EX-10.45 JOINT ANNOUNCEMENT DATED JUNE 2, 2008






Exhibit 10.45



The Stock Exchange of Hong Kong Limited and the New York Stock Exchange take no responsibility for
the contents of this Announcement, make no representation as to its accuracy or completeness and
expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance
upon the whole or any part of the contents of this Announcement.



None of the US Securities and Exchange Commission (the “SEC”), any US state securities commission
or any other regulatory authority takes responsibility for the contents of this Announcement, or
makes any representation as to its accuracy or completeness. The SEC, the US state securities
commissions and all other regulatory authorities expressly disclaim any liability whatsoever for
any loss howsoever arising from or in reliance upon the whole or any part of the contents of this
Announcement. Any representation to the contrary is unlawful in the United States.



This Announcement appears for information purposes only and does not constitute an invitation or
offer to acquire, purchase or subscribe for securities of Unicom or Netcom, nor is it any
solicitation of any vote or approval in any jurisdiction. This Announcement also does not
constitute any solicitation or recommendation under the rules and regulations of the SEC.



This Announcement is not an offer for sale or a sale of Unicom Shares or Unicom ADSs in the United
States. The new Unicom Shares and the new Unicom ADSs have not been registered under the US
Securities Act and may not be offered or sold in the United States absent registration or an
exemption from registration under the US Securities Act.









JOINT ANNOUNCEMENT




(1) PROPOSED MERGER OF UNICOM AND NETCOM BY WAY OF A SCHEME

OF ARRANGEMENT OF NETCOM UNDER SECTION 166 OF THE HONG KONG

COMPANIES ORDINANCE




(2) POSSIBLE VERY SUBSTANTIAL ACQUISITION FOR UNICOM




(3) MANDATE TO ISSUE NEW UNICOM SHARES




(4) ADOPTION OF SPECIAL PURPOSE UNICOM SHARE OPTION SCHEME AND




(5) RESUMPTION OF TRADING




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	Lead Financial Adviser to Unicom

	 	Exclusive Financial Adviser to Netcom
	

	 	
	 
	 	 
	Financial Adviser to Unicom

	 	Independent Financial Adviser to the 

Netcom IBC
	

	 	












	1.	 	INTRODUCTION
	 
	 	 	The boards of directors of Unicom and Netcom refer to (1) the Announcement on Deepening the
Reform of the Structure of the Telecommunications Sector dated 24 May 2008 jointly issued by
the Ministry of Industry and Information, the National Development and Reform Commission and
the Ministry of Finance of the PRC which states, among other things, that the PRC government
will deepen the reform of the structure of the telecommunications sector, and encourage the
formation of three market competitors where each has nationwide network resources, relatively
comparable strength and scale, as well as full service operation capabilities, that the
allocation of telecommunications resources will be further optimized and the competition
structure will be improved, and that three 3G licences will be granted once the contemplated
restructuring is completed, and (2) the announcements issued by Unicom and Netcom on 25 May
2008.
	 
	 	 	The boards of directors of Unicom and Netcom jointly announce that on 2 June 2008, Unicom
formally presented the Proposals (as described in the paragraphs headed “1. The Proposals”,
“2. Conditions of the Proposals and the Scheme” and “3. Further Terms of the Proposals” in
the text of this Announcement) to the board of directors of Netcom and requested the board to
put forward the Proposals to the Netcom Shareholders to consider the merger of Unicom and
Netcom by way of a scheme of arrangement by Netcom under Section 166 of the Hong Kong
Companies Ordinance.
	 
	2.	 	TERMS OF THE PROPOSALS
	 
	 	 	Pursuant to the Share Proposal, the Scheme Shares (including the Scheme Shares
unconditionally issued or to be issued pursuant to the valid exercise of the outstanding
Netcom Options prior to the Scheme Record Time) will be cancelled and, in consideration
thereof, each Scheme Shareholder will be entitled to receive:
	 
	 	 	For every Scheme Share cancelled . . . . . . . . . 1.508 new Unicom Shares
	 
	 	 	Pursuant to the ADS Proposal, the Scheme Shares underlying the Netcom ADSs will be cancelled
and, in consideration thereof, each holder of Netcom ADSs will be entitled to receive:
	 
	 	 	For every Netcom ADS . . . . . . . . . . . . . . . . . . 3.016 new Unicom ADSs









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	 	 	Each Netcom ADS represents 20 Netcom Shares while each Unicom ADS represents 10 Unicom Shares.
The consideration for the ADS Proposal is equivalent to the consideration for the Share Proposal
and is calculated using the Share Exchange Ratio and taking into account the number of Netcom
Shares which each Netcom ADS represents and the number of Unicom Shares which each Unicom ADS
represents.
	 
	 	 	Pursuant to the Option Proposal, Unicom will offer holders of Netcom Options new Special Unicom
Options in exchange for the outstanding Netcom Options held by them at the Scheme Record Time
(whether vested or not). The number of new Special Unicom Options which will be granted to each
holder of Netcom Options and the exercise price of such new Special Unicom Options will be
determined in accordance with a formula which ensures that the value of the new Special Unicom
Options received by a holder of Netcom Options is equivalent to the “see- through” price of that
holder’s outstanding Netcom Options (that is, the value determined by deducting the exercise
price of the relevant Netcom Option from the value of HK$27.87, being the closing price of each
Netcom Share of HK$27.05 on the Hong Kong Stock Exchange on the Last Trading Date and a 3%
premium, for each Scheme Share pursuant to the Share Proposal). The new Special Unicom Options
will be granted by Unicom pursuant to the Special Purpose Unicom Share Option Scheme which is
proposed to be adopted by Unicom at the Unicom EGM.
	 
	 	 	Implementation of the Proposals will be carried out in accordance with Hong Kong laws, the
Takeovers Code, US federal securities laws and the requirements of the Hong Kong Stock Exchange
and the New York Stock Exchange.
	 
	 	 	The directors of Unicom believe that the terms of the Proposals are fair and reasonable and in
the interests of the Unicom Shareholders as a whole.
	 
	 	 	The board of directors of Netcom has established the Netcom IBC, comprising all of the
independent non-executive directors of Netcom, being Mr. Timpson Chung Shui Ming, Mr. John Lawson
Thornton, Dr. Qian Yingyi and Mr. Hou Ziqiang, to advise the Disinterested Netcom Shareholders
and the holders of Netcom ADSs and Netcom Options as to (a) whether the Proposals are, or are
not, fair and reasonable and (b) whether to vote in favour of the Scheme at the Court Meeting and
the Netcom EGM. The Netcom IBC has appointed Rothschild as the independent financial adviser to
the Netcom IBC in respect of the Proposals. The Netcom IBC is evaluating the Proposals and the
views and recommendations of the Netcom IBC in respect of the Proposals will be set out in the
Scheme Document to be despatched to the Netcom Shareholders and the holders of Netcom ADSs and
Netcom Options.
	 
