing activities
|
(24,966,582)
|
(17,574,614)
|
|
----
|
----
|
||
Cash
flows from financing activities
|
|||
Proceeds
from exercise of share options
|
313,262
|
535,299
|
|
Proceeds
from short-term bonds
|
—
|
6,949,700
|
|
Proceeds
from short-term bank loans
|
—
|
2,143,000
|
|
Proceeds
from long-term bank loans
|
—
|
1,345,050
|
|
Proceeds
from issuance of convertible bonds
|
—
|
7,993,500
|
|
Repayment
of short-term bonds
|
(6,969,700)
|
(9,731,800)
|
|
Repayment
of short-term bank loans
|
—
|
(8,905,858)
|
|
Repayment
of long-term bank loans
|
(3,991,246)
|
(10,758,599)
|
|
Dividends
paid to Unicom’s equity holders
|
31
|
(2,284,942)
|
(1,384,146)
|
----
|
----
|
||
Net
cash used in financing activities
|
(12,932,626)
|
(11,813,854)
|
|
----
|
----
|
||
Net
(decrease)/increase in cash and cash equivalents
|
(5,567,715)
|
6,753,896
|
|
Cash
and cash equivalents, beginning of year
|
12,243,191
|
5,489,295
|
|
----
|
----
|
||
Cash
and cash equivalents, end of year
|
14
|
6,675,476
|
12,243,191
|
========
|
========
|
||
Analysis
of the balances of cash and cash equivalents:
|
|||
Cash
balances
|
4,155
|
4,549
|
|
Bank
balances
|
6,671,321
|
12,238,642
|
|
----
|
----
|
||
6,675,476
|
12,243,191
|
||
==========
|
==========
|
Year
ended 31 December
|
||
2006
|
||
2007
|
As
restated (Note
2.1)
|
|
Profit
before income tax
|
12,955,027
|
6,564,912
|
Adjustments
for:
|
||
Depreciation
and amortisation
|
22,677,167
|
22,686,568
|
Amortisation
of customer acquisition costs of contractual CDMA
subscribers
|
4,000,358
|
4,375,353
|
Interest
income
|
(186,243)
|
(263,542)
|
Financial
(gains)/costs
|
(256,794)
|
460,003
|
Loss
on disposal of property, plant and equipment
|
109,021
|
144,950
|
Share-based
compensation costs
|
157,262
|
146,294
|
Provision
for doubtful debts
|
1,727,009
|
1,753,915
|
Realised/unrealised
loss on changes in fair value of derivative component of convertible
bonds
|
568,860
|
2,396,592
|
Changes
in working capital:
|
||
Increase
in accounts receivable
|
(1,495,952)
|
(591,235)
|
Increase
in inventories
|
(154,493)
|
(214,437)
|
Increase
in other assets
|
(3,103,991)
|
(1,877,314)
|
Increase
in prepayments and other current assets
|
(2,165,549)
|
(415,625)
|
Increase
in amounts due from Domestic Carriers
|
(11,215)
|
(36)
|
Decrease
in amounts due from related parties
|
148,074
|
220,750
|
Increase
in payables and accrued liabilities
|
1,499,999
|
2,300,159
|
Increase
in advances from customers
|
1,507,666
|
2,097,677
|
Decrease
in deferred revenue
|
(957,713)
|
(1,106,934)
|
(Decrease)/increase
in amounts due to Domestic Carriers
|
(254,602)
|
18,017
|
(Decrease)/increase
in amounts due to Unicom Parent
|
(368,618)
|
308,883
|
Increase
in amounts due to related parties
|
440,856
|
212,081
|
----
|
----
|
|
Cash
generated from operations
|
36,836,129
|
39,217,031
|
========
|
========
|
|
(i)
|
Payables
to equipment suppliers for construction-in-progress during 2007 increased
by approximately RMB4.0 billion (2006: approximately RMB5.1
billion).
|
|
(ii)
|
On
20 August 2007, the US$1 billion convertible bonds were fully converted
into 899,745,075 Unicom Shares. Please refer to Note 18 for
details.
|
|
•
|
reversal
of revaluation surplus and related depreciation and amortisation charges
arising from the revaluation of assets performed by independent valuers
for the purpose of reporting to relevant PRC government authorities prior
to 1 January 2007;
|
|
•
|
recognition
of goodwill associated with the acquisition of subsidiaries prior to
2005;
|
|
•
|
capitalisation
of the direct costs associated with the acquisition of subsidiaries prior
to 2005;
|
|
•
|
additional
capitalisation of borrowing costs prior to the adoption of CAS on 1
January 2007;
|
|
•
|
capitalisation
and amortisation of upfront non-refundable revenue and the related direct
incremental costs for activating cellular subscribers prior to the
adoption of CAS on 1 January 2007;
and
|
|
•
|
adjustments
on deferred taxation in relation to HKFRS
adjustments.
|
The
Unicom Group (before the Business Combination)
|
Guizhou
Business
|
Elimination
|
The
Unicom
Group
(after the Business Combination)
|
|
For
the year ended/as at 31 December 2007
|
||||
Results
of operations:
|
||||
Revenue
(Turnover)
|
98,515,372
|
1,407,223
|
(383,208)
|
99,539,387
|
Profit
for the year
|
9,205,580
|
95,277
|
—
|
9,300,857
|
Basic
earnings per share (RMB)
|
0.706
|
—
|
—
|
0.713
|
Financial
position:
|
||||
Non-current
assets
|
130,763,519
|
1,824,730
|
—
|
132,588,249
|
Current
assets
|
16,857,746
|
165,824
|
(189,449)
|
16,834,121
|
Total
assets
|
147,621,265
|
1,990,554
|
(189,449)
|
149,422,370
|
Non-current
liabilities
|
2,960,312
|
13,370
|
—
|
2,973,682
|
Current
liabilities
|
47,890,623
|
1,530,420
|
(189,449)
|
49,231,594
|
Total
liabilities
|
50,850,935
|
1,543,790
|
(189,449)
|
52,205,276
|
Net
assets
|
96,770,330
|
446,764
|
—
|
97,217,094
|
The
Unicom Group (before the Business Combination)
|
Guizhou
Business
|
Elimination
|
The
Unicom Group (after the Business Combination)
|
|
For
the year ended/as at 31 December 2006
|
||||
Results
of operations:
|
||||
Revenue
(Turnover)
|
94,294,493
|
1,352,867
|
(300,045)
|
95,347,315
|
Profit
for the year
|
3,731,931
|
69,096
|
—
|
3,801,027
|
Basic
earnings per share (RMB)
|
0.296
|
—
|
—
|
0.302
|
Financial
position:
|
||||
Non-current
assets
|
126,011,725
|
1,594,365
|
—
|
127,606,090
|
Current
assets
|
20,426,261
|
303,215
|
(38,852)
|
20,690,624
|
Total
assets
|
146,437,986
|
1,897,580
|
(38,852)
|
148,296,714
|
Non-current
liabilities
|
16,723,791
|
17,344
|
—
|
16,741,135
|
Current
liabilities
|
50,302,537
|
1,427,729
|
(38,852)
|
51,691,414
|
Total
liabilities
|
67,026,328
|
1,445,073
|
(38,852)
|
68,432,549
|
Net
assets
|
79,411,658
|
452,507
|
—
|
79,864,165
|
|
•
|
HKFRS
7, “Financial instruments: Disclosures”, and the complementary amendment
to HKAS 1, “Presentation of financial statements — Capital disclosures”,
introduce new disclosures relating to financial instruments and capital
management which do not have any significant impact on the classification
and valuation of the Unicom Group’s financial
instruments.
|
|
•
|
HK(IFRIC)-Int
8, “Scope of HKFRS 2”, requires consideration of transactions involving
the issuance of equity instruments, where the identifiable consideration
received is less than the fair value of the equity instruments issued in
order to establish whether or not they fall within the scope of HKFRS 2.
This interpretation does not have any significant impact on the Unicom
Group’s consolidated financial
statements.
|
|
•
|
HK(IFRIC)-Int
9, “Reassessment of embedded derivatives”, requires an entity to assess
whether an embedded derivative is required to be separated from the host
contract and accounted for as a derivative when the entity first becomes a
party to the contract. Subsequent reassessment is prohibited unless there
is a change in the terms of the contract that significantly modifies the
cash flows that otherwise would be required under the contract, in which
case reassessment is required. As the Unicom Group did not change the
terms of these kind of contracts, this interpretation does not have any
impact on the Unicom Group’s consolidated financial
statements.
|
|
•
|
HK(IFRIC)-Int
10, “Interim financial reporting and impairment”, prohibits the impairment
losses recognised in an interim period on goodwill, investments in equity
instruments and investments in financial assets carried at cost to be
reversed at a subsequent balance sheet date. This interpretation does not
have any significant impact on the Unicom Group’s consolidated financial
statements.
|
|
•
|
HK(IFRIC)-Int
7, “Applying the restatement approach under HKAS 29, Financial reporting
in hyperinflationary economies”, provides guidance on how to apply
requirements of HKAS 29 in a reporting period in which an entity
identifies the existence of hyperinflation in the economy of its
functional currency, when the economy was not hyperinflationary in the
prior period. As none of the Unicom Group entities have a currency of
hyperinflationary economy as its functional currency, this interpretation
is not relevant to the Unicom Group’s
operation.
|
(c)
|
Standards, amendments and
interpretations to existing standards that are not yet effective in 2007
and have not been early adopted by the Unicom
Group
|
|
•
|
HKFRS
8, “Operating segments” (effective for annual periods beginning on or
after 1 January 2009), replaces HKAS 14 and aligns segment reporting with
the requirements of the US Standard SFAS 131, “Disclosures about segments
of an enterprise and related information”. The new standard requires a
“management approach”, under which segment information is presented on the
same basis as that used for internal reporting purposes. The Unicom Group
will apply HKFRS 8 from 1 January 2009. This standard is not expected to
have any significant impact on the classification and presentation of the
Unicom Group’s consolidated financial
statements.
|
|
•
|
(Revised)
HKAS 1, “Presentation of financial statements” (effective for annual
periods beginning on or after 1 January 2009). The revised HKAS 1 affects
the presentation of owner changes in equity and of comprehensive income.
It does not change the recognition, measurement or disclosures of specific
transactions and other events required by other HKFRS. Management is
currently assessing the impact of (Revised) HKAS 1 on the Unicom Group’s
consolidated financial statements but the probable key impact will be on
the manner in which the Unicom Group presents financial
statements.
|
|
•
|
HKAS
23 (Amendment), “Borrowing costs” (applied to borrowing cost related to
qualifying assets for which the commencement date for capitalisation is on
or after 1 January 2009). The amendment requires an entity to capitalise
borrowing costs directly attributable to the acquisition, construction or
production of a qualifying asset (one that takes a substantial period of
time to get ready for use or sale) as part of the cost of that asset. The
option of immediately expensing those borrowing costs will be removed.
HKAS 23 (Amendment) is not expected to have a material impact on the
Unicom Group’s consolidated financial
statements.
|
|
•
|
HK(IFRIC)-Int
11, “Group and treasury share transactions” (effective for annual periods
beginning on or after 1 March 2007), provides guidance on whether
share-based transactions involving treasury shares or involving group
entities (for example, options over parent’s shares) should be accounted
for as equity-settled or cash-settled share-based payment transactions in
the stand-alone accounts of the parent and group companies. Management is
currently assessing the impact of HK(IFRIC)-Int 11 on the Unicom Group’s
and Unicom’s financial statements.
|
|
•
|
HK(IFRIC)-Int
13, “Customer loyalty programmes” (effective for annual periods beginning
on or after 1 July 2008), clarifies that where goods or services are sold
together with a customer loyalty incentive (for example, loyalty points or
free services/products), the arrangement is a multiple-element arrangement
and the consideration received or receivable from the customer is
allocated between the components of the arrangement using fair values.
Management is currently assessing the impact of HK(IFRIC)-Int 13 on the
Unicom Group’s operations and consolidated financial
statements.
|
|
•
|
HK(IFRIC)-Int
12, “Service concession arrangements” (effective for annual periods
beginning on or after 1 January 2008). HK(IFRIC)-Int 12 applies to
contractual arrangements whereby a private sector operator participates in
the development, financing, operation and maintenance of infrastructure
for public sector services. HK(IFRIC)-Int 12 is not relevant to the Unicom
Group’s operations because the Unicom Group did not involve in such
arrangements.
|
|
•
|
HK(IFRIC)-Int
14, “The limit on a defined benefit asset, minimum funding requirements
and their interaction” (effective for annual periods beginning on or after
1 January 2008). HK(IFRIC)-Int 14 provides guidance on assessing the limit
in HKAS 19 on the amount of the surplus that can be recognised as an
asset. It also explains how the pension asset or liability may be affected
by a statutory or contractual minimum funding requirement. HK(IFRIC)-Int
14 is not relevant to the Unicom Group’s operations because none of the
Unicom Group’s companies have defined benefit
assets.
|
Depreciable
life
|
Residual
rate
|
|
Buildings
|
10-40
years
|
3%
|
Telecommunications
equipment
|
5-15
years
|
3%
|
Office
furniture, fixtures and others
|
5-7
years
|
3%
|
|
•
|
Usage
fees are recognised when the service is
rendered;
|
|
•
|
Monthly
fees are recognised as revenue in the month during which the services are
rendered;
|
|
•
|
Revenue
from telephone cards, which represent service fees received from customers
for telephone services, is recognised when the related service is rendered
upon actual usage of the telephone cards by
customers;
|
|
•
|
Leased
lines and indefeasible rights of use (“IRU”) are treated as operating
leases with rental income recognised on a straight-line basis over the
lease term, except for the lease of specific and identified network assets
that transfer substantially all the risks and rewards incidental to the
ownership to the lessee, which is recognised as capacity
sales;
|
|
•
|
Value-added
services revenue, which mainly represents revenue from the provision of
services such as short message, cool ringtone, CDMA IX wireless data
services and secretarial services to subscribers, are recognised when
service is rendered;
|
|
•
|
Standalone
sales of telecommunications products, which mainly represent handsets and
accessories, are recognised when title has been passed to the buyers;
and
|
|
•
|
For
CDMA promotional package where CDMA handsets are provided to subscribers
for their use during a specified contract period (Note 4.2(a)), since the
commercial substance of the transaction is to develop new contractual
subscribers by offering handsets, the two elements of CDMA cellular
services and handsets are considered as a linked transaction. Service
revenues from such promotional package are recognised based upon actual
usage of cellular service at the tariff set out in the contracts. The
costs of CDMA handsets are considered as subscriber acquisition costs,
which are deferred and amortised over the specified contract period (refer
to Note 2.7).
|
2007
|
2006
|
|
Short-term
bank deposits
|
||
State-owned
banks
|
527,885
|
21,432
|
Other
banks
|
116,131
|
174,388
|
----
|
----
|
|
644,016
|
195,820
|
|
========
|
========
|
|
Cash
and cash equivalents
|
||
State-owned
banks
|
6,525,506
|
12,055,646
|
Other
banks
|
149,970
|
187,545
|
----
|
----
|
|
6,675,476
|
12,243,191
|
|
========
|
=========
|
The
Unicom Group
|
Less
than 1 year
|
Between
1 and 2 years
|
Between
2 and 5 years
|
Over 5
years
|
At
31 December 2007
|
||||
Bank
loans
|
2,360,140
|
80,830
|
1,726,022
|
—
|
Obligations
under finance lease
|
1,520
|
1,824
|
2,264
|
—
|
----
|
----
|
----
|
----
|
|
2,361,660
|
82,654
|
1,728,286
|
—
|
|
=========
|
=========
|
=========
|
=========
|
|
At
31 December 2006
|
||||
Bank
loans
|
4,272,004
|
2,583,182
|
1,936,621
|
—
|
Convertible
bonds
|
—
|
—
|
8,141,351
|
—
|
Obligations
under finance lease
|
105,101
|
8,059
|
2,639
|
58
|
----
|
----
|
----
|
----
|
|
4,377,105
|
2,591,241
|
10,080,611
|
58
|
|
=========
|
=========
|
=========
|
=========
|
Unicom
|
Less
than 1 year
|
Between
1
and
2 years
|
Between
2
and
5 years
|
Over
5 years
|
At
31 December 2007
|
||||
Bank
loans
|
2,352,940
|
73,630
|
1,521,462
|
—
|
=========
|
=========
|
=========
|
==========
|
|
At
31 December 2006
|
||||
Bank
loans
|
224,520
|
2,539,664
|
1,724,861
|
—
|
Convertible
bonds
|
—
|
—
|
8,141,351
|
—
|
-----
|
----
|
-----
|
-----
|
|
224,520
|
2,539,664
|
9,866,212
|
—
|
|
==========
|
==========
|
==========
|
==========
|
2006
|
||
2007
|
(As
restated)
|
|
Interest
bearing debts:
|
||
—
Short-term bonds
|
—
|
7,087,217
|
—
Long-term bank loans
|
1,660,921
|
4,139,349
|
—
Convertible bonds
|
—
|
10,324,949
|
—
Obligations under finance leases
|
3,882
|
10,230
|
—
Current portion of long-term bank loans
|
2,191,382
|
3,984,350
|
—
Current portion of obligations under finance leases
|
1,448
|
100,004
|
-----
|
----
|
|
3,857,633
|
25,646,099
|
|
Minority
interest
|
3,914
|
2,841
|
----
|
----
|
|
Interest
bearing debts plus minority interest
|
3,861,547
|
25,648,940
|
----
|
-----
|
|
Total
equity:
|
||
—
Capital and reserves attributable to Unicom’s equity
holders
|
97,213,180
|
79,861,324
|
—
Minority interest
|
3,914
|
2,841
|
-----
|
-----
|
|
Interest
bearing debts plus total equity
|
101,074,727
|
105,510,264
|
-----
|
-----
|
|
Debt-to-capitalisation
ratio
|
3.8%
|
24.3%
|
==========
|
===========
|
|
•
|
31%
of the audited CDMA service revenue of the lessee for each of the years
2007 and 2008; or
|
|
•
|
30%
of the audited CDMA service revenue of the lessee for the year 2007 or
2008, where the audited CDMA business profit before taxation of the lessee
for the relevant year is less than the audited CDMA business profit before
taxation of the lessee for the year 2006 as set out in the relevant annual
audited financial statements of the
lessee.
|
|
•
|
GSM
Business — the provision of GSM telephone and related
services;
|
|
•
|
CDMA
Business — the provision of CDMA telephone and related services, through a
leasing arrangement for CDMA network capacity from Unicom New
Horizon;
|
|
•
|
Data
and Internet Business — the provision of domestic and international data,
Internet and other related services;
and
|
|
•
|
Long
Distance Business — the provision of domestic and international long
distance and other related
services.
|
2007
|
|||||||
GSM
Business
|
CDMA
Business
|
Data
and Internet Business
|
Long
Distance Business
|
Unallocated
Amounts
|
Elimination
|
Total
|
|
Revenue
(Turnover):
|
|||||||
Usage
fee
|
35,111,665
|
13,941,247
|
1,712,831
|
352,081
|
—
|
51,117,824
|
|
Monthly
fee
|
6,965,329
|
4,574,887
|
—
|
—
|
—
|
11,540,216
|
|
Interconnection
revenue
|
6,022,826
|
2,066,187
|
36,300
|
476,803
|
—
|
8,602,116
|
|
Leased
lines rental
|
—
|
—
|
535,832
|
670,866
|
—
|
1,206,698
|
|
Value-added
services revenue
|
13,528,197
|
6,413,204
|
331,133
|
—
|
—
|
20,272,534
|
|
Other
revenue
|
1,147,287
|
734,715
|
9,757
|
7,751
|
—
|
1,899,510
|
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
||
Total
services revenue
|
62,775,304
|
27,730,240
|
2,625,853
|
1,507,501
|
—
|
94,638,898
|
|
Sales
of telecommunications products
|
11,521
|
4,888,282
|
677
|
9
|
—
|
4,900,489
|
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
||
Total
revenue from external customers
|
62,786,825
|
32,618,522
|
2,626,530
|
1,507,510
|
—
|
99,539,387
|
|
Intersegment
revenue
|
—
|
—
|
2,186,120
|
1,705,045
|
—
|
(3,891,165)
|
—
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
|
Total
revenue
|
62,786,825
|
32,618,522
|
4,812,650
|
3,212,555
|
—
|
(3,891,165)
|
99,539,387
|
Leased
lines and network capacities
|
(235,722)
|
(8,486,539)
|
(396,148)
|
(49,195)
|
—
|
32,107
|
(9,135,497)
|
Interconnection
charges
|
(10,021,694)
|
(3,553,441)
|
(319,282)
|
(871,460)
|
—
|
3,859,058
|
(10,906,819)
|
Depreciation
and amortisation
|
(19,057,783)
|
(630,829)
|
(2,286,406)
|
(701,779)
|
(370)
|
(22,677,167)
|
|
Employee
benefit expenses
|
(4,411,785)
|
(1,777,553)
|
(509,627)
|
(245,845)
|
(195,178)
|
(7,139,988)
|
|
Selling
and marketing
|
(9,878,991)
|
(8,912,742)
|
(631,987)
|
(257,625)
|
(27)
|
(19,681,372)
|
|
General,
administrative and other expenses
|
(10,098,930)
|
(3,263,971)
|
(744,068)
|
(504,450)
|
(27,943)
|
(14,639,362)
|
|
Cost
of telecommunications products sold
|
(229,199)
|
(4,800,842)
|
(1,651)
|
(14)
|
—
|
(5,031,706)
|
|
Financial
gains/(costs)
|
134,162
|
(15,159)
|
20,236
|
15,325
|
(723,868)
|
656,312
|
87,008
|
Interest
income
|
107,060
|
14,865
|
16,863
|
5,286
|
698,481
|
(656,312)
|
186,243
|
Realised/unrealised
loss on changes in fair value of derivative component of convertible
bonds
|
—
|
—
|
—
|
—
|
(568,860)
|
(568,860)
|
|
Other
gains-net
|
131,582
|
7,197
|
950
|
2,194
|
2,781,237
|
2,923,160
|
|
-----
|
-----
|
-----
|
-----
|
-----
|
------
|
||
Segment
profit (loss) before income tax
|
9,225,525
|
1,199,508
|
(38,470)
|
604,992
|
1,963,472
|
12,955,027
|
|
==========
|
==========
|
==========
|
==========
|
==========
|
|||
Income
tax expenses
|
(3,654,170)
|
||||||
-----
|
|||||||
Profit
for the year
|
9,300,857
|
||||||
==========
|
|||||||
Attributable
to:
|
|||||||
Equity
holders of Unicom
|
9,299,784
|
||||||
Minority
interest
|
1,073
|
||||||
-----
|
|||||||
9,300,857
|
|||||||
===========
|
|||||||
Other
information:
|
|||||||
Provision
for doubtful debts
|
1,257,670
|
395,263
|
45,916
|
28,160
|
—
|
1,727,009
|
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
||
Capital
expenditures for segment assets (a)
|
16,492,453
|
—
|
2,223,724
|
2,744,467
|
4,257,277
|
25,717,921
|
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
2006 (As
restated)
|
|||||||
GSM
Business
|
CDMA
Business
|
Data
and Internet Business
|
Long
Distance Business
|
Unallocated
Amounts
|
Elimination
|
Total
|
|
Revenue
(Turnover):
|
|||||||
Usage
fee
|
34,067,003
|
15,085,577
|
1,769,012
|
63,340
|
—
|
50,984,932
|
|
Monthly
fee
|
7,437,095
|
5,122,008
|
—
|
—
|
—
|
12,559,103
|
|
Interconnection
revenue
|
4,921,363
|
1,759,293
|
39,758
|
389,375
|
—
|
7,109,789
|
|
Leased
lines rental
|
—
|
—
|
472,475
|
557,270
|
—
|
1,029,745
|
|
Value-added
services revenue
|
11,597,432
|
5,375,579
|
—
|
—
|
—
|
16,973,011
|
|
Other
revenue
|
1,859,345
|
534,018
|
39,147
|
4,565
|
—
|
2,437,075
|
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
||
Total
services revenue
|
59,882,238
|
27,876,475
|
2,320,392
|
1,014,550
|
—
|
91,093,655
|
|
Sales
of telecommunications products
|
8,166
|
4,243,594
|
1,900
|
—
|
—
|
4,253,660
|
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
||
Total
revenue from external customers
|
59,890,404
|
32,120,069
|
2,322,292
|
1,014,550
|
—
|
95,347,315
|
|
Intersegment
revenue
|
—
|
—
|
3,033,392
|
1,836,887
|
—
|
(4,870,279)
|
—
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
|
Total
revenue
|
59,890,404
|
32,120,069
|
5,355,684
|
2,851,437
|
—
|
(4,870,279)
|
95,347,315
|
Leased
lines and network capacities
|
(244,896)
|
(8,348,151)
|
(303,858)
|
(64,785)
|
—
|
18,691
|
(8,942,999)
|
Interconnection
charges
|
(9,580,077)
|
(3,533,740)
|
(481,528)
|
(927,468)
|
—
|
4,851,588
|
(9,671,225)
|
Depreciation
and amortisation
|
(18,877,780)
|
(718,467)
|
(2,419,598)
|
(670,191)
|
(532)
|
(22,686,568)
|
|
Employee
benefit expenses
|
(4,160,376)
|
(1,537,816)
|
(527,358)
|
(272,653)
|
(182,476)
|
(6,680,679)
|
|
Selling
and marketing
|
(9,415,055)
|
(9,248,734)
|
(683,402)
|
(224,078)
|
(61)
|
(19,571,330)
|
|
General,
administrative and other expenses
|
(9,562,494)
|
(2,896,574)
|
(797,130)
|
(259,900)
|
(27,293)
|
(13,543,391)
|
|
Cost
of telecommunications products sold
|
(189,692)
|
(4,718,968)
|
(6,197)
|
(19)
|
—
|
(4,914,876)
|
|
Financial
costs
|
(475,571)
|
(51,656)
|
(35,512)
|
(54,229)
|
(467,026)
|
424,362
|
(659,632)
|
Interest
income
|
127,046
|
6,903
|
12,483
|
2,323
|
539,149
|
(424,362)
|
263,542
|
Realised/unrealised
loss on changes in fair value of derivative component of convertible
bonds
|
—
|
—
|
—
|
—
|
(2,396,592)
|
(2,396,592)
|
|
Other
gains/(loss)-net
|
23,513
|
982
|
246
|
(3,409)
|
15
|
21,347
|
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
||
Segment
profit (loss) before income tax
|
7,535,022
|
1,073,848
|
113,830
|
377,028
|
(2,534,816)
|
6,564,912
|
|
==========
|
==========
|
==========
|
==========
|
==========
|
|||
Income
tax expenses
|
(2,763,885)
|
||||||
-----
|
|||||||
Profit
for the year
|
3,801,027
|
||||||
==========
|
|||||||
Attributable
to:
|
|||||||
Equity
holders of Unicom
|
3,800,920
|
||||||
Minority
interest
|
107
|
||||||
-----
|
|||||||
3,801,027
|
|||||||
===========
|
|||||||
Other
information:
|
|||||||
Provision
for doubtful debts
|
1,133,690
|
460,515
|
106,883
|
52,827
|
—
|
1,753,915
|
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
||
Capital
expenditures for segment assets (a)
|
10,822,935
|
—
|
2,500,814
|
2,640,789
|
5,827,151
|
21,791,689
|
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
31
December 2007
|
|||||||
GSM
Business
|
CDMA
Business
|
Data
and Internet Business
|
Long
Distance Business
|
Unallocated
Amounts
|
Elimination
|
Total
|
|
Total
segment assets
|
107,735,724
|
9,885,462
|
7,985,260
|
17,573,749
|
56,499,840
|
(50,257,665)
|
149,422,370
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
||
Total
segment liabilities
|
32,947,282
|
9,100,579
|
2,526,811
|
3,831,729
|
3,798,875
|
52,205,276
|
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
31
December 2006 (As restated)
|
|||||||
GSM
Business
|
CDMA
Business
|
Data
and Internet Business
|
Long
Distance Business
|
Unallocated
Amounts
|
Elimination
|
Total
|
|
Total
segment assets
|
108,993,645
|
7,876,684
|
8,300,155
|
16,810,768
|
56,477,257
|
(50,161,795)
|
148,296,714
|
==========
|
=========
|
=========
|
=========
|
=========
|
==========
|
||
Total
segment liabilities
|
39,529,979
|
8,137,358
|
2,801,914
|
3,673,741
|
14,289,557
|
68,432,549
|
|
==========
|
=========
|
==========
|
==========
|
==========
|
==========
|
|
(a)
|
Capital
expenditures classified under “Unallocated amounts” represent capital
expenditures on common facilities, which benefit all business
segments.
|
The
Unicom Group
|
||||||||||||||||||||||||||||
2007
|
2006
(As
restated)
|
|||||||||||||||||||||||||||
Buildings
|
Tele-
communications equipment
|
Office
furniture, fixtures and others
|
Leasehold
improvements
|
Construction- in-progress
|
Total
|
Total
|
||||||||||||||||||||||
Cost
or valuation:
|
||||||||||||||||||||||||||||
Beginning
of year
|
14,803,953 | 168,812,268 | 9,674,505 | 1,388,443 | 13,670,239 | 208,349,408 | 189,027,732 | |||||||||||||||||||||
Additions
|
171,943 | 206,103 | 364,650 | — | 24,975,225 | 25,717,921 | 21,791,689 | |||||||||||||||||||||
Transfer
from CIP
|
1,461,030 | 20,609,388 | 1,181,800 | 427,006 | (23,679,224 | ) | — | — | ||||||||||||||||||||
Revaluation
surplus
|
— | — | — | — | — | — | 200,330 | |||||||||||||||||||||
Reclassification
to other assets
|
— | — | — | — | — | — | (528,428 | ) | ||||||||||||||||||||
Disposals
|
(75,865 | ) | (2,487,221 | ) | (237,219 | ) | (203,846 | ) | — | (3,004,151 | ) | (2,141,915 | ) | |||||||||||||||
-----
|
-----
|
----
|
----
|
----
|
----
|
-----
|
||||||||||||||||||||||
End
of year
|
16,361,061 | 187,140,538 | 10,983,736 | 1,611,603 | 14,966,240 | 231,063,178 | 208,349,408 | |||||||||||||||||||||
-----
|
-----
|
----
|
----
|
-----
|
-----
|
-----
|
||||||||||||||||||||||
Representing:
|
||||||||||||||||||||||||||||
At
cost
|
3,829,030 | 187,140,538 | 10,983,736 | 1,611,603 | 14,966,240 | 218,531,147 | 195,817,377 | |||||||||||||||||||||
At
valuation
|
12,532,031 | — | — | — | — | 12,532,031 | 12,532,031 | |||||||||||||||||||||
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
||||||||||||||||||||||
16,361,061 | 187,140,538 | 10,983,736 | 1,611,603 | 14,966,240 | 231,063,178 | 208,349,408 | ||||||||||||||||||||||
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
||||||||||||||||||||||
Accumulated
depreciation and impairment:
|
||||||||||||||||||||||||||||
Beginning
of year
|
3,568,448 | 86,137,955 | 5,031,750 | 801,321 | 14,307 | 95,553,781 | 75,227,572 | |||||||||||||||||||||
Charge
for the year
|
321,038 | 19,866,791 | 1,691,176 | 281,328 | — | 22,160,333 | 22,263,719 | |||||||||||||||||||||
Disposals
|
(62,917 | ) | (2,328,303 | ) | (218,035 | ) | (203,846 | ) | — | (2,813,101 | ) | (1,937,510 | ) | |||||||||||||||
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
||||||||||||||||||||||
End
of year
|
3,826,569 | 103,676,443 | 6,504,891 | 878,803 | 14,307 | 114,901,013 | 95,553,781 | |||||||||||||||||||||
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
-----
|
||||||||||||||||||||||
Net
book value:
|
||||||||||||||||||||||||||||
End
of year
|
12,534,492 | 83,464,095 | 4,478,845 | 732,800 | 14,951,933 | 116,162,165 | 112,795,627 | |||||||||||||||||||||
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
||||||||||||||||||||||
Beginning
of year
|
11,235,505 | 82,674,313 | 4,642,755 | 587,122 | 13,655,932 | 112,795,627 | 113,800,160 | |||||||||||||||||||||
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
Unicom
|
||||||||||||||||||||
2007
|
2006
|
|||||||||||||||||||
Tele-
communications equipment
|
Office
furniture, fixtures and others
|
Construction-
in-progress
|
Total
|
Total
|
||||||||||||||||
Cost:
|
||||||||||||||||||||
Beginning of year
|
50,792 | 8,060 | — | 58,852 | 60,935 | |||||||||||||||
Additions
|
— | 547 | 4,414 | 4,961 | 388 | |||||||||||||||
Disposals
|
(3,452 | ) | (1,307 | ) | — | (4,759 | ) | (2,471 | ) | |||||||||||
-----
|
-----
|
-----
|
-----
|
-----
|
||||||||||||||||
End of year
|
47,340 | 7,300 | 4,414 | 59,054 | 58,852 | |||||||||||||||
-----
|
-----
|
-----
|
-----
|
-----
|
||||||||||||||||
Accumulated
depreciation:
|
||||||||||||||||||||
Beginning of year
|
12,754 | 7,452 | — | 20,206 | 17,275 | |||||||||||||||
Charge for the year
|
3,277 | 370 | — | 3,647 | 3,985 | |||||||||||||||
Disposals
|
(989 | ) | (813 | ) | — | (1,802 | ) | (1,054 | ) | |||||||||||
-----
|
-----
|
-----
|
-----
|
-----
|
||||||||||||||||
End of year
|
15,042 | 7,009 | — | 22,051 | 20,206 | |||||||||||||||
-----
|
-----
|
-----
|
-----
|
-----
|
||||||||||||||||
Net
book value:
|
||||||||||||||||||||
End of year
|
32,298 | 291 | 4,414 | 37,003 | 38,646 | |||||||||||||||
===========
|
===========
|
===========
|
===========
|
===========
|
||||||||||||||||
Beginning of year
|
38,038 | 608 | — | 38,646 | 43,660 | |||||||||||||||
===========
|
===========
|
===========
|
===========
|
===========
|
The
Unicom Group
|
||
2007
|
2006
|
|
Cost:
|
||
Goodwill
arising from acquisitions
|
3,143,983
|
3,143,983
|
=========
|
=========
|
The
Unicom Group
|
|||
2006
|
|||
Note
|
2007
|
(As
restated)
|
|
Direct
incremental costs for activating subscribers
|
(a)
|
1,301,112
|
2,260,728
|
Customer
acquisition costs of contractual CDMA subscribers
|
4.2(a),
(b)
|
2,349,225
|
1,712,426
|
Long-term
prepayment for land use rights
|
(c)
|
5,881,167
|
4,933,290
|
Purchased
software
|
(d)
|
1,020,673
|
681,712
|
Prepaid
rental for premises and leased lines
|
1,233,019
|
1,006,252
|
|
Others
|
(d)
|
1,070,003
|
762,404
|
----
|
----
|
||
12,855,199
|
11,356,812
|
||
=========
|
=========
|
|
(a)
|
For
the year ended 31 December 2007, amortisation of direct incremental costs
for activating GSM and CDMA subscribers amounted to approximately RMB1,527
million (2006: approximately RMB1,829 million) (Note 25), which has been
included in “selling and marketing”
expenses.