	 	 	Holders of Unicom Shares, Unicom ADSs, Unicom Options, Netcom Shares, Netcom ADSs and Netcom
Options and potential investors in Unicom and Netcom should be aware that the implementation of
the Proposals (including the Scheme) is subject to the conditions set out in this Announcement
being satisfied or waived, as applicable, and thus the Proposals (including the Scheme) may or
may not become effective. Holders of Unicom Shares, Unicom ADSs, Unicom Options, Netcom Shares,
Netcom ADSs and Netcom Options and potential investors of Unicom and Netcom should therefore
exercise caution when dealing in Unicom Shares, Unicom ADSs, Unicom Options, Netcom Shares,
Netcom ADSs or Netcom Options or other securities of Unicom or Netcom. Persons who are in doubt
as to the action they should take should consult their stockbroker, bank manager, solicitor or
other professional advisers.









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	3.	 	CONDITIONS OF THE PROPOSALS AND THE SCHEME
	 
	 	 	The Share Proposal is subject to, and the Scheme will become effective and binding on Netcom
and all Scheme Shareholders subject to, the satisfaction or waiver (as applicable) of the
following conditions:






	 	(a)	 	the approval of the Unicom Shareholders in general meeting having been obtained
for (i) the Proposals, (ii) the allotment and issue by Unicom of new Unicom Shares
pursuant to the Share Proposal and the ADS Proposal and (iii) the adoption of the
Special Purpose Unicom Share Option Scheme, in accordance with the Listing Rules and the
NYSE Rules;
	 
	 	(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 Disinterested Netcom Shareholders, present
and voting either in person or by proxy at the Court Meeting, provided that:






	 	(i)	 	the Scheme is approved (by way of poll) by at least 75% of the votes
attaching to the Netcom Shares held by the Disinterested Netcom Shareholders that
are cast either in person or by proxy at the Court Meeting; and
	 
	 	(ii)	 	the number of votes cast (by way of poll) against the resolution to
approve the Scheme at the Court Meeting is not more than 10% of the votes attaching
to all the Netcom Shares held by the Disinterested Netcom Shareholders;






	 	(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) approve and give effect to the reduction of the issued share
capital of Netcom by cancelling and extinguishing the Scheme Shares and (ii) approve the
issue of the new 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 timely
advised the High Court that the new 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 and 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;


















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	 	(f)	 	the Hong Kong Stock Exchange having granted its approval for the listing of, and
permission to deal in, the new Unicom Shares to be issued pursuant to the Share Proposal and
the ADS Proposal and the new Unicom Shares to 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 new Unicom
ADSs representing the new Unicom Shares to be issued pursuant to the ADS Proposal;
	 
	 	(h)	 	all applicable filings, notices and waivers required in connection with the Proposals
(including its implementation) from or with any governmental or regulatory body having been
made and, if applicable, any waiting periods under any applicable antitrust or similar laws
and regulations having expired or terminated;
	 
	 	(i)	 	all necessary authorisations, consents and approvals (including approval in-principle) of
any governmental or regulatory body in relation to the Proposals (including their
implementation) 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 any other
relevant jurisdictions;
	 
	 	(j)	 	all necessary 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(ies);
	 
	 	(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 considered necessary by Unicom and Netcom, acting reasonably;
	 
	 	(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;














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	 	(n)	 	subject to Note 2 to Rule 30.1 of the Takeovers Code, since the date of this
Announcement, there having been no material adverse change in the business, financial or
trading position of the Unicom Group or the Netcom Group, each taken as a whole;
	 
	 	(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 being received from the SFC and/or the Hong Kong Stock
Exchange and/or the SEC and/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 is 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 this Announcement and up to the Effective Date, Netcom not having
declared, made or paid any dividend or distribution of any kind, and not agreeing or
proposing to declare, make or pay any dividend or distribution of any kind.






	 	 	Unicom reserves the right to waive all or any of the conditions (except for the conditions
referred to in paragraphs (a) to (m) and paragraph (o) above) in whole or in part. Netcom
does not have the right to waive any of the conditions. All of the above conditions will have
to be satisfied or waived, as applicable, on or before 30 September 2008 (or such other date
as Unicom and Netcom may agree and the High Court may allow), otherwise the Share Proposal
and the Scheme will lapse.
	 
	 	 	Assuming that the above conditions are satisfied or waived, as applicable, it is expected that
the Scheme will become effective on or before 31 October 2008.
	 
	 	 	Each of the ADS Proposal and the Option Proposal will be conditional upon the Scheme becoming
effective.
	 
	4.	 	WITHDRAWAL OF LISTING OF THE NETCOM SHARES AND THE NETCOM ADSs 

	 
		 	Upon the Scheme becoming
effective, all the Scheme Shares (including the Scheme Shares underlying the Netcom ADSs)
will be cancelled. The share certificates for the Scheme Shares will thereafter cease to
have effect as documents or evidence of title. An application will be made by Netcom to the
Hong Kong Stock Exchange for the voluntary withdrawal of the listing of the Netcom Shares
from the Hong Kong Stock Exchange pursuant to Rule 6.15 of the Listing Rules immediately
following the Effective Date, which is subject to the approval of the Listing Committee of
the Hong Kong Stock Exchange.













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	 	 	Upon the Scheme becoming effective, Unicom intends to cause Netcom to apply for delisting of
the Netcom ADSs from the New York Stock Exchange. Unicom may also seek to cause Netcom to
terminate the Netcom ADS Deposit Agreement. If the Scheme becomes effective, Unicom intends
to cause Netcom to file a Form 15 with the SEC to request that Netcom’s reporting obligations
under the US Securities Exchange Act be terminated or suspended, because the effectiveness of
the Scheme will cause the number of holders of Netcom Shares in the United States to fall
below 300.
	 
	 	 	The listing of the Netcom Shares on the Hong Kong Stock Exchange and the Netcom ADSs on the
New York Stock Exchange will not be withdrawn if the Proposals are not approved, lapse or do
not become unconditional for any reason.
	 
	5.	 	UNDERTAKINGS
	 
	 	 	Netcom BVI has given an irrevocable undertaking to Unicom to vote in favour of all
resolutions to approve the Scheme and any related matters necessary to implement the Scheme
proposed at the Court Meeting and the Netcom EGM in respect of its legal and beneficial
shareholding in Netcom of 4,647,449,014 Netcom Shares (representing approximately 69.37% of
the issued share capital of Netcom as at the Last Trading Date). Under the irrevocable
undertaking, Netcom Parent has undertaken to use its best endeavours to procure the
performance by Netcom BVI of its obligations under the irrevocable undertaking.
	 
	 	 	Netcom BVI has also received an irrevocable instruction to vote in favour of all resolutions
to approve the Scheme and any related matters necessary to implement the Scheme proposed at
the Court Meeting and the Netcom EGM in respect of the 149,683,549 Netcom Shares
(representing approximately 2.23% of the issued share capital of Netcom as at the Last
Trading Date), which Netcom BVI holds as trustee on behalf of a state-owned entity.
	 
	 	 	In addition, Telefonica has given an irrevocable undertaking to Unicom to vote in favour of
all resolutions to approve the Scheme and any related matters necessary to implement the
Scheme proposed at the Court Meeting and the Netcom EGM in respect of its shareholding in
Netcom of 333,971,305 Netcom Shares (representing approximately 4.99% of the issued share
capital of Netcom as at the Last Trading Date).
	 
	 	 	Under the terms of the irrevocable undertakings given by Netcom BVI and Telefonica and the
irrevocable instruction received by Netcom BVI, the undertakings and the instruction will
lapse (a) if this Announcement has not been released by 30 June 2008, (b) if Unicom announces, with
the consent of the Executive and before the Scheme Document is posted, that it does not
intend to proceed with the Scheme, (c) if the Scheme lapses or is withdrawn in accordance
with its terms or (d) in the event of a higher competing offer for Netcom made by a third
party.
	 
	 	 	In addition to conditions (a) to (d) above, the undertaking given by Netcom BVI and the
irrevocable instruction received by Netcom BVI will lapse if the Scheme is not approved at
the Court Meeting or the Netcom EGM.









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	 	 	In addition to conditions (a) to (d) above, the undertaking given by Telefonica will lapse
(e) if the Scheme is not approved at the Court Meeting or the Netcom EGM by 30 November 2008,
(f) if since the date of the giving of the undertaking, there has been a material adverse
change in the business, financial or trading position of Unicom or (g) in the event that the
Netcom IFA appointed by the Netcom IBC does not render an opinion that the Proposals are fair
and reasonable.
	 
	6.	 	POSSIBLE CONCERT PARTY AGREEMENT
	 
	 	 	Each of Unicom and Netcom has been informed by Unicom BVI and Netcom BVI, respectively, that
they are not and have never been parties acting in concert with each other or with or in
respect of either Unicom or Netcom. Each of Unicom and Netcom has further been informed that
Unicom BVI and Netcom BVI intend to enter into the Concert Party Agreement upon or shortly
after the last to occur of (i) the Proposals and the issue of new Unicom Shares being duly
approved by the requisite majority of the Unicom Shareholders at the Unicom EGM,
(ii) the Scheme being duly approved by the requisite majority of the Disinterested Netcom
Shareholders at the Court Meeting and (iii) the special resolutions being duly passed with
the requisite majority of the Netcom Shareholders at the Netcom EGM. Pursuant to the Concert
Party Agreement, Unicom BVI and Netcom BVI will agree to cooperate actively to obtain or
consolidate control of Unicom following the completion of the Scheme. Thus, Unicom BVI and
Netcom BVI will become parties acting in concert in respect of Unicom following the
completion of the Scheme. In addition, following the completion of the Scheme, Unicom BVI and
Netcom BVI will also be presumed to be acting in concert with each other in respect of Unicom
pursuant to class (1) of the definition of “acting in concert” in the Takeovers Code.
	 
	 	 	On 26 May 2008, the State-owned Assets Supervision and Administration Commission notified
each of Unicom Parent and Netcom Parent, the respective ultimate parent companies of Unicom
and Netcom, that, among other things, it may, depending on the outcome of any proposed merger
of Unicom and Netcom, consider a merger of Unicom Parent and Netcom Parent. Each of Unicom
Parent and Netcom Parent has confirmed to Unicom and Netcom, respectively, that it has not
received any notice or other indication and that it is not otherwise aware of the timing or
any term of or condition to such merger. On this basis, any merger of Unicom Parent and
Netcom Parent will not result in any change of control of Unicom or Netcom and will not give
rise to any implication under Rule 26 of the Takeovers Code.
	 
	7.	 	POSSIBLE VERY SUBSTANTIAL ACQUISITION, ALLOTMENT AND ISSUE OF NEW UNICOM SHARES AND
ADOPTION OF SPECIAL PURPOSE UNICOM SHARE OPTION SCHEME
	 
	 	 	The implementation of the Proposals will result in Netcom becoming a wholly-owned subsidiary
of Unicom and as the highest of the percentage ratios set out in Rule 14.07 of the Listing
Rules in respect of the implementation of the Proposals is more than 100%, the Proposals will
constitute a possible very substantial acquisition for Unicom under the Listing Rules. The
Proposals are therefore conditional upon the approval of the Unicom Shareholders in general
meeting.













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	 	 	The allotment and issue of new Unicom Shares to the Scheme Shareholders pursuant to the Share
Proposal and to the Unicom Depositary pursuant to the ADS Proposal is subject to the approval
of the Unicom Shareholders in general meeting pursuant to Rule 13.36(1)(a) of the Listing
Rules.
	 
	 	 	The adoption of the Special Purpose Unicom Share Option Scheme by Unicom is subject to the
approval of the Unicom Shareholders in general meeting pursuant to Rule 17.02(1)(a) of the
Listing Rules.
	 
	 	 	None of the Unicom Shareholders have a material interest in the Very Substantial Acquisition,
the allotment and issue of new Unicom Shares to the Scheme Shareholders and the adoption of
the Special Purpose Unicom Share Option Scheme by Unicom. Accordingly, none of the Unicom
Shareholders are required to abstain from voting at the Unicom EGM. However, notwithstanding
the foregoing, an independent non-executive director of Netcom who holds 6,000 Unicom Shares
has undertaken to Netcom that he will abstain from voting at the Unicom EGM.
	 
	 	 	The resolutions relating to the Very Substantial Acquisition, the allotment and issue of new
Unicom Shares to the Scheme Shareholders and the adoption of the Special Purpose Unicom Share
Option Scheme will be approved by way of a poll at the Unicom EGM.
	 
	8.	 	DISPOSAL OF THE CDMA BUSINESS BY UNICOM
	 
	 	 	On 2 June 2008, Unicom entered into a framework agreement with CUCL, a wholly-owned
subsidiary of Unicom, and China Telecom which sets out the terms and conditions on which CUCL
will dispose of its CDMA business together with relevant assets and liabilities to China
Telecom. Such disposal will constitute a major transaction for Unicom and is subject to the
approval of the Unicom Shareholders. Details of the disposal and the relevant transactions
which are proposed to be entered into in connection with the disposal are set out in a
separate announcement issued by Unicom dated 2 June 2008. Unicom expects that the disposal of
the CDMA business by Unicom will be completed before the Effective Date. The disposal of the
CDMA business by Unicom is a separate and independent transaction from the Proposals.
	 
	9.	 	RESUMPTION OF TRADING
	 
	 	 	At the request of Unicom, trading in the Unicom Shares on the Hong Kong Stock Exchange was
suspended from 12:26 p.m. on 23 May 2008 (Hong Kong time) and trading in the Unicom ADSs on
the New York Stock Exchange was suspended from 9:30 a.m. on 23 May 2008 (New York time). An
application has been made by Unicom to the Hong Kong Stock Exchange for the resumption of
trading in the Unicom Shares from 9:30 a.m. on 3 June 2008 (Hong Kong time). It is expected
that trading in the Unicom ADSs on the New York Stock Exchange will resume on either 2 June
2008, or 3 June 2008.









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	 	 	At the request of Netcom, trading in the Netcom Shares on the Hong Kong Stock Exchange was
suspended from 12:26 p.m. on 23 May 2008 (Hong Kong time) and trading in the Netcom ADSs
on the New York Stock Exchange was suspended from 9:30 a.m. on 23 May 2008 (New York
time). An application has been made by Netcom to the Hong Kong Stock Exchange for the
resumption of trading in the Netcom Shares from 9:30 a.m. on 3 June 2008 (Hong Kong time).
It is expected that trading in the Netcom ADSs on the New York Stock Exchange will resume
on either 2 June 2008 or 3 June 2008.