|
|
(b)
|
For
the year ended 31 December 2007, amortisation of the customer acquisition
costs of contractual CDMA subscribers amounted to approximately RMB4,000
million (2006: approximately RMB4,375 million) (Note 25), which was
recorded in “selling and marketing” expenses. As at 31 December 2007, the
carrying amount of unamortised customer acquisition costs of contractual
CDMA subscribers totaled approximately RMB2,857 million (2006:
approximately RMB2,170 million), with approximately RMB2,349 million
(2006: approximately RMB1,712 million) recorded in “other assets” (for
contracts expiring over 1 year) and approximately RMB508 million (2006:
approximately RMB458 million) recorded in “prepayments and other current
assets” (for contracts expiring within 1 year) (Note
12).
|
|
(c)
|
The
Unicom Group’s long-term prepayment for land use rights represents prepaid
operating lease payments for land use rights in China and their net book
value is analysed as follows:
|
The
Unicom Group
|
||
2006
|
||
2007
|
(As
restated)
|
|
Held on:
|
||
Leases of between 10 to 50 years
|
5,836,838
|
4,898,461
|
Leases of less than 10 years
|
44,329
|
34,829
|
-----
|
-----
|
|
5,881,167
|
4,933,290
|
|
=========
|
==========
|
|
(d)
|
For
the year ended 31 December 2007, the amortisation of purchased software
and others of other assets amounted to approximately RMB517 million (2006:
approximately RMB423 million) (Note
25).
|
The
Unicom Group
|
||
2006
|
||
2007
|
(As
restated)
|
|
Provision
for enterprise income tax on the estimated taxable profits for
the year
|
||
—
Hong Kong
|
5,916
|
4,817
|
—
Outside Hong Kong
|
3,736,021
|
2,838,365
|
-----
|
-----
|
|
3,741,937
|
2,843,182
|
|
Deferred
taxation
|
(87,767)
|
(79,297)
|
-----
|
------
|
|
3,654,170
|
2,763,885
|
|
==========
|
===========
|
|
(a)
|
Unicom
did not have any assessable income sourced from Hong Kong for the years
ended 31 December 2007 and 2006.
|
|
(b)
|
China
Unicom International Limited (“Unicom International”, a subsidiary of
Unicom) assessed its income tax liability in Hong Kong using the tax rate
of 17.5% (2006: 17.5%). The income tax liability of Unicom International
amounted to approximately RMB5.92 million for the year ended 31 December
2007 (2006: approximately RMB4.82
million).
|
|
(c)
|
China
Unicom (Macau) Company Limited (“Unicom Macau”, a subsidiary of Unicom)
assessed its income tax liability in Macau using progressive tax rates
from 3% to 12%. There is no Macau income tax liability of Unicom Macau for
the years ended 31 December 2007 and 2006 as there were no assessable
profits in both years.
|
|
(d)
|
Various
provincial/municipal branches of CUCL were granted preferential tax
treatment by relevant tax authorities to assess their enterprise income
tax at the rates of 13% or 18% in China for the years ended 31 December
2007 and 2006. The remaining provincial branches were assessed at the
statutory tax rate of 33%.
|
|
(e)
|
For
the year ended 31 December 2007, Unicom Huasheng Telecommunications
Technology Company Limited (“Unicom Huasheng”, a subsidiary of CUCL) and
its branches are subject to income tax at the statutory enterprise income
tax rate of 33% in China. The income tax liabilities of Unicom Huasheng
and its branches were assessed separately by relevant local tax
authorities.
|
|
(f)
|
Before
the Business Combination became effective on 31 December 2007, Guizhou
Business was operated by Guizhou branch of Unicom Parent. The income tax
of Guizhou branch of Unicom Parent was reported on a consolidated basis
with Unicom Parent and no separate tax return was prepared. The
accumulated tax losses incurred by Guizhou Business have not been fully
utilised by Unicom Parent, therefore no income tax expenses were
recognised for the Guizhou Business in 2007 or prior years in accounting
for the Guizhou Business using merger
accounting.
|
|
In
addition, in accordance with the relevant PRC tax laws and regulations,
the accumulated tax losses and other temporary differences associated with
Guizhou Business carried forward from prior years could not be utilised by
CUCL upon the completion of the Business Combination. Accordingly,
deferred tax assets and liabilities were not recognised by CUCL in the
relevant periods presented in applying merger accounting to the Business
Combination of Guizhou Business.
|
|
(g)
|
Pursuant
to the new PRC enterprise income tax law passed by the Tenth National
People’s Congress on 16 March 2007, the new enterprise income tax rates
for domestic and foreign enterprises are unified at 25% and are effective
from 1 January 2008. However, for entities operating in special economic
zones that previously enjoyed preferential tax rates, the applicable tax
rate will be increased progressively to 25% over a five year period. As a
result, the deferred tax balance has been adjusted to reflect the tax
rates that are expected to apply to the respective periods when the asset
is expected to be realised or the liability is expected to be settled,
resulting in a decrease of approximately RMB130 million of net deferred
tax assets in the balance sheet as at 31 December 2007 and approximately
RMB154 million of deferred taxation charged to the income statement and
approximately RMB24 million of deferred taxation credited to equity for
the year ended 31 December 2007.
|
|
(h)
|
On
6 December 2007, the State Council issued the detail implementation
regulations of the new PRC enterprise income tax law. Pursuant to the
regulations, a 5% withholding income tax will be levied on dividends
declared on or after 1 January 2008 by foreign investment enterprises to
their foreign shareholders in Hong Kong. Pursuant to a notice jointly
issued by the Ministry of Finance and the State Administration of Taxation
on 22 February 2008, where foreign investment enterprises declare
dividends in 2008 and beyond out of their cumulative retained profits as
at 31 December 2007, such dividends are exempted from withholding income
tax. For dividends paid out of profits earned by foreign investment
enterprises after 1 January 2008, the 5% withholding income tax will be
applicable, unless the investor is deemed as a PRC Tax Resident
Enterprise. Management is currently assessing the PRC Tax Resident
Enterprise status of Unicom and the impact of this tax regulation on the
Unicom Group’s operations and financial position effective from
2008.
|
The
Unicom Group
|
||||||||||||
2006
|
||||||||||||
Note
|
2007
|
(As
restated)
|
||||||||||
PRC
statutory tax rate of 33%
|
33.0 | % | 33.0 | % | ||||||||
Non-deductible
expenses
|
1.1 | % | 1.8 | % | ||||||||
Realised/unrealised
loss on changes in fair value of derivative component of convertible
bonds
|
1.4 | % | 12.0 | % | ||||||||
Non-taxable
income
|
||||||||||||
—
Tax refund on reinvestment in a subsidiary
|
24 | (7.1 | %) | — | ||||||||
—
Interest income
|
(0.1 | %) | (0.6 | %) | ||||||||
—
Connection fee
|
— | (1.3 | %) | |||||||||
Accumulated
tax losses and other temporary differences of Guizhou Business
not recognised by the Unicom Group
|
(f)
|
(0.2 | %) | (0.3 | %) | |||||||
Impact
of PRC preferential tax rates
|
(1.1 | %) | (2.3 | %) | ||||||||
Investment
tax credits for domestic equipment
|
— | (0.2 | %) | |||||||||
Effect
of change of tax rate under the new PRC enterprise income tax
law
|
(g)
|
1.2 | % | — | ||||||||
----
|
----
|
|||||||||||
Effective
tax rate
|
28.2 | % | 42.1 | % | ||||||||
========
|
========
|
The
Unicom Group
|
||
2007
|
2006
|
|
Aggregate
amount (RMB in millions)
|
148
|
150
|
Per
share effect (RMB)
|
0.011
|
0.012
|
=========
|
=========
|
The
Unicom Group
|
||
2007
|
2006
|
|
Deferred
tax assets:
|
||
—
Deferred tax asset to be recovered after 12 months
|
461,902
|
787,991
|
—
Deferred tax asset to be recovered within 12 months
|
680,452
|
887,636
|
----
|
----
|
|
1,142,354
|
1,675,627
|
|
----
|
----
|
|
Deferred
tax liabilities:
|
||
—
Deferred tax liabilities to be settled after 12 months
|
(448,620)
|
(1,051,774)
|
—
Deferred tax liabilities to be settled within 12 months
|
(266,832)
|
(314,185)
|
----
|
----
|
|
(715,452)
|
(1,365,959)
|
|
----
|
-----
|
|
Net
deferred tax assets after offsetting
|
426,902
|
309,668
|
=========
|
==========
|
|
Deferred
tax liabilities that cannot be offset
|
(5,864)
|
(5,879)
|
=========
|
==========
|
The
Unicom Group
|
|||
Note
|
2007
|
2006
|
|
Net
deferred tax assets after offsetting:
|
|||
—
Beginning of year
|
309,668
|
335,234
|
|
—
Deferred tax credited to the income statement
|
87,752
|
79,563
|
|
—
Deferred tax credited/(charged) to equity
|
6
|
29,482
|
(105,129)
|
----
|
----
|
||
— End of
year
|
426,902
|
309,668
|
|
========
|
========
|
||
The
deferred tax liabilities that cannot be offset:
|
|||
—
Beginning of year
|
(5,879)
|
(5,613)
|
|
—
Deferred tax credited/(charged) to the income statement
|
15
|
(266)
|
|
-----
|
----
|
||
— End of
year
|
(5,864)
|
(5,879)
|
|
==========
|
=========
|
The
Unicom Group
|
|||
Note
|
2007
|
2006
|
|
China
|
|||
Deferred
tax assets:
|
|||
Interest
on loans from CCF joint ventures
|
(i)
|
23,129
|
45,463
|
Loss
arising from terminations of CCF Arrangements
|
(i)
|
—
|
20,636
|
Provision
for doubtful debts
|
411,274
|
492,920
|
|
Write-down
of inventories to net realisable value
|
39,833
|
32,858
|
|
Accruals
of retirement benefits
|
12,993
|
18,137
|
|
Additional
depreciation deductible for tax in future years
|
—
|
6,315
|
|
Monetary
housing benefits
|
8,595
|
12,607
|
|
Net
amount of deferral and amortisation of upfront non-refundable
revenue
|
321,936
|
740,429
|
|
Accruals
of expenses not yet deductible for tax purpose
|
257,145
|
232,863
|
|
Others
|
67,449
|
73,399
|
|
----
|
----
|
||
1,142,354
|
1,675,627
|
||
----
|
----
|
||
Deferred
tax liabilities:
|
|||
Net
amount of capitalisation and amortisation of direct incremental
costs
|
(321,936)
|
(740,429)
|
|
Capitalised
interest already deducted for tax purpose
|
(317,869)
|
(520,401)
|
|
Revaluation
of buildings
|
6
|
(75,647)
|
(105,129)
|
----
|
-----
|
||
(715,452)
|
(1,365,959)
|
||
----
|
-----
|
||
426,902
|
309,668
|
||
=========
|
==========
|
||
Hong
Kong
|
|||
Deferred
tax liabilities:
|
|||
Accelerated
depreciation for tax purpose
|
(5,864)
|
(5,879)
|
|
==========
|
==========
|
|
(i)
|
Prior
to 2000, in the process of developing its cellular networks, the GSM
Business entered into cooperation agreements with certain contractual
joint ventures (the “CJVs”) established in China. Each CJV was established
by one or more Chinese enterprises and one or more foreign parties. The
aforementioned cooperation arrangements are referred to as the
China-China-Foreign Arrangement (the “CCF Arrangements”). Pursuant to the
CCF Arrangements, the CJVs extended funding to the GSM Business for the
construction of telecommunications systems and network equipment in China.
Based on the terms of the cooperation agreements, the CCF Arrangements had
been accounted for as secured financing arrangements to the GSM Business,
and interest had been accrued by the GSM Business based on the funds
provided by the CJVs at the then prevailing market borrowing rates. All
CCF Arrangements were terminated in 1999 and 2000, the related loss on the
termination of CCF Arrangements was charged to the income statement as
incurred. Pursuant to the approval of relevant tax authorities, all the
interest costs and the loss on termination of these CCF Arrangements are
to be deducted against current taxable income over 7 years. The resulting
deferred tax assets were recognised
accordingly.
|
The
Unicom Group
|
||
2006
|
||
2007
|
(As
restated)
|
|
Handsets
|
1,587,124
|
1,489,132
|
Telephone
cards
|
584,742
|
531,407
|
Others
|
356,498
|
353,332
|
----
|
-----
|
|
2,528,364
|
2,373,871
|
|
=============
|
=============
|
The
Unicom Group
|
||
2006
|
||
2007
|
(As
restated)
|
|
Accounts
receivable for GSM services
|
2,558,757
|
3,486,610
|
Accounts
receivable for CDMA services
|
1,637,100
|
2,248,486
|
Accounts
receivable for Data and Internet services
|
203,623
|
323,369
|
Accounts
receivable for Long Distance services
|
440,615
|
458,402
|
----
|
----
|
|
Sub-total
|
4,840,095
|
6,516,867
|
Less: Provision
for doubtful debts for GSM services
|
(1,027,899)
|
(1,864,775)
|
Provision for doubtful debts
for CDMA services
|
(442,192)
|
(912,892)
|
Provision for doubtful debts
for Data and Internet services
|
(104,218)
|
(77,006)
|
Provision for doubtful debts
for Long Distance services
|
(54,632)
|
(219,983)
|
----
|
-----
|
|
3,211,154
|
3,442,211
|
|
=========
|
=========
|
The
Unicom Group
|
||
2006
|
||
2007
|
(As
restated)
|
|
Within
one month
|
1,968,344
|
2,343,254
|
More
than one month to three months
|
944,300
|
935,798
|
More
than three months to one year
|
1,519,487
|
1,719,787
|
More
than one year
|
407,964
|
1,518,028
|
----
|
----
|
|
4,840,095
|
6,516,867
|
|
=========
|
=========
|
The
Unicom Group
|
||
2006
|
||
2007
|
(As
restated)
|
|
More
than one month to three months
|
944,300
|
935,798
|
More
than three months to one year
|
282,379
|
102,196
|
More
than one year
|
16,131
|
60,963
|
-----
|
----
|
|
1,242,810
|
1,098,957
|
|
==========
|
=========
|
The
Unicom Group
|
||
2006
|
||
2007
|
(As
restated)
|
|
More
than three months to one year
|
1,237,108
|
1,617,591
|
More
than one year
|
391,833
|
1,457,065
|
----
|
----
|
|
1,628,941
|
3,074,656
|
|
=========
|
=========
|
The
Unicom Group
|
||
2006
|
||
2007
|
(As
restated)
|
|
Balance,
beginning of year
|
3,074,656
|
3,132,660
|
Provision
for the year
|
1,727,009
|
1,753,915
|
Written-off
during the year
|
(3,172,724)
|
(1,811,919)
|
-----
|
-----
|
|
Balance,
end of year
|
1,628,941
|
3,074,656
|
==========
|
==========
|
The
Unicom Group
|
Unicom
|
||||
2006
|
|||||
Note
|
2007
|
(As
restated)
|
2007
|
2006
|
|
Prepaid
rental
|
488,001
|
375,269
|
426
|
153
|
|
Deposits
and prepayments
|
682,206
|
760,629
|
4,558
|
5,284
|
|
Advances
to employees
|
132,407
|
162,830
|
3
|
11
|
|
Customer
acquisition costs of contractual CDMA subscribers
|
8(b)
|
508,340
|
458,095
|
—
|
—
|
Tax
refund on reinvestment in a subsidiary
|
24
|
1,458,715
|
—
|
—
|
—
|
Others
|
246,610
|
283,017
|
6,809
|
5,542
|
|
----
|
----
|
----
|
----
|
||
3,516,279
|
2,039,840
|
11,796
|
10,990
|
||
=========
|
=========
|
=========
|
=========
|
The
Unicom Group
|
Unicom
|
|||
2006
|
||||
2007
|
(As
restated)
|
2007
|
2006
|
|
Within
one year
|
3,371,984
|
1,943,711
|
9,819
|
9,174
|
More
than one year
|
144,295
|
96,129
|
1,977
|
1,816
|
----
|
-----
|
-----
|
-----
|
|
3,516,279
|
2,039,840
|
11,796
|
10,990
|
|
=========
|
=========
|
==========
|
==========
|
The
Unicom Group
|
Unicom
|
|||
2007
|
2006
|
2007
|
2006
|
|
Bank
deposits with maturity exceeding three months
|
635,645
|
187,449
|
635,645
|
187,449
|
Restricted
bank deposit
|
8,371
|
8,371
|
—
|
—
|
----
|
----
|
----
|
----
|
|
644,016
|
195,820
|
635,645
|
187,449
|
|
========
|
========
|
=========
|
=========
|
The
Unicom Group
|
Unicom
|
|||
2006
|
||||
2007
|
(As
restated)
|
2007
|
2006
|
|
Cash
at bank and in hand
|
6,119,784
|
11,241,559
|
31,128
|
12,725
|
Bank
deposits with original maturities of three months or less
|
555,692
|
1,001,632
|
463,132
|
907,276
|
----
|
-----
|
----
|
-----
|
|
6,675,476
|
12,243,191
|
494,260
|
920,001
|
|
=========
|
==========
|
=========
|
==========
|
Unicom
|
||
2007
|
2006
|
|
HK$’000
|
HK$’000
|
|
Authorised:
|
||
30,000,000,000
Unicom Shares
|
3,000,000
|
3,000,000
|
=========
|
=========
|
Issued
and fully paid:
|
Number
of Unicom Shares
|
Unicom
Shares value of HK$0.1 each
|
Share capital
|
Share
premium
|
Total
|
’000
|
HK$’000
|
HK$’000
|
HK$’000
|
HK$’000
|
|
At
1 January 2006
|
12,574,265
|
1,257,426
|
1,333,621
|
52,601,014
|
53,934,635
|
Employee
share option scheme
|
|||||
—Recognition
of Unicom Shares issued on exercise of Unicom Options (Note
29)
|
106,724
|
10,672
|
10,819
|
621,962
|
632,781
|
----
|
----
|
----
|
-----
|
-----
|
|
At
31 December 2006
|
12,680,989
|
1,268,098
|
1,344,440
|
53,222,976
|
54,567,416
|
Employee
share option scheme
|
|||||
—Recognition
of Unicom Shares issued on exercise of Unicom Options (Note
29)
|
53,556
|
5,356
|
5,206
|
366,324
|
371,530
|
Conversion
of convertible bonds (Note 18)
|
899,745
|
89,975
|
87,262
|
10,730,766
|
10,818,028
|
----
|
----
|
----
|
-----
|
-----
|
|
At
31 December 2007
|
13,634,290
|
1,363,429
|
1,436,908
|
64,320,066
|
65,756,974
|
=========
|
=========
|
========
|
==========
|
==========
|
The
Unicom Group
|
Unicom
|
||||
Interest
rates and final maturity
|
2007
|
2006
|
2007
|
2006
|
|
RMB
denominated bank loans
|
Fixed
interest rates of 3.60% (2006: 3.60% to 5.58%) per annum with maturity
through 2010 (2006: maturity through 2010)
|
||||
—
unsecured
|
200,000
|
315,000
|
—
|
—
|
|
----
|
----
|
----
|
----
|
||
200,000
|
315,000
|
—
|
—
|
||
----
|
----
|
----
|
----
|
||
US$
denominated bank loans
|
Floating
interest rates of US$ LIBOR plus interest margin of 0.35% to 0.44% (2006:
0.35% to 0.44%) per annum with maturity through 2010 (2006: maturity
through 2010) (a)
|
||||
—
unsecured
|
3,652,303
|
7,808,699
|
3,652,303
|
3,904,349
|
|
----
|
----
|
----
|
----
|
||
Sub-total
|
3,852,303
|
8,123,699
|
3,652,303
|
3,904,349
|
|
----
|
----
|
----
|
----
|
||
Less:
Current portion
|
(2,191,382)
|
(3,984,350)
|
(2,191,382)
|
—
|
|
-----
|
-----
|
-----
|
-----
|
||
1,660,921
|
4,139,349
|
1,460,921
|
3,904,349
|
||
==========
|
==========
|
==========
|
==========
|
The
Unicom Group
|
Unicom
|
|||
2007
|
2006
|
2007
|
2006
|
|
Balances
due:
|
||||
—
not later than one year
|
2,191,382
|
3,984,350
|
2,191,382
|
—
|
— later
than one year and not later than two years
|
—
|
2,377,609
|
—
|
2,342,610
|
— later
than two years and not later than five years
|
1,660,921
|
1,761,740
|
1,460,921
|
1,561,739
|
-----
|
-----
|
-----
|
-----
|
|
3,852,303
|
8,123,699
|
3,652,303
|
3,904,349
|
|
Less:
Portion classified as current liabilities
|
(2,191,382)
|
(3,984,350)
|
(2,191,382)
|
—
|
-----
|
-----
|
-----
|
-----
|
|
1,660,921
|
4,139,349
|
1,460,921
|
3,904,349
|
|
==========
|
==========
|
==========
|
==========
|
|
(a)
|
On
26 September 2003, Unicom signed an agreement with 13 financial
institutions for a long-term syndicated loan of US$700 million. This
facility was split into 3 tranches (i) US$200 million 3-year loan; (ii)
US$300 million 5-year loan; and (iii) US$200 million 7-year loan and
carried an interest rate of 0.28%, 0.35% and 0.44% over US dollar LIBOR
per annum for each tranche, respectively. In October 2003, Unicom and CUCL
entered into an agreement to re-lend such funds to CUCL with similar terms
to finance the network construction of CUCL. Unicom has fully repaid the
US$200 million 3-year loan in 2006.
|
|
|
In
addition, on 25 February 2004, CUCL signed an agreement with various
financial institutions for a long-term syndicated loan of US$500 million
to finance its working capital and network construction expenditure. This
facility is repayable in 3 years and carries an interest rate of 0.40%
over US dollar LIBOR per annum. In February 2007, CUCL fully repaid the
US$500 million loan.
|
|
(b)
|
The
effective interest rate of long-term bank loans denominated in RMB at 31
December 2007 was 3.60% (31 December 2006: 4.22%), and the effective
interest rates of long-term bank loans denominated in US$ at 31 December
2007 ranged from 4.95% to 5.04% (31 December 2006: from 5.72% to
5.81%).
|
|
(c)
|
The
carrying amount of long-term bank loans approximated their fair values as
at balance sheet date.
|
The
Unicom Group and Unicom
|
||
2007
|
2006
|
|
Liability
component
|
—
|
7,117,035
|
Derivative
component
|
—
|
3,207,914
|
----
|
----
|
|
Carrying
value of convertible bonds
|
—
|
10,324,949
|
----
|
-----
|
|
Number
of conversion shares at the issuance date (shares)
|
—
|
899,745,075
|
========
|
==========
|
20
August 2007 (Conversion date)
|
31
December 2006
|
|
Stock
price
|
HK$12.16
|
HK$11.40
|
Exercise
price
|
HK$8.63
|
HK$8.63
|
Volatility
|
37%
|
31%
|
Dividend
yield
|
2%
|
2%
|
Risk
free rate
|
3.89%
|
3.51-3.55%
|
Expected
life
|
1.13-1.88 years
|
1.76-2.51 years
|
Option
value
|
HK$4.20
|
HK$3.56
|
The
Unicom Group
|
||
2006
|
||
2007
|
(As
restated)
|
|
Total
minimum lease payments under finance leases:
|
||
—
not later than one year
|
1,520
|
105,101
|
— later
than one year and not later than two years
|
1,824
|
8,059
|
— later
than two years and not later than five years
|
2,264
|
2,639
|
— later
than five years
|
—
|
58
|
----
|
-----
|
|
5,608
|
115,857
|
|
Less:
Future finance charges
|
(278)
|
(5,623)
|
----
|
-----
|
|
Present
value of minimum obligations
|
5,330
|
110,234
|
=========
|
==========
|
|
Representing
obligations under finance leases:
|
||
—
current liabilities
|
1,448
|
100,004
|
=========
|
==========
|
|
—
non-current liabilities
|
3,882
|
10,230
|
==========
|
==========
|
|
The
present value of obligations under finance leases:
|
||
—
not later than one year
|
1,448
|
100,004
|
— later
than one year and not later than two years
|
1,727
|
7,666
|
— later
than two years and not later than five years
|
2,155
|
2,510
|
— later
than five years
|
—
|
54
|
----
|
-----
|
|
5,330
|
110,234
|
|
Less:
Portion classified as current liabilities
|
(1,448)
|
(100,004)
|
-----
|
-----
|
|
3,882
|
10,230
|
|
==========
|
==========
|
The
Unicom Group
|
Unicom
|
||||
2006
|
|||||
Note
|
2007
|
(As
restated)
|
2007
|
2006
|
|
Payables
to contractors and equipment suppliers
|
20,357,177
|
16,355,649
|
—
|
—
|
|
Accrued
expenses
|
2,681,173
|
2,251,746
|
26,918
|
33,292
|
|
Payables
to telecommunications product suppliers
|
1,863,724
|
1,879,017
|
—
|
—
|
|
Customer
deposits
|
2,188,244
|
1,887,661
|
—
|
—
|
|
Maintenance
expense payables
|
1,394,671
|
1,214,163
|
—
|
—
|
|
Salary
and welfare payables
|
731,062
|
608,122
|
—
|
—
|
|
Amounts
due to services providers/content providers
|
1,073,820
|
800,756
|
—
|
—
|
|
Provision
for subscriber points expenses
|
4.1(d)
|
633,608
|
555,586
|
—
|
—
|
Others
|
(a)
|
1,107,828
|
991,204
|
30,699
|
34,779
|
-----
|
-----
|
-----
|
-----
|
||
32,031,307
|
26,543,904
|
57,617
|
68,071
|
||
==========
|
==========
|
==========
|
==========
|
The
Unicom Group
|
Unicom
|
|||
2006
|
||||
2007
|
(As
restated)
|
2007
|
2006
|
|
Less
than six months
|
24,077,455
|
20,390,910
|
57,617
|
68,071
|
Six
months to one year
|
5,063,993
|
3,993,082
|
—
|
—
|
More
than one year
|
2,889,859
|
2,159,912
|
—
|
—
|
-----
|
-----
|
-----
|
-----
|
|
32,031,307
|
26,543,904
|
57,617
|
68,071
|
|
==========
|
==========
|
==========
|
==========
|
Unicom
|
||
2007
|
2006
|
|
Unlisted
equity investments, at cost
|
55,436,519
|
55,341,026
|
==========
|
==========
|
Name
|
Place
and date of incorporation and nature of legal entity
|
Percentage
of equity interests held
|
Particular
of issued share capital
|
Principal
activities and place of operation
|
|
Direct
|
Indirect
|
||||
China
Unicom Corporation Limited
|
The
PRC,
21
April 2000,
limited
liability company
|
100%
|
—
|
RMB64,721,120,000
(Note (i))
|
Telecommunications
operation in the PRC
|
Unicom
New World (BVI) Limited
|
British
Virgin Islands, 5 November 2003, limited
company
|
100%
|
—
|
1,000
shares, HK$1 each
|
Investment
holding in BVI
|
China
Unicom International Limited
|
Hong
Kong,
24
May 2000,
limited
company
|
100%
|
—
|
60,100,000
shares, HK$1 each (Note (ii))
|
Telecommunications
service in Hong Kong
|
China
Unicom USA Co.
|
USA,
24
May 2002, corporation
|
—
|
100%
|
US$500,000 (Note
(iii))
|
Telecommunications
service in USA
|
China
Unicom (Macau) Company Limited
|
Macau,
15
October 2004, limited company
|
99%
|
1%
|
MOP
60,000,000
|
Telecommunications
operation in Macau
|
Billion
Express Investments Limited
|
British
Virgin Islands, 15 August 2007, limited
company
|
100%
|
—
|
1
share, US$1 each
|
Investment
holding in BVI
|
Central
Link Investment Limited
|
Hong
Kong,
31
August 2007, limited company
|
—
|
100%
|
2
shares, HK$1 each
|
Dormant
|
Unicom
Huasheng Telecommunications Technology Company Limited
|
The
PRC,
1
July 2005,
limited
liability company
|
—
|
99.5%
|
RMB500,000,000
|
Sales
of telecom products in the PRC
|
|
Note
(i):
|
Pursuant
to a resolution by the Unicom Board on 31 July 2007, Unicom approved CUCL
to increase its share capital from approximately RMB47.43 billion to
approximately RMB64.72 billion.
|
|
Note
(ii):
|
Pursuant
to a resolution by the Unicom Board on 28 March 2007, Unicom approved
Unicom International to increase its share capital from HK$100,000 to
HK$60.1 million.
|
|
Note
(iii):
|
China
Unicom USA Co. increased its share capital from US$10,000 to US$500,000
during the year.
|
|
(i)
|
In
October 2003, Unicom and CUCL signed an agreement for a long-term
unsecured loan of US$700 million with terms similar to the long-term
syndicated bank loan to finance the network construction of CUCL (Note
17(a)). The loan was split into 3 tranches (i) US$200 million 3-year loan;
(ii) US$300 million 5-year loan and (iii) US$200 million 7-year loan and
carried an interest rate of 0.4%, 0.47% and 0.55% over US dollar LIBOR per
annum, respectively. During 2006, CUCL fully repaid the US$200 million
3-year loan.
|
|
(ii)
|
In
September 2006, Unicom and CUCL signed an agreement for a long-term
unsecured loan of US$995 million. The loan is interest bearing at 5.67%
per annum and wholly repayable in
2009.
|
|
(iii)
|
In
July 2006, Unicom and Unicom Macau signed an agreement for a long-term
loan facility of HK$60 million. As at 31 December 2007, Unicom Macau has
utilised HK$59.4 million, equivalent to approximately RMB55.6 million
(2006: approximately HK$29.3 million, equivalent to approximately RMB29.5
million). The loans are unsecured, interest-free and repayable in
September 2008.
|
|
|
In
September 2007, Unicom and Unicom Macau signed another agreement for a
long-term loan facility of MOP40 million. As at 31 December 2007, Unicom
Macau has not utilised the facility
yet.