	1.	 	THE PROPOSALS
	 
	 	 	Introduction
	 
	 	 	The boards of directors of Unicom and Netcom refer to (1) the Announcement on Deepening the
Reform of the Structure of the Telecommunications Sector dated 24 May 2008 jointly issued by
the Ministry of Industry and Information, the National Development and Reform Commission and
the Ministry of Finance of the PRC which states, among other things, that the PRC government
will deepen the reform of the structure of the telecommunications sector, and encourage the
formation of three market competitors where each has nationwide network resources, relatively
comparable strength and scale, as well as full service operation capabilities, that the
allocation of telecommunications resources will be further optimized and the competition
structure will be improved, and that three 3G licences will be granted once the contemplated
restructuring is completed, and (2) the announcements issued by Unicom and Netcom on 25 May
2008.
	 
	 	 	The boards of directors of Unicom and Netcom jointly announce that on 2 June 2008, Unicom
formally presented the Proposals (as described in the paragraphs headed “1. The Proposals”,
“2. Conditions of the Proposals and the Scheme” and “3. Further Terms of the Proposals” in
the text of this Announcement) to the board of directors of Netcom and requested the board to
put forward the Proposals to the Netcom Shareholders to consider the merger of Unicom and
Netcom by way of a scheme of arrangement by Netcom under Section 166 of the Hong Kong
Companies Ordinance.
	 
	 	 	The Proposals involve the cancellation of all Scheme Shares (including (1) the Scheme Shares
unconditionally issued or to be issued pursuant to the valid exercise of the outstanding
Netcom Options prior to the Scheme Record Time and (2) the Scheme Shares underlying the
Netcom ADSs) and all Netcom Options outstanding at the Scheme Record Time.
	 
	 	 	If approved, the Scheme will be binding on all Netcom Shareholders irrespective of whether
they attended or voted at the Court Meeting or the Netcom EGM.
	 
	 	 	Implementation of the Proposals will be carried out in accordance with Hong Kong laws, the
Takeovers Code, US federal securities laws and the requirements of the Hong Kong Stock
Exchange and the New York Stock Exchange.






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	 	 	The Share Proposal
	 
	 	 	Pursuant to the Share Proposal, the Scheme Shares (including the Scheme Shares unconditionally
issued or to be issued pursuant to the valid exercise of the outstanding Netcom Options prior to
the Scheme Record Time) will be cancelled and, in consideration thereof, each Scheme Shareholder
will be entitled to receive:
	 
	 	 	For every Scheme Share cancelled ...1.508 new Unicom Shares
	 
	 	 	Under the Share Proposal, the share capital of Netcom will, on the Effective Date, be reduced by
cancelling and extinguishing the Scheme Shares and immediately thereafter, the issued share
capital of Netcom will be increased to the amount prior to the cancellation of the Scheme Shares
and the reserve created as a result of such cancellation of the Scheme Shares will be applied to
pay up in full the issue of the New Netcom Shares to Unicom at par, credited as fully paid.
	 
	 	 	The exchange ratio of 1.508 Unicom Shares for every Scheme Share cancelled (the “Share Exchange
Ratio”) 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 and a 3% premium, and the
closing price of each Unicom Share of HK$18.48 on the Hong Kong Stock Exchange on the Last Trading
Date.
	 
	 	 	Based on the Share Exchange Ratio and 6,699,197,200 Netcom Shares in issue as at the Last Trading
Date (assuming that none of the outstanding Netcom Options are exercised), the maximum number of
new Unicom Shares that Unicom will issue is 10,102,389,378. This represents approximately
73.94% of the existing issued share capital of Unicom of 13,662,075,945 Unicom Shares as at the
Last Trading Date, and approximately 42.51% of the enlarged issued share capital of Unicom of
23,764,465,323 Unicom Shares immediately following the issue of the new Unicom Shares
(assuming that none of the outstanding Unicom Options are exercised) and approximately 42.11% of
the enlarged issued share capital of Unicom of 23,993,094,923 Unicom Shares immediately following
the issue of the new Unicom Shares (assuming that all of the outstanding Unicom Options are
exercised).
	 
	 	 	Based on the Share Exchange Ratio and 6,825,034,460 Netcom Shares in issue as at the Last Trading
Date (assuming that all of the outstanding Netcom Options are exercised), the maximum number of
new Unicom Shares that Unicom will issue is 10,292,151,966. This represents approximately
75.33% of the existing issued share capital of Unicom of 13,662,075,945 Unicom Shares as at the
Last Trading Date, and approximately 42.97% of the enlarged issued share capital of Unicom of
23,954,227,911 Unicom Shares immediately following the issue of the new Unicom Shares
(assuming that none of the outstanding Unicom Options are exercised) and approximately 42.56% of
the enlarged issued share capital of Unicom of 24,182,857,511 Unicom Shares immediately following
the issue of the new Unicom Shares (assuming that all of the outstanding Unicom Options are
exercised).






11









 









	 	 	The ADS Proposal
	 
	 	 	As the Netcom ADSs are governed by the Netcom ADS Deposit Agreement and not Hong Kong law,
implementation of the ADS Proposal will not result in and of itself in the cancellation of the
Netcom ADSs. Instead, pursuant to the ADS Proposal, the Scheme Shares underlying the Netcom ADSs
will be cancelled along with all other Scheme Shares and, in consideration thereof, each holder of
Netcom ADSs will be entitled to receive:
	 
	 	 	For every Netcom ADS . . . . . . . . . . . . . . . . . . . 3.016 new Unicom ADSs
	 
	 	 	As at the Last ADS Trading Date, there were 7,218,677 Netcom ADSs outstanding. Each Netcom
ADS represents 20 Netcom Shares while each Unicom ADS represents 10 Unicom Shares.
	 
	 	 	The consideration for the ADS Proposal is equivalent to the consideration for the Share Proposal
and is calculated using the Share Exchange Ratio and taking into account the number of Netcom
Shares which each Netcom ADS represents and the number of Unicom Shares which each Unicom ADS
represents.
	 
	 	 	The Option Proposal
	 
	 	 	As at the Last Trading Date, there were 125,837,260 Netcom Options outstanding. In the event that
any Netcom Option is validly exercised after the date of this Announcement but prior to the Scheme
Record Time and new Netcom Shares are issued pursuant to such exercise, such Netcom Shares as at
the Scheme Record Time shall constitute Scheme Shares and their holders shall be eligible to
receive the consideration under the Share Proposal and their Scheme Shares will be cancelled under
the Scheme.
	 
	 	 	Pursuant to the Option Proposal, Unicom will offer holders of Netcom Options new Special Unicom
Options in exchange for the outstanding Netcom Options held by them at the Scheme Record Time
(whether vested or not).
	 
	 	 	The number of new Special Unicom Options which will be granted to each holder of Netcom Options
and the exercise price of such new Special Unicom Options will be determined in the manner set out
below.





Number of new Special Unicom Options = A x B




Exercise price of each new Special Unicom Option = C/A





	 	 	where:
	 
	 	 	A is the Share Exchange Ratio;
	 
	 	 	B is the number of outstanding Netcom Options held by the relevant holder of Netcom Options at the
Scheme Record Time; and




12









 












	 	 	C is the exercise price of the outstanding Netcom Options held by the relevant holder of Netcom
Options at the Scheme Record Time.
	 
	 	 	The above formula ensures that the value of the new Special Unicom Options received by a holder of
Netcom Options is equivalent to the “see-through” price of that holder’s outstanding Netcom
Options (that is, the value determined by deducting the exercise price of the relevant Netcom
Option from the value of HK$27.87, being the closing price of each Netcom Share of HK$27.05 on the
Hong Kong Stock Exchange on the Last Trading Date and a 3% premium, for each Scheme Share pursuant
to the Share Proposal) (the “See-Through Price”).
	 
	 	 	The new Special Unicom Options will be granted by Unicom pursuant to the Special Purpose Unicom
Share Option Scheme which is proposed to be adopted by Unicom at the Unicom EGM. The terms of the
Special Purpose Unicom Share Option Scheme will be identical to the Netcom Share Option Scheme,
except that:






	 	(a)	 	the exercise price of the new Special Unicom Options granted will be such price which will
result in the value of the new Special Unicom Options received by the holders of the
outstanding Netcom Options being equivalent to the See-Through Price; and
	 
	 	(b)	 	other than the new Special Unicom Options to be granted pursuant to the Option Proposal, no
further new Special Unicom Options will be granted under the Special Purpose Unicom Share
Option Scheme.






	 	 	Unicom has applied to the Hong Kong Stock Exchange for a waiver from strict compliance with the
requirement of Rule 17.03(9) of the Listing Rules so that the exercise price of the new Special
Unicom Options granted under the Special Purpose Unicom Share Option Scheme is such price as
described above instead of a price determined by reference to the closing price or the five day
average closing price of the Unicom Shares prior to the date of grant of the new Special Unicom
Options as required by Rule 17.03(9) of the Listing Rules. The reasons for the waiver application
are that the Option Proposal would ensure that the holders of Netcom Options will receive a
consideration for their outstanding Netcom Options which is comparable to the consideration which
the Scheme Shareholders will receive for the Scheme Shares, the Option Proposal is a unique case
and strict compliance with the requirement of Rule 17.03(9) of the Listing Rules would be unfair
and impractical and the Option Proposal would also ensure that the holders of Netcom Options are
incentivised to remain in the employment of the enlarged group following the completion of the
Scheme.
	 
	 	 	Save for the waiver from strict compliance with the requirement of Rule 17.03(9) of the Listing
Rules, the Special Purpose Unicom Share Option Scheme will be in compliance with the requirements
of Chapter 17 of the Listing Rules. Further details of the Special Purpose Unicom Share Option
Scheme will be included in the circular to be despatched to the Unicom Shareholders.
	 
	 	 	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.




13









 












	 	 	Comparisons of Value
	 
	 	 	Based on the weighted average traded price of each Unicom Share of HK$17.76 on the Hong Kong Stock
Exchange on the Last Trading Date, the value for each Netcom Share under the Share Proposal
represents:






	 	(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 5 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 10 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;
and
	 
	 	(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.






	 	 	Based on the weighted average traded price of each Unicom ADS of US$20.97 on the New York Stock
Exchange on the Last ADS Trading Date, the value for each Netcom ADS under the ADS Proposal
represents:






	 	(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 5 trading days immediately prior to and including the Last ADS Trading Date;
	 
	 	(c)	 	a discount 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 10 trading days immediately prior to and including the Last ADS Trading Date;




14









 












	 	(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; and
	 
	 	(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.






	 	 	Highest and Lowest Prices
	 
	 	 	During the six-month period preceding the Last Trading Date, the highest closing price of Netcom
Shares as quoted on the Hong Kong Stock Exchange was HK$27.05 each on the Last Trading Date, and
the lowest closing price of Netcom Shares as quoted on the Hong Kong Stock Exchange was HK$19.90
each on 20 March 2008.
	 
	 	 	During the six-month period preceding the Last ADS Trading Date, the highest closing price of
Netcom ADSs as quoted on the New York Stock Exchange was US$66.59 each on 26 February
2008, and the lowest closing price of Netcom ADSs as quoted on the New York Stock Exchange was
US$52.41 each on 19 March 2008.
	 
	 	 	Total Consideration
	 
	 	 	On the basis of the value of HK$26.78 for each Scheme Share under the Share Proposal (being the
value of 1.508 Unicom Shares based on the weighted average traded price of each Unicom Share of
HK$17.76 on the Hong Kong Stock Exchange on the Last Trading Date), the entire issued share
capital of 6,699,197,200 Netcom Shares as at the Last Trading Date (assuming that none of the
outstanding Netcom Options are exercised) is valued at approximately HK$179,404,501,016 and the
Fully Diluted Netcom Share Capital of 6,825,034,460 Netcom Shares is valued at approximately
HK$182,774,422,839.
	 
	 	 	






15









 









	2.	 	CONDITIONS OF THE PROPOSALS AND THE SCHEME
	 
	 	 	The Share Proposal is subject to, and the Scheme will become effective and binding on Netcom
and all Scheme Shareholders subject to, the satisfaction or waiver (as applicable) of the
following conditions:






	 	(a)	 	the approval of the Unicom Shareholders in general meeting having been obtained
for (i) the Proposals, (ii) the allotment and issue by Unicom of new Unicom Shares
pursuant to the Share Proposal and the ADS Proposal and (iii) the adoption of the
Special Purpose Unicom Share Option Scheme, in accordance with the Listing Rules and the
NYSE Rules;
	 
	 	(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 Disinterested Netcom Shareholders, present
and voting either in person or by proxy at the Court Meeting, provided that:






	 	(i)	 	the Scheme is approved (by way of poll) by at least 75% of the votes
attaching to the Netcom Shares held by the Disinterested Netcom Shareholders that
are cast either in person or by proxy at the Court Meeting; and
	 
	 	(ii)	 	the number of votes cast (by way of poll) against the resolution to
approve the Scheme at the Court Meeting is not more than 10% of the votes attaching
to all the Netcom Shares held by the Disinterested Netcom Shareholders;






	 	(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) approve and give effect to the reduction of the issued share capital of Netcom by
cancelling and extinguishing the Scheme Shares and (ii) approve the issue of the new
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 timely
advised the High Court that the new 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 and applicable exemptions under US state securities law);
	 
	 	(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;
	 
	 	(f)	 	the Hong Kong Stock Exchange having granted its approval for the listing of, and
permission to deal in, the new Unicom Shares to be issued pursuant to the Share Proposal
and the ADS Proposal and the new Unicom Shares which may be issued upon the exercise of
the Special Unicom Options;




16









 












	 	(g)	 	the New York Stock Exchange having granted its approval for the listing of the new Unicom
ADSs representing the new Unicom Shares to be issued pursuant to the ADS Proposal;
	 
	 	(h)	 	all applicable filings, notices and waivers required in connection with the Proposals
(including its implementation) from or with any governmental or regulatory body having been
made and, if applicable, any waiting periods under any applicable antitrust or similar laws
and regulations having expired or terminated;
	 
	 	(i)	 	all necessary, authorisations, consents and approvals (including approval in-principle) of
any governmental or regulatory body in relation to the Proposals (including their
implementation) 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 necessary 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(ies);
	 
	 	(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
considered necessary by Unicom and Netcom, acting reasonably;
	 
	 	(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 this Announcement,
there having been no material adverse change in the business, financial or trading position
of the Unicom Group or the Netcom Group, each taken as a whole;




17









 












	 	(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 being received from the SFC and/or the Hong Kong Stock
Exchange and/or the SEC and/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 is 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 this Announcement and up to the Effective Date, Netcom not
having declared, made or paid any dividend or distribution of any kind, and not agreeing
or proposing to declare, make or pay any dividend or distribution of any kind.