|
|
(iv)
|
The
carrying amounts of loans to subsidiaries approximated their fair values
as at balance sheet date.
|
2006
|
|||
Note
|
2007
|
(As
restated)
|
|
GSM
Business
|
|||
Usage
fee
|
(a)
(i)
|
35,111,665
|
34,067,003
|
Monthly
fee
|
(b)
|
6,965,329
|
7,437,095
|
Interconnection
revenue
|
(c)
|
6,022,826
|
4,921,363
|
Value-added
services revenue
|
(e)
|
13,528,197
|
11,597,432
|
Other
revenue
|
1,147,287
|
1,859,345
|
|
----
|
----
|
||
Total
GSM service revenue
|
62,775,304
|
59,882,238
|
|
-----
|
-----
|
||
CDMA
Business
|
|||
Usage
fee
|
(a)
(i)
|
13,941,247
|
15,085,577
|
Monthly
fee
|
(b)
|
4,574,887
|
5,122,008
|
Interconnection
revenue
|
(c)
|
2,066,187
|
1,759,293
|
Value-added
services revenue
|
(e)
|
6,413,204
|
5,375,579
|
Other
revenue
|
734,715
|
534,018
|
|
-----
|
-----
|
||
Total
CDMA service revenue
|
27,730,240
|
27,876,475
|
|
-----
|
-----
|
||
Data and Internet
Business
|
|||
Usage
fee
|
(a)
(ii)
|
1,712,831
|
1,769,012
|
Interconnection
revenue
|
(c)
|
36,300
|
39,758
|
Leased
lines rental income
|
(d)
|
535,832
|
472,475
|
Value-added
services revenue
|
(e)
|
331,133
|
—
|
Other
revenue
|
9,757
|
39,147
|
|
-----
|
-----
|
||
Total
Data and Internet service revenue
|
2,625,853
|
2,320,392
|
|
-----
|
-----
|
||
Long Distance
Business
|
|||
Usage
fee
|
(a)
(ii)
|
352,081
|
63,340
|
Interconnection
revenue
|
(c)
|
476,803
|
389,375
|
Leased
lines rental income
|
(d)
|
670,866
|
557,270
|
Other
revenue
|
7,751
|
4,565
|
|
-----
|
-----
|
||
Total
Long Distance service revenue
|
1,507,501
|
1,014,550
|
|
-----
|
-----
|
||
Total
service revenue
|
94,638,898
|
91,093,655
|
|
Sales
of telecommunications products
|
4,900,489
|
4,253,660
|
|
-----
|
-----
|
||
Total
revenue
|
99,539,387
|
95,347,315
|
|
==========
|
==========
|
|
(a)
|
Usage
fees comprise:
|
|
(i)
|
charges
for incoming and outgoing calls made by cellular subscribers including
charges for local calls, domestic direct dial (“DDD”) and international
direct dial (“IDD”) as well as roaming fees for calls made by cellular
subscribers outside their local service areas;
and
|
|
(ii)
|
charges
for IP telephone calls, data and Internet services and fixed line long
distance calls.
|
|
(b)
|
Monthly
fees represent fixed amounts charged to cellular subscribers on a monthly
basis for maintaining their access to the related
services.
|
|
(c)
|
Interconnection
revenue represents amounts received from other operators, including Unicom
Parent, for calls from their networks to the Unicom Group’s networks. It
also includes roaming-in fees received from other operators, for calls
made by their subscribers using the Unicom Group’s cellular networks
(Notes 33.1(a) and 33.2(a)).
|
|
(d)
|
Leased
lines rental income represents rentals received for leasing of
transmission lines and IRU to business customers and other major
telecommunications service operators in China. Other major
telecommunications service operators include China Telecommunications
Corporation and its subsidiaries, China Mobile Communications Corporation
and its subsidiaries and China Network Communication Group Corporation and
its subsidiaries. These entities are collectively referred to as “Domestic
Carriers”.
|
|
(e)
|
Value-added
services revenue mainly represents revenue from the provision of services
such as short message, cool ringtone, CDMA 1X wireless data services and
secretarial services to
subscribers.
|
2006
|
|||
Note
|
2007
|
(As
restated)
|
|
Tax
refund on reinvestment in a subsidiary
|
(a)
|
2,780,682
|
—
|
Others
|
142,478
|
21,347
|
|
-----
|
-----
|
||
2,923,160
|
21,347
|
||
==========
|
==========
|
|
Note
(a):
|
During
2007, Unicom reinvested the undistributed profits into a subsidiary and
was granted a refund of a portion of the taxes previously paid by this
subsidiary as permitted under the tax law effective until 31 December
2007. This tax refund on reinvestment in a subsidiary was recorded as
“other gains”.
|
2006
|
|||
Note
|
2007
|
(As
restated)
|
|
Depreciation
on property, plant and equipment
|
6
|
22,160,333
|
22,263,719
|
Amortisation
of other assets
|
8(d)
|
516,834
|
422,849
|
-----
|
-----
|
||
Total
depreciation and amortisation
|
22,677,167
|
22,686,568
|
|
Amortisation
of direct incremental costs for activating cellular
subscribers
|
8(a)
|
1,527,459
|
1,828,784
|
Amortisation
of customer acquisition costs of contractual CDMA
subscribers
|
8(b)
|
4,000,358
|
4,375,353
|
Provision
for doubtful debts:
|
|||
—
GSM Business
|
1,257,670
|
1,133,690
|
|
— CDMA
Business
|
395,263
|
460,515
|
|
— Data
and Internet Business
|
45,916
|
106,883
|
|
— Long
Distance Business
|
28,160
|
52,827
|
|
-----
|
-----
|
||
Total
provision for doubtful debts
|
11
|
1,727,009
|
1,753,915
|
Write-down
of inventories to net realisable value
|
10
|
163,268
|
46,795
|
Cost
of inventories
|
10
|
5,031,706
|
4,914,876
|
Auditors’
remuneration
|
68,578
|
120,323
|
|
Operating
lease charges:
|
|||
—
Leased lines
|
753,859
|
686,376
|
|
— CDMA
network capacities
|
4.2(c)
|
8,381,638
|
8,256,623
|
—
Others
|
1,724,877
|
1,483,828
|
|
-----
|
-----
|
||
Total
operating lease expenses
|
10,860,374
|
10,426,827
|
|
Other
expenses:
|
|||
— Repair
and maintenance
|
3,125,440
|
2,954,132
|
|
—
Travelling, entertainment and meeting
|
878,585
|
791,046
|
|
— Power
and water charges
|
3,009,933
|
2,674,195
|
|
—
Vehicle usage
|
701,841
|
588,653
|
|
— Office
and administration expenses
|
1,214,775
|
1,131,779
|
|
==========
|
==========
|
Note
|
2007
|
2006
(As
restated)
|
|
Financial
(gains)/costs:
|
|||
—
Interest on bank loans repayable over 5 years
|
—
|
956
|
|
—
Interest on bank loans and bonds repayable within 5 years
|
367,952
|
1,170,599
|
|
—
Interest element of finance lease
|
4,735
|
33,895
|
|
—
Interest expense on convertible bonds
|
18
|
241,535
|
193,123
|
— Less:
Amounts capitalised in construction-in-progress
|
6
|
(273,551)
|
(430,814)
|
-----
|
-----
|
||
Total
interest expense
|
340,671
|
967,759
|
|
—
Exchange gain, net
|
(480,322)
|
(372,691)
|
|
—
Others
|
52,643
|
64,564
|
|
-----
|
-----
|
||
Total
financial (gains)/costs
|
(87,008)
|
659,632
|
|
==========
|
==========
|
2006
|
|||
Note
|
2007
|
(As
restated)
|
|
Employee
benefit expenses:
|
|||
—
Salaries and wages
|
5,635,509
|
5,184,865
|
|
—
Contributions to defined contribution pension schemes
|
27
|
542,894
|
478,305
|
—
Contributions to supplementary defined contribution pension
schemes
|
27
|
72,011
|
54,037
|
—
Contributions to state-sponsored fund
|
28
|
287,184
|
286,785
|
—
Monetary housing benefits
|
28
|
32,588
|
35,528
|
— Other
housing benefits
|
28
|
412,540
|
494,865
|
—
Share-based compensation
|
29
|
157,262
|
146,294
|
----
|
----
|
||
Total
|
7,139,988
|
6,680,679
|
|
==========
|
==========
|
Name
of Unicom Director
|
Notes
|
Fees
|
Salaries
and allowance
|
Bonuses
paid and payable
|
Other
benefits Note(a)
|
Contri-
butions to pension schemes
|
Total
|
Chang
Xiaobing
|
—
|
2,247
|
1,730
|
715
|
21
|
4,713
|
|
Shang
Bing
|
—
|
1,966
|
1,405
|
612
|
21
|
4,004
|
|
Tong
Jilu
|
—
|
1,592
|
1,112
|
469
|
21
|
3,194
|
|
Yang
Xiaowei
|
(f)
|
—
|
1,264
|
848
|
434
|
21
|
2,567
|
Li
Zhengmao
|
(f)
|
—
|
1,264
|
848
|
434
|
21
|
2,567
|
Li
Gang
|
(f)
|
—
|
1,264
|
848
|
410
|
21
|
2,543
|
Zhang
Junan
|
(f)
|
—
|
1,264
|
848
|
410
|
21
|
2,543
|
Miao
Jianhua
|
(b)
|
—
|
595
|
402
|
—
|
9
|
1,006
|
Lu
Jianguo
|
(f)
|
300
|
—
|
—
|
434
|
—
|
734
|
Lee
Suk Hwan
|
(c)
|
54
|
—
|
—
|
—
|
—
|
54
|
Wu
Jinglian
|
384
|
—
|
—
|
24
|
—
|
408
|
|
Shan
Weijian
|
346
|
—
|
—
|
24
|
—
|
370
|
|
Cheung
Wing Lam, Linus
|
365
|
—
|
—
|
24
|
—
|
389
|
|
Wong
Wai Ming
|
(d)
|
375
|
—
|
—
|
—
|
—
|
375
|
Li
Jianguo
|
(e)
|
—
|
659
|
—
|
229
|
12
|
900
|
----
|
----
|
----
|
----
|
----
|
-----
|
||
Total
|
1,824
|
12,115
|
8,041
|
4,219
|
168
|
26,367
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
Name
of Unicom Director
|
Notes
|
Fees
|
Salaries
and allowance
|
Bonuses
paid and payable
|
Other
benefits Note(a)
|
Contri-
butions to pension schemes
|
Total
|
Chang
Xiaobing
|
—
|
2,460
|
2,092
|
788
|
19
|
5,359
|
|
Shang
Bing
|
—
|
2,152
|
1,632
|
688
|
19
|
4,491
|
|
Tong
Jilu
|
—
|
1,742
|
1,291
|
534
|
19
|
3,586
|
|
Li
Jianguo
|
(e)
|
—
|
1,038
|
738
|
399
|
15
|
2,190
|
Yang
Xiaowei
|
(f)
|
—
|
1,038
|
738
|
397
|
15
|
2,188
|
Li
Zhengmao
|
(f)
|
—
|
1,038
|
738
|
397
|
15
|
2,188
|
Li
Gang
|
(f)
|
—
|
1,038
|
738
|
338
|
15
|
2,129
|
Zhang
Junan
|
(f)
|
—
|
1,038
|
738
|
338
|
15
|
2,129
|
Lu
Jianguo
|
(f)
|
247
|
—
|
—
|
399
|
—
|
646
|
Wu
Jinglian
|
420
|
—
|
—
|
100
|
—
|
520
|
|
Shan
Weijian
|
379
|
—
|
—
|
100
|
—
|
479
|
|
Cheung
Wing Lam, Linus
|
400
|
—
|
—
|
84
|
—
|
484
|
|
Wong
Wai Ming
|
(d)
|
390
|
—
|
—
|
—
|
—
|
390
|
Li
Qiuhong
|
(g)
|
—
|
346
|
235
|
57
|
3
|
641
|
Lo
Wing Yan, William
|
(g)
|
—
|
608
|
—
|
(248)
|
3
|
363
|
Ye
Fengping
|
(g)
|
—
|
346
|
—
|
63
|
3
|
412
|
Liu
Yunjie
|
(g)
|
81
|
—
|
—
|
39
|
—
|
120
|
----
|
----
|
----
|
----
|
----
|
----
|
||
Total
|
1,917
|
12,844
|
8,940
|
4,473
|
141
|
28,315
|
|
========
|
========
|
========
|
========
|
=========
|
========
|
|
Notes:
|
|
(a)
|
Other
benefits represent the share options granted to the Unicom Directors under
the Unicom Share Option Schemes. In 2007, Unicom has changed the
presentation basis of the disclosure of other benefits by using
share-based compensation costs recognised for the relevant year, which is
consistent with the Unicom Group’s accounting policies as set out in Note
2.16(c). In previous years, other benefits represented the difference
between the market price of the options and the exercise price of the
options exercised during the year. Accordingly, the comparative
information of other benefits for the year ended 31 December 2006 has been
revised by Unicom to conform with the current year’s
presentation.
|
|
(b)
|
Mr.
Miao Jianhua was appointed as executive director on 12 July
2007.
|
|
(c)
|
Mr.
Lee Suk Hwan was appointed as non-executive director on 23 October
2007.
|
|
(d)
|
Mr.
Wong Wai Ming was appointed as independent non-executive director on 19
January 2006.
|
|
(e)
|
Ms.
Li Jianguo was appointed as executive director on 1 April 2006 and
resigned on 9 July 2007.
|
|
(f)
|
Mr.
Yang Xiaowei, Mr. Li Zhengmao, Mr. Li Gang and Mr. Zhang Junan were
appointed as executive directors on 1 April 2006. Mr. Lu Jianguo was
appointed as non-executive director on 1 April
2006.
|
|
(g)
|
Mr.
Li Qiuhong, Mr. Lo Wing Yan, William, and Mr. Ye Fengping resigned as
executive directors on 1 April 2006. Mr. Liu Yunjie resigned as
non-executive director on 1 April
2006.
|
2007
|
2006
|
|
Salaries
and allowances
|
—
|
1,038
|
Bonuses
paid and payable
|
—
|
706
|
Other
benefits (Note 26.1(a))
|
—
|
232
|
Contributions
to pension schemes
|
—
|
9
|
---
|
---
|
|
—
|
1,985
|
|
=======
|
=======
|
2006
|
||
2007
|
(As
restated)
|
|
Contributions
to defined contribution pension schemes
|
542,894
|
478,305
|
Contributions
to supplementary defined contribution pension schemes
|
72,011
|
54,037
|
=========
|
=========
|
2006
|
||
2007
|
(As
restated)
|
|
Contributions
to state-sponsored fund
|
287,184
|
286,785
|
Special
monetary housing benefits
|
32,588
|
35,528
|
Other
housing benefits
|
412,540
|
494,865
|
----
|
----
|
|
732,312
|
817,178
|
|
========
|
========
|
Unicom
|
||||
2007
|
2006
|
|||
Average
exercise price in HK$ per share
|
Number
of share options involved
|
Average
exercise price in HK$ per share
|
Number
of share options involved
|
|
Balance,
beginning of year
|
6.95
|
314,256,000
|
6.51
|
257,602,000
|
Granted
|
—
|
—
|
6.35
|
167,466,000
|
Forfeited
|
8.43
|
(3,420,800)
|
6.92
|
(4,088,000)
|
Exercised
|
6.03
|
(53,555,600)
|
4.95
|
(106,724,000)
|
----
|
------
|
----
|
------
|
|
Balance,
end of year
|
7.12
|
257,279,600
|
6.95
|
314,256,000
|
========
|
===========
|
========
|
===========
|
Date
of Unicom Options grant
|
The
period during which a Unicom Option may be exercised
|
The
price per Unicom Share to be paid on exercise of Unicom
Options
|
Number
of Unicom Options outstanding as at 31
December 2007
|
Number
of Unicom Options outstanding as at 31
December 2006
|
Unicom
Options granted under the Pre-Global Offering Share Option
Scheme:
|
||||
22
June 2000 (a)
|
22
June 2002 to
21
June 2010
|
HK$15.42
|
21,126,800
|
24,178,000
|
Unicom
Options granted under the Share Option Scheme:
|
||||
30
June 2001 (b)
|
30
June 2001 to
22
June 2010
|
HK$15.42
|
5,608,000
|
6,292,000
|
10
July 2002 (c)
|
10
July 2003 to
9
July 2008
|
HK$6.18
|
3,308,000
|
11,540,400
|
21
May 2003 (d)
|
21
May 2004 to
20
May 2009
|
HK$4.30
|
11,092,800
|
25,611,600
|
20
July 2004 (e)
|
20
July 2005 to
19
July 2010
|
HK$5.92
|
50,924,000
|
80,224,000
|
21
December 2004 (f)
|
21
December 2005 to
20
December 2010
|
HK$6.20
|
654,000
|
654,000
|
15
February 2006 (g)
|
15
February 2008 to
14
February 2012
|
HK$6.35
|
164,566,000
|
165,756,000
|
-----
|
-----
|
|||
257,279,600
|
314,256,000
|
|||
==========
|
==========
|
|
(a)
|
Pursuant
to the resolution passed by the Unicom Board in June 2000, a total of the
27,116,600 Unicom Options were granted on 22 June 2000 to the senior
management, including directors, and certain other employees (which
represent, on their full exercise, 27,116,600 Unicom Shares) under the
fixed award Pre-Global Offering Share Option Scheme adopted by Unicom on 1
June 2000 in the following terms:
|
|
(i)
|
the
exercise price is equivalent to the share issue price of the Global
Offering of HK$15.42 per Unicom Share (excluding the brokerage fee and
Hong Kong Stock Exchange transaction levy);
and
|
|
(ii)
|
the
Unicom Options are vested and exercisable after 2 years from the grant
date and expire 10 years from the date of
grant.
|
|
No
further Unicom Option can be granted under the Pre-Global Offering Option
Scheme.
|
|
The
Pre-Global Offering Option Scheme had been amended in conjunction with the
amended terms of the Share Option Scheme on 13 May 2002 and 11 May 2007,
respectively. Apart from the above two terms, the principal terms are
substantially the same as the amended Share Option Scheme in all material
aspects.
|
|
(b)
|
On
1 June 2000, Unicom adopted the Share Option Scheme pursuant to which the
Unicom Directors may, at their discretion, invite employees, including
executive directors, of Unicom or any of its subsidiaries, to take up
share options to subscribe for shares up to a maximum aggregate number of
shares (including those that could be subscribed for under the Pre-Global
Offering Share Option Scheme as described above) equal to 10% of the total
issued share capital of Unicom. Pursuant to the Share Option Scheme, the
nominal consideration payable by a participant for the grant of Unicom
Options will be HK$1.00. The exercise price payable by a participant upon
the exercise of a Unicom Option will be determined by the Unicom Directors
at their discretion at the date of grant, except that such price may not
be set below a minimum price which is the higher
of:
|
|
(i)
|
the
nominal value of a share; and
|
|
(ii)
|
80%
of the average of the closing prices of Unicom Shares on the Hong Kong
Stock Exchange on the five trading days immediately preceding the date of
grant of the Unicom Options on which there were dealings in the Unicom
Shares on the Hong Kong Stock
Exchange.
|
|
The
period during which an option may be exercised will be determined by the
Unicom Directors at their discretion, except that no Unicom Option may be
exercised later than 10 years from 22 June 2000. According to a resolution
of the Unicom Board in June 2001, Unicom has granted 6,724,000 Unicom
Options under the Share Option Scheme which represent, on their full
exercise, 6,724,000 Unicom Shares to certain employees of the Unicom Group
under the following terms:
|
|
(i)
|
the
price of a Unicom Share payable by a participant upon the exercise of a
Unicom Option shall be HK$15.42 (excluding the brokerage fee and Hong Kong
Stock Exchange transaction levy);
and
|
|
(ii)
|
the
Unicom Options are vested on the date of grant and exercisable from the
date of grant to 22 June 2010.
|
|
The
terms of the Share Option Scheme were amended on 13 May 2002 to comply
with the requirements set out in the Chapter 17 of the Listing Rules which
came into effect on 1 September 2001 with the following major
amendments:
|
|
(i)
|
Unicom
Options may be granted to employees including executive directors of the
Unicom Group or any of the non-executive
directors;
|
|
(ii)
|
the
option period commences on a day after the date on which a Unicom Option
is offered but not later than 10 years from the offer date;
and
|
|
(iii)
|
minimum
subscription price shall not be less than the higher
of:
|
|
•
|
the
nominal value of the Unicom Shares;
|
|
•
|
the
closing price of the Unicom Shares of the stock exchange as stated in the
stock exchange’s quotation sheets on the offer date in respect of the
Unicom Options; and
|
|
•
|
the
average closing price of the Unicom Shares on the stock exchange’s
quotation sheets for the five trading days immediately preceding the offer
date.
|
|
On
11 May 2007, Unicom further amended the Share Option Scheme with major
amendments related to the exercise of Unicom Options upon cessation of
employment. These amendments are made in order to reduce the
administrative burden on Unicom to monitor outstanding Unicom Options for
grantees whose employment has been
terminated.
|
|
(c)
|
Pursuant
to the resolution passed by the Unicom Board and the Independent
Non-Executive Directors of Unicom dated 10 July 2002, a total of
36,028,000 Unicom Options were granted to eligible individuals including
directors, independent non-executive directors, and the non-executive
directors of Unicom under the amended Share Option Scheme under the
following terms:
|
|
(i)
|
aggregate
of 2,802,000 Unicom Options were granted to the executive directors,
non-executive directors and independent non-executive directors of
Unicom;
|
|
(ii)
|
the
exercise price per Unicom Option is HK$6.18;
and
|
|
(iii)
|
the
vesting dates and exercisable periods of the Unicom Options are as
follows:
|
Vesting
dates
|
Exercisable
periods
|
Portions
|
10
July 2003
|
10
July 2003 to 9 July 2008
|
40%
|
10
July 2004
|
10
July 2004 to 9 July 2008
|
30%
|
10
July 2005
|
10
July 2005 to 9 July 2008
|
30%
|
|
(d)
|
Pursuant
to the resolution passed by the Unicom Board and the Independent
Non-Executive Directors of Unicom dated 21 May 2003 and 30 May 2003, a
total of 105,590,000 Unicom Options and 366,000 Unicom Options were
granted to eligible individuals (including directors, independent
non-executive directors, non-executive directors, middle to senior
management of the Unicom Group) respectively, under the amended Share
Option Scheme in the following
terms:
|
|
(i)
|
an
aggregate of 2,772,000 Unicom Options were granted to the executive
directors, non-executive directors and independent non-executive directors
of Unicom;
|
|
(ii)
|
the
exercise prices per Unicom Option are HK$4.30 and HK$4.66, respectively;
and
|
|
(iii)
|
the
vesting dates and exercisable periods of the Unicom Options are as
follows:
|
Vesting
dates
|
Exercisable
periods
|
Portions
|
21
May 2004
|
21
May 2004 to 20 May 2009
|
40%
|
21
May 2005
|
21
May 2005 to 20 May 2009
|
30%
|
21
May 2006
|
21
May 2006 to 20 May 2009
|
30%
|
|
(e)
|
Pursuant
to the resolution passed by the Unicom Board and the Independent
Non-Executive Directors of Unicom dated 20 July 2004, a total of
112,668,000 Unicom Options were granted to eligible individuals (including
directors, independent non-executive directors, non-executive directors,
middle to senior management of the Unicom Group), under the amended Share
Option Scheme in the following
terms:
|
|
(i)
|
an
aggregate of 3,366,000 Unicom Options were granted to the executive
directors, non-executive directors and independent non-executive directors
of Unicom;
|
|
(ii)
|
the
exercise price per Unicom Option is HK$5.92;
and
|
|
(iii)
|
the
vesting dates and exercisable periods of the Unicom Options are as
follows:
|
Vesting
dates
|
Exercisable
periods
|
Portions
|
20
July 2005
|
20
July 2005 to 19 July 2010
|
40%
|
20
July 2006
|
20
July 2006 to 19 July 2010
|
30%
|
20
July 2007
|
20
July 2007 to 19 July 2010
|
30%
|
|
(f)
|
Pursuant
to the resolution passed by the Unicom Board and the Independent
Non-Executive Directors of Unicom dated 21 December 2004, a total of
654,000 Unicom Options were granted to the executive directors of Unicom,
under the amended Share Option Scheme in the following
terms:
|
|
(i)
|
the
exercise price per Unicom Option is HK$6.20;
and
|
|
(ii)
|
the
vesting dates and exercisable periods of the Unicom Options are as
follows:
|
Vesting
dates
|
Exercisable
periods
|
Portions
|
21
December 2005
|
21
December 2005 to 20 December 2010
|
40%
|
21
December 2006
|
21
December 2006 to 20 December 2010
|
30%
|
21
December 2007
|
21
December 2007 to 20 December 2010
|
30%
|
|
(g)
|
Pursuant
to the resolution passed by the Unicom Board and the Independent
Non-Executive Directors of Unicom dated 15 February 2006, a total of
167,466,000 Unicom Options were granted to eligible individuals (including
directors and middle to senior management of the Unicom Group) under the
amended Share Option Scheme in the following
terms:
|
|
(i)
|
this
grant comprises basic and conditional portions. The criterion for the
exercise of the conditional portion of Unicom Options are based on the
achievement of revenue and profit targets of the 2006 budget of the Unicom
Group and respective provincial branches. Under this scheme, out of the
total of 167,466,000 Unicom Options granted, 37,762,000 Unicom Options
were granted with performance
conditions;
|
|
(ii)
|
an
aggregate of 2,840,000 Unicom Options were granted to the then executive
directors of Unicom;
|
|
(iii)
|
the
exercise price per Unicom Option is HK$6.35;
and
|
|
(iv)
|
the
vesting dates and exercisable periods of the Unicom Options are as
follows:
|
Vesting
dates
|
Exercisable
periods
|
Portions
|
15
February 2008
|
15
February 2008 to 14 February 2012
|
50%
|
15
February 2009
|
15
February 2009 to 14 February 2012
|
50%
|
Grant
date
|
Exercise
price
|
Weighted
average closing price per Unicom Share at respective days immediately
before days of exercise of Unicom Options
|
Proceeds
received
|
Number
of Unicom Shares
involved
|
HK$
|
HK$
|
HK$
|
||
22
June 2000
|
15.42
|
17.56
|
34,657,992
|
2,247,600
|
30
June 2001
|
15.42
|
17.62
|
8,450,160
|
548,000
|
10
July 2002
|
6.18
|
12.96
|
49,793,496
|
8,057,200
|
21
May 2003
|
4.30
|
12.95
|
60,057,240
|
13,966,800
|
20
July 2004
|
5.92
|
13.77
|
170,117,120
|
28,736,000
|
-----
|
-----
|
|||
323,076,008
|
53,555,600
|
|||
===========
|
==========
|
Grant
date
|
Exercise
price
|
Weighted
average closing price per Unicom Share at respective days immediately
before days of exercise of Unicom Options
|
Proceeds
received
|
Number
of Unicom Shares involved
|
HK$
|
HK$
|
HK$
|
||
10
July 2002
|
6.18
|
8.82
|
81,180,480
|
13,136,000
|
21
May 2003
|
4.30
|
8.35
|
282,742,200
|
65,754,000
|
30
May 2003
|
4.66
|
8.51
|
986,860
|
212,000
|
20
July 2004
|
5.92
|
8.80
|
163,522,240
|
27,622,000
|
-----
|
-----
|
|||
528,431,780
|
106,724,000
|
|||
===========
|
===========
|
2007
|
2006 (As
restated)
|
|||||
Profit
attributable to equity holders
|
Unicom
Shares In thousands
|
Per Unicom Share amount
|
Profit
attributable to equity holders
|
Unicom
Shares In thousands
|
Per Unicom Share
Amount
|
|
RMB’000
|
RMB
|
RMB’000
|
RMB
|
|||
Basic
earnings
|
9,299,784
|
13,036,566
|
0.713
|
3,800,920
|
12,599,018
|
0.302
|
=========
|
=========
|
|||||
Effect
of conversion of Unicom Options
|
—
|
124,523
|
—
|
50,288
|
||
-----
|
-----
|
-----
|
-----
|
|||
Diluted
earnings
|
9,299,784
|
13,161,089
|
0.707
|
3,800,920
|
12,649,306
|
0.300
|
==========
|
==========
|
=========
|
==========
|
==========
|
=========
|
2006
|
||
2007
|
(As
restated)
|
|
Profit
attributable to equity holders of Unicom
|
9,299,784
|
3,800,920
|
Adjustments
for:
|
||
Realised/unrealised
loss on changes in fair value of derivative component of Convertible
Bonds
|
568,860
|
2,396,592
|
Other
gains from tax refund on reinvestment in a subsidiary
|
(2,780,682)
|
—
|
-----
|
-----
|
|
Adjusted
profit attributable to equity holders excluding the
realised/ unrealised loss on changes in fair value of
derivative component of Convertible Bonds and other gains from tax refund
on reinvestment in a subsidiary
|
7,087,962
|
6,197,512
|
==========
|
===========
|
|
Adjusted
basic earnings per Unicom Share excluding the realised/unrealised loss on
changes in fair value of derivative component of Convertible Bonds and
other gains from tax refund on reinvestment in a subsidiary
(RMB)
|
0.544
|
0.492
|
===========
|
==========
|
|
Adjusted
diluted earnings per Unicom Share excluding the realised/unrealised loss
on changes in fair value of derivative component of Convertible Bonds and
other gains from tax refund on reinvestment in a subsidiary
(RMB)
|
0.539
|
0.490
|
===========
|
==========
|
2007
|
2006
|
|
Proposed
final dividend of RMB0.20 (2006: RMB0.18) per Unicom Share
|
2,726,858
|
2,282,578
|
==========
|
==========
|
The
Unicom Group
|
||||||
2007
|
2006
|
|||||
Original
currency
|
Exchange
rate
|
RMB
equivalent
|
Original
currency
|
Exchange
rate
|
RMB
equivalent
|
|
’000
|
’000
|
’000
|
’000
|
|||
Cash
and cash equivalents:
|
||||||
—
denominated in HK dollars
|
394,439
|
0.94
|
369,345
|
651,551
|
1.00
|
654,613
|
—
denominated in US dollars
|
41,179
|
7.30
|
300,797
|
478,937
|
7.81
|
3,735,659
|
—
denominated in MOP
|
64
|
0.91
|
58
|
—
|
0.98
|
—
|
—
denominated in EURO
|
2,603
|
10.67
|
27,767
|
1,700
|
10.27
|
17,457
|
-----
|
-----
|
|||||
Sub-total
|
697,967
|
4,407,729
|
||||
-----
|
-----
|
Short-term
bank deposits:
|
||||||
—
denominated in HK dollars
|
70,884
|
0.94
|
66,375
|
13,000
|
1.00
|
13,060
|
—
denominated in US dollars
|
77,933
|
7.30
|
569,270
|
22,333
|
7.81
|
174,389
|
-----
|
-----
|
|||||
Sub-total
|
635,645
|
187,449
|
||||
-----
|
-----
|
|||||
Total
|
1,333,612
|
4,595,178
|
||||
==========
|
==========
|
Unicom
|
||||||
2007
|
2006
|
|||||
Original
currency
|
Exchange
rate
|
RMB
equivalent
|
Original
currency
|
Exchange
rate
|
RMB
equivalent
|
|
’000
|
’000
|
’000
|
’000
|
|||
Cash
and cash equivalents:
|
||||||
—
denominated in HK dollars
|
354,867
|
0.94
|
332,290
|
624,847
|
1.00
|
627,765
|
—
denominated in US dollars
|
22,174
|
7.30
|
161,970
|
37,424
|
7.81
|
292,236
|
-----
|
-----
|
|||||
Sub-total
|
494,260
|
920,001
|
||||
-----
|
-----
|
|||||
Short-term
bank deposits:
|
||||||
—
denominated in HK dollars
|
70,884
|
0.94
|
66,375
|
13,000
|
1.00
|
13,060
|
—
denominated in US dollars
|
77,933
|
7.30
|
569,270
|
22,333
|
7.81
|
174,389
|
-----
|
-----
|
|||||
Sub-total
|
635,645
|
187,449
|
||||
-----
|
-----
|
|||||
Total
|
1,129,905
|
1,107,450
|
||||
==========
|
==========
|
Name
of related parties
|
Nature
of relationship with Unicom
|
China
United Telecommunications Corporation (“Unicom Parent”)
|
Ultimate
holding company
|
Unicom
NewSpace Corporation Limited (“Unicom
NewSpace”)
|
A
subsidiary of Unicom Parent
|
Unicom
Xingye Science and Technology Trade Company Limited
(”Unicom
Xingye”)
|
A
subsidiary of Unicom Parent
|
Unicom
Import and Export Company Limited (“Unicom I/E
Co”)
|
A
subsidiary of Unicom Parent
|
Unicom
New Horizon Mobile Telecommunications Company Limited (“Unicom New
Horizon”)
|
A
subsidiary of Unicom Parent
|
Unicom
New Guoxin Telecommunications Corporation Limited (“New
Guoxin”)
|
A
subsidiary of Unicom Parent
|
China
Information Technology Designing & Consulting Institute
(“CITDCI”)
|
A
subsidiary of Unicom Parent
|
UNISK
(Beijing) Information Technology Corporation Limited
(“UNISK”)
|
A
joint venture company of Unicom
Parent
|
2006
|
|||
Note
|
2007
|
(As
restated)
|
|
Transactions
with Unicom Parent and its subsidiaries:
|
|||
Interconnection
revenues
|
(ii),
(iv)
|
37,257
|
60,744
|
Interconnection
charges
|
(iii),
(iv)
|
6,329
|
15,701
|
Rental
income for premises and facilities
|
(i),
(v)
|
17,017
|
16,257
|
Charge
for operator-based subscriber value-added services
by
New Guoxin
|
(i),
(vi)
|
378,462
|
374,035
|
Charge
for customer services by New Guoxin
|
(i),
(vii)
|
860,653
|
681,162
|
Agency
fee incurred for subscriber development services
by
New Guoxin
|
(i),
(viii)
|
115,610
|
58,982
|
CDMA
network capacity lease rental
|
(i),
(ix)
|
8,381,638
|
8,256,623
|
Constructed
capacity related cost of CDMA network
|
(i),
(x)
|
215,080
|
188,656
|
Charges
for cellular subscriber value-added service by UNISK and Unicom
NewSpace
|
(i),
(xi)
|
54,491
|
45,618
|
Rental
charges for premises, equipment and facilities
|
(i),
(xii)
|
30,958
|
27,931
|
Charges
for the international gateway services
|
(i),
(xiii)
|
15,213
|
17,143
|
Purchase
of telecom cards
|
(i),
(xiv)
|
697,285
|
712,098
|
Agency
fee incurred for procurement of telecommunications
equipment
|
(i),
(xv)
|
18,073
|
13,166
|
Charge
for engineering design and technical services by CITDCI
|
(i),
(xvi)
|
58,003
|
—
|
=========
|
=========
|
|
(i)
|
On
26 October 2006, CUCL entered into the new agreements “2006 Comprehensive
Services Agreement” and “2006 CDMA Lease Agreement” with Unicom Parent and
Unicom New Horizon to continue to carry out the related party
transactions. The new agreements have been approved by the minority
shareholders of Unicom on 1 December 2006, and become effective from 1
January 2007. Upon completion of Business Combination, the 2006
Comprehensive Services Agreement and 2006 CDMA Lease Agreement were
amended where necessary so that the service area of CUCL is extended to
include Guizhou province. In addition, the rights and obligations of
Guizhou branch of Unicom Parent under the framework agreement entered with
Guizhou branch of Unicom Huasheng for the procurement of CDMA mobile
handsets on 19 December 2006 were assigned to and assumed by
CUCL.