	 	 	Unicom reserves the right to waive all or any of the conditions (except for the conditions
referred to in paragraphs (a) to (m) and paragraph (o) above) in whole or in part. Netcom
does not have the right to waive any of the conditions. All of the above conditions will have
to be satisfied or waived, as applicable, on or before 30 September 2008 (or such other date
as Unicom and Netcom may agree and the High Court may allow), otherwise the Share Proposal
and the Scheme will lapse. Assuming that the above conditions are satisfied or waived, as
applicable, it is expected that the Scheme will become effective on or before 31 October
2008.
	 
	 	 	Each of the ADS Proposal and the Option Proposal will be conditional upon the Scheme becoming
effective.
	 
	 	 	None of the Netcom Shareholders have a material interest in the Proposals and all the Netcom
Shareholders are “disinterested shareholders” under the Takeovers Code. Accordingly, none of
the Netcom Shareholders are required to abstain from voting at the Court Meeting or the
Netcom EGM.






	3.	 	FURTHER TERMS OF THE PROPOSALS
	 
	 	 	New Unicom Shares and New Unicom ADSs to be Issued
	 
	 	 	The new Unicom Shares and the new Unicom ADSs to be issued pursuant to the Share Proposal and
the ADS Proposal, respectively, will be issued free from all liens, charges and encumbrances
and together with all rights attaching to them, including the right to receive all dividends
and other distributions, if any, declared, made or paid on or after the date of their issue
and will rank pari passu with the existing Unicom Shares and Unicom ADSs.
	 
	 	 	The new Unicom Shares to be issued pursuant to the Share Proposal and the ADS Proposal,
including the new Unicom Shares underlying the new Unicom ADSs, will be issued in reliance
upon the exemption from the registration requirements of the US Securities Act provided by
Section 3(a)(10) thereof. As a consequence, the new Unicom Shares will not be registered under the US
Securities Act. Although the new Unicom Shares will not be registered under the US Securities
Act, the holders will not be subject to any restrictions on resale of such new Unicom Shares
and new





18









 






	 	 	Unicom ADSs under to US federal securities laws, except that holders of new Unicom Shares or
new Unicom ADSs who are deemed to be an “affiliate” of Unicom within the meaning of US
federal securities laws will be subject to resale restrictions under US federal securities
laws.
	 
	 	 	An application will be made to the Hong Kong Stock Exchange for the listing of, and
permission to deal in, the new Unicom Shares to be issued pursuant to the Share Proposal and
the ADS Proposal and the new Unicom Shares to be issued upon the exercise of the Special
Unicom Options. In addition, Unicom will make a supplemental application to the New York
Stock Exchange to list the new Unicom ADSs representing the new Unicom Shares to be issued
pursuant to the ADS Proposal.
	 
	 	 	Overseas Shareholders
	 
	 	 	The making of the Proposals to persons not resident in Hong Kong may be subject to the laws
of the relevant jurisdictions. Such persons should inform themselves about and observe any
applicable legal or regulatory requirements. It is the responsibility of any overseas holder
of Netcom Shares, Netcom ADSs and Netcom Options wishing to accept any of the Proposals to
satisfy themselves as to the full observance of the laws of the relevant jurisdiction in
connection therewith, including the obtaining of any governmental, exchange control or other
consents which may be required, or the compliance with other necessary formalities and the
payment of any issue, transfer or other taxes due in such jurisdiction.
	 
	4.	 	WITHDRAWAL OF LISTING OF THE NETCOM SHARES AND THE NETCOM ADSs
	 
	 	 	Upon the Scheme becoming effective, all the Scheme Shares (including the Scheme Shares
underlying the Netcom ADSs) will be cancelled. The share certificates for the Scheme Shares
will thereafter cease to have effect as documents or evidence of title. An application will
be made by Netcom to the Hong Kong Stock Exchange for the voluntary withdrawal of the listing
of the Netcom Shares from the Hong Kong Stock Exchange pursuant to Rule 6.15 of the Listing
Rules immediately following the Effective Date, which is subject to the approval of the
Listing Committee of the Hong Kong Stock Exchange.
	 
	 	 	Upon the Scheme becoming effective, Unicom intends to cause Netcom to apply for delisting of
the Netcom ADSs from the New York Stock Exchange. Unicom may also seek to cause Netcom to
terminate the Netcom ADS Deposit Agreement. If the Scheme becomes effective, Unicom intends
to cause Netcom to file a Form 15 with the SEC to request that Netcom’s reporting obligations
under the US Securities Exchange Act be terminated or suspended, because the effectiveness of
the Scheme will cause the number of holders of Netcom Shares in the United States to fall
below 300.
	 
	 	 	The Netcom Shareholders and the holders of the Netcom ADSs will be notified by way of a press
announcement of the proposed withdrawal of listing and the exact dates of the last day for
dealing in the Netcom Shares and the Netcom ADSs and on which dates the Scheme and the
withdrawal of the listing of the Netcom Shares on the Hong Kong Stock Exchange and the
delisting of the Netcom ADSs from the New York Stock Exchange will become effective.




19









 












	 	 	The listing of the Netcom Shares on the Hong Kong Stock Exchange and the Netcom ADSs on the
New York Stock Exchange will not be withdrawn if the Proposals are not approved, lapse or do
not become unconditional for any reason.
	 
	5.	 	UNDERTAKINGS
	 
	 	 	Netcom BVI has given an irrevocable undertaking to Unicom to vote in favour of all
resolutions to approve the Scheme and any related matters necessary to implement the Scheme
proposed at the Court Meeting and the Netcom EGM in respect of its legal and beneficial
shareholding in Netcom of 4,647,449,014 Netcom Shares (representing approximately 69.37% of
the issued share capital of Netcom as at the Last Trading Date). Under the irrevocable
undertaking, Netcom Parent has undertaken to use its best endeavours to procure the
performance by Netcom BVI of its obligations under the irrevocable undertaking.
	 
	 	 	Netcom BVI has also received an irrevocable instruction to vote in favour of all resolutions
to approve the Scheme and any related matters necessary to implement the Scheme proposed at
the Court Meeting and the Netcom EGM in respect of the 149,683,549 Netcom Shares
(representing approximately 2.23% of the issued share capital of Netcom as at the Last
Trading Date), which Netcom BVI holds as trustee on behalf of a state-owned entity.
	 
	 	 	In addition, Telefonica has given an irrevocable undertaking to Unicom to vote in favour of
all resolutions to approve the Scheme and any related matters necessary to implement the
Scheme proposed at the Court Meeting and the Netcom EGM in respect of its shareholding in
Netcom of 333,971,305 Netcom Shares (representing approximately 4.99% of the issued share
capital of Netcom as at the Last Trading Date).
	 
	 	 	Under the terms of the irrevocable undertakings given by Netcom BVI and Telefonica and the
irrevocable instruction received by Netcom BVI, the undertakings and the instruction will
lapse (a) if this Announcement has not been released by 30 June 2008, (b) if Unicom announces, with
the consent of the Executive and before the Scheme Document is posted, that it does not
intend to proceed with the Scheme, (c) if the Scheme lapses or is withdrawn in accordance
with its terms or (d) in the event of a higher competing offer for Netcom made by a third party.
	 