|
|
|
The
purchase of Guizhou Business has been accounted for using merger
accounting in accordance with AG 5. Accordingly, the transactions between
Guizhou branch of Unicom Parent and the Unicom Group were eliminated and
not disclosed as related party transactions in the consolidated financial
statements.
|
|
(ii)
|
Interconnection
revenues represent the amounts received or receivable from Unicom Parent
for calls from its networks to the Unicom Group’s
networks.
|
|
(iii)
|
Interconnection
charges are for calls made from the Unicom Group’s networks to Unicom
Parent’s networks.
|
|
(iv)
|
Interconnection
settlement between Unicom Parent’s network and the Unicom Group’s
network is based on standards established from time to time by the
MII.
|
|
(v)
|
Pursuant
to 2006 Comprehensive Services Agreement, the Unicom Group agreed to
provide premises to New Guoxin. The rental amount is based on the lower of
depreciation costs and market price for similar premises in that
locality.
|
|
(vi)
|
Pursuant
to 2006 Comprehensive Services Agreement, the Unicom Group shall retain
40% of the actually received revenue generated from the value-added
services provided by New Guoxin to the Unicom Group’s subscribers and
allocate 60% of such revenue to New Guoxin. The settlement should be made
among branches of the Unicom Group and New Guoxin
respectively.
|
|
(vii)
|
Pursuant
to 2006 Comprehensive Services Agreement, New Guoxin provides business
inquiries, tariff inquiries, account maintenance, complaints handling, and
customer interview and subscriber retention services to the Unicom Group’s
customers. The service fee payable by the Unicom Group shall be calculated
on the basis of the customer service costs plus a profit margin, which
shall not exceed 10%. The customer service costs were determined by the
actual cost per operator seat and the number of effective operator seats.
In addition, Guangdong has been added as one of the economically developed
metropolises in determining the cost per operator
seat.
|
|
(viii)
|
Pursuant
to 2006 Comprehensive Services Agreement, New Guoxin provides subscriber
development services to the Unicom Group through telephone or other
channels by utilising its own network, equipment and operators. The agency
fee chargeable to the Unicom Group does not exceed the average of agency
fees chargeable by any independent third party agent in the same
region.
|
|
(ix)
|
Pursuant
to 2006 CDMA Lease Agreement entered among CUCL, Unicom Parent and Unicom
New Horizon, Unicom New Horizon agreed to lease the capacity of CDMA
network to CUCL. Details please refer to Note
4.2(c).
|
|
(x)
|
Pursuant
to 2006 CDMA Lease Agreement, the constructed capacity related costs in
connection with the CDMA network capacity used by the Unicom Group,
including the rentals for the exchange centers and the base stations,
water and electricity charges, heating charges and fuel charges for the
relevant equipment etc., as well as the maintenance costs of a non-capital
nature, are charged to the Unicom Group. The proportion of the constructed
capacity related costs to be borne by the Unicom Group shall be calculated
on a monthly basis by reference to the actual number of cumulative CDMA
subscribers of the Unicom Group at the end of the month prior to the
occurrence of the costs divided by 90%, as a percentage of the total
capacity available on the CDMA
network.
|
|
(xi)
|
Pursuant
to 2006 Comprehensive Services Agreement, UNISK and Unicom NewSpace agreed
to provide the cellular subscribers of CUCL various types of value-added
services through its cellular communication network and data platform. The
Unicom Group should retain a portion of the revenue generated from the
value-added service provided to the Unicom Group’s subscribers (and
actually received by the Unicom Group) and allocate a portion of such fees
to UNISK and Unicom NewSpace for settlement, on the condition that such
proportion allocated to UNISK and Unicom NewSpace should not exceed the
average proportion for independent value-added telecommunications content
providers who provide value-added telecommunications content to the Unicom
Group in the same region. The percentage of revenue to be allocated to
UNISK and Unicom NewSpace by the Unicom Group varies depending on the
types of value-added service provided to the Unicom
Group.
|
|
(xii)
|
Pursuant
to 2006 Comprehensive Services Agreement, CUCL and Unicom Parent agreed to
mutually lease premises, equipment and facilities from each other. Rentals
are based on the lower of depreciation costs and market
rates.
|
|
(xiii)
|
Pursuant
to 2006 Comprehensive Services Agreement, charges for international
gateway services represent the amounts paid or payable to Unicom Parent
for international gateway services provided for the Unicom Group’s
international long distance networks. The charge for this service is based
on the cost of operation and maintenance of the international gateway
facilities incurred by Unicom Parent, including depreciation, together
with a margin of 10% over cost.
|
|
(xiv)
|
Pursuant
to 2006 Comprehensive Services Agreement, the Unicom Group agreed to
purchase telephone cards from Unicom Parent (to be imported by Unicom
Xingye) at cost plus a margin to be agreed from time to time, but not to
exceed 20%, and subject to appropriate volume discounts. Prices and
volumes are subject to review by the parties on an annual
basis.
|
|
(xv)
|
Pursuant
to 2006 Comprehensive Services Agreement, Unicom I/E Co. agreed to provide
equipment procurement services to the Unicom Group. Unicom I/E Co. charges
the Unicom Group 0.55% (for contract up to an amount of US$30 million
(inclusive)) and 0.35% (for contract with an amount of more than US$30
million) of the value of imported equipment, and 0.25% (for contract up to
an amount of RMB200 million (inclusive)) and 0.l5% (for contract with an
amount of more than RMB200 million) of the value of domestic equipment for
such services.
|
|
(xvi)
|
Pursuant
to 2006 Comprehensive Services Agreement, CITDCI agreed to provide
engineering design and technical services to the Unicom Group based on its
demands and requirements. The service fee standards for the engineering
design and technical services are determined based on standards
promulgated by the relevant government authorities. In addition, such
prices should not be higher than those adopted by an independent third
party providing similar services in the same
industry.
|
|
(xvii)
|
Unicom
Parent is the registered proprietor of the “Unicom” trademark in English
and the trademark bearing the “Unicom” logo, which are registered at the
PRC State Trademark Bureau. Pursuant to an exclusive PRC trademark licence
agreement entered into between Unicom Parent and CUCL, CUCL and its
affiliates are granted the right to use these trademarks on a royalty free
basis for an initial period of 5 years, renewable at CUCL’s
option.
|
The
Unicom Group
|
||
2006
|
||
2007
|
(As
restated)
|
|
Due
to Unicom Parent, beginning of year
|
1,088,297
|
779,414
|
Interconnection
revenues
|
(37,257)
|
(60,744)
|
Interconnection
charges
|
6,329
|
15,701
|
Revenue
for leasing of premises and facilities
|
(17,017)
|
(16,257)
|
Rental
charges for premises, equipment and facilities
|
30,958
|
27,931
|
Charges
for the international gateway services
|
15,213
|
17,143
|
Transfer
of profit of Guizhou Business to Unicom Parent
under
terms of the Business Combination
|
101,020
|
—
|
Net
(payment)/receipt during the year
|
(366,844)
|
325,109
|
----
|
----
|
|
Due
to Unicom Parent, end of year
|
820,699
|
1,088,297
|
========
|
=========
|
The
Unicom Group
|
|||
Note
|
2007
|
2006
(As
restated)
|
|
Interconnection
revenue
|
(i)
|
6,985,782
|
5,557,246
|
Interconnection
charges
|
(i)
|
10,394,740
|
9,237,341
|
Leased
line revenue
|
(ii)
|
34,756
|
54,912
|
Leased
line charges
|
(ii)
|
403,863
|
329,983
|
=========
|
=========
|
|
(i)
|
The
interconnection revenue and charges mainly represent the amounts due from
or to Domestic Carriers for telephone calls made between the Unicom
Group’s networks and the network of Domestic Carriers. The interconnection
settlements are calculated in accordance with interconnection agreements
reached between the branches of the Unicom Group and Domestic Carriers on
a provincial basis. The terms of these agreements are set in accordance
with the standard settlement arrangement stipulated by the
MII.
|
|
(ii)
|
Leased
line charges are paid or payable to Domestic Carriers by the Unicom Group
for the provision of transmission lines. At the same time, the Unicom
Group leases transmission lines to Domestic Carriers in return for leased
line rental income. The charges are calculated at a fixed charge per line,
depending on the number of lines being used by the Unicom Group and
Domestic Carriers.
|
The
Unicom Group
|
||
2007
|
2006
(As
restated)
|
|
Amounts
due from Domestic Carriers
|
||
—
Receivables for interconnection revenue and leased line
revenue
|
170,231
|
158,894
|
—
Less: Provision for doubtful debts
|
(20,495)
|
(20,373)
|
----
|
-----
|
|
149,736
|
138,521
|
|
=========
|
==========
|
|
Amounts
due to Domestic Carriers
|
||
—
Payables for interconnection charges and leased lines
charges
|
600,283
|
854,885
|
=========
|
==========
|
The
Unicom Group
|
||
2007
|
2006
(As
restated)
|
|
Purchase
of CDMA handsets
|
1,151,048
|
1,144,181
|
Construction
and installation fee
|
220,698
|
220,086
|
Purchase
of equipment
|
1,136,038
|
1,660,562
|
Line
leasing revenue
|
178,502
|
166,559
|
Finance
income/costs, include:
|
||
—
Interest income
|
172,415
|
226,788
|
—
Interest expense
|
10,593
|
840,698
|
Short-term
bank loan received
|
—
|
2,070,000
|
Long-term
bank loan received
|
—
|
1,315,000
|
Short-term
bank loan repaid
|
—
|
7,372,661
|
Long-term
bank loan repaid
|
115,000
|
8,853,008
|
=========
|
=========
|
The
Unicom Group
|
||
2007
|
2006 (As
restated)
|
|
Current
assets
|
||
Prepayment
and other current assets
|
53,418
|
288,930
|
Short-term
bank deposits
|
527,885
|
21,432
|
Cash
and cash equivalents
|
6,525,506
|
12,055,646
|
Non-current
liabilities
|
||
Long-term
bank loans
|
200,000
|
235,000
|
Current
liabilities
|
||
Payables
and accrued liabilities
|
667,749
|
666,726
|
Current
portion of long-term bank loans
|
—
|
80,000
|
==========
|
==========
|
The
Unicom Group
|
||||
2007
|
2006
(As
restated)
|
|||
Land
and buildings
|
Equipment
|
Total
|
Total
|
|
Authorised
and contracted for
|
837,103
|
2,415,361
|
3,252,464
|
2,729,602
|
Authorised
but not contracted for
|
611,294
|
1,768,886
|
2,380,180
|
943,280
|
----
|
-----
|
-----
|
-----
|
|
Total
|
1,448,397
|
4,184,247
|
5,632,644
|
3,672,882
|
==========
|
==========
|
==========
|
==========
|
Unicom
|
||
2007
|
2006
|
|
Authorised
and contracted for
|
—
|
—
|
Authorised
but not contracted for
|
18,592
|
—
|
-----
|
-----
|
|
18,592
|
—
|
|
==========
|
==========
|
The
Unicom Group
|
|||||
2007
|
2006
(As
restated)
|
||||
Land
and buildings
|
Equipment
|
CDMA
network capacity (a)
|
Total
|
Total
|
|
Leases
expiring:
|
|||||
—
not later than one year
|
942,544
|
31,284
|
7,543,474
|
8,517,302
|
8,503,568
|
— later
than one year and not later than
five years
|
2,071,864
|
80,979
|
—
|
2,152,843
|
1,976,475
|
— later
than five years
|
1,690,041
|
50,303
|
—
|
1,740,344
|
1,107,791
|
-----
|
-----
|
-----
|
-----
|
-----
|
|
Total
|
4,704,449
|
162,566
|
7,543,474
|
12,410,489
|
11,587,834
|
==========
|
==========
|
==========
|
==========
|
==========
|
|
(a)
|
In
relation to the above CDMA network capacity commitment, it is estimated
based on the Minimum Lease Fee pursuant to 2006 CDMA Lease Agreement (see
Note 4.2(c) for details).
|
Unicom
|
||
2007
|
2006
|
|
Office
premise lease expiring:
|
||
—
not later than one year
|
10,225
|
10,971
|
— later
than one year and not later than five years
|
4,261
|
15,542
|
-----
|
-----
|
|
Total
|
14,486
|
26,513
|
==========
|
==========
|
Unaudited
|
Audited
|
|
31
March 2008
|
31
December 2007
|
|
ASSETS
|
||
Non-current
assets
|
||
Property,
plant and equipment
|
113,210,439
|
116,162,165
|
Goodwill
|
3,143,983
|
3,143,983
|
Other
assets
|
12,891,721
|
12,855,199
|
Deferred
income tax assets
|
640,312
|
426,902
|
----
|
----
|
|
129,886,455
|
132,588,249
|
|
----
|
----
|
|
Current
assets
|
||
Inventories
|
2,237,739
|
2,528,364
|
Accounts
receivable, net
|
3,340,288
|
3,211,154
|
Prepayments
and other current assets
|
2,966,882
|
3,516,279
|
Amounts
due from related parties
|
86,174
|
109,096
|
Amounts
due from Domestic Carriers
|
166,185
|
149,736
|
Short-term
bank deposits
|
609,912
|
644,016
|
Cash
and cash equivalents
|
9,847,305
|
6,675,476
|
----
|
----
|
|
19,254,485
|
16,834,121
|
|
----
|
----
|
|
Total
assets
|
149,140,940
|
149,422,370
|
=========
|
=========
|
|
EQUITY
|
||
Capital
and reserves attributable to Unicom’s equity holders
|
||
Share
capital
|
1,438,786
|
1,436,908
|
Share
premium
|
64,497,837
|
64,320,066
|
Reserves
|
3,965,250
|
3,968,515
|
Retained
profits
|
||
—
Proposed 2007 final dividend
|
2,726,858
|
2,726,858
|
—
Others
|
26,783,083
|
24,760,833
|
----
|
----
|
|
99,411,814
|
97,213,180
|
|
Minority interest in
equity
|
4,230
|
3,914
|
----
|
----
|
|
Total
equity
|
99,416,044
|
97,217,094
|
----
|
----
|
Unaudited
|
Audited
|
|
LIABILITIES
|
31
March 2008
|
31
December 2007
|
Non-current
liabilities
|
||
Long-term
bank loans
|
1,604,367
|
1,660,921
|
Obligations
under finance leases
|
3,175
|
3,882
|
Deferred
income tax liabilities
|
5,721
|
5,864
|
Deferred
revenue
|
1,231,032
|
1,303,015
|
-----
|
-----
|
|
2,844,295
|
2,973,682
|
|
-----
|
-----
|
|
Current
liabilities
|
||
Payables
and accrued liabilities
|
29,873,856
|
32,031,307
|
Taxes
payable
|
1,166,963
|
1,239,512
|
Amounts
due to Unicom Parent
|
98,384
|
820,699
|
Amounts
due to related parties
|
879,114
|
769,558
|
Amounts
due to Domestic Carriers
|
688,816
|
600,283
|
Current
portion of long-term bank loans
|
2,106,550
|
2,191,382
|
Current
portion of obligations under finance leases
|
971
|
1,448
|
Advances
from customers
|
12,065,947
|
11,577,405
|
-----
|
------
|
|
46,880,601
|
49,231,594
|
|
-----
|
-----
|
|
Total
liabilities
|
49,724,896
|
52,205,276
|
-----
|
-----
|
|
Total equity and
liabilities
|
149,140,940
|
149,422,370
|
==========
|
==========
|
|
Net current
liabilities
|
(27,626,116)
|
(32,397,473)
|
==========
|
==========
|
|
Total assets less current
liabilities
|
102,260,339
|
100,190,776
|
==========
|
==========
|
Unaudited
Three
months ended
31
March
|
|||
2007
|
|||
Note
|
2008
|
As
restated (Note 2)
|
|
Revenue
(Turnover)
|
|||
GSM
Business
|
16,262,428
|
15,252,211
|
|
CDMA
Business
|
6,781,221
|
6,657,968
|
|
Data
and Internet Business
|
685,631
|
622,211
|
|
Long
Distance Business
|
412,435
|
328,321
|
|
-----
|
-----
|
||
Total
service revenue
|
24,141,715
|
22,860,711
|
|
Sales
of telecommunications products
|
1,347,778
|
1,264,894
|
|
-----
|
-----
|
||
Total
revenue
|
25,489,493
|
24,125,605
|
|
Leased
lines and network capacities
|
(2,273,415)
|
(2,207,727)
|
|
Interconnection
charges
|
(2,861,363)
|
(2,493,307)
|
|
Depreciation
and amortisation
|
(5,741,691)
|
(5,707,856)
|
|
Employee
benefit expenses
|
(1,830,708)
|
(1,682,574)
|
|
Selling
and marketing
|
(5,085,751)
|
(4,526,826)
|
|
General,
administrative and other expenses
|
(3,750,784)
|
(3,420,605)
|
|
Cost
of telecommunications products sold
|
(1,253,215)
|
(1,400,198)
|
|
Financial
gains/(costs)
|
57,146
|
(61,052)
|
|
Interest
income
|
30,239
|
61,624
|
|
Unrealised
gain on changes in fair value of derivative
component
of convertible bonds
|
—
|
146,432
|
|
Other
gains — net
|
11,881
|
14,075
|
|
-----
|
-----
|
||
Profit before income
tax
|
2,791,832
|
2,847,591
|
|
Income
tax expenses
|
3
|
(769,266)
|
(856,699)
|
-----
|
-----
|
||
Profit for the
period
|
2,022,566
|
1,990,892
|
|
==========
|
==========
|
||
Attributable
to:
|
|||
Equity
holders of Unicom
|
2,022,250
|
1,990,788
|
|
Minority
interest
|
316
|
104
|
|
-----
|
-----
|
||
2,022,566
|
1,990,892
|
||
===========
|
===========
|
||
Basic
earnings per Unicom Share (RMB)
|
4
|
0.148
|
0.157
|
===========
|
===========
|
||
Diluted
earnings per Unicom Share (RMB)
|
4
|
0.147
|
0.134
|
===========
|
===========
|
Unaudited
Three
months ended
31
March
|
||
2007
|
||
2008
|
As
restated (Note 2)
|
|
Net
cash generated from operating activities
|
7,750,348
|
8,438,477
|
Net
cash used in investing activities
|
(4,732,519)
|
(4,594,088)
|
Net
cash from/(used in) financing activities
|
154,000
|
(6,802,611)
|
-----
|
-----
|
|
Net increase/(decrease) in cash
and cash equivalents
|
3,171,829
|
(2,958,222)
|
Cash
and cash equivalents, beginning of period
|
6,675,476
|
12,243,191
|
-----
|
-----
|
|
Cash and cash equivalents, end
of period
|
9,847,305
|
9,284,969
|
==========
|
==========
|
|
Analysis
of the balances of cash and cash equivalents:
|
||
Cash
balances
|
2,892
|
3,910
|
Bank
balances
|
9,844,413
|
9,281,059
|
-----
|
-----
|
|
9,847,305
|
9,284,969
|
|
==========
|
==========
|
Unaudited
|
||||||
Three
months ended 31 March
|
||||||
2007
|
||||||
2008
|
(As
restated)
|
|||||
Profit
attributable to equity holders
|
Unicom
Shares
|
Per Unicom Share amount
|
Profit
attributable to equity holders
|
Unicom
Shares
|
Per Unicom Share amount
|
|
RMB’000
|
In
thousands
|
RMB
|
RMB’000
|
In
thousands
|
RMB
|
|
Basic
earnings
|
2,022,250
|
13,645,328
|
0.148
|
1,990,788
|
12,685,184
|
0.157
|
=========
|
=========
|
|||||
Effect
of conversion of
Unicom
Options
|
—
|
142,870
|
—
|
133,143
|
||
Effect
of convertible bonds
|
—
|
—
|
(152,678)
|
899,745
|
||
----
|
-----
|
-----
|
-----
|
|||
Diluted
earnings
|
2,022,250
|
13,788,198
|
0.147
|
1,838,110
|
13,718,072
|
0.134
|
=========
|
==========
|
=========
|
==========
|
==========
|
==========
|
Unaudited
Three
months ended 31 March
|
||
2007
|
||
2008
|
(As
restated)
|
|
Profit
attributable to equity holders of Unicom
|
2,022,250
|
1,990,788
|
Adjustments
for:
|
||
Unrealised
gain on changes in fair value of derivative component of convertible
bonds
|
—
|
(146,432)
|
-----
|
-----
|
|
Adjusted
profit attributable to equity holders excluding the unrealised gain on
changes in fair value of derivative component of convertible
bonds
|
2,022,250
|
1,844,356
|
==========
|
==========
|
|
Adjusted
basic earnings per Unicom Share excluding the unrealised gain on changes
in fair value of derivative component of convertible bonds
(RMB)
|
0.148
|
0.145
|
==========
|
==========
|
|
Adjusted
diluted earnings per Unicom Share excluding the unrealised gain on changes
in fair value of derivative component of convertible bonds
(RMB)
|
0.147
|
0.134
|
==========
|
==========
|
|
Note
1:
|
EBITDA
represents profit for the year before interest income, financial
gains/costs, other gains-net (other gains include the tax refund on
reinvestment in a subsidiary), income tax and depreciation and
amortisation. As the telecommunications business is a capital intensive
industry, capital expenditures and financial gains/costs may have a
significant impact on the net profit of the companies with similar
operating results. Therefore, the Unicom Group believes EBITDA may be
helpful in analyzing the operating results of a telecommunications service
operator like Unicom.
|
|
|
Adjusted
EBITDA represents profit for the year before realised/unrealised loss on
changes in fair value of derivative component of convertible bonds,
interest income, financial gains/costs, other gains-net (other gains
include the tax refund on reinvestment in a subsidiary), income tax,
depreciation and amortisation. The Unicom Group believes that the adjusted
EBITDA may provide not only more meaningful supplemental information to
but also facilitates the management and investors to assess its
performance and liquidity by excluding realised/unrealised loss on changes
in fair value of derivative component of convertible bonds that is not
considered as an indicator of its operating performance from a cash flow
perspective.
|
|
|
Although
EBITDA has been widely applied in the global telecommunications industry
as indicator to reflect the operating performance, financial capability
and liquidity, it should be considered in addition to, and is not a
substitute for or superior to, the measure of financial performance
prepared under the generally accepted accounting principles (the “GAAP”)
as it does not have any standardised meaning under GAAP and is not
regarded as measures of operating performance and liquidity under GAAP. In
addition, it may not be comparable to similar indicators provided by other
companies.
|
2007
|
2006
(As
restated)
|
|||
RMB
in million
|
As
percentage of total service revenue
|
RMB
in million
|
As
percentage of total service revenue
|
|
Total
service revenue
|
94,639
|
100.0%
|
91,094
|
100.0%
|
Include: Cellular
|
90,506
|
95.6%
|
87,759
|
96.3%
|
Of
which: GSM
|
62,776
|
66.3%
|
59,882
|
65.7%
|
CDMA
|
27,730
|
29.3%
|
27,877
|
30.6%
|
Long distance, data and
Internet
|
4,133
|
4.4%
|
3,335
|
3.7%
|
2007
|
2006
(As
restated)
|
|||
RMB
in million
|
As
percentage of service revenue
|
RMB
in million
|
As
percentage of service revenue
|
|
Total
operating costs and expenses
|
83,906
|
88.7%
|
81,492
|
89.4%
|
Leased
lines and network capacities
|
9,135
|
9.7%
|
8,943
|
9.8%
|
Interconnection
charges
|
10,907
|
11.5%
|
9,671
|
10.6%
|
Depreciation
and amortisation
|
22,677
|
24.0%
|
22,687
|
24.9%
|
Employee
benefit expenses
|
7,140
|
7.5%
|
6,681
|
7.3%
|
Selling
and marketing
|
19,681
|
20.8%
|
19,571
|
21.5%
|
General,
administrative and other expenses
|
14,639
|
15.5%
|
13,543
|
14.9%
|
Financial
(gains)/costs and interest income
|
(273)
|
(0.3%)
|
396
|
0.4%
|
9.
|
Realised
loss on changes in fair value of derivative component of Convertible Bonds
and other gains from tax refund on reinvestment in a
subsidiary
|
2007
|
2008
|
|||
RMB
(in
billion)
|
RMB
(in
billion)
|
As
percentage
|
||
Total
|
25.72
|
47.25
|
100%
|
|
Wireless
(including GSM cellular)
|
16.49
|
35.00
|
74.1%
|
|
Long
distance, data and Internet
|
0.72
|
1.10
|
2.3%
|
|
Gateway
and infrastructure network
|
4.25
|
4.80
|
10.2%
|
|
Others
|
4.26
|
6.35
|
13.4%
|
|
Note
3:
|
Debt-to-capitalisation
ratio represents interest bearing debts plus minority interest over
interest bearing debts plus total
equity.
|
|
Note 1:
|
EBITDA
represents profit for the year before interest income, financial costs,
other gains-net, income tax and depreciation and amortisation. As the
telecommunications business is a capital intensive industry, capital
expenditures and financial costs may have a significant impact on the net
profit of the companies with similar operating results. Therefore, the
Unicom Group believes EBITDA may be helpful in analyzing the operating
results of a telecommunications service operator like
Unicom.
|
2006
(As
restated)
|
2005
(As
restated)
|
||||
RMB
in million
|
As
percentage of total service revenue
|
RMB
in million
|
As
percentage of total service revenue
|
||
Total
service revenue
|
91,094
|
100.0%
|
85,179
|
100.0%
|
|
Include: Cellular
|
87,759
|
96.3%
|
80,707
|
94.8%
|
|
Of
which: GSM
|
59,882
|
65.7%
|
52,618
|
61.8%
|
|
CDMA
|
27,877
|
30.6%
|
28,089
|
33.0%
|
|
Long
Distance, Data and Internet
|
3,335
|
3.7%
|
4,472
|
5.2%
|
2006
(As
restated)
|
2005
(As
restated)
|
||||
RMB
in million
|
As
percentage of service revenue
|
RMB
in million
|
As
percentage of service revenue
|
||
Total
costs and expenses
|
88,783
|
97.4%
|
80,945
|
94.9%
|
|
Leased
lines and network capacities
|
8,943
|
9.8%
|
8,900
|
10.4%
|
|
Interconnection
charges
|
9,671
|
10.6%
|
8,436
|
9.9%
|
|
Depreciation
and amortisation
|
22,687
|
24.9%
|
20,635
|
24.2%
|
|
Employee
benefit expenses
|
6,681
|
7.3%
|
5,653
|
6.6%
|
|
Selling
and marketing
|
19,571
|
21.5%
|
20,795
|
24.4%
|
|
General,
administrative and other expenses
|
13,543
|
14.9%
|
11,855
|
13.9%
|
|
Finance
costs, net of interest income
|
396
|
0.4%
|
1,032
|
1.2%
|
|
Cost
of telecommunications products sold
|
4,915
|
5.4%
|
3,674
|
4.3%
|
|
Unrealised
loss on changes in fair value of derivative component of Convertible
Bonds
|
2,397
|
2.6%
|
—
|
—
|
|
Other
gains-net
|
(21)
|
—
|
(35)
|
—
|
2006
(As
restated)
|
2007
|
||
RMB
in billion
|
RMB
in billion
|
||
Total
|
21.79
|
26.24
|
|
GSM
Cellular
|
10.82
|
13.84
|
|
Long
Distance, Data and Internet
|
1.44
|
1.00
|
|
Gateway
and infrastructure network
|
3.70
|
3.90
|
|
Others
|
5.83
|
7.50
|
|
Note 1:
|
EBITDA
represents profit for the year before interest income, finance costs, net
other income, income tax expense, depreciation and amortisation and
minority interests. As the telecommunications business is a capital
intensive industry, capital expenditure and finance costs may have a
significant impact on the profit for the year of the companies with
similar operating results. Therefore, the Unicom Group believes EBITDA may
be helpful in analyzing the operation results of a telecommunications
service provider like Unicom. Although EBITDA has been widely applied in
the global telecommunications industry as a benchmark to reflect the
operating performance, financial capability and liquidity, it is not
regarded as a measure of operating performance and liquidity under
generally accepted accounting principles. It also does not represent net
cash from operating activities. In addition, the Unicom Group’s EBITDA may
not be comparable to similar indicators provided by other
companies.
|
2004
(As
restated)
|
2005
(As
restated)
|
||||
RMB
in million
|
As
percentage of total
|
RMB
in million
|
As
percentage of total
|
||
Revenue
|
|||||
Cellular
|
74,231
|
93.2%
|
83,551
|
94.9%
|
|
include: GSM
|
47,930
|
60.2%
|
52,621
|
59.8%
|
|
CDMA
|
26,301
|
33.0%
|
30,930
|
35.1%
|
|
Long
Distance, Data and Internet
|
5,437
|
6.8%
|
4,487
|
5.1%
|
|
Total
revenue
|
79,668
|
100.0%
|
88,038
|
100.0%
|
2004
(As
restated)
|
2005
(As
restated)
|
||||
RMB
in million
|
As
percentage of total
|
RMB
in million
|
As
percentage of total
|
||
Revenue
|
47,930
|
100.0%
|
52,621
|
100.0%
|
|
(1)
Service
revenue
|
47,926
|
100.0%
|
52,618
|
100.0%
|
|
Include: Usage
fee
|
32,349
|
67.5%
|
32,449
|
61.7%
|
|
Monthly fee
|
7,000
|
14.6%
|
6,918
|
13.1%
|
|
Interconnection
revenue
|
2,592
|
5.4%
|
3,459
|
6.6%
|
|
Others
|
5,985
|
12.5%
|
9,792
|
18.6%
|
|
(2) Sales
of telecommunications products
|
4
|
0.0%
|
3
|
0.0%
|
2004 (As
restated)
|
2005 (As
restated)
|
|||
RMB
in million
|
As
percentage of total
|
RMB
in million
|
As
percentage of total
|
|
Revenue
|
26,301
|
100.0%
|
30,930
|
100.0%
|
(1) Service
revenue
|
24,588
|
93.5%
|
28,089
|
90.8%
|
Include: Usage
fee
|
16,334
|
62.1%
|
17,086
|
55.2%
|
Monthly
fee
|
4,677
|
17.8%
|
5,001
|
16.2%
|
Interconnection
revenue
|
920
|
3.5%
|
1,408
|
4.6%
|
Others
|
2,657
|
10.1%
|
4,594
|
14.8%
|
(2) Sales
of telecommunications products
|
1,713
|
6.5%
|
2,841
|
9.2%
|
2004 (As
restated)
|
2005 (As
restated)
|
|||
RMB
in million
|
As
percentage of total operating revenue
|
RMB
in million
|
As
percentage of total operating revenue
|
|
Total
costs and expenses
|
73,295
|
92.0%
|
80,945
|
91.9%
|
include:
|
||||
Leased
lines and network capacities
|
7,486
|
9.4%
|
8,900
|
10.1%
|
Interconnection
charges
|
7,527
|
9.5%
|
8,436
|
9.6%
|
Depreciation
and amortisation
|
19,205
|
24.0%
|
20,635
|
23.4%
|
Employee
benefit expenses
|
4,653
|
5.8%
|
5,653
|
6.4%
|
Selling
and marketing
|
19,670
|
24.7%
|
20,795
|
23.6%
|
General,
administrative and other expenses
|
10,599
|
13.3%
|
11,855
|
13.4%
|
Cost
of telecommunication products sold
|
2,612
|
3.3%
|
3,674
|
4.2%
|
Net
finance costs
|
1,647
|
2.1%
|
1,032
|
1.2%
|
2005 (As
restated)
|
2006
Planned
|
|
RMB
in billion
|
RMB
in billion
|
|
Total
|
17.75
|
22.43
|
Cellular
|
7.47
|
11.23
|
Long
Distance, Data and Internet
|
1.18
|
1.47
|
Gateway
and infrastructure network
|
2.95
|
3.78
|
Others
|
6.15
|
5.95
|
Bank
loans
|
Interest
rate and final maturity
|
RMB
million
|
—
Renminbi denominated
|
Interest
rate was 3.60% per annum with maturity through 17 July
2010
|
200
|
— US
dollar denominated
|
Interest
rates ranging from 3.46% to 3.55% per annum with maturity
through 26 September 2010
|
3,430
|
Finance
lease obligations
|
3
|
|
----
|
||
3,633
|
||
Less:
Current portion of long-term bank loans and finance lease
obligations
|
(2,058)
|
|
----
|
||
Long-term
portion of long-term bank loans and finance lease
obligations
|
1,575
|
|
========
|
APPENDIX
III
|
UNAUDITED
PRO FORMA CONSOLIDATED
|
|
FINANCIAL
INFORMATION OF THE ENLARGED GROUP
|
1.
|
UNAUDITED
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF THE ENLARGED
GROUP
|
As
at 31 December 2007
|
|||||||
Extracted
from the Disposal of CDMA Business Circular (Notes 1 &
5)
|
Pro
Forma Adjustments
|
||||||
Unicom
Group
|
Deduct:
CDMA
business
|
Other
pro
forma
adjustments
|
Adjusted
amount
after
CDMA
Business
Disposal
|
Netcom
Group
|
Other
pro
forma
adjustments
|
The
Enlarged
Group
|
|
Note
2
|
Note
3
|
Note
4
|
Note
5
|
||||
ASSETS
|
|||||||
Non-current
assets
|
|||||||
Property,
plant and equipment
|
116,162
|
2,823
|
113,339
|
160,938
|
274,277
|
||
Goodwill
|
3,144
|
—
|
(373)
|
2,771
|
—
|
2,771
|
|
Other
assets
|
12,855
|
2,960
|
9,895
|
7,289
|
17,184
|
||
Deferred
income tax assets
|
427
|
37
|
18
|
408
|
2,693
|
3,101
|
|
-----
|
-----
|
-----
|
-----
|
-----
|
|||
132,588
|
5,820
|
126,413
|
170,920
|
297,333
|
|||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Current
assets
|
|||||||
Inventories
|
2,528
|
1,765
|
763
|
287
|
1,050
|
||
Accounts
receivable, net
|
3,211
|
1,323
|
1,888
|
7,625
|
9,513
|
||
Prepayments
and other current
assets
|
3,517
|
849
|
2,668
|
940
|
3,608
|
||
Amounts
due from related parties
|
109
|
—
|
109
|
347
|
456
|
||
Amounts
due from Domestic
Carriers
|
150
|
—
|
13,140
|
13,290
|
914
|
(163)(c)
|
14,041
|
Short-term
bank deposits
|
644
|
—
|
644
|
91
|
735
|
||
Cash
and cash equivalents
|
6,675
|
2,834
|
30,660
|
34,501
|
5,304
|
39,805
|
|
-----
|
-----
|
-----
|
-----
|
-----
|
|||
16,834
|
6,771
|
53,863
|
15,508
|
69,208
|
|||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Total
assets
|
149,422
|
12,591
|
180,276
|
186,428
|
366,541
|
||
=============
|
=============
|
=============
|
=============
|
=============
|
|||
As
at 31 December 2007
|
|||||||
Extracted
from the Disposal of CDMA
Business
Circular (Notes 1 & 5)
|
Pro
Forma
|
Adjustments
|
|||||
Unicom
Group
|
Deduct:
CDMA
business
|
Other
pro
forma
adjustments
|
Adjusted
amount
after
CDMA
Business
Disposal
|
Netcom
Group
|
Other
pro
forma
adjustments
|
The
Enlarged
Group
|
|
Note
2
|
Note
3
|
Note
4
|
Note
5
|
||||
EQUITY
|
|||||||
Capital
and reserves attributable
to Unicom’s equity holders
|
|||||||
Share
capital
|
1,437
|
—
|
1,437
|
2,206
|
(1,307)(a)
|
2,336
|
|
Share
premium
|
64,320
|
—
|
64,320
|
43,538
|
121,719
(a)
|
229,577
|
|
Reserves
|
3,968
|
—
|
3,968
|
9,353
|
(120,412)(a)
|
(107,091)
|
|
Equity
of CDMA Business (net assets)
|
—
|
4,669
|
4,669
|
—
|
—
|
—
|
|
Retained
profits
|
|||||||
-
Proposed final dividend
|
2,727
|
—
|
2,727
|
3,700
|
6,427
|
||
-
Others
|
24,761
|
—
|
24,962
|
49,723
|
23,255
|
(320)(b)
|
72,658
|
-----
|
-----
|
-----
|
-----
|
-----
|
|||
97,213
|
4,669
|
122,175
|
82,052
|
203,907
|
|||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Minority
interest in equity
|
4
|
4
|
—
|
—
|
—
|
||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Total
equity
|
97,217
|
4,673
|
122,175
|
82,052
|
203,907
|
||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
LIABILITIES
|
|||||||
Non-current
liabilities
|
|||||||
Long-term
bank loans
|
1,661
|
—
|
(1,461)
|
200
|
14,425
|
14,625
|
|
Corporate
bonds
|
—
|
—
|
—
|
2,000
|
2,000
|
||
Obligations
under finance
leases
|
4
|
—
|
4
|
—
|
4
|
||
Deferred
income tax
liabilities
|
6
|
—
|
6
|
856
|
862
|
||
Deferred
revenue
|
1,302
|
609
|
481
|
1,174
|
6,367
|
7,541
|
|
Provisions
|
—
|
—
|
—
|
2,007
|
2,007
|
||
Amounts
due to related
parties
|
—
|
—
|
—
|
6,169
|
6,169
|
||
Other
non-current liabilities
|
—
|
—
|
—
|
12
|
12
|
||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
2,973
|
609
|
1,384
|
31,836
|
33,220
|
|||
-----
|
-----
|
-----
|
-----
|
-----
|
As
at 31 December 2007
|
|||||||
Extracted
from the Disposal of CDMA
Business
Circular (Notes 1 & 5)
|
Pro
Forma
|
Adjustments
|
|||||
Unicom
Group
|
Deduct:
CDMA
business
|
Other
pro
forma
adjustments
|
Adjusted
amount
after
CDMA
Business
Disposal
|
Netcom
Group
|
Other
pro
forma
adjustments
|
The
Enlarged
Group
|
|
Note
2
|
Note
3
|
Note
4
|
Note
5
|
||||
Current
liabilities
|
|||||||
Payables
and accrued liabilities
|
32,032
|
2,476
|
100
|
29,656
|
17,988
|
320(b)
|
47,964
|
Taxes
payable
|
1,240
|
10
|
12,707
|
13,937
|
3,750
|
17,687
|
|
Amounts
due to Unicom Parent
|
821
|
—
|
821
|
—
|
821
|
||
Amounts
due to related parties
|
770
|
—
|
770
|
4,886
|
5,656
|
||
Amounts
due to Domestic
Carriers
|
600
|
—
|
600
|
74
|
(163)(c)
|
511
|
|
Short
term bank loans
|
—
|
—
|
—
|
11,850
|
11,850
|
||
Short-term
bonds
|
—
|
—
|
—
|
20,000
|
20,000
|
||
Current
portion of long-term
bank loans
|
2,191
|
—
|
1,461
|
3,652
|
5,220
|
8,872
|
|
Current
portion of obligations
under finance leases
|
1
|
—
|
1
|
102
|
103
|
||
Current
portion of provision
|
—
|
—
|
—
|
3,381
|
3,381
|
||
Advances
from customers
|
11,577
|
4,823
|
526
|
7,280
|
5,289
|
12,569
|
|
-----
|
-----
|
-----
|
-----
|
-----
|
|||
49,232
|
7,309
|
56,717
|
72,540
|
129,414
|
|||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Total
liabilities
|
52,205
|
7,918
|
58,101
|
104,376
|
162,634
|
||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Total
equity and liabilities
|
149,422
|
12,591
|
180,276
|
186,428
|
366,541
|
||
=============
|
=============
|
=============
|
=============
|
=============
|
|||
Adjusted
net tangible assets of the Enlarged Group
|
Note
6
|
198,564
|
|||||
=============
|
|||||||
Adjusted
net tangible assets of the Enlarged Group per Unicom Share
(RMB)
|
Note
7
|
8.36
|
|||||
=============
|
For
the year ended 31 December 2007
|
|||||||
Extracted
from the Disposal of CDMA
Business
Circular (Notes 1 & 5)
|
Pro Forma |
Adjustments
|
|||||
Unicom
Group
|
Deduct:
CDMA
business
|
Other
pro
forma
adjustments
|
Adjusted
amount
after
CDMA
Business
Disposal
|
Netcom
Group
|
Other
pro
forma
adjustments
|
The
Enlarged
Group
|
|
Note
2
|
Note
3
|
Note
4
|
Note
5
|
||||
Continuing
operations
|
|||||||
Revenues
(Turnover)
|
99,539
|
32,618
|
752
|
67,673
|
84,081
|
(1,178)(d)
|
150,576
|
Leased
lines and network
capacities
|
(9,135)
|
(8,487)
|
(648)
|
(611)
|
27(d)
|
(1,232)
|
|
Interconnection
charges
|
(10,907)
|
(3,553)
|
(1,209)
|
(8,563)
|
(4,014)
|
1,151(d)
|
(11,426)
|
Depreciation
and amortisation
|
(22,677)
|
(1,012)
|
(390)
|
(22,055)
|
(25,495)
|
(47,550)
|
|
Employee
benefit expenses
|
(7,140)
|
(1,824)
|
(5,316)
|
(12,223)
|
(17,539)
|
||
Selling
and marketing
|
(19,681)
|
(8,913)
|
(10,768)
|
(4,959)
|
(15,727)
|
||
General,
administrative and other
expenses
|
(14,639)
|
(3,569)
|
(11,070)
|
(15,682)
|
(320)(b)
|
(27,072)
|
|
Cost
of telecommunications
products sold
|
(5,032)
|
(4,801)
|
(231)
|
(3,831)
|
(4,062)
|
||
Financial
gains/(costs)
|
87
|
(15)
|
(54)
|
48
|
(3,333)
|
(3,285)
|
|
Interest
income
|
186
|
15
|
171
|
113
|
284
|
||
Realised
loss on changes in fair
value of derivative component
of convertible bonds
|
(569)
|
—
|
(569)
|
—
|
(569)
|
||
Other
gains - net
|
2,923
|
7
|
2,916
|
1,221
|
4,137
|
||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Profit
before income tax
|
12,955
|
466
|
11,588
|
15,267
|
26,535
|
||
Income
tax expenses
|
(3,654)
|
(272)
|
298
|
(3,084)
|
(3,796)
|
(6,880)
|
|
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Profit
for the year from
continuing operations
|
9,301
|
194
|
8,504
|
11,471
|
19,655
|
||
Profit
for the year from
discontinued operations
|
—
|
—
|
25,439
|
25,439
|
624
|
26,063
|
|
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Profit
for the year
|
9,301
|
194
|
33,943
|
12,095
|
45,718
|
||
=============
|
=============
|
=============
|
=============
|
=============
|
For
the year ended 31 December 2007
|
|||||||
Extracted
from the Disposal of CDMA
Business
Circular (Notes 1 & 5)
|
Pro
Forma
|
Adjustments
|
|||||
Unicom
Group
|
Deduct:
CDMA
business
|
Other
pro
forma
adjustments
|
Adjusted
amount
after
CDMA
Business
Disposal
|
Netcom
Group
|
Other
pro
forma
adjustments
|
The
Enlarged
Group
|
|
Note
2
|
Note
3
|
Note
5
|
|||||
Cash
flows from operating activities
|
|||||||
Cash
generated from operations
|
36,836
|
1,133
|
35,703
|
40,776
|
76,479
|
||
Interest
received
|
189
|
15
|
174
|
113
|
287
|
||
Interest
paid
|
(498)
|
—
|
108
|
(390)
|
(3,021)
|
(3,411)
|
|
Income
tax paid
|
(4,195)
|
—
|
(4,195)
|
(4,107)
|
(8,302)
|
||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Cash
inflow from operating activities of
continuing operations
|
32,332
|
1,148
|
31,292
|
33,761
|
65,053
|
||
Cash
inflow from operating activities of
discontinued operations
|
—
|
—
|
—
|
388
|
388
|
||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Net
cash generated from operating activities
|
32,332
|
1,148
|
31,292
|
34,149
|
65,441
|
||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Cash
flows from investing activities
|
|||||||
Purchase
of property, plant and
equipment
|
(21,502)
|
—
|
(21,502)
|
(20,323)
|
(41,825)
|
||
Proceeds
from sale of property, plant and
equipment
|
82
|
—
|
82
|
65
|
147
|
||
Consideration
for purchase of entity
under common control
|
(880)
|
—
|
(880)
|
(2,259)
|
(3,139)
|
||
(Increase)/decrease
in short-term bank
deposits
|
(448)
|
—
|
(448)
|
14
|
(434)
|
||
Purchase
of other assets
|
(2,219)
|
—
|
(2,219)
|
(196)
|
(2,415)
|
||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Cash
outflow used in investing activities of
continuing operations
|
(24,967)
|
—
|
(24,967)
|
(22,699)
|
(47,666)
|
||
Cash
inflow from investing activities of
discontinued operations
|
—
|
—
|
43,800
|
43,800
|
3,103
|
46,903
|
|
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Net
cash (used in)/from investing activities
|
(24,967)
|
—
|
18,833
|
(19,596)
|
(763)
|
||
-----
|
-----
|
-----
|
-----
|
-----
|
For
the year ended 31 December 2007
|
|||||||
Extracted
from the Disposal of CDMA
Business
Circular (Notes 1 & 5)
|
Pro
Forma
|
Adjustments
|
|||||
Unicom
Group
|
Deduct:
CDMA
business
|
Other
pro
forma
adjustments
|
Adjusted
amount
after
CDMA
Business
Disposal
|
Netcom
Group
|
Other
pro
forma
adjustments
|
The
Enlarged
Group
|
|
Note
2
|
Note
3
|
Note
5
|
|||||
Cash
flows from financing activities
|
|||||||
Proceeds
from exercise of share
options
|
313
|
—
|
313
|
219
|
532
|
||
Proceeds
from short-term bonds
|
—
|
—
|
—
|
20,000
|
20,000
|
||
Proceeds
from short-term bank loans
|
—
|
—
|
—
|
63,837
|
63,837
|
||
Proceeds
from long-term bank loans
|
—
|
—
|
—
|
2,559
|
2,559
|
||
Proceeds
from issuance of corporate
bonds
|
—
|
—
|
—
|
2,000
|
2,000
|
||
Proceeds
from related parties loans
|
—
|
—
|
—
|
2,249
|
2,249
|
||
Repayment
of short-term bonds
|
(6,970)
|
—
|
(6,970)
|
(9,676)
|
(16,646)
|
||
Repayment
of short-term bank loans
|
—
|
—
|
—
|
(82,965)
|
(82,965)
|
||
Repayment
of long-term bank loans
|
(3,991)
|
—
|
(3,845)
|
(7,836)
|
(9,425)
|
(17,261)
|
|
Repayment
of capital element of
finance lease payments
|
—
|
—
|
—
|
(890)
|
(890)
|
||
Payment
of prior year distribution to
owner
|
—
|
—
|
—
|
(1,180)
|
(1,180)
|
||
Dividends
paid to equity holders
|
(2,285)
|
—
|
(2,285)
|
(3,600)
|
(5,885)
|
||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Cash
outflow used in financing
activities of continuing operations
|
(12,933)
|
—
|
(16,778)
|
(16,872)
|
(33,650)
|
||
Cash
inflow from financing activities of
discontinued operations
|
—
|
—
|
—
|
—
|
—
|
||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Net
cash used in financing activities
|
(12,933)
|
—
|
(16,778)
|
(16,872)
|
(33,650)
|
||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Cash
flows (used in)/from continuing
operations
|
(5,568)
|
1,148
|
(10,453)
|
(5,810)
|
(16,263)
|
||
Cash
flows from discontinued
operations
|
—
|
—
|
43,800
|
3,491
|
47,291
|
||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Net
(decrease)/ increase in cash and
cash equivalents
|
(5,568)
|
1,148
|
33,347
|
(2,319)
|
31,028
|
||
Cash
and cash equivalents at the
beginning of year
|
12,243
|
1,686
|
10,557
|
7,623
|
18,180
|
||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
Cash
and cash equivalents at the end
of year
|
6,675
|
2,834
|
43,904
|
5,304
|
49,208
|
||
=============
|
=============
|
=============
|
=============
|
=============
|
For
the year ended 31 December 2007
|
|||||||
Extracted
from the Disposal of CDMA
Business
Circular (Notes 1 & 5)
|
Pro Forma |
Adjustments
|
|||||
Unicom
Group
|
Deduct:
CDMA
business
|
Other
pro
forma
adjustments
|
Adjusted
amount
after
CDMA
Business
Disposal
|
Netcom
Group
|
Other
pro
forma
adjustments
|
The
Enlarged
Group
|
|
Note
2
|
Note
3
|
Note
5
|
|||||
Analysis
of the balances of cash
and cash equivalents:
|
|||||||
Cash
balances
|
4
|
—
|
4
|
4
|
8
|
||
Bank
balances
|
6,671
|
2,834
|
43,900
|
5,300
|
49,200
|
||
-----
|
-----
|
-----
|
-----
|
-----
|
|||
6,675
|
2,834
|
43,904
|
5,304
|
49,208
|
|||
=============
|
=============
|
=============
|
=============
|
=============
|
1.
|
Prior
to the Proposed Merger, the majority of the equity interests of both
Unicom and Netcom are ultimately held by the State-owned Assets
Supervision and Administration Commission of the PRC. For accounting
purposes, the Proposed Merger is considered to be a business combination
of entities and businesses under common control. The Proposed Merger has
been accounted for using merger accounting in accordance with the AG 5
issued by the HKICPA. The Unaudited Pro Forma Consolidated Financial
Information presents the Proposed Merger as if it had occurred on 31
December 2007 for the unaudited pro forma consolidated balance sheet and
on 1 January 2007 for the unaudited pro forma consolidated income
statement and the unaudited pro forma consolidated cash flow
statement.
|
According
to the announcement issued by Unicom dated 28 July 2008 relating to the
CDMA Business Disposal, Unicom, CUCL and China Telecom entered into the
CDMA Business Disposal Agreement on 27 July 2008, which sets out the terms
and conditions on which Unicom and CUCL will sell, and China Telecom will
purchase, the CDMA Business. To facilitate investors in their analysis of
the impact of the Proposed Merger on the financial position, results of
operations and cash flow of the Unicom Group, it is assumed that the CDMA
Business Disposal has been completed as at 31 December 2007 for the
unaudited pro forma consolidated balance sheet or 1 January 2007 for the
unaudited pro forma consolidated income statement and the unaudited pro
forma consolidated cash flow statement. The historical numbers for the
Unicom Group and the pro forma adjustments to reflect the CDMA Business
Disposal to arrive at the figures included in the column titled “Adjusted
amount after CDMA Business Disposal” included in the Unaudited Pro Forma
Consolidated Financial Information is based on the unaudited pro forma
financial information of the Unicom Group illustrating the effect of the
CDMA Business Disposal as set out in Appendix I to the Disposal of CDMA
Business Circular.
|
2.
|
The
amounts are extracted from the audited consolidated financial statements
of the Unicom Group for the year ended 31 December 2007 set out in
Unicom’s published annual report for the year ended 31 December 2007
(“2007 Annual Report”).
|
Prior
to the Proposed Merger, the Unicom Group’s fixed assets other than
buildings are stated at historical cost less accumulated depreciation and
accumulated impairment losses, and buildings are stated at revalued
amounts. On the other hand, Netcom’s fixed line telecommunications
equipment is carried at revalued amounts, and buildings are stated at
historical cost less accumulated depreciation and accumulated impairment
losses.
|
|
In
order to ensure consistency of accounting policies of the buildings and
the fixed line telecommunications equipment adopted by the Enlarged Group
and to enhance the comparability with the accounting policies adopted by
other fixed line telecommunications operators, the Unicom Board has, on 25
July 2008, approved the change in the following accounting policies of the
Unicom Group, which will take effect only on the completion of the
Proposed Merger:
|
|
a)
|
Buildings
of the Unicom Group will be stated at historical costs (less accumulated
depreciation and accumulated impairment losses) instead of at revalued
amounts.
|
|
b)
|
Telecommunications
equipment of long distance, data and Internet business of the Unicom Group
will be stated at revalued amounts instead of historical costs (less
accumulated depreciation and accumulated impairment
losses).
|
3.
|
The
amounts are based on the audited consolidated financial statements of the
Netcom Group for the year ended 31 December 2007 set out in Appendix I to
the Explanatory Statement, and after certain figures have been
reclassified to conform to the accounting policies and the presentation of
the Unicom Group’s audited financial statements for the year ended 31
December 2007.
|
4.
|
The
adjustments reflect the following:
|
|
a)
|
The
adjustment represents the estimated financial impact of issuing new Unicom
Shares in consideration of the cancellation of the Scheme Shares under the
Scheme and the elimination of Unicom´s investment in Netcom using merger
accounting. As described in this document, Unicom will allot and issue
approximately 10.1 billion new Unicom Shares as consideration for the
Share Proposal (including those underlying the Unicom ADSs to be issued
under the ADS Proposal) and the enlarged issued share capital of Unicom
will be approximately 23.76 billion Unicom Shares immediately following
the issue of such new Unicom Shares, based on the Share Exchange Ratio and
the outstanding number of Unicom Shares and Netcom Shares respectively on
the Last Trading Date and assuming that none of the outstanding Netcom
Options or Unicom Options had been exercised. The fair value of the new
Unicom Shares to be issued at the date of completion of the Proposed
Merger may be different from the fair value of the new Unicom Shares used
in the preparation of the unaudited pro forma consolidated balance sheet
of the Enlarged Group as presented above. In this circumstance, the actual
adjustment to the share premium and reserve resulting from the Proposed
Merger may be different from those presented
above.
|
|
b)
|
The
adjustment represents the estimated professional fees and other
transaction costs directly attributable to the Proposed Merger of
approximately RMB320 million which is expensed in the unaudited pro forma
consolidated income statement.
|
|
c)
|
The
adjustment represents the elimination of inter-company receivables and
payables between the Unicom Group and the Netcom Group as at 31 December
2007.
|
|
d)
|
The
adjustment represents the elimination of inter-company transactions
between the Unicom Group and the Netcom Group for the year ended 31
December 2007, including interconnection revenue and charges amounting to
approximately RMB1,151 million and leased line revenue and charges
amounting to approximately RMB27
million.
|
|
e)
|
Pursuant
to the Special Purpose Unicom Share Option Scheme, the Netcom Options
outstanding as at the Scheme Record Time will be cancelled and the Netcom
Optionholders will be granted Special Unicom Options as consideration for
the cancellation of their Netcom Options. Unicom has estimated the fair
value of the Special Unicom Options assuming the Proposed Merger had been
completed on the Last Trading Date and considered that the cancellation of
the Netcom Options outstanding as at the Scheme Record Time and the grant
of the Special Unicom Options to the Netcom Optionholders will have no
significant impact on the Unaudited Pro Forma Consolidated Financial
Information. Since the estimated fair values of the Netcom Options and the
Special Unicom Options will be changed upon completion of the Proposed
Merger, there may be significant impact on the consolidated financial
information if the fair value of the Special Unicom Options is
significantly higher than the Netcom Options at that
time.
|
5.
|
The
Unaudited Pro Forma Consolidated Financial Information has been prepared
based on the unaudited pro forma financial information reflecting the CDMA
Business Disposal as set out in the Disposal of CDMA Business Circular,
after considering the pro forma adjustments as set out
above.
|
(In
RMB million)
|
Unicom
Group
|
Netcom
Group
|
Pro
forma
adjustments
|
Note
|
The
Enlarged
Group
|
As
at 31 December 2007
|
|||||
Total
Assets
|
149,422
|
186,428
|
(163)
|
(a)
|
335,687
|
Total
Liabilities
|
52,205
|
104,376
|
(163)
|
(a)
|
156,738
|
320
|
(c)
|
||||
Capital
and reserves attributable to Unicom’s equity holders
|
97,213
|
82,052
|
(320)
|
(c)
|
178,945
|
For
the year ended 31 December 2007
|
|||||
Revenue
|
99,539
|
84,081
|
(1,579)
|
(b)
|
182,041
|
Profit
for the year
|
9,301
|
12,095
|
(320)
|
(c)
|
21,076
|
|
(a)
|
The
adjustment represents the elimination of inter-company receivables and
payables between the Unicom Group and the Netcom Group as at 31 December
2007.
|
|
(b)
|
The
adjustment represents the elimination of inter-company transactions
between the Unicom Group and the Netcom Group for the year ended 31
December 2007 including interconnection revenue and charges generated from
CDMA business.
|
|
(c)
|
The
adjustment represents the estimated professional fees and other
transaction costs directly attributable to the Proposed Merger expensed in
the unaudited pro forma consolidated income
statement.
|
6.
|
The
unaudited pro forma adjusted net tangible assets of the Enlarged Group as
at 31 December 2007 is based on the unaudited pro forma adjusted net
assets of the Enlarged Group attributable to equity holders of Unicom as
at 31 December 2007 of approximately RMB203,907 million less intangible
assets (i.e. goodwill, purchased software and other intangible assets) of
the Enlarged Group as at 31 December 2007 of approximately RMB5,343
million.
|
7.
|
The
number of the Unicom Shares used for the calculation of this figure is
approximately 23,764 million Unicom Shares, comprising approximately
13,662 million Unicom Shares issued and outstanding and approximately
10,102 million new Unicom Shares to be issued, based on the outstanding
number of the Unicom Shares and the Netcom Shares respectively on the Last
Trading Date and assuming that none of the outstanding Netcom Options or
Unicom Options had been exercised.
|
8.
|
No
other adjustment has been made to reflect any trading result or other
transaction of the Unicom Group and the Netcom Group entered into
subsequent to 31 December 2007.
|
2.
|
ACCOUNTANT’S
REPORT ON THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF
THE ENLARGED GROUP
|
a)
|
the
Unaudited Pro Forma Consolidated Financial Information has been properly
compiled by the Unicom Directors on the basis
stated;
|
b)
|
such
basis is consistent with the accounting policies of the Unicom Group;
and
|
c)
|
the
adjustments are appropriate for the purposes of the Unaudited Pro Forma
Consolidated Financial Information as disclosed pursuant to Rule 4.29(1)
of the Listing Rules.
|
APPENDIX
IV
|
GENERAL
INFORMATION ON NETCOM
|
Authorised
Share Capital:
|
US$
|
||
25,000,000,000
Netcom Shares
|
1,000,000,000
|
||
=============
|
|||
Issued
and Fully Paid-up Share Capital:
|
|||
6,699,197,200
Netcom Shares
|
267,967,888
|
||
=============
|
(b)
|
All of the Netcom Shares rank pari passu in all respects as regards rights to capital, dividends and voting. |
(c)
|
Netcom issued 24,868,800 new Netcom Shares pursuant to the exercise of Netcom Options after 31 December 2007, being the end of the last financial year of Netcom, up to the Latest Practicable Date. |
(d)
|
As at the Latest Practicable Date, there were 7,098,720 Netcom ADSs outstanding. Each Netcom ADS represents 20 Netcom Shares. |
(e)
|
As at the Latest Practicable Date, there were 125,836,260 Netcom Options outstanding. If all of such Netcom Options are exercised, a total of 125,836,260 new Netcom Shares will be issued. These Netcom Options were issued pursuant to the Netcom Share Option Scheme. Two grants of the Netcom Options were made by Netcom. The Netcom Options granted on 22 October 2004, of which 66,864,360 Netcom Options were outstanding as at the Latest Practicable Date, have an exercise price of HK$8.40 and may be exercised in stages from 17 May 2006 to 16 November 2010. The Netcom Options granted on 6 December 2005, of which 58,971,900 Netcom Options were outstanding as at the Latest Practicable Date, have an exercise price of HK$12.45 and may be exercised in stages from 6 December 2007 to 5 December 2011. |
(f) | Other than the Netcom Shares, the Netcom ADSs and the Netcom Options, there are no other options, derivatives, warrants or other securities convertible or exchangeable into Netcom Shares which are issued by Netcom. |
Date
|
Closing
Price for
each
Netcom Share
|
||
(HK$)
|
|||
31
December 2007
|
23.45
|
||
31
January 2008
|
23.80
|
||
29
February 2008
|
24.65
|
||
31
March 2008
|
22.40
|
||
30
April 2008
|
23.50
|
||
23
May 2008 (Last Trading Date)
|
27.05
|
||
30
May 2008
|
27.05
|
(1) | |
30
June 2008
|
21.25
|
||
31
July 2008
|
24.00
|
||
12
August 2008 (Latest Practicable Date)
|
23.00
|
Date
|
Closing
Price for
each
Netcom ADS
|
||
(US$)
|
|||
31
December 2007
|
59.40
|
||
31
January 2008
|
62.35
|
||
29
February 2008
|
61.23
|
||
31
March 2008
|
57.99
|
||
30
April 2008
|
61.05
|
||
22
May 2008 (Last ADS Trading Date)
|
61.97
|
||
30
May 2008
|
61.97
|
(1) | |
30
June 2008
|
54.59
|
||
31
July 2008
|
60.58
|
||
11
August 2008 (Latest Practicable Date)
|
59.57
|
Name
of Netcom Director
|
Number
and
Description of
Equity
Derivatives(1)
|
Number
of
Underlying
Netcom
Shares
Involved
in
the
Netcom
Options
|
%
of
Shareholding
|
|
Zuo
Xunsheng
|
455,500
|
455,500
|
0.007%
|
|
Li
Fushen
|
480,000
|
480,000
|
0.007%
|
|
Yan
Yixun
|
354,000
|
354,000
|
0.005%
|
|
-------
|
-------
|
|||
Total
|
1,289,500
|
0.019%
|
||
=============
|
=============
|
Netcom
Securities
|
Expiry
Period
|
Exercise
Price
|
Quantity
Held
|
Conversion
Rate
|
Conversion
Amount
Netcom
Shares
|
|
Netcom
Shares
|
3,429,500
|
|||||
Netcom
ADSs
|
13,209
|
20
|
264,180
|
|||
Call
Options on Netcom ADSs
|
September
2008
|
US$70.00
|
6(1)
|
100
|
12,000
|
(i)
|
save as disclosed in paragraph 4(b) of this Appendix IV, none of the subsidiaries of Netcom, any of the pension funds of the Netcom Group and any adviser to Netcom as specified in class (2) of the definition of “associate” under the Takeovers Code (but excluding exempt principal traders) owned or controlled any Netcom Securities; |
(ii)
|
there were no arrangements of the kind referred to in the third paragraph of Note 8 to Rule 22 of the Takeovers Code between Netcom, or any person who is an associate of Netcom by virtue of classes (1), (2), (3) or (4) of the definition of “associate” under the Takeovers Code, and any other person; |
(iii)
|
save as disclosed in paragraph 4(b) of this Appendix IV, no fund managers (other than exempt fund managers) connected with Netcom who managed funds on a discretionary basis owned or controlled any Netcom Securities; and |
(iv)
|
none of the Netcom Directors had borrowed or lent any Netcom Securities. |
(a)
|
During the Relevant Period, save as disclosed in this paragraph 5(a) below, none of the Netcom Directors had dealt for value in any Netcom Securities: |
Name
|
Date
|
Type
of
Transaction
|
Number
of
Netcom
Securities
|
Price
|
|
Zuo
Xunsheng
|
5
May 2008
|
Exercise
of Netcom Options
|
24,500
Netcom Options
|
HK$8.40
for each Netcom Option
|
|
5
May 2008
|
Sale
|
24,500
Netcom Shares
|
HK$25.50
for each Netcom Share
|
(b)
|
During the period commencing from 2 June 2008, being the date of the Announcement, and ending on the Latest Practicable Date, the following entities (other than exempt principal traders) which control or are controlled by or under the same control as Citigroup had dealt for value in Netcom Shares and Netcom ADSs: |
Name
|
Settlement
Date
|
Type
of
Transaction
|
Number
of
Netcom
ADSs
|
Price
for each Netcom
ADS
|
|
Citigroup
Global Markets, Inc.