	 	 	In addition to conditions (a) to (d) above, the undertakings given by Netcom BVI and the
irrevocable instruction received by Netcom BVI will lapse if the Scheme is not approved at
the Court Meeting or the Netcom EGM.
	 
	 	 	In addition to conditions (a) to (d) above, the undertakings given by Telefonica will lapse
(e) if the Scheme is not approved at the Court Meeting or the Netcom EGM by 30 November 2008,
(f) if since the date of the giving of the undertakings, there has been a material adverse
change in the business, financial or trading position of Unicom or (g) in the event that the
Netcom IFA appointed by the Netcom IBC does not render an opinion that the Proposals are fair
and reasonable.






20









 









	6.	 	POSSIBLE CONCERT PARTY AGREEMENT
	 
	 	 	Each of Unicom and Netcom has been informed by Unicom BVI and Netcom BVI, respectively, that
they are not and have never been parties acting in concert with each other or with or in
respect of either Unicom or Netcom. Each of Unicom and Netcom has further been informed that
Unicom BVI and Netcom BVI intend to enter into the Concert Party Agreement upon or shortly
after the last to occur of (i) the Proposals and the issue of new Unicom Shares being duly
approved by the requisite majority of the Unicom Shareholders at the EGM, (ii) the Scheme
being duly approved by the requisite majority of the Disinterested Netcom Shareholders at the
Court Meeting and (iii) the special resolutions being duly passed with the requisite majority
of the Netcom Shareholders at the Netcom EGM. Pursuant to the Concert Party Agreement, Unicom
BVI and Netcom BVI will agree to cooperate actively to obtain or consolidate control of
Unicom following the completion of the Scheme. Thus, Unicom BVI and Netcom BVI will become
parties acting in concert in respect of Unicom following the completion of the Scheme. In
addition, following the completion of the Scheme, Unicom BVI and Netcom BVI will also be
presumed to be acting in concert with each other in respect of Unicom pursuant to class (1)
of the definition of “acting in concert” in the Takeovers Code.
	 
	 	 	On 26 May 2008, the State-owned Assets Supervision and Administration Commission notified
each of Unicom Parent and Netcom Parent, the respective ultimate parent companies of Unicom
and Netcom, that, among other things, it may, depending on the outcome of any proposed merger
of Unicom and Netcom, consider a merger of Unicom Parent and Netcom Parent. Each of Unicom
Parent and Netcom Parent has confirmed to Unicom and Netcom, respectively, that it has not
received any notice or other indication and that it is not otherwise aware of the timing or
any term of or condition to such merger. On this basis, any merger of Unicom Parent and
Netcom Parent will not result in any change of control of Unicom or Netcom and will not give
rise to any implication under Rule 26 of the Takeovers Code.
	 
	7.	 	REASONS FOR AND BENEFITS OF THE PROPOSALS
	 
	 	 	The management teams of Unicom and Netcom believe that the proposed merger represents an
important transaction for both companies, following the industry trend of convergence between
fixed lines and wireless businesses within China, allowing the two companies to leverage on
increased economies of scale, reinforce their market position of the enlarged group, improve
their overall competitiveness and lay the foundation for sustainable long-term growth. It is
anticipated that through effective integration, synergies will occur in six key areas.






	 	(1)	 	Clear strategic positioning
	 
	 	 	 	The proposed merger, the potential disposal of the CDMA business, and the expected
issuance of 3G licences to be issued by the PRC government is expected to optimise the
enlarged group’s business structure, allowing it to provide a full spectrum and
multi-tiered suite of wireless, fixed, broadband and data value adding services to its
subscribers. In the wireless sector, the




21









 












	 	 	 	enlarged group intends to focus on GSM businesses and promptly establish a leading edge over
competitors based on 3G technologies. Furthermore, the enlarged group intend to build up a
market leading professional service system, laying the foundation for its long-term growth
potential.
	 
	 	(2)	 	Improved market position
	 
	 	 	 	The proposed merger is expected to result in the creation of a significantly larger business
in terms of total assets, revenue and subscriber base, with enhanced scope for future
financial strength and profitability. The anticipated overall strengthening of the enlarged
group should help to consolidate and elevate the competitive position and market influence of
the enlarged group in the Chinese telecommunications market.
	 
	 	(3)	 	Combining resources and strengths to achieve economies of scale and larger scope
	 
	 	 	 	Sales channels: By integrating the leading sales channels of Unicom and Netcom in their
respective sectors, the enlarged group plans to establish a single national network of sales,
distribution and service, particularly in China’s ten Northern provinces. The management
plans to further rationalise the network structure and enhance operation efficiency going
forward.
	 
	 	 	 	Subscriber base: The combination of Netcom’s strength in fixed line and broadband services
with Unicom’s strength in wireless business is expected to result in a wider customer base
through sharing customer resources and focusing on customer retention. In particular,
Netcom’s strength among corporate and business customers can be leveraged to offer integrated
full- service products.
	 
	 	 	 	Network coverage: The combination of the networks of both companies is expected to improve
network capacity and transmission quality and to result in improved utilisation of current
network and hardware resources.
	 
	 	 	 	Marketing: The enlarged group is expected to be better able to tailor its marketing programs
and to cross-sell and bundle its services and products to different subscribers, improving
customer loyalty. Meanwhile, the economies of scale offered by the integrated sales and
marketing capacity should allow the enlarged group to reduce churn and enhance efficiency.
	 
	 	(4)	 	Technological and product innovation to suit the ever-changing market trends
	 
	 	 	 	By leveraging the technological expertise of Unicom and Netcom in their respective sectors,
their combined business is expected to operate on a single research and development platform
which allows for development of telecommunication services and products integrating the
wireless, fixed lines, broadband and internet technologies. This should enable the enlarged
group to focus its resources on its key business development areas and thus enhance the
overall group’s competency.





22









 






	 	 	 	Fixed mobile convergence (FMC): The proposed merger is expected to facilitate integration of
fixed line telecommunications products, mobile telecommunications products, terminals,
network and technologies.
	 
	 	 	 	Effective coverage services: It is expected that the enlarged group will be able to provide
effective coverage services by leveraging a combination of indoor WiFi/broadband capabilities
alongside existing and anticipated outdoor coverage services (GSM/GPRS/3G), thereby enhancing
the development of fixed lines and mobile broadband business.
	 
	 	 	 	Bundled “all-in-one” services: The enlarged group is expected to be better able to offer one-
stop services for corporate and business customers, as well as broadband and multimedia
communication services for family and personal customers.
	 
	 	 	 	Value-added services: The enlarged group is expected to be better able to broaden the scope
of value-added services and realise resource sharing among different channels and terminals.
It is anticipated that the overall value-added services business will be strengthened through
better utilisation of the network resources and development of the business potential.
	 
	 	(5)	 	Enhanced human capital and organisational structure
	 
	 	 	 	The combined professional experience of both companies in mobile telecommunications and fixed
line telecommunications is expected to create a pool of experienced and highly skilled
professionals covering the full range of business lines. Moreover, integration of the various
businesses and sharing of management expertise is expected to improve operating efficiency.
	 