|
17
July 2008
|
Sale
|
1,708
|
US$60.876
|
|
17
July 2008
|
Sale
|
310
|
US$60.83
|
||
1
August 2008
|
Sale
|
27
|
US$61.64
|
(i)
|
save as disclosed in paragraph 5(b) of this Appendix IV, none of the subsidiaries of Netcom, any of the pension funds of the Netcom Group and any adviser to Netcom as specified in class (2) of the definition of “associate” under the Takeovers Code (but excluding exempt principal traders) had dealt for value in any Netcom Securities; |
(ii)
|
no person who had an arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with Netcom or with any person who is an associate of Netcom by virtue of classes (1), (2), (3) and (4) of the definition of “associate” under the Takeovers Code had dealt for value in any Netcom Securities; and |
(iii)
|
no fund managers (other than exempt fund managers) connected with Netcom who managed funds on a discretionary basis had dealt for value in any Netcom Securities. |
(a)
|
As at the Latest Practicable Date: | |
(i)
|
Li Jianguo, an executive Netcom Director, held 602,000 Unicom Shares; and | |
(ii)
|
Timpson Chung Shui Ming, an independent non-executive Netcom Director, held 6,000 Unicom Shares. | |
(b)
|
As at the Latest Practicable Date, entities (other than exempt principal traders) which control or are controlled by or under the same control as Citigroup held the following interests in Unicom: |
Unicom
Securities
|
Quantity
Held
|
Conversion
Rate
|
Conversion
Amount
-
Unicom
Shares
|
|
Unicom
Shares
|
13,914,000
|
|||
Unicom
ADSs
|
502,570
|
10
|
5,025,700
|
(c)
|
As at the Latest Practicable Date: |
(i)
|
save as disclosed in paragraph 6(a) of this Appendix IV, neither Netcom nor any of the Netcom Directors was interested in any Unicom Securities or had borrowed or lent any Unicom Securities; | |
(ii)
|
save as disclosed in paragraph 6(b) of this Appendix IV, none of the subsidiaries of Netcom, any of the pension funds of the Netcom Group and any adviser to Netcom as specified in class (2) of the definition of “associate” under the Takeovers Code (but excluding exempt principal traders) owned or controlled any Unicom Securities; and | |
(iii)
|
save as disclosed in paragraph 6(b) of this Appendix IV, no fund managers (other than exempt fund managers) connected with Netcom who managed funds on a discretionary basis owned or controlled any Unicom Securities. |
(a)
|
During the Relevant Period, save as disclosed in this paragraph 7(a) below, neither Netcom nor any of the Netcom Directors had dealt for value in any Unicom Securities: |
Name
|
Date
|
Type
of
Transaction
|
Number
of
Unicom
Securities
|
Price
|
|
Timpson
Chung Shui Ming
|
12
December 2007
|
Purchase
|
6,000
Unicom Shares
|
HK$15.64
for each Unicom Share
|
|
Li
Jianguo
|
28
February 2008
|
Exercise
of Unicom Options
|
292,000
Unicom Options
|
HK$15.42
for each Unicom Option
|
|
28
February 2008
|
Sale
|
292,000
Unicom Shares
|
HK$19.74
for each Unicom Share
|
||
8
July 2008
|
Exercise
of Unicom Options
|
142,000
Unicom Options
|
HK$5.92
for each Unicom Option
|
||
8
July 2008
|
Exercise
of Unicom Options
|
460,000
Unicom Options
|
HK$6.35
for each Unicom Option
|
(b)
|
During the period commencing from 2 June 2008, being the date of the Announcement, and ending on the Latest Practicable Date, the following entities (other than exempt principal traders) which control or are controlled by or under the same control as Citigroup had dealt for value in Unicom Shares and Unicom ADSs: |
Name
|
Settlement
Date
|
Type
of
Transaction
|
Number
of
Unicom
Shares
|
Price
for each Unicom
Share
|
|
Nikko
Asset Management Co. Ltd.
|
12
June 2008
|
Purchase
|
50,000
|
HK$14.18
|
|
Citigroup
Global Markets Asia Limited
|
7
August 2008
|
Purchase
|
20,000
|
HK$16.02
|
|
7
August 2008
|
Sale
|
20,000
|
HK$15.96
|
Name
|
Settlement
Date
|
Type
of
Transaction
|
Number
of
Unicom
ADSs
|
Price
for each
Unicom
ADS
|
|
Citigroup
Global Markets,
Inc
|
5
June 2008
|
Sale
|
100
|
US$19.206
|
|
2
July 2008
|
Sale
|
51
|
US$18.46
|
||
2
July 2008
|
Sale
|
26
|
US$18.45
|
||
2
July 2008
|
Sale
|
68
|
US$18.47
|
||
2
July 2008
|
Sale
|
57
|
US$18.48
|
||
11
July 2008
|
Sale
|
200
|
US$19.47
|
||
4
August 2008
|
Sale
|
34
|
US$20.33
|
||
4
August 2008
|
Sale
|
606
|
US$20.341
|
||
8
August 2008
|
Sale
|
600
|
US$20.232
|
(c)
|
During the period commencing from 2 June 2008, being the date of the Announcement, and ending on the Latest Practicable Date: |
(i)
|
save as disclosed in paragraph 7(b) of this Appendix IV, none of the subsidiaries of Netcom, any of the pension funds of the Netcom Group and any adviser to Netcom as specified in class (2) of the definition of “associate” under the Takeovers Code (but excluding exempt principal traders) had dealt for value in any Unicom Securities; | |
(ii)
|
no person who had an arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with Netcom or with any person who is an associate of Netcom by virtue of classes (1), (2), (3) and (4) of the definition of “associate” under the Takeovers Code had dealt for value in any Unicom Securities; and | |
(iii)
|
save as disclosed in paragraph 7(b) of this Appendix IV, no fund managers (other than exempt fund managers) connected with Netcom who managed funds on a discretionary basis had dealt for value in any Unicom Securities. |
As
at the Latest Practicable Date:
|
||
(1)
|
no
benefit (save for statutory compensation required under appropriate laws)
would be given to any Netcom Director as compensation for loss of office
or otherwise in connection with the Scheme;
|
|
(2)
|
save
for the Proposals, there are no agreements or arrangements between any
Netcom Director and any other person which is conditional on or dependent
upon the outcome of the Scheme or otherwise connected with the Scheme;
and
|
|
(3)
|
there
are no material contracts entered into by Unicom in which any Netcom
Director has a material personal
interest.
|
(1)
|
a
strategic alliance agreement entered into between Netcom and Telefónica
dated 14 November 2005, and as amended by an agreement between Netcom and
Telefónica dated 12 November 2006, in connection with the cooperation of
Netcom and Telefónica in certain areas, including, among others,
management exchange, international business including voice and IP
peering, call centres, mobile services, technological assistance in the
areas of VAS, IPTV solutions, mobile content and other related areas as
well as the co-operation in the purchase of technology, end user equipment
and infrastructure;
|
|
(2)
|
a
share purchase agreement dated 2 June 2006 entered into among China Netcom
Corporation International Limited (the “Seller”), Netcom, Northern Trust
(Guernsey) Limited as custodian for Asset Holder PCC Limited re Ashmore
Emerging Markets Liquid Investment Portfolio (“Ashmore”) and Spinnaker
Global Opportunity Fund Limited (“Spinnaker” and together with Ashmore,
the “Purchasers”) in relation to the disposal by the Seller of the entire
equity interests in Asia Netcom Corporation Limited to the Purchasers for
a total cash consideration of US$168,840,000;
|
|
(3)
|
an
asset transfer agreement dated 15 January 2007 entered into between Netcom
Parent and China Netcom (Group) Company Limited in relation to the
disposal of the telecommunications operations of China Netcom (Group)
Company Limited in Shanghai Municipality and Guangdong Province and
related assets and liabilities to Netcom Parent at a total cash
consideration of RMB3.5 billion;
|
|
(4)
|
an
equity interest transfer agreement entered into between China Netcom Group
System Integration Limited Corporation and China Netcom Group Beijing
Communications Corporation on 5 December 2007, pursuant to which China
Netcom System Integration Limited Corporation agreed to acquire the entire
equity interest of Beijing Telecommunications Planning and Designing
Institute Corporation Limited from China Netcom Group Beijing
Communications Corporation for a total consideration of
RMB298,915,300;
|
|
(5)
|
a
loan agreement entered into between Netcom and Netcom BVI dated on 17
December 2007, pursuant to which Netcom BVI extended a loan of HK$83
million to Netcom at an annual interest rate of 6 months HIBOR plus 0.1%;
and
|
|
(6)
|
a
loan agreement entered into between Netcom and China Netcom Corporation
(BVI) Limited dated on 17 December2007, pursuant to which China Netcom
Corporation (BVI) Limited extended a loan of HK$347 million to Netcom at
an annual interest rate of 6 months HIBOR plus 0.1%.
|
|
Name
|
Qualification
|
|
Citigroup
Global Markets Asia Limited
|
A
corporation licensed under the SFO to carry on Type 1 (dealing in
securities), Type 4 (advising on securities), Type 6 (advising on
corporate finance) and Type 7 (providing automated trading services)
regulated activities
|
|
N
M Rothschild & Sons (Hong Kong) Limited
|
A
corporation licensed under the SFO to carry on Type 1 (dealing in
securities), Type 4 (advising on securities) and Type 6 (advising on
corporate finance) regulated
activities
|
(a)
|
Citigroup
has given and has not withdrawn its written consent to the issue of this
document with the inclusion of references to its name in the form and
context in which they respectively appear.
|
|
(b)
|
Rothschild
has given and has not withdrawn its written consent to the issue of this
document with the inclusion of the text of its letter and references to
its name in the form and context in which they respectively
appear.
|
APPENDIX
V
|
GENERAL
INFORMATION ON NETCOM
|
2.
|
SHARE
CAPITAL
|
|
(a)
|
As
at the Latest Practicable Date, the authorised and issued share capital of
Unicom were as follows:
|
Authorised
Share Capital:
|
HK$
|
|
30,000,000,000
Unicom Shares
|
3,000,000,000
|
|
=============
|
||
Issued
and Fully Paid-up Share Capital:
|
||
13,664,951,945
Unicom Shares
|
1,366,495,195
|
|
=============
|
(b)
|
All
the Unicom Shares rank pari passu in all
respects as regards rights to capital, dividends and
voting.
|
||
(c)
|
Unicom
issued 30,662,000 Unicom Shares pursuant to the exercise of Unicom Options
after 31 December 2007, being the end of the last financial year of
Unicom, up to the Latest Practicable Date.
|
||
(d)
|
No
Unicom Shares have been repurchased by Unicom after 31 December 2007,
being the end of the last financial year of Unicom.
|
||
(e)
|
As
at the Latest Practicable Date, there were 40,060,116 Unicom ADSs
outstanding. Each Unicom ADS represents 10 Unicom
Shares.
|
||
(f)
|
As
at the Latest Practicable Date, there were 224,547,600 Unicom Options
outstanding. If all of such Unicom Options are exercised, a total of
224,547,600 Unicom Shares will be issued. These Unicom Options were issued
pursuant to the Unicom Share Option Schemes. The Unicom Options granted
pursuant to the Unicom Pre-Global Offering Share Option Scheme on 22 June
2000, of which 16,977,600 Unicom Options were outstanding as at the Latest
Practicable Date, have an exercise price of HK$15.42 and may be exercised
from 22 June 2002 to 21 June 2010. The Unicom Options granted pursuant to
the Unicom Share Option Scheme:
|
||
(i)
|
on
30 June 2001, of which 4,390,000 Unicom Options were outstanding as at the
Latest Practicable Date, have an exercise price of HK$15.42 and may be
exercised from 30 June 2001 to 22 June 2010;
|
||
(ii)
|
on
10 July 2002 had an exercise price of HK$6.18 and might be exercised in
stages from 10 July 2003 to 9 July 2008. All of these Unicom Options have
lapsed;
|
||
(iii)
|
on
21 May 2003, of which 9,286,000 Unicom Options were outstanding as at the
Latest Practicable Date, have an exercise price of HK$4.30 and may be
exercised in stages from 21 May 2004 to 20 May 2009;
|
||
(iv)
|
on
20 July 2004, of which 41,316,000 Unicom Options were outstanding as at
the Latest Practicable Date, have an exercise price of HK$5.92 and may be
exercised in stages from 20 July 2005 to 19 July 2010;
|
||
(v)
|
on
21 December 2004, of which 654,000 Unicom Option were outstanding as at
the Latest Practicable Date, have an exercise price of HK$6.20 and may be
exercised in stages from 21 December 2005 to 20 December 2010;
and
|
||
(vi)
|
on
15 February 2006, of which 151,924,000 Unicom Option were outstanding as
at the Latest Practicable Date, have an exercise price of HK$6.35 and may
be exercised in stages from 15 February 2008 to 14 February
2012.
|
||
(g)
|
Other
than the Unicom Shares, the Unicom ADSs and the Unicom Options, there are
no other options, derivatives, warrants or other securities convertible or
exchangeable into Unicom Shares which are issued by
Unicom.
|
||
(h)
|
There
has been no reorganisation of the capital of Unicom during the two
financial years preceding the date of the
Announcement.
|
Date
|
Closing
Price for each Unicom Share
|
||
(HK$)
|
|||
31
December 2007
|
17.90
|
||
31
January 2008
|
17.98
|
||
29
February 2008
|
17.14
|
||
31
March 2008
|
16.38
|
||
30
April 2008
|
16.88
|
||
23
May 2008 (Last Trading Date)
|
18.48
|
||
30
May 2008
|
18.48
|
(1)
|
|
30
June 2008
|
14.48
|
||
31
July 2008
|
16.18
|
||
12
August 2008 (Latest Practicable Date)
|
15.46
|
Note:
|
|
(1)
|
This
is the closing price on the Last Trading Date. The Unicom Shares were
suspended from trading on the Hong Kong Stock Exchange from 12:26 p.m.
(Hong Kong time) on the Last Trading Date and resumed trading at 9:30 a.m.
(Hong Kong time) on 3 June 2008.
|
Date
|
Closing
Price for
each
Unicom ADS
|
||
(US$)
|
|||
31
December 2007
|
22.40
|
||
31
January 2008
|
23.67
|
||
29
February 2008
|
21.23
|
||
31
March 2008
|
21.27
|
||
30
April 2008
|
21.57
|
||
22
May 2008 (Last ADS Trading Date)
|
20.96
|
||
30
May 2008
|
20.96
|
(1)
|
|
30
June 2008
|
18.52
|
||
31
July 2008
|
20.46
|
||
11
August 2008 (Latest Practicable Date)
|
20.01
|
Note:
|
|
(1)
|
This
is the closing price on the Last ADS Trading Date. The Unicom ADSs were
suspended from trading on the New York Stock Exchange from 9:30 a.m. (New
York time) on 23 May 2008 and resumed trading at 9:30 a.m. (New York time)
on 3 June 2008.
|
4.
|
SHAREHOLDINGS
IN NETCOM SECURITIES
|
||||
(a)
|
As
at the Latest Practicable Date:
|
||||
(i)
|
neither
Unicom nor any of the Unicom Directors was interested in any Netcom
Securities or had borrowed or lent any Netcom Securities;
and
|
||||
(ii)
|
none
of the parties acting in concert with Unicom owned or controlled any
Netcom Securities or had borrowed or lent any Netcom
Securities.
|
||||
(b)
|
As
at the Latest Practicable Date, the shareholdings in Netcom owned or
controlled by the persons who, prior to the despatch of this document, had
given irrevocable undertakings to Unicom to vote in favour of all of the
resolutions to approve the Scheme and any related matters for the
implementation of the Scheme to be proposed at the Court Meeting and the
Netcom EGM are as follows:
|
Netcom
Shareholder
|
Number
of Netcom Shares Held
|
%
of Shareholding
|
|
Netcom
BVI
|
4,647,449,014
|
69.37%
|
|
Telefónica
|
333,971,305
|
4.99%
|
|
-------
|
-------
|
||
Total
|
4,981,420,319
|
74.36%
|
|
=============
|
=============
|
5.
|
DEALINGS
IN NETCOM SECURITIES
|
||||||
(a) | During the Relevant Period, save as disclosed in this paragraph 5(a) below, neither Unicom nor any of the Unicom Directors had dealt for value in any Netcom Securities: | ||||||
Name
|
Date
|
Type
of
Transaction
|
Number
of Netcom
Securities
|
Price
|
|||
Tong
Jilu(1)
|
12
February 2008
|
Purchase
|
20,000
Netcom Shares
|
HK$22.25
|
|||
18
February 2008
|
Sale
|
20,000
Netcom Shares
|
HK$26.10
|
||||
Note:
|
|||||||
(1)
|
Director
of each of Unicom, Unicom Parent and Unicom A Share
Company.
|
||||||
(b)
|
During
the Relevant Period, the following entities (other than exempt fund
managers) which control or are controlled by or under the same control as
JPMorgan had dealt for value in Netcom Shares and Netcom ADSs1:
|
||||||
Name
|
Date
|
Type
of Transaction
|
Number
of Netcom Shares
|
Average
Price (HK$)
|
Maximum
Price (HK$)
|
Minimum
Price (HK$)
|
|
Bear
Stearns International Limited
|
6
December 2007
|
Purchase
|
10,500
|
24.80
|
24.80
|
24.80
|
|
7
December 2007
|
Purchase
|
31,500
|
24.20
|
24.20
|
24.20
|
||
11
December 2007
|
Purchase
|
18,000
|
23.96
|
23.96
|
23.96
|
||
11
December 2007
|
Sale
|
100,000
|
24.37
|
24.37
|
24.37
|
||
12
December 2007
|
Purchase
|
20,000
|
24.13
|
24.13
|
24.13
|
||
17
December 2007
|
Purchase
|
50,000
|
23.68
|
23.68
|
23.68
|
||
4
January 2008
|
Purchase
|
14,000
|
23.73
|
23.73
|
23.73
|
||
7
January 2008
|
Purchase
|
280,000
|
23.70
|
23.70
|
23.70
|
||
8
January 2008
|
Purchase
|
17,500
|
24.45
|
24.45
|
24.45
|
||
14
January 2008
|
Purchase
|
15,500
|
24.72
|
24.81
|
24.57
|
||
15
January 2008
|
Purchase
|
4,000
|
24.49
|
24.49
|
24.49
|
||
21
January 2008
|
Purchase
|
150,000
|
24.98
|
25.03
|
24.88
|
||
1
February 2008
|
Purchase
|
13,500
|
24.30
|
24.30
|
24.30
|
||
5
February 2008
|
Purchase
|
100,000
|
24.55
|
24.55
|
24.55
|
||
20
February 2008
|
Purchase
|
50,000
|
24.53
|
24.53
|
24.53
|
||
18
March 2008
|
Sale
|
254,000
|
20.74
|
20.88
|
20.63
|
||
25
March 2008
|
Purchase
|
200,000
|
21.46
|
21.47
|
21.42
|
||
25
March 2008
|
Sale
|
2,000,000
|
19.46
|
19.46
|
19.46
|
||
26
March 2008
|
Purchase
|
190,000
|
21.67
|
21.82
|
21.52
|
||
3
April 2008
|
Purchase
|
80,000
|
23.68
|
23.68
|
23.68
|
||
J.P.
Morgan Securities Limited
|
31
January 2008
|
Purchase
|
160,000
|
24.20
|
24.20
|
24.20
|
|
1
February 2008
|
Purchase
|
300,000
|
24.20
|
24.45
|
23.75
|
||
19
February 2008
|
Purchase
|
18,000
|
25.00
|
25.00
|
25.00
|
||
22
February 2008
|
Sale
|
18,000
|
23.97
|
23.97
|
23.97
|
||
29
February 2008
|
Purchase
|
439,500
|
24.53
|
24.55
|
24.41
|
||
3
March 2008
|
Sale
|
269,500
|
23.71
|
23.85
|
23.60
|
||
4
March 2008
|
Sale
|
130,000
|
23.61
|
23.71
|
23.60
|
||
6
March 2008
|
Purchase
|
11,500
|
24.73
|
24.73
|
24.73.
|
||
11
March 2008
|
Sale
|
12,000
|
23.70
|
23.70
|
23.70
|
||
14
March 2008
|
Sale
|
39,500
|
22.25
|
22.25
|
22.25
|
||
18
March 2008
|
Purchase
|
11,000
|
21.25
|
21.25
|
21.25
|
||
1
April 2008
|
Sale
|
11,000
|
22.80
|
22.80
|
22.80
|
||
2
April 2008
|
Purchase
|
270,000
|
23.96
|
24.05
|
23.80
|
||
3
April 2008
|
Purchase
|
250,000
|
23.43
|
23.75
|
23.25
|
||
7
April 2008
|
Purchase
|
468,500
|
22.89
|
23.25
|
22.60
|
||
10
April 2008
|
Sale
|
168,500
|
22.28
|
22.30
|
22.25
|
||
11
April 2008
|
Sale
|
100,000
|
23.00
|
23.00
|
23.00
|
||
15
April 2008
|
Sale
|
100,000
|
21.75
|
21.75
|
21.75
|
||
17
April 2008
|
Purchase
|
293,500
|
22.75
|
23.00
|
22.60
|
||
18
April 2008
|
Purchase
|
206,500
|
22.52
|
22.65
|
22.35
|
||
21
April 2008
|
Purchase
|
300,000
|
22.87
|
23.00
|
22.80
|
||
24
April 2008
|
Sale
|
200,000
|
23.70
|
23.75
|
23.65
|
||
25
April 2008
|
Purchase
|
200,000
|
23.30
|
23.35
|
23.25
|
||
29
April 2008
|
Sale
|
300,000
|
23.98
|
24.05
|
23.95
|
||
30
April 2008
|
Purchase
|
300,000
|
23.60
|
23.70
|
23.50
|
||
J.P.
Morgan Whitefriars Inc.
|
10
December 2007
|
Purchase
|
87,000
|
23.68
|
23.68
|
23.68
|
|
11
December 2007
|
Purchase
|
70,500
|
24.09
|
24.09
|
24.09
|
||
12
December 2007
|
Purchase
|
33,000
|
24.12
|
24.12
|
24.12
|
||
21
February 2008
|
Sale
|
11,500
|
24.72
|
24.72
|
24.72
|
||
11
March 2008
|
Sale
|
7,500
|
23.72
|
23.72
|
23.72
|
||
1
April 2008
|
Purchase
|
19,000
|
23.00
|
23.00
|
23.00
|
Name
|
Date
|
Type
of
Transaction
|
Number
of
Netcom
Shares
|
Price
(HK$)
|
|
Bear
Stearns International Limited
|
15
May 2008
|
Sale
|
596,500
|
24.68
|
|
22
May 2008
|
Purchase
|
72,000
|
24.00
|
||
J.P.
Morgan Securities Limited
|
2
May 2008
|
Sale
|
100,000
|
24.30
|
|
2
May 2008
|
Sale
|
100,000
|
24.45
|
||
2
May 2008
|
Sale
|
100,000
|
24.60
|
||
2
May 2008
|
Sale
|
100,000
|
24.70
|
||
2
May 2008
|
Sale
|
100,000
|
25.15
|
||
2
May 2008
|
Sale
|
100,000
|
25.20
|
||
2
May 2008
|
Sale
|
100,000
|
25.25
|
||
5
May 2008
|
Purchase
|
100,000
|
24.50
|
||
8
May 2008
|
Sale
|
200,000
|
25.35
|
||
14
May 2008
|
Purchase
|
100,000
|
25.00
|
||
14
May 2008
|
Purchase
|
34,500
|
25.10
|
||
14
May 2008
|
Purchase
|
150,000
|
25.15
|
||
14
May 2008
|
Purchase
|
100,000
|
25.20
|
||
15
May 2008
|
Purchase
|
8,000
|
23.50
|
||
15
May 2008
|
Purchase
|
15,500
|
23.80
|
||
15
May 2008
|
Purchase
|
100,000
|
23.90
|
||
15
May 2008
|
Purchase
|
100,000
|
24.05
|
||
15
May 2008
|
Purchase
|
100,000
|
24.10
|
||
16
May 2008
|
Purchase
|
92,000
|
23.90
|
||
19
May 2008
|
Purchase
|
100,000
|
23.50
|
||
19
May 2008
|
Purchase
|
100,000
|
23.70
|
||
19
May 2008
|
Purchase
|
100,000
|
23.80
|
||
19
May 2008
|
Purchase
|
100,000
|
24.00
|
||
21
May 2008
|
Sale
|
100,000
|
24.00
|
||
21
May 2008
|
Sale
|
100,000
|
24.20
|
||
22
May 2008
|
Sale
|
20,000
|
23.30
|
||
22
May 2008
|
Sale
|
50,000
|
23.55
|
||
22
May 2008
|
Sale
|
20,000
|
23.60
|
||
22
May 2008
|
Sale
|
20,000
|
23.65
|
||
22
May 2008
|
Sale
|
40,000
|
23.65
|
||
22
May 2008
|
Sale
|
50,000
|
23.70
|
||
22
May 2008
|
Sale
|
50,000
|
23.80
|
||
22
May 2008
|
Sale
|
50,000
|
23.80
|
||
22
May 2008
|
Sale
|
50,000
|
23.90
|
||
22
May 2008
|
Sale
|
50,000
|
23.90
|
||
22
May 2008
|
Sale
|
100,000
|
24.00
|
||
22
May 2008
|
Sale
|
100,000
|
24.05
|
||
23
May 2008
|
Sale
|
100,000
|
24.40
|
||
23
May 2008
|
Sale
|
100,000
|
25.00
|
||
23
May 2008
|
Purchase
|
100,000
|
25.30
|
Name
|
Date
|
Type
of
Transaction
|
Number
of
Netcom
ADSs
|
Average
Price
(US$)
|
Maximum
Price
(US$)
|
Minimum
Price
(US$)
|
|
Bear
Stearns & Co., Inc.
|
7
December 2007
|
Sale
|
15,500
|
61.07
|
61.07
|
61.07
|
|
28
December 2007
|
Sale
|
45,000
|
60.00
|
60.00
|
60.00
|
||
4
January 2008
|
Purchase
|
16,350
|
62.00
|
62.00
|
62.00
|
||
7
January 2008
|
Purchase
|
28,300
|
61.00
|
61.00
|
61.00
|
||
28
January 2008
|
Sale
|
12,000
|
60.00
|
60.00
|
60.00
|
||
28
January 2008
|
Purchase
|
51,600
|
62.10
|
62.10
|
62.10
|
||
20
February 2008
|
Sale
|
4
|
62.77
|
62.77
|
62.77
|
||
6
March 2008
|
Sale
|
10,000
|
59.92
|
59.92
|
59.92
|
||
7
March 2008
|
Sale
|
10,000
|
58.65
|
58.65
|
58.65
|
||
14
March 2008
|
Sale
|
9,000
|
57.72
|
57.72
|
57.72
|
||
19
March 2008
|
Sale
|
19,000
|
54.29
|
54.29
|
54.29
|
||
20
March 2008
|
Sale
|
2
|
53.65
|
53.65
|
53.65
|
||
27
March 2008
|
Sale
|
200
|
57.45
|
57.45
|
57.45
|
||
28
March 2008
|
Sale
|
7,900
|
58.31
|
58.31
|
58.31
|
||
31
March 2008
|
Purchase
|
100
|
58.21
|
58.21
|
58.21
|
||
1
April 2008
|
Purchase
|
100
|
61.81
|
61.81
|
61.81
|
||
3
April 2008
|
Sale
|
17,500
|
60.38
|
60.38
|
60.38
|
||
J.P.
Morgan Securities Limited
|
30
January 2008
|
Sale
|
8,000
|
64.57
|
64.57
|
64.57
|
|
31
January 2008
|
Sale
|
15,000
|
62.99
|
62.99
|
62.99
|
||
1
April 2008
|
Sale
|
26,000
|
62.07
|
62.07
|
62.07
|
||
4
April 2008
|
Sale
|
12,100
|
61.55
|
61.55
|
61.55
|
||
7
April 2008
|
Sale
|
11,325
|
58.71
|
58.71
|
58.71
|
||
11
April 2008
|
Purchase
|
18,425
|
57.01
|
57.01
|
57.01
|
||
16
April 2008
|
Sale
|
25,000
|
59.45
|
59.45
|
59.45
|
||
18
April 2008
|
Sale
|
15,172
|
59.38
|
59.38
|
59.38
|
||
21
April 2008
|
Purchase
|
172
|
58.05
|
58.05
|
58.05
|
Name
|
Date
|
Type
of
Transaction
|
Number
of
Netcom
ADSs
|
Price (US$)
|
|
J.P.
Morgan Securities Limited
|
16
May 2008
|
Sale
|
15,000
|
62.73
|
|
21
May 2008
|
Purchase
|
40,000
|
60.06
|
(c)
|
During
the Relevant Period
|
||||
(i)
|
save
as disclosed in paragraphs 5(a) and 5(b) of this Appendix V, none of the
parties acting in concert with Unicom had dealt for value in any Netcom
Securities;
|
||||
(ii)
|
none
of the persons referred to in paragraph 4(b) of this Appendix V had dealt
for value in any Netcom Securities; and
|
||||
(iii)
|
no
persons who had any arrangements of the kind referred to in Note 8 to Rule
22 of the Takeovers Code with Unicom or any of the parties acting in
concert with Unicom had dealt for value in any Netcom
Securities.
|
(a)
|
As
at the Latest Practicable Date, the following Unicom Directors and chief
executive of Unicom had, or were deemed to have, interests or short
positions in the Unicom Shares, underlying Unicom Shares or debentures of
Unicom or any of its associated corporations (within the meaning of Part
XV of the SFO) which were required to be notified to Unicom and the Hong
Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO
(including interests and short positions which they were deemed or taken
to have under such provisions of the SFO), or which are required, pursuant
to Section 352 of the SFO to be entered in the register referred to
therein, or which are required, pursuant to the Model Code for Securities
Transactions by Directors of Listed Issuers contained in the Listing
Rules, to be notified to Unicom and the Hong Kong Stock
Exchange:
|
Name
of Unicom Director
|
Capacity and
Nature
|
Date
of Grant of Unicom Options
|
Exercise
Price
|
Number
of Outstanding Unicom Options(1)(2)
|
%
of
Shareholding
|
|
Chang
Xiaobing
|
Beneficial
owner
(Personal)
|
21
December 2004
|
HK$6.20
|
526,000
|
||
15
February 2006
|
HK$6.35
|
800,000
|
||||
-------
|
-------
|
|||||
1,326,000
|
0.010%
|
|||||
Tong
Jilu
|
Beneficial
owner
|
30
June 2001
|
HK$15.42
|
292,000
|
||
(Personal)
|
20
July 2004
|
HK$5.92
|
92,000
|
|||
15
February 2006
|
HK$6.35
|
500,000
|
||||
Beneficial
owner
|
20
July 2004
|
HK$5.92
|
32,000
|
|||
(Spouse)
|
15
February 2006
|
HK$6.35
|
40,000
|
|||
-------
|
-------
|
|||||
956,000
|
0.007%
|
|||||
Li
Gang
|
Beneficial
owner
(Personal)
|
15
February 2006
|
HK$6.35
|
500,000
|
0.004%
|
|
Zhang
Junan
|
Beneficial
owner
(Personal)
|
15
February 2006
|
HK$6.35
|
500,000
|
0.004%
|
|
Lu
Jianguo
|
Beneficial
owner
|
22
June 2000
|
HK$15.42
|
292,600
|
||
(Personal)
|
20
July 2004
|
HK$5.92
|
292,000
|
|||
15
February 2006
|
HK$6.35
|
500,000
|
||||
──────
|
─────
|
|||||
1,084,600
|
0.008%
|
|||||
Wu
Jinglian
|
Beneficial
owner
|
21
May 2003
|
HK$4.30
|
292,000
|
||
(Personal)
|
20
July 2004
|
HK$5.92
|
292,000
|
|||
──────
|
─────
|
|||||
584,000
|
0.004%
|
|||||
Shan
Weijian
|
Beneficial
owner
|
21
May 2003
|
HK$4.30
|
292,000
|
||
(Personal)
|
20
July 2004
|
HK$5.92
|
292,000
|
|||
───────
|
──────
|
|||||
584,000
|
0.004%
|
|||||
Total
|
5,534,600
|
0.041%
|
||||
=============
|
=============
|
Date
of Grant
|
Exercise
Period
|
|
Options
granted pursuant to the Unicom Pre-Global Offering Share Option
Scheme
|
||
22
June 2000
|
22
June 2002 to 21 June 2010
|
|
Options
granted pursuant to the Unicom Share Option Scheme
|
||
30
June 2001
|
30
June 2001 to 22 June 2010
|
|
21
May 2003
|
21
May 2004 to 20 May 2009 (in respect of 40% of the Unicom Options
granted)
|
|
21
May 2005 to 20 May 2009 (in respect of 30% of the Unicom Options
granted)
|
||
21
May 2006 to 20 May 2009 (in respect of the remaining 30% of the Unicom
Options granted)
|
||
20
July 2004
|
20
July 2005 to 19 July 2010 (in respect of 40% of the Unicom Options
granted)
|
|
20
July 2006 to 19 July 2010 (in respect of 30% of the Unicom Options
granted)
|
||
20
July 2007 to 19 July 2010 (in respect of the remaining 30% of the Unicom
Options granted)
|
||
21
December 2004
|
21
December 2005 to 20 December 2010 (in respect of 40% of the Unicom Options
granted)
|
|
21
December 2006 to 20 December 2010 (in respect of 30% of the Unicom Options
granted)
|
||
21
December 2007 to 20 December 2010 (in respect of the remaining 30% of the
Unicom Options granted)
|
||
15
February 2006
|
15
February 2008 to 14 February 2012 (in respect of 50% of the Unicom Options
granted)
|
|
15
February 2009 to 14 February 2012 (in respect of the remaining 50% of the
Unicom Options granted)
|
(b) | As at the Latest Practicable Date, the following persons, who are a director or supervisor of Unicom Parent or Unicom A Share Company and are therefore parties acting in concert with Unicom, had the following interests in Unicom Options: |
Name
|
Capacity
and
Nature
|
Date
of Grant of Unicom Options
|
Exercise
Price
|
Number of
Outstanding Unicom Options(1)(2)
|
% Shareholding
|
|
Jiang Peihua(3)
|
Beneficial
owner
|
22
June 2000
|
HK$15.42
|
1,600
|
||
(Personal)
|
15
February 2006
|
HK$6.35
|
206,000
|
|||
-------
|
-------
|
|||||
207,600
|
0.0015%
|
|||||
Liu Yunjie(4)
|
Beneficial
owner
|
22
June 2000
|
HK$15.42
|
148,600
|
0.0011%
|
|
(Personal)
|
||||||
Zhang Jian(4)
|
Beneficial
owner
|
15
February 2006
|
HK$6.35
|
218,000
|
0.0016%
|
|
(Personal)
|
||||||
Zhao Chuanli(5)
|
Beneficial
owner
|
22
June 2000
|
HK$15.42
|
24,400
|
||
(Personal)
|
15
February 2006
|
HK$6.35
|
210,000
|
|||
-------
|
-------
|
|||||
234,400
|
0.0017%
|
(1) | Each Unicom Option gives the holder the right to subscribe for one Unicom Share. | |
(2) | Particulars of the Unicom Options are as follows: | |
Date
of Grant
|
Exercise
Period
|
|
Options
granted pursuant to the Unicom Pre-Global Offering Share Option
Scheme
|
||
22
June 2000
|
22
June 2002 to 21 June 2010
|
|
Options
granted pursuant to the Unicom Share Option Scheme
|
||
15
February 2006
|
15
February 2008 to 14 February 2012 (in respect of 50% of the Unicom Options
granted)
|
|
15
February 2009 to 14 February 2012 (in respect of the remaining 50% of the
Unicom Options granted)
|
(3) | Director of Unicom Parent. | ||
(4) | Director of Unicom A Share Company. | ||
(5) | Supervisor of Unicom A Share Company. | ||
(c) |
As at the Latest
Practicable Date, the shareholdings in Unicom owned or controlled by the
parties acting in concert with Unicom (other than the directors of Unicom,
Unicom Parent and Unicom A Share Company as disclosed in paragraphs 6(a)
and 6(b) of this Appendix V) are as
follows:
|
Unicom
Shares Held
|
%
Shareholding
|
|||
Name
|
Directly
|
Indirectly
|
||
Unicom
Parent
|
—
|
9,725,000,020
|
71.17%
|
|
Unicom
A Share Company
|
—
|
9,725,000,020
|
71.17%
|
|
Unicom
BVI
|
9,725,000,020
|
—
|
71.17%
|
|
China
International Capital Corporation Hong Kong Asset Management Limited
(“CICCHKAM”)(1)
|
1,824,000
|
—
|
0.013%
|
(1) | CICCHKAM is a fellow subsidiary of CICC, which is the lead financial adviser to Unicom, and is therefore presumed to be a party acting in concert with Unicom in relation to the Proposals under the Takeovers Code. The Unicom Shares were held by CICCHKAM on behalf of discretionary accounts which were under the management of CICCHKAM. | ||
(d) | As at the Latest Practicable Date: | ||
(i) | save as disclosed in paragraph 6(a) of this Appendix V, none of the Unicom Directors was interested in any Unicom Securities or had borrowed or lent any Unicom Securities; | ||
(ii) | save as disclosed in paragraphs 6(b) and 6(c) of this Appendix V, none of the parties acting in concert with Unicom owned or controlled any Unicom Securities or had borrowed or lent any Unicom Securities; and | ||
(iii) | none of the persons referred to in paragraph 4(b) of this Appendix V owned or controlled any Unicom Securities. | ||
|
Name
|
Date
|
Type
of
Transaction
|
Number
of
Unicom
Securities
|
Price
|
|
Tong Jilu(1)
|
1
February 2008
|
Exercise
of Unicom Options
|
200,000
Unicom Options
|
HK$5.92
for each Unicom Option
|
|
1
February 2008
|
Sale
|
8,000
Unicom Shares
|
HK$18.42
for each Unicom Share
|
||
1
February 2008
|
Sale
|
92,000
Unicom Shares
|
HK$18.40
for each Unicom Share
|
||
1
February 2008
|
Sale
|
50,000
Unicom Shares
|
HK$18.34
for each Unicom Share
|
||
1
February 2008
|
Sale
|
50,000
Unicom Shares
|
HK$18.30
for each Unicom Share
|
||
Jiang Peihua(2)
|
31
December 2007
|
Exercise
of Unicom Options
|
10,000
Unicom Options
|
HK$5.92
for each Unicom Option
|
|
31
December 2007
|
Sale
|
10,000
Unicom Shares
|
HK$17.66
for each Unicom Share
|
||
31
December 2007
|
Exercise
of Unicom Options
|
130,000
Unicom Options
|
HK$15.42
for each Unicom Option
|
||
31
December 2007
|
Sale
|
80,000
Unicom Shares
|
HK$17.72
for each Unicom Share
|
||
31
December 2007
|
Sale
|
50,000
Unicom Shares
|
HK$17.86
for each Unicom Share
|
||
28
March 2008
|
Exercise
of Unicom Options
|
102,000
Unicom Options
|
HK$6.35
for each Unicom Option
|
||
28
March 2008
|
Sale
|
102,000
Unicom Shares
|
HK$17.06
for each Unicom Share
|
||
Liu Yunjie(3)
|
11
January 2008
|
Exercise
of Unicom Options
|
144,000
Unicom Options
|
HK$15.42
for each Unicom Option
|
|
11
January 2008
|
Sale
|
58,000
Unicom Shares
|
HK$18.80
for each Unicom Share
|
||
11
January 2008
|
Sale
|
36,000
Unicom Shares
|
HK$18.82
for each Unicom Share
|
||
11
January 2008
|
Sale
|
50,000
Unicom Shares
|
HK$18.84
for each Unicom Share
|
||
Zhang Jian(3)
|
18
February 2008
|
Exercise
of Unicom Options
|
90,000
Unicom Options
|
HK$6.35
for each Unicom Option
|
18
February 2008
|
Sale
|
90,000
Unicom Shares
|
HK$19.68
for each Unicom Share
|
||
Zhao Chuanli(4)
|
24
December 2007
|
Exercise
of Unicom Options
|
20,000
Unicom Options
|
HK$5.92
for each Unicom Option
|
|
24
December 2007
|
Sale
|
20,000
Unicom Shares
|
HK$17.50
for each Unicom Share
|
||
27
December 2007
|
Exercise
of Unicom Options
|
20,000
Unicom Options
|
HK$5.92
for each Unicom Option
|
||
27
December 2007
|
Sale
|
20,000
Unicom Shares
|
HK$18.40
for each Unicom Share
|
||
4
February 2008
|
Exercise
of Unicom Options
|
24,000
Unicom Options
|
HK$5.92
for each Unicom Option
|
||
4
February 2008
|
Sale
|
24,000
Unicom Shares
|
HK$19.20
for each Unicom Share
|
||
4
February 2008
|
Exercise
of Unicom Options
|
100,000
Unicom Options
|
HK$15.42
for each Unicom Option
|
||
4
February 2008
|
Sale
|
100,000
Unicom Shares
|
HK$19.42
for each Unicom Share
|
||
14
February 2008
|
Exercise
of Unicom Options
|
30,000
Unicom Options
|
HK$15.42
for each Unicom Option
|
||
14
February 2008
|
Sale
|
30,000
Unicom Shares
|
HK$18.50
for each Unicom Share
|
||
15
February 2008
|
Exercise
of Unicom Options
|
30,000
Unicom Options
|
HK$15.42
for each Unicom Option
|
||
15
February 2008
|
Sale
|
30,000
Unicom Shares
|
HK$18.80
for each Unicom Share
|
||
15
February 2008
|
Exercise
of Unicom Options
|
50,000
Unicom Options
|
HK$6.35
for each Unicom Option
|
||
15
February 2008
|
Sale
|
18,000
Unicom Shares
|
HK$19.00
for each Unicom Share
|
||
15
February 2008
|
Sale
|
32,000
Unicom Shares
|
HK$19.02
for each Unicom Share
|
||
18
February 2008
|
Exercise
of Unicom Options
|
20,000
Unicom Options
|
HK$15.42
for each Unicom Option
|
||
18
February 2008
|
Sale
|
20,000
Unicom Shares
|
HK$20.00
for each Unicom Share
|
||
18
February 2008
|
Exercise
of Unicom Options
|
20,000
Unicom Options
|
HK$6.35
for each Unicom Option
|
18
February 2008
|
Sale
|
20,000
Unicom Shares
|
HK$20.00
for each Unicom Share
|
||
CICCHKAM(5)
|
5
December 2007
|
Sale
|
30,000
Unicom Shares
|
HK$16.06
for each Unicom Share
|
|
5
December 2007
|
Sale
|
70,000
Unicom Shares
|
HK$16.08
for each Unicom Share
|
||
5
December 2007
|
Sale
|
58,000
Unicom Shares
|
HK$16.10
for each Unicom Share
|
||
5
December 2007
|
Sale
|
96,000
Unicom Shares
|
HK$16.12
for each Unicom Share
|
||
5
December 2007
|
Sale
|
30,000
Unicom Shares
|
HK$16.14
for each Unicom Share
|
||
5
December 2007
|
Sale
|
10,000
Unicom Shares
|
HK$16.16
for each Unicom Share
|
||
5
December 2007
|
Sale
|
50,000
Unicom Shares
|
HK$16.18
for each Unicom Share
|
||
5
December 2007
|
Sale
|
10,000
Unicom Shares
|
HK$16.20
for each Unicom Share
|
||
5
December 2007
|
Sale
|
58,000
Unicom Shares
|
HK$16.22
for each Unicom Share
|
||
5
December 2007
|
Sale
|
30,000
Unicom Shares
|
HK$16.24
for each Unicom Share
|
||
5
December 2007
|
Sale
|
18,000
Unicom Shares
|
HK$16.26
for each Unicom Share
|
||
5
December 2007
|
Sale
|
60,000
Unicom Shares
|
HK$16.28
for each Unicom Share
|
||
5
December 2007
|
Sale
|
10,000
Unicom Shares
|
HK$16.30
for each Unicom Share
|
||
5
December 2007
|
Sale
|
10,000
Unicom Shares
|
HK$16.32
for each Unicom Share
|
||
5
December 2007
|
Sale
|
10,000
Unicom Shares
|
HK$16.36
for each Unicom Share
|
||
6
December 2007
|
Sale
|
26,000
Unicom Shares
|
HK$16.14
for each Unicom Share
|
||
6
December 2007
|
Sale
|
20,000
Unicom Shares
|
HK$16.16
for each Unicom Share
|
||
6
December 2007
|
Sale
|
22,000
Unicom Shares
|
HK$16.18
for each Unicom Share
|
6
December 2007
|
Sale
|
20,000
Unicom Shares
|
HK$16.20
for each Unicom Share
|
||
6
December 2007
|
Sale
|
6,000
Unicom Shares
|
HK$16.28
for each Unicom Share
|
||
6
December 2007
|
Sale
|
22,000
Unicom Shares
|
HK$16.30
for each Unicom Share
|
||
6
December 2007
|
Sale
|
10,000
Unicom Shares
|
HK$16.32
for each Unicom Share
|
||
6
December 2007
|
Sale
|
20,000
Unicom Shares
|
HK$16.38
for each Unicom Share
|
||
6
December 2007
|
Sale
|
20,000
Unicom Shares
|
HK$16.40
for each Unicom Share
|
||
6
December 2007
|
Sale
|
10,000
Unicom Shares
|
HK$16.42
for each Unicom Share
|
||
6
December 2007
|
Sale
|
10,000
Unicom Shares
|
HK$16.44
for each Unicom Share
|
||
6
December 2007
|
Sale
|
40,000
Unicom Shares
|
HK$16.46
for each Unicom Share
|
||
6
December 2007
|
Sale
|
30,000
Unicom Shares
|
HK$16.48
for each Unicom Share
|
||
6
December 2007
|
Sale
|
20,000
Unicom Shares
|
HK$16.50
for each Unicom Share
|
||
15
February 2008
|
Purchase
|
100,000
Unicom Shares
|
HK$19.50
for each Unicom Share
|
||
15
February 2008
|
Purchase
|
20,000
Unicom Shares
|
HK$19.60
for each Unicom Share
|
||
15
February 2008
|
Purchase
|
80,000
Unicom Shares
|
HK$19.66
for each Unicom Share
|
||
15
February 2008
|
Purchase
|
20,000
Unicom Shares
|
HK$19.72
for each Unicom Share
|
||
6
March 2008
|
Purchase
|
6,000
Unicom Shares
|
HK$17.06
for each Unicom Share
|
||
6
March 2008
|
Purchase
|
20,000
Unicom Shares
|
HK$17.12
for each Unicom Share
|
||
6
March 2008
|
Purchase
|
14,000
Unicom Shares
|
HK$17.14
for each Unicom Share
|
||
6
March 2008
|
Purchase
|
30,000
Unicom Shares
|
HK$17.16
for each Unicom Share
|
6
March 2008
|
Purchase
|
50,000
Unicom Shares
|
HK$17.18
for each Unicom Share
|
||
6
March 2008
|
Purchase
|
20,000
Unicom Shares
|
HK$17.24
for each Unicom Share
|
||
6
March 2008
|
Purchase
|
20,000
Unicom Shares
|
HK$17.26
for each Unicom Share
|
||
6
March 2008
|
Purchase
|
20,000
Unicom Shares
|
HK$17.28
for each Unicom Share
|
||
6
March 2008
|
Purchase
|
2,000
Unicom Shares
|
HK$17.32
for each Unicom Share
|
||
6
March 2008
|
Purchase
|
30,000
Unicom Shares
|
HK$17.36
for each Unicom Share
|
||
6
March 2008
|
Purchase
|
40,000
Unicom Shares
|
HK$17.40
for each Unicom Share
|
||
6
March 2008
|
Purchase
|
46,000
Unicom Shares
|
HK$17.42
for each Unicom Share
|
||
6
March 2008
|
Purchase
|
20,000
Unicom Shares
|
HK$17.44
for each Unicom Share
|
||
6
March 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$17.46
for each Unicom Share
|
||
6
March 2008
|
Purchase
|
44,000
Unicom Shares
|
HK$17.52
for each Unicom Share
|
||
6
March 2008
|
Purchase
|
30,000
Unicom Shares
|
HK$17.54
for each Unicom Share
|
||
6
March 2008
|
Purchase
|
38,000
Unicom Shares
|
HK$17.58
for each Unicom Share
|
||
14
April 2008
|
Purchase
|
50,000
Unicom Shares
|
HK$15.90
for each Unicom Share
|
||
14
April 2008
|
Purchase
|
20,000
Unicom Shares
|
HK$15.92
for each Unicom Share
|
||
14
April 2008
|
Purchase
|
40,000
Unicom Shares
|
HK$15.96
for each Unicom Share
|
||
14
April 2008
|
Purchase
|
40,000
Unicom Shares
|
HK$15.98
for each Unicom Share
|
||
14
April 2008
|
Purchase
|
72,000
Unicom Shares
|
HK$16.00
for each Unicom Share
|
||
14
April 2008
|
Purchase
|
50,000
Unicom Shares
|
HK$16.02
for each Unicom Share
|
14
April 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$16.06
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
70,000
Unicom Shares
|
HK$16.90
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$16.86
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
36,000
Unicom Shares
|
HK$16.96
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
14,000
Unicom Shares
|
HK$16.98
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
30,000
Unicom Shares
|
HK$16.94
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
30,000
Unicom Shares
|
HK$16.88
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
60,000
Unicom Shares
|
HK$16.84
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
60,000
Unicom Shares
|
HK$16.92
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
20,000
Unicom Shares
|
HK$17.00
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
50,000
Unicom Shares
|
HK$17.04
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
20,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$17.08
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
40,000
Unicom Shares
|
HK$17.16
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$16.92
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
8,000
Unicom Shares
|
HK$16.86
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
2,000
Unicom Shares
|
HK$16.86
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
20,000
Unicom Shares
|
HK$16.94
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$16.98
for each Unicom Share
|
29
April 2008
|
Purchase
|
4,000
Unicom Shares
|
HK$16.96
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
6,000
Unicom Shares
|
HK$16.96
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$16.94
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$16.92
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$16.90
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$16.86
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
20,000
Unicom Shares
|
HK$16.84
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
4,000
Unicom Shares
|
HK$17.00
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
6,000
Unicom Shares
|
HK$17.00
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$17.00
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$17.00
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
2,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
4,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
4,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
4,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
2,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
2,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
29
April 2008
|
Purchase
|
2,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
2,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
4,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
4,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
2,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
2,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
6,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
2,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
4,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
4,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
20,000
Unicom Shares
|
HK$17.06
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
20,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
29
April 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
||
2
May 2008
|
Purchase
|
30,000
Unicom Shares
|
HK$17.06
for each Unicom Share
|
||
2
May 2008
|
Purchase
|
10,000
Unicom Shares
|
HK$17.08
for each Unicom Share
|
||
2
May 2008
|
Purchase
|
40,000
Unicom Shares
|
HK$17.10
for each Unicom Share
|
2
May 2008
|
Purchase
|
20,000
Unicom Shares
|
HK$17.12
for each Unicom Share
|
||
2
May 2008
|
Purchase
|
30,000
Unicom Shares
|
HK$17.14
for each Unicom Share
|
||
2
May 2008
|
Purchase
|
20,000
Unicom Shares
|
HK$17.22
for each Unicom Share
|
Name
|
Date
|
Transaction
Type
|
Number
of Unicom Shares
|
Average
Price (HK$)
|
Maximum
Price (HK$)
|
Minimum
Price (HK$)
|
|
Bear
Stearns International Limited
|
5
December 2007
|
Purchase
|
400,000
|
16.11
|
16.16
|
16.10
|
|
6
December 2007
|
Purchase
|
20,000
|
16.45
|
16.45
|
16.45
|
||
7
December 2007
|
Purchase
|
52,000
|
16.52
|
16.52
|
16.52
|
||
11
December 2007
|
Purchase
|
58,000
|
16.23
|
16.23
|
16.23
|
||
11
December 2007
|
Sale
|
200,000
|
16.37
|
16.38
|
16.36
|
||
12
December 2007
|
Purchase
|
136,000
|
15.74
|
15.96
|
15.66
|
||
17
December 2007
|
Purchase
|
364,000
|
15.01
|
15.14
|
14.84
|
||
19
December 2007
|
Sale
|
100,000
|
15.98
|
15.98
|
15.98
|
4
January 2008
|
Purchase
|
24,000
|
16.66
|
16.66
|
16.66
|
||
8
January 2008
|
Purchase
|
32,000
|
16.19
|
16.19
|
16.19
|
||
10
January 2008
|
Sale
|
400,000
|
17.90
|
18.08
|
17.82
|
||
11
January 2008
|
Sale
|
100,000
|
18.66
|
18.66
|
18.66
|
||
14
January 2008
|
Purchase
|
26,000
|
17.73
|
17.76
|
17.67
|
||
15
January 2008
|
Purchase
|
6,000
|
18.38
|
18.38
|
18.38
|
||
21
January 2008
|
Purchase
|
100,000
|
16.54
|
16.54
|
16.54
|
||
25
January 2008
|
Purchase
|
890,000
|
18.22
|
18.22
|
18.22
|
||
25
January 2008
|
Sale
|
100,000
|
17.96
|
17.96
|
17.96
|
||
29
January 2008
|
Sale
|
100,000
|
18.04
|
18.04
|
18.04
|
||
30
January 2008
|
Sale
|
2,000
|
18.42
|
18.42
|
18.42
|
||
31
January 2008
|
Sale
|
100,000
|
17.98
|
17.98
|
17.98
|
||
1
February 2008
|
Purchase
|
22,000
|
18.44
|
18.44
|
18.44
|
||
1
February 2008
|
Sale
|
100,000
|
19.18
|
19.18
|
19.18
|
||
5
February 2008
|
Sale
|
6,000
|
19.46
|
19.46
|
19.46
|
||
11
February 2008
|
Sale
|
100,000
|
18.38
|
18.38
|
18.38
|
||
29
February 2008
|
Purchase
|
86,000
|
17.16
|
17.16
|
17.16
|
||
4
March 2008
|
Purchase
|
100,000
|
16.16
|
16.16
|
16.16
|
||
12
March 2008
|
Purchase
|
16,000
|
18.02
|
18.02
|
18.02
|
||
1
April 2008
|
Purchase
|
100,000
|
16.24
|
16.24
|
16.24
|
||
9
April 2008
|
Purchase
|
100,000
|
16.38
|
16.38
|
16.38
|
||
10
April 2008
|
Purchase
|
200,000
|
16.06
|
16.08
|
16.04
|
||
25
April 2008
|
Purchase
|
200,000
|
16.40
|
16.40
|
16.40
|
||
J.P.
Morgan Securities Limited
|
5
December 2007
|
Purchase
|
7,000,000
|
16.10
|
16.16
|
16.10
|
|
5
December 2007
|
Sale
|
3,626,000
|
16.20
|
16.22
|
16.17
|
||
6
December 2007
|
Sale
|
274,000
|
16.66
|
16.74
|
16.60
|
||
7
December 2007
|
Sale
|
1,000,000
|
16.25
|
16.88
|
15.76
|
||
10
December 2007
|
Sale
|
500,000
|
16.15
|
16.32
|
16.08
|
||
14
December 2007
|
Sale
|
94,000
|
15.56
|
15.56
|
15.56
|
||
17
December 2007
|
Purchase
|
94,000
|
15.40
|
15.40
|
15.40
|
||
16
January 2008
|
Sale
|
220,000
|
17.22
|
17.40
|
17.20
|
||
17
January 2008
|
Sale
|
180,000
|
17.30
|
17.30
|
17.30
|
||
23
January 2008
|
Purchase
|
400,000
|
16.20
|
16.26
|
16.14
|
||
3
February 2008
|
Purchase
|
450,000
|
19.28
|
19.28
|
19.28
|
||
4
February 2008
|
Sale
|
50,000
|
19.48
|
19.48
|
19.48
|
||
5
February 2008
|
Sale
|
400,000
|
19.46
|
19.60
|
19.34
|
||
6
February 2008
|
Sale
|
200,000
|
18.49
|
18.50
|
18.48
|
||
11
February 2008
|
Sale
|
246,000
|
18.22
|
18.40
|
18.09
|
||
12
February 2008
|
Purchase
|
72,500,000
|
17.62
|
17.62
|
17.62
|
||
12
February 2008
|
Sale
|
8,938,000
|
18.12
|
18.44
|
17.90
|
||
13
February 2008
|
Purchase
|
262,000
|
17.89
|
17.89
|
17.89
|
||
13
February 2008
|
Sale
|
13,080,000
|
17.88
|
18.10
|
17.68
|
||
14
February 2008
|
Sale
|
16,292,000
|
18.79
|
18.96
|
18.36
|
||
15
February 2008
|
Sale
|
13,816,000
|
19.21
|
19.92
|
18.94
|
||
18
February 2008
|
Sale
|
1,306,000
|
19.68
|
19.74
|
19.68
|
||
19
February 2008
|
Sale
|
126,000
|
19.20
|
19.20
|
19.17
|
||
21
February 2008
|
Sale
|
398,000
|
18.77
|
19.00
|
18.30
|
||
22
February 2008
|
Sale
|
100,000
|
18.50
|
18.50
|
18.50
|
||
4
March 2008
|
Purchase
|
200,000
|
16.20
|
16.20
|
16.20
|
||
5
March 2008
|
Sale
|
200,000
|
16.99
|
17.16
|
16.82
|
||
20
March 2008
|
Purchase
|
546,000
|
15.71
|
15.74
|
15.38
|
||
25
March 2008
|
Sale
|
746,000
|
17.01
|
17.52
|
16.56
|
||
26
March 2008
|
Sale
|
200,000
|
17.79
|
17.84
|
17.74
|
||
15
April 2008
|
Sale
|
250,000
|
16.22
|
16.24
|
16.20
|
||
16
April 2008
|
Sale
|
700,000
|
16.37
|
16.50
|
16.26
|
||
18
April 2008
|
Purchase
|
48,000
|
16.35
|
16.35
|
16.35
|
||
28
April 2008
|
Sale
|
48,000
|
16.28
|
16.28
|
16.28
|
J.P.
Morgan Whitefriars Inc.
|
11
January 2008
|
Purchase
|
30,000
|
18.56
|
18.56
|
18.56
|
|
25
January 2008
|
Sale
|
2,000
|
17.72
|
17.72
|
17.72
|
||
31
January 2008
|
Sale
|
24,000
|
18.58
|
18.58
|
18.58
|
||
5
February 2008
|
Sale
|
4,000
|
19.18
|
19.18
|
19.18
|
||
26
February 2008
|
Purchase
|
160,000
|
17.84
|
17.84
|
17.84
|
||
28
February 2008
|
Sale
|
160,000
|
17.99
|
17.99
|
17.99
|
||
4
March 2008
|
Purchase
|
190,000
|
17.01
|
17.01
|
17.01
|
||
11
March 2008
|
Purchase
|
48,000
|
17.61
|
17.61
|
17.61
|
||
14
March 2008
|
Sale
|
238,000
|
17.51
|
17.51
|
17.51
|
||
18
March 2008
|
Purchase
|
238,000
|
16.49
|
16.49
|
16.49
|
||
20
March 2008
|
Sale
|
142,000
|
15.92
|
15.92
|
15.92
|
||
26
March 2008
|
Sale
|
96,000
|
17.60
|
17.60
|
17.60
|
(1) | Certain exempted dealings undertaken by J.P. Morgan Securities Limited, J.P. Morgan Whitefriars Inc., Bear Stearns & Co., Inc. and Bear Stearns International Limited are excluded as such entities are exempt principal traders. |
Name
|
Date
|
Transaction
Type
|
Number
of
Unicom
Shares
|
Price
(HK$)
|
|
Bear
Stearns International Limited
|
14
May 2008
|
Sale
|
1,560,000
|
16.72
|
|
22
May 2008
|
Purchase
|
114,000
|
16.83
|
Name
|
Date
|
Transaction
Type
|
Number
of Unicom ADSs
|
Average
Price (US$)
|
Maximum
Price (US$)
|
Minimum
Price (US$)
|
|
Bear
Stearns & Co., Inc.
|
6
December 2007
|
Sale
|
53,600
|
21.27
|
21.27
|
21.27
|
|
12
December 2007
|
Sale
|
4,800
|
20.20
|
20.20
|
20.20
|
||
28
December 2007
|
Purchase
|
29,600
|
22.56
|
22.56
|
22.56
|
||
9
January 2008
|
Sale
|
112,000
|
20.00
|
20.00
|
20.00
|
||
10
January 2008
|
Purchase
|
129,400
|
22.97
|
22.97
|
22.97
|
||
11
January 2008
|
Purchase
|
130,000
|
23.60
|
23.60
|
23.60
|
||
13
February 2008
|
Sale
|
59,800
|
23.55
|
23.55
|
23.55
|
||
15
February 2008
|
Purchase
|
34,600
|
24.92
|
24.92
|
24.92
|
||
7
March 2008
|
Purchase
|
15,600
|
21.14
|
21.14
|
21.14
|
||
7
March 2008
|
Purchase
|
38,000
|
21.96
|
21.96
|
21.96
|
||
20
March 2008
|
Purchase
|
30,000
|
20.62
|
20.62
|
20.62
|
||
20
March 2008
|
Sale
|
7
|
21.03
|
21.03
|
21.03
|
||
27
March 2008
|
Sale
|
400
|
22.62
|
22.62
|
22.62
|
||
28
March 2008
|
Sale
|
10,000
|
21.52
|
21.52
|
21.52
|
||
31
March 2008
|
Purchase
|
400
|
21.13
|
21.13
|
21.13
|
||
10
April 2008
|
Sale
|
70,000
|
20.74
|
20.74
|
20.74
|
||
17
April 2008
|
Purchase
|
50,000
|
21.34
|
21.34
|
21.34
|
||
18
April 2008
|
Purchase
|
23,500
|
21.34
|
21.34
|
21.34
|
||
25
April 2008
|
Sale
|
53,400
|
20.93
|
20.93
|
20.93
|
||
J.P.
Morgan Securities Limited
|
4
December 2007
|
Sale
|
125,000
|
21.15
|
21.15
|
21.15
|
|
5
December 2007
|
Sale
|
35,000
|
21.41
|
21.41
|
21.41
|
||
11
December 2007
|
Sale
|
40,000
|
20.25
|
20.25
|
20.25
|
11
December 2007
|
Purchase
|
40,000
|
20.25
|
20.25
|
20.25
|
||
15
January 2008
|
Purchase
|
40,000
|
21.71
|
21.71
|
21.71
|
||
22
January 2008
|
Sale
|
40,019
|
21.03
|
21.03
|
21.03
|
||
23
January 2008
|
Purchase
|
19
|
21.35
|
21.35
|
21.35
|
||
5
February 2008
|
Purchase
|
40,000
|
23.52
|
23.52
|
23.52
|
||
6
February 2008
|
Purchase
|
10,000
|
22.90
|
22.90
|
22.90
|
||
12
February 2008
|
Sale
|
821,000
|
23.50
|
23.50
|
23.50
|
||
13
February 2008
|
Sale
|
725,000
|
23.32
|
23.32
|
23.32
|
||
14
February 2008
|
Sale
|
330,000
|
24.02
|
24.02
|
24.02
|
||
19
March 2008
|
Purchase
|
50,000
|
20.84
|
20.84
|
20.84
|
||
26
March 2008
|
Sale
|
10,000
|
22.45
|
22.45
|
22.45
|
||
10
April 2008
|
Purchase
|
31,000
|
20.48
|
20.48
|
20.48
|
||
11
April 2008
|
Purchase
|
12
|
20.27
|
20.27
|
20.27
|
||
11
April 2008
|
Sale
|
12
|
20.27
|
20.27
|
20.27
|
||
11
April 2008
|
Purchase
|
41,100
|
20.27
|
20.27
|
20.27
|
||
14
April 2008
|
Purchase
|
17,900
|
20.05
|
20.05
|
20.05
|
||
15
April 2008
|
Purchase
|
25,000
|
20.61
|
20.61
|
20.61
|
||
16
April 2008
|
Sale
|
20,000
|
21.15
|
21.15
|
21.15
|
(c) | During the Relevant Period: | ||
(i) | save as disclosed in paragraphs 7(a) and 7(b) of this Appendix V, none of the Unicom Directors and any of the parties acting in concert with Unicom had dealt for value in any Unicom Securities; | ||
(ii) | none of the persons referred to in paragraph 4(b) of this Appendix V had dealt for value in any Unicom Securities; and | ||
(iii) | no persons who had any arrangements of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with Unicom or any of the parties acting in concert with Unicom had dealt for value in any Unicom Securities. |
(a) | Save for the Proposals and save as disclosed in paragraph 5 headed “Undertakings” in the Explanatory Statement, there is no agreement, arrangement or undertaking, including any compensation arrangement, between Unicom or any party acting in concert with it on the one hand and any of the Netcom Directors, recent Netcom Directors, Netcom Shareholders or recent Netcom Shareholders on the other hand having any connection with or dependence upon the Scheme. | ||
(b) | There is no agreement or arrangement to which Unicom is a party which relate to the circumstances in which it may or may not invoke or seek to invoke a condition to the Scheme. | ||
(c) | The emoluments of the Unicom Directors will not be affected by the Scheme or by any associated transaction. | ||
(1) | a subscription agreement dated 20 June 2006 entered into between Unicom and SK Telecom pursuant to which Unicom agreed to issue to SK Telecom an aggregate principal amount of US$1,000,000,000 zero coupon convertible bonds due 2009 in consideration of SK Telecom agreeing to pay an issue price of 100% of the principal amount of the convertible bonds; | ||
(2)
|
a
strategic alliance framework agreement dated 20 June 2006 entered into
between Unicom and SK Telecom in connection with the cooperation of both
parties in certain areas (such as CDMA handsets, value-added services, VAS
business plan, marketing, IT infrastructure and network) relating to the
business, technical and operational cooperation on the further development
of CDMA cellular communications services;
|
|
(3)
|
the
Unicom CDMA Lease;
|
|
(4)
|
a
transfer agreement dated 26 October 2006 entered into between Unicom A
Share Company and CUCL pursuant to which Unicom A Share Company agreed to
transfer all of its rights and obligations under the Unicom CDMA Lease to
CUCL;
|
|
(5)
|
a
comprehensive services agreement dated 26 October 2006 (the “2006
Comprehensive Services Agreement”) entered into between Unicom A Share
Company and Unicom Parent pursuant to which Unicom Parent agreed (by
itself or through the subsidiaries of Unicom Parent) to enter into various
service arrangements with Unicom A Share Company (the rights and
obligations of Unicom A Share Company under that agreement were
subsequently transferred to CUCL);
|
|
(6)
|
a
transfer agreement dated 26 October 2006 entered into between Unicom A
Share Company and CUCL pursuant to which Unicom A Share Company agreed to
transfer all of its rights and obligations under the 2006 Comprehensive
Services Agreement to CUCL;
|
|
(7)
|
a
framework agreement dated 19 December 2006 entered into between Unicom
Huasheng Telecommunications Technology Co., Ltd., an indirect subsidiary
of Unicom, and the Guizhou branch of Unicom Parent for Unicom Huasheng
Telecommunications Technology Co., Ltd. to procure the supply of CDMA
mobile handsets from the Guizhou branch of Unicom Parent for a
consideration of the aggregate price set out in the relevant supply
notices for the period from 1 January 2006 to 31 December 2008. The amount
payable by Unicom Huasheng Telecommunications Technology Co., Ltd. under
the agreement will not be more than RMB180 million for the year ending 31
December 2008;
|
|
(8)
|
an
asset transfer agreement dated 16 November 2007 entered into between CUCL
and Unicom Parent in connection with the acquisition by CUCL of the GSM
cellular telecommunication assets and business and the CDMA cellular
telecommunication business, comprising the relevant assets, rights and
obligations of the Guizhou Branch of Unicom Parent (“Unicom Guizhou
Assets”), from Unicom Parent for a cash consideration of RMB880
million;
|
|
(9)
|
a
supplemental agreement dated 16 November 2007 entered into between Unicom
New Horizon, Unicom Parent, CUCL and Unicom A Share Company in connection
with the acquisition of the Unicom Guizhou Assets and the Unicom CDMA
Lease;
|
|
(10)
|
an
irrevocable undertaking dated 1 June 2008 entered into between Telefónica
and Unicom pursuant to which Telefónica has undertaken to Unicom to, among
other things, vote in favour of all of the resolutions to approve the
Scheme at the Court Meeting;
|
|
(11)
|
an
irrevocable undertaking dated 1 June 2008 entered into between Netcom BVI,
Netcom Parent and Unicom pursuant to which Netcom BVI has undertaken to
Unicom to, among other things, vote in favour of all of the resolutions to
approve the Scheme at the Court Meeting;
|
|
(12)
|
the
CDMA Business Disposal Framework Agreement;
|
|
(13)
|
the
CDMA Business Disposal Agreement;
|
|
(14)
|
an
option waiver and lease termination agreement dated 27 July 2008 (the
“Option Waiver and Lease Termination Agreement”) entered into between
Unicom Parent, Unicom New Horizon and Unicom A Share Company (the rights
and obligations of Unicom A Share Company under that agreement were
subsequently transferred to CUCL) relating to the waiver by CUCL of its
right to exercise its option to purchase the CDMA network from Unicom New
Horizon pursuant to the Unicom CDMA Lease and the termination of the
Unicom CDMA Lease;
|
|
(15)
|
a
transfer agreement dated 27 July 2008 entered into between Unicom A Share
Company and CUCL pursuant to which Unicom A Share Company agreed to
transfer all of its rights and obligations under the Option Waiver and
Lease Termination Agreement to
CUCL;
|
(16)
|
the
framework agreement dated 12 August 2008 entered into between Netcom
Parent and CUCL to record the principles governing, and the principal
terms of, the existing continuing transactions between the parties
relating to the interconnection of their respective networks and the
settlement of charges in respect of domestic long distance voice
services;
|
|
(17)
|
the
framework agreement dated 12 August 2008 entered into between Netcom
Parent and CUCL to record the principles governing, and the principal
terms of, the existing continuing transactions between the parties
relating to the leasing of property by CUCL from Netcom
Parent;
|
|
(18)
|
the
framework agreement dated 12 August 2008 entered into between Netcom
Parent and CUCL to record the principles governing, and the principal
terms of, the existing continuing transactions between the parties
relating to the provision of certain engineering and information
technology services to CUCL by Netcom Parent;
|
|
(19)
|
the
framework agreement dated 12 August 2008 entered into between Netcom
Parent and CUCL to record the principles governing, and the principal
terms of, the existing continuing transactions between the parties
relating to the provision of ancillary telecommunications services to CUCL
by Netcom Parent;
|
|
(20)
|
the
framework agreement dated 12 August 2008 entered into between Netcom
Parent and CUCL to record the principles governing, and the principal
terms of, the existing continuing transactions between the parties
relating to provision of various support services to CUCL by Netcom
Parent;
|
|
(21)
|
the
framework agreement dated 12 August 2008 entered into between Netcom
Parent and CUCL to record the principles governing, and the principal
terms of, the pre-existing continuing transactions between the parties
relating to the lease of certain telecommunications resources and certain
other telecommunications facilities by CUCL;
|
|
(22)
|
the
comprehensive services agreement dated 12 August 2008 (the “2008
Comprehensive Services Agreement”) entered into between Unicom Parent and
Unicom A Share Company (the rights and obligations of Unicom A Share
Company under that agreement were subsequently transferred to CUCL and
China Netcom (Group) Company Limited (“CNC China”), a wholly-owned
subsidiary of Netcom) relating to the provision of services between the
parties; and
|
|
(23)
|
a
transfer agreement dated 12 August 2008 entered into between Unicom A
Share Company, CUCL and CNC China pursuant to which Unicom A Share Company
agreed to transfer all of its rights and obligations under the 2008
Comprehensive Services Agreement to CUCL and CNC
China.
|
Name
|
Qualification
|
|
China
International Capital Corporation
(Hong
Kong) Limited
|
A
corporation licensed under the SFO to carry on Type 1 (dealing in
securities), Type 4 (advising on securities), Type 6 (advising on
corporate finance) and Type 9 (asset management) regulated
activities
|
|
J.P.
Morgan Securities (Asia Pacific) Limited
|
A
registered institution under the SFO licensed to carry on Type 1 (dealing
in securities), Type 4 (advising on securities), Type 6 (advising on
corporate finance) and Type 7 (providing automated trading services)
regulated activities, and a restricted licence bank under the Banking
Ordinance, Chapter 155 of the Laws of Hong Kong
|
|
PricewaterhouseCoopers
|
Certified
Public Accountants
|
12.
|
CONSENTS
|
|
(a)
|
Each
of CICC and JPMorgan has given and has not withdrawn its written consent
to the issue of this document with the inclusion of references to its name
in the form and context in which they respectively
appear.
|
|
(b)
|
PricewaterhouseCoopers
has given and has not withdrawn its written consent to the issue of this
document with the inclusion of the text of its letter and references to
its name in the form and context in which they respectively
appear.
|
|
13.
|
MISCELLANEOUS
|
|
(a)
|
The
principal members of Unicom’s concert group are (1) Unicom, (2) Unicom
BVI, (3) Unicom A Share Company and (4) Unicom Parent.
|
|
(b)
|
Unicom
Parent is the ultimate holding company of Unicom. Unicom Parent held
approximately 60.74% of the issued share capital of Unicom A Share
Company, which in turn held approximately 82.10% of the issued share
capital of Unicom BVI, wh ich in turn held approximately 71.17% of the
issued share capital of Unicom as at the Latest Practicable
Date.
|
|
(c)
|
The
registered address of Unicom and its principal office in Hong Kong is at
75th Floor, The Center, 99 Queen’s Road Central, Hong Kong. The Unicom
Directors are Mr. Chang Xiaobing, Mr. Tong Jilu, Mr Li Gang, Mr. Zhang
Junan, Mr. Lu Jianguo, Mr. Lee Suk Hwan, Mr. Wu Jinglian, Mr. Shan
Weijian, Mr. Cheung Wing Lam, Linus and Mr. Wong Wai
Ming.
|
|
(d)
|
The
registered address of Unicom Parent is at Room 615, 6/F., Office Tower 3,
Henderson Center, No. 18, Jianguomen Nei Ave., Dongcheng District, Beijing
100005, the PRC. The directors of Unicom Parent are Mr. Chang Xiaobing,
Mr. Tong Jilu, Mr. Li Gang, Mr. Zhang Junan, Mr. Dong Qunke, Mr. Li Xiong,
Mr. Zhang Dongchen and Mr. Jiang Peihua.
|
|
(e)
|
The
registered address of Unicom A Share Company is at 29/F, Lian Tong Tower,
1033 Chang Ning Road, Shanghai 200050, the PRC. The directors of Unicom A
Share Company are Mr. Chang Xiaobing, Mr. Lu Jianguo, Mr. Tong Jilu, Mr.
Liu Yunjie, Mr. Zhang Jian, Mr. Gao Shangquan, Mr. Chen Xiaoyue, Mr. Chen
Junliang and Mr. Wang Chenguang. The supervisors of Unicom A Share Company
are Mr. Zhao Chuanli and Ms. Tang Fuxin.
|
|
(f)
|
The
registered address of Unicom BVI is at Craigmuir Chambers, P.O.Box 71,
Road Town, Tortola, British Virgin Islands. The directors of Unicom BVI
Company are Mr. Chang Xiaobing and Mr. Li Qiuhong.
|
|
(g)
|
CICC
is the lead financial adviser to Unicom and its address is at 29th Floor,
One International Finance Centre, 1 Harbour View Street, Central, Hong
Kong.
|
|
(h)
|
JPMorgan
is the financial adviser to Unicom and its address is at 28/F, Chater
House, 8 Connaught Road Central, Hong Kong.
|
|
(i)
|
Unicom
does not have any intention to transfer, charge or pledge any Netcom
Shares it acquires pursuant to the Scheme to any other
person.
|
|
(j)
|
As
at the Latest Practicable Date, there were no arrangements of the kind
referred to in Note 8 to Rule 22 of the Takeovers Code which existed
between Unicom or any of the parties acting in concert with Unicom and any
other person.
|
APPENDIX
VI
|
DOCUMENTS
AVAILABLE FOR INSPECTION
|
|
(1)
|
the
memorandum and articles of association of
Netcom;
|
|
(2)
|
the
memorandum and articles of association of
Unicom;
|
|
(3)
|
the
annual reports of Netcom for the two financial years ended 31 December
2007;
|
|
(4)
|
the
annual reports of Unicom for the two financial years ended 31 December
2007;
|
|
(5)
|
the
announcement dated 21 April 2008 made by Netcom of its unaudited
consolidated revenues for the three months ended 31 March
2008;
|
|
(6)
|
the
announcement dated 24 April 2008 made by Unicom of its unaudited
consolidated results for the three months ended 31 March
2008;
|
|
(7)
|
the
letter from the Board;
|
|
(8)
|
the
letter from the Independent Board
Committee;
|
|
(9)
|
the
letter from Rothschild;
|
|
(10)
|
the
unaudited pro forma consolidated financial information of the Enlarged
Group, the text of which is set out in Appendix III to the Explanatory
Statement;
|
|
(11)
|
the
accountant’s report from PricewaterhouseCoopers in respect of the
unaudited pro forma consolidated financial information of the Enlarged
Group, the text of which is set out in Appendix III to the Explanatory
Statement;
|
|
(12)
|
the
Option Proposal Letter;
|
|
(13)
|
the
proposed rules of the Special Purpose Unicom Share Option
Scheme;
|
|
(14)
|
the
ADS Voting Instruction Card;
|
|
(15)
|
the
Netcom Depositary’s Notice of Court Meeting and Extraordinary General
Meeting of Netcom;
|
|
(16)
|
the
written consents referred to in paragraph 13 headed “Consents” in Appendix
IV to the Explanatory Statement;
|
|
(17)
|
the
written consents referred to in paragraph 12 headed “Consents” in Appendix
V to the Explanatory Statement;
|
|
(18)
|
the
irrevocable undertakings from Netcom BVI and Telefónica and the
irrevocable instruction received by Netcom BVI referred to in paragraph 5
headed “Undertakings” in the Explanatory
Statement;
|
|
(19)
|
the
material contracts referred to in paragraph 11 headed “Material Contracts”
in Appendix IV to the Explanatory
Statement;
|
|
(20)
|
the
material contracts referred to in paragraph 10 headed “Material Contracts”
in Appendix V to the Explanatory
Statement;
|
|
(21)
|
the
full list of dealings during the Relevant Period by (a) Bear Stearns
International Limited, J.P. Morgan Securities Limited and J.P. Morgan
Whitefriars Inc. in the Netcom Shares and the Unicom Shares and (b) Bear
Stearns & Co., Inc. and J.P. Morgan Securities Limited in the Netcom
ADSs and the Unicom ADSs; and
|
|
(22)
|
this
document.
|
SCHEME
OF ARRANGEMENT
|
|
HCMP
1452/2008
|
PRELIMINARY
|
|
(A)
|
In
this Scheme of Arrangement, unless inconsistent with the subject or
context, the following expressions shall have the meanings respectively
set opposite them:
|
“Court
Meeting”
|
a
meeting of the holders of the Netcom Shares convened by direction of the
High Court for the purpose of approving this Scheme
|
|
“Effective
Date”
|
the
date on which this Scheme becomes effective in accordance with Clause 7 of
this Scheme
|
|
“High
Court”
|
High
Court of Hong Kong
|
|
“holder”
|
a
registered holder, including any person entitled by transmission to be
registered as such and joint holders
|
|
“Hong
Kong”
|
the
Hong Kong Special Administrative Region of the People’s Republic of
China
|
“Netcom”
|
China
Netcom Group Corporation (Hong Kong) Limited 中國網通集團(香港)有限公司,
a company incorporated under the laws of Hong Kong with limited
liability
|
|
“Netcom
Shares”
|
ordinary
shares of US$0.04 each in the capital of Netcom
|
|
“Register”
|
the
register of members of Netcom
|
|
“Scheme”
|
this
scheme of arrangement under Section 166 of the Companies Ordinance in its
present form or with or subject to any modification thereof or addition
thereto or conditions approved or imposed by the High
Court
|
|
“Scheme
Record Time”
|
5:00
p.m. (Hong Kong time) on a day on which The Stock Exchange of Hong Kong
Limited is open for trading and immediately preceding the Effective
Date
|
|
“Scheme
Shares”
|
all
the Netcom Shares in issue as at the Scheme Record Time
|
|
“Takeovers
Code”
|
The
Code on Takeovers and Mergers issued by the Securities and Futures
Commission in Hong Kong
|
|
“Unicom”
|
China
Unicom Limited 中國聯通股份有限公司,
a company incorporated under the laws of Hong Kong with limited
liability
|
|
“Unicom
Shares”
|
ordinary
shares of HK$0.10 each in the capital of Unicom
|
|
“HK$”
|
Hong
Kong dollars, the lawful currency of Hong
Kong
|
|
“US$”
|
United
States dollars, the lawful currency of the United
States
|
(B)
|
The
authorised share capital of Netcom at the date of this Scheme is
US$1,000,000,000 divided into 25,000,000,000 Netcom Shares, 6,699,197,200
of which have been issued and are fully
paid.
|
(C)
|
The
primary purpose of this Scheme is that Netcom shall become a wholly-owned
subsidiary of Unicom and the holders of the Scheme Shares shall become
shareholders of Unicom.
|
(D)
|
Unicom
as at the date of this Scheme does not beneficially own any Netcom
Shares.
|
(E)
|
As
at the date of this Scheme, various members of the group of companies to
which J.P. Morgan Securities (Asia Pacific) Limited belongs trade in
securities and derivative products including or involving the Netcom
Shares the number of which may fluctuate from time to time. By virtue of
their relationships with J.P. Morgan Securities (Asia Pacific) Limited,
which is the financial adviser to Unicom in respect of this Scheme, and as
such members are exempt principal traders under the Takeovers Code, each
of such members is precluded from voting at the Court Meeting
notwithstanding that the Netcom Shares in which any of them is legally or
beneficially interested will form part of the Scheme Shares. Each of these
members has accordingly undertaken to Netcom, through J.P. Morgan
Securities (Asia Pacific) Limited, that in relation to the Netcom Shares
which will be beneficially owned by any of them at the time of the Court
Meeting, such Netcom Shares would neither be represented nor voted at the
Court Meeting unless otherwise permitted under the Takeovers Code or by
the Securities and Futures Commission of Hong
Kong.
|
(F)
|
Further,
as at the date of this Scheme, various members of the group of companies
to which Citigroup Global Markets Asia Limited belongs trade in securities
and derivative products including or involving the Netcom Shares the
number of which may fluctuate from time to time. By virtue of their
relationships with Citigroup Global Markets Asia Limited, which is the
exclusive financial adviser to Netcom in respect of this Scheme, and as
such members are exempt principal traders under the Takeovers Code, each
of such members is precluded from voting at the Court Meeting
notwithstanding that the Netcom Shares in which any of them is legally or
beneficially interested will form part of the Scheme Shares. Each of these
members has accordingly undertaken to Netcom, through Citigroup Global
Markets Asia Limited, that in relation to the Netcom Shares which will be
beneficially owned by any of them at the time of the Court Meeting, such
Netcom Shares would neither be represented nor voted at the Court Meeting
unless otherwise permitted under the Takeovers Code or by the Securities
and Futures Commission of Hong
Kong.
|
(G)
|
Unicom
has agreed to appear by Counsel at the hearing of the petition to sanction
this Scheme and to undertake to the High Court to be bound by this Scheme
and to execute and do and procure to be executed and done all such
documents, acts and things as may be necessary or desirable to be executed
or done by Unicom for the purpose of giving effect to this
Scheme.
|
|
(a)
|
the
authorised and issued share capital of Netcom shall be reduced by
cancelling and extinguishing the Scheme
Shares;
|
|
(b)
|
subject
to and forthwith upon such reduction of capital taking effect, the
authorised share capital of Netcom shall be increased to its former amount
of US$1,000,000,000 by the creation of such number of Netcom Shares as
shall be equal to the number of the Scheme Shares cancelled;
and
|
|
(c)
|
Netcom
shall apply the credit arising in its books of account as a result of the
reduction of capital referred to in sub-clause (a) of this Clause 1 in
paying up in full at par the Netcom Shares created pursuant to sub-clause
(b) of this Clause 1, which Netcom Shares shall be allotted and issued,
credited as fully paid, to Unicom or its nominees or
both.
|
|
2.
|
(a)
|
In
consideration of the cancellation and extinguishment of the Scheme Shares,
Unicom shall, subject as provided in sub-clauses (b) and (c) of this
Clause 2, allot and issue to each holder of the Scheme Shares (as
appearing on the Register at the Scheme Record Time) the Unicom Shares,
credited as fully paid, in the proportion of 1.508 Unicom Shares for every
Scheme Share then held by them.
|
|
(b)
|
In
the case where the directors of Unicom or Netcom have been advised that
the allotment and issue of the Unicom Shares to a holder of the Scheme
Shares under sub-clause (a) of this Clause 2 may be prohibited by any
relevant law or so prohibited except after compliance with conditions or
requirements which the directors of Unicom or Netcom regard as unduly
onerous by reason of delay, expense or otherwise, Unicom may allot and
issue the relevant Unicom Shares to a person appointed by the directors of
Unicom who shall sell the same in the market as soon as reasonably
practicable and account to such holder of the Scheme Shares for the net
proceeds of sale (after the deduction of all expenses incurred and tax
payable in connection with such sale) in full satisfaction of his rights
to the Unicom Shares to which but for this sub-clause (b) of this Clause
2, he would have become entitled under the Scheme, except that no payment
will be made of any amount less than HK$50, which will be retained for the
benefit of Unicom. In order to give effect to such sale, the person
appointed by the directors of Unicom shall be authorised as attorney on
behalf of the holders of the Scheme Shares concerned to execute and
deliver as transferor forms of transfer or other instruments or
instructions of transfer and to give such instructions and to do all other
things which he may consider necessary or expedient in connection with
such sale. In the absence of bad faith or wilful default, none of Netcom,
Unicom and the person so appointed shall have any liability for any loss
or damage arising as a result of such
sale.
|
|
(c)
|
No
holder of any Scheme Shares shall be entitled to have allotted and issued
to him a fraction of a Unicom Share but all fractions to which, but for
this sub-clause (c) of this Clause 2, any such holder would have become
entitled shall be aggregated (and, if necessary, rounded up to the nearest
whole number of Unicom Shares) and allotted and issued to a person
nominated by Unicom who shall sell the same and the net proceeds of sale
shall be paid to Unicom for its own
benefit.
|
3.
|
The
Unicom Shares to be allotted and issued pursuant to Clause 2 of this
Scheme shall form one class with and rank pari
passu in all respects with the existing Unicom
Shares.
|
4.
|
(a)
|
Not
later than ten days after the Effective Date, Unicom shall effect as of
the Effective Date the allotment and issue of the Unicom Shares pursuant
to Clause 2 of this Scheme.
|
|
(b)
|
Not
later than ten days after the Effective Date, Unicom shall deliver or
cause to be delivered (except to the extent to which Unicom may be
prohibited by law in any part of the world from so doing) the certificates
for the Unicom Shares allotted and issued in accordance with Clause 2 of
this Scheme to the person or persons to whom the same shall have been
respectively so allotted and issued by sending such certificates through
the post (by airmail where available) in pre-paid envelopes addressed to
such persons:
|
|
(i)
|
(subject
to (iii) below) in the case of each sole holder to the registered address
of such holder as appearing on the Register at the Scheme Record Time;
or
|
|
(ii)
|
(subject
to (iii) below) in the case of joint holders to the registered address as
appearing on the Register at the Scheme Record Time of the joint holder
whose name then stands first on the Register in respect of the relevant
joint holding; or
|
|
(iii)
|
in
the case of the Unicom Shares allotted and issued pursuant to sub-clauses
(b) and (c) of Clause 2 of this Scheme, to the relevant persons appointed
by the directors of Unicom,
|
|
(c)
|
Not
later than 28 days after the Effective Date, Unicom shall deliver or cause
to be delivered (except to the extent to which Unicom may be prohibited by
law from so doing) the cheques representing the net proceeds of sale
payable by Unicom in accordance with sub-clause (b) of Clause 2 of this
Scheme to the person or persons to whom the same shall have been
respectively so payable by sending such cheques through the post (by air
mail where available) in pre-paid envelopes addressed to such
persons:
|
|
(i)
|
in
the case of each sole holder to the registered address of such holder as
appearing on the Register at the Scheme Record Time;
or
|
|
(ii)
|
in
the case of joint holders to the registered address as appearing on the
Register at the Scheme Record Time of the joint holder whose name then
stands first on the Register in respect of the relevant joint
holding,
|
|
(d)
|
All
certificates and, if applicable, cheques shall be posted at the risk of
the addressees and other persons entitled thereto and neither Unicom nor
Netcom shall be responsible for any loss or delay in
transmission.
|
|
(e)
|
In
case where delivery of any certificate for the Unicom Shares has been
returned undelivered, then in every such case the same shall be retained
by the share registrar of Unicom, Hong Kong Registrars Limited, at its
address aforesaid pending their collection, but nothing in this provision
shall limit or restrict the application of any provisions in the articles
of association of Unicom from time to time regarding untraceable
shareholders.
|
|
(f)
|
On
or after the day being six calendar months after the posting of the
cheques pursuant to sub-clause (c) of this Clause 4, Unicom shall have the
right to cancel or countermand payment of any such cheque which has not
then been encashed or has been returned uncashed and shall place all
monies represented thereby in a deposit account in Unicom’s name with a
licensed bank in Hong Kong appointed by Unicom. Unicom shall hold such
monies until the expiration of six years from the Effective Date and shall
prior to such date make payments thereout of the sums payable pursuant to
sub-clause (b) of Clause 2 of this Scheme to the persons who satisfy
Unicom that they are respectively entitled thereto and the cheques
referred to in sub-clause (c) of this Clause 4 of which they are payees
have not been cashed. Any payments made by Unicom hereunder shall include
any interest accrued on the sums to which the respective persons are
entitled pursuant to sub-clause (b) of Clause 2 of this Scheme, calculated
at the annual rate prevailing from time to time at the licensed bank in
which the monies are deposited, subject, if applicable, to the deduction
of any interest or withholding tax or any other deductions required by
law. Unicom shall exercise its absolute discretion in determining whether
or not it is satisfied that any person is so entitled and a certificate of
Unicom to the effect that any particular person is so entitled or not so
entitled, as the case may be, shall be conclusive and binding upon all
persons claiming an interest in the relevant
monies.
|
|
(g)
|
On
the expiration of six years from the Effective Date, Unicom shall be
released from any further obligation to make any payments under this
Scheme and Unicom shall retain the balance, if any, of the sums standing
to the credit of the deposit account referred to in sub-clause (f) of this
Clause 4 including accrued interest subject, if applicable, to the
deduction of any interest or withholding tax required by
law.
|
|
(h)
|
The
preceding sub-clauses of this Clause 4 shall be subject to any prohibition
or condition imposed by law.
|
5.
|
With
effect from and including the Effective Date, each instrument of transfer
and certificate validly subsisting at the Scheme Record Time in respect of
a transfer or holding of any number of the Scheme Shares shall cease to be
valid for any purpose as an instrument of transfer or a certificate for
such Scheme Shares and every holder of the Scheme Shares shall be bound at
the request of Netcom to deliver up such certificate to Netcom for
cancellation thereof.
|
6.
|
With
effect from and including the Effective Date, all mandates or relevant
instructions to Netcom in relation to the Scheme Shares shall cease to be
valid as effective mandates or
instructions.
|
7.
|
The
Scheme shall become effective as soon as an office copy of the Order of
the High Court sanctioning this Scheme under Section 166 of the Companies
Ordinance and confirming, under Section 60 of the same Ordinance, the
reduction of capital provided for by this Scheme, together with a minute
relating to the share capital of Netcom and containing the particulars
required by Section 61 of such Ordinance, shall have been duly registered
by the Registrar of Companies.
|
8.
|
Unless
this Scheme shall have become effective on or before 30 November 2008 or
such later date as the High Court may allow, this Scheme shall
lapse.
|
9.
|
Netcom
and Unicom may jointly consent for and on behalf of all concerned to any
modification of, or addition to, this Scheme or to any condition which the
High Court may approve or impose.
|
10.
|
All
costs, charges and expenses of and incidental to this Scheme and the costs
of carrying this Scheme into effect shall be borne by
Netcom.
|
NOTICE
OF COURT MEETING
|
IN
THE MATTER OF
|
NOTICE
OF COURT MEETING
|
|||
LINKLATERS
10th
Floor, Alexandra House
Chater
Road
Hong
Kong
Solicitors
for China Netcom Group Corporation (Hong Kong)
Limited
|
NOTICE
OF NETCOM EGM
|
|
(A)
|
the
Scheme of Arrangement dated 15 August 2008 (the “Scheme”) between the
Company and the holders of the Scheme Shares (as defined in the Scheme) in
the form of the print which has been produced to this Meeting and for the
purposes of identification signed by the Chairman of this Meeting, with
any modification thereof or addition thereto or condition approved or
imposed by the High Court of the Hong Kong Special Administrative Region,
be and is hereby approved; and
|
|
(B)
|
for
the purposes of giving effect to the Scheme, on the Effective Date (as
defined in the Scheme):
|
|
(1)
|
the
authorised and issued share capital of the Company be reduced by
cancelling and extinguishing the Scheme
Shares;
|
|
(2)
|
subject
to and forthwith upon such reduction of share capital taking effect, the
authorised share capital of the Company be increased to its former amount
of US$1,000,000,000 by the creation of such number of ordinary shares of
US$0.04 each in the capital of the Company as shall be equal to the number
of the Scheme Shares cancelled; and
|
|
(3)
|
the
Company shall apply the credit arising in its books of account as a result
of such reduction of share capital in paying up in full at par the
ordinary shares of US$0.04 each in the capital of the Company to be
created as aforesaid, which new shares shall be allotted and issued,
credited as fully paid, to China Unicom Limited and/or its nominees and
the directors of the Company be and are hereby unconditionally authorised
to allot and issue the same
accordingly.”
|
By
Order of the Board
China
Netcom Group Corporation (Hong Kong) Limited
Huo
Haifeng Mok Kam
Wan
Joint
Company Secretaries
|
Registered
office:
|
1.
|
A
white form of proxy for use at the Meeting is enclosed with this
Notice.
|
2.
|
A
member entitled to attend and vote at the Meeting is entitled to appoint
one or more proxies to attend and, on a poll, vote in his stead. A proxy
need not be a member of the
Company.
|
3.
|
In
order to be valid, the white form of proxy, together with the power of
attorney or other authority, if any, under which it is signed or
notarially certified copy of such power of attorney or other authority,
must be deposited at the Company’s registered office at Room 6701, The
Center, 99 Queen’s Road Central, Hong Kong, at least 48 hours before the
time appointed for holding the Meeting. Completion and return of the white
form of proxy will not preclude a member from attending and voting in
person at the Meeting or at any adjourned Meeting if a member so
wishes.
|
4.
|
When
two or more persons are registered as the holders of any share and if more
than one of such joint holders be present at the Meeting, personally or by
proxy, that one so present whose name stands first on the Register of
Members in respect of such shares shall alone be entitled to vote in
respect thereof.
|