	 	(6)	 	Optimising capital structure and enhanced financial capabilities
	 
	 	 	 	The proposed merger of the two companies and the sale of the CDMA business is expected to
enhance the enlarged group’s ability to optimise its capital structure through adjusting
leverage. Furthermore, it is anticipated that the sharing of resources will contribute to
reduce overall capital expenditures and operating expenditures, which is expected to increase
financial resources and financing abilities available for the further development of the core
businesses.
	 
	 	 	 	The directors of Unicom believe that the terms of the Proposals are fair and reasonable and
in the interests of the Unicom Shareholders as a whole.
	 
	 	 	 	The Netcom IBC, which comprises all the independent non-executive directors of Netcom, has
been appointed to advise the Disinterested Netcom Shareholders and the holders of Netcom ADSs
and Netcom Options in respect of the Proposals. The Netcom IBC is yet to opine on the
Proposals. The views and recommendations of the Netcom IBC in respect of the Proposals will
be set out in the Scheme Document to be despatched to the Netcom Shareholders and the holders
of Netcom ADSs and Netcom Options.






23











 






	8.	 	INFORMATION ON UNICOM
	 
	 	 	General Information
	 
	 	 	Unicom was incorporated in Hong Kong with limited liability on 8 February 2000. Unicom,
through its subsidiaries, is principally engaged in GSM and CDMA cellular business in 31
provinces, municipalities and autonomous regions in the PRC, the provision of international
and domestic long distance calls, data and Internet services and other related
telecommunication value-added businesses.
	 
	 	 	The Unicom Shares were listed on the Hong Kong Stock Exchange on 22 June 2000 (Hong Kong
time) and the Unicom ADSs were listed on the New York Stock Exchange on 21 June 2000 (New
York time).
	 
	 	 	Based on the latest published audited consolidated financial statements of Unicom, under Hong
Kong Financial Reporting Standards, the total net asset value of Unicom as at 31 December
2007 was approximately RMB97,217,094,000 (HK$109,232,689,888).
	 
	 	 	Based on the latest published audited consolidated financial statements of Unicom, under Hong
Kong Financial Reporting Standards, the profit before and after taxation of Unicom for the
financial year ended 31 December 2006 were approximately RMB6,564,912,000 (HK$7,376,305,618)
and RMB3,801,027,000 (HK$4,270,816,854), respectively, and the profit before and after
taxation of Unicom for the financial year ended 31 December 2007 were approximately
RMB12,955,027,000
(HK$14,556,210,112) and RMB9,300,857,000 (HK$10,450,401,124), respectively.






	 	 	Shareholding Structure of Unicom
	 
	 	 	As at the Last Trading Date, there were 13,662,075,945 Unicom Shares in issue and 228,629,600

Unicom Options outstanding and as at the Last ADS Trading Date, there were 50,501,765 Unicom
ADSs. 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.
	 
	 	 	Unicom Parent is the ultimate shareholding company of Unicom. Unicom Parent holds
approximately 60.74% of the issued share capital of Unicom A Share Company, which in turn
holds approximately 82.1% of the issued share capital of Unicom BVI, which in turn holds
approximately
71.18% of the issued share capital of Unicom as at the Last Trading Date.




24









 












	 	 	Assuming the Scheme becomes effective and none of the outstanding Netcom Options are exercised, a
total of 10,102,389,378 new Unicom Shares will be issued. Based on publicly available information,
the table below sets out the shareholding structure of Unicom as at the Last Trading Date and
following the completion of the Proposals, assuming 10,102,389,378 new Unicom Shares are issued
and there are no other changes in the shareholdings in Unicom prior to the completion of the
Proposals:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Following completion of the	 	 	Following completion of the	 
	 	 	 	 	 	 	 	 	 	 	Proposals (assuming all of	 	 	Proposals (assuming none	 
	 	 	 	 	 	 	 	 	 	 	the outstanding Unicom	 	 	of the outstanding Unicom	 
	Name	 	As at the Last Trading Date	 	 	Options are exercised)	 	 	Options are exercised)	 
	 	 	No. of	 	 	 	 	 	 	No. of	 	 	 	 	 	 	No. of	 	 	 	 
	 	 	Unicom Shares	 	 	%	 	 	Unicom Shares	 	 	%	 	 	Unicom Shares	 	 	%	 
	Unicom BVI
	 	 	9,725,000,020	 	 	 	71.18	%	 	 	9,725,000,020	 	 	 	40.53	%	 	 	9,725,000,020	 	 	 	40.92	%
	SK Telecom
	 	 	899,745,075	 	 	 	6.59	%	 	 	899,745,075	 	 	 	3.75	%	 	 	899,745,075	 	 	 	3.79	%
	Netcom BVI
	 	 	0	 	 	 	0.00	%	 	 	7,008,353,115	 	 	 	29.21	%	 	 	7,008,353,115	 	 	 	29.49	%
	5 PRC
shareholders
	 	 	0	 	 	 	0.00	%	 	 	448,930,069	 	 	 	1.87	%	 	 	448,930,069	 	 	 	1.89	%
	Telefonica
(1)
	 	 	0	 	 	 	0.00	%	 	 	503,628,728	 	 	 	2.10	%	 	 	503,628,728	 	 	 	2.12	%
	ABLP
	 	 	0	 	 	 	0.00	%	 	 	599,252,490	 	 	 	2.50	%	 	 	599,252,490	 	 	 	2.52	%
	Other Public
Shareholders
	 	 	3,037,330,850	 	 	 	22.23	%	 	 	4,808,185,425	 	 	 	20.04	%	 	 	4,579,555,825	 	 	 	19.27	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	 	13,662,075,945	 	 	 	100.00	%	 	 	23,993,094,923	 	 	 	100.00	%	 	 	23,764,465,323	 	 	 	100.00	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 








 




			
	(1)	 	Calculated based on Telefonica’s existing shareholding of 333,971,305 Netcom Shares.




25









 











	 	 	Assuming the Scheme becomes effective and all of the outstanding Netcom Options are
exercised, a total of 10,292,151,966 new Unicom Shares will be issued. Based on publicly
available information, the table below sets out the shareholding structure of Unicom as at
the Last Trading Date and following the completion of the Proposals, assuming 10,292,151,966
new Unicom Shares are issued and there are no other changes in the shareholdings in Unicom
prior to the completion of the Proposals:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Following completion of the	 	 	Following completion of the	 
	 	 	 	 	 	 	 	 	 	 	Proposals (assuming all of	 	 	Proposals (assuming none	 
	 	 	 	 	 	 	 	 	 	 	the outstanding Unicom	 	 	of the outstanding Unicom	 
	Name	 	As at the Last Trading Date	 	 	Options are exercised)	 	 	Options are exercised)	 
	 	 	No. of	 	 	 	 	 	 	No. of	 	 	 	 	 	 	No. of	 	 	 	 
	 	 	Unicom Shares	 	 	%	 	 	Unicom Shares	 	 	%	 	 	Unicom Shares	 	 	%	 
	Unicom BVI
	 	 	9,725,000,020	 	 	 	71.18	%	 	 	9,725,000,020	 	 	 	40.21	%	 	 	9,725,000,020	 	 	 	40.60	%
	SK Telecom
	 	 	899,745,075	 	 	 	6.59	%	 	 	899,745,075	 	 	 	3.72	%	 	 	899,745,075	 	 	 	3.76	%
	Netcom BVI
	 	 	0	 	 	 	0.00	%	 	 	7,008,353,115	 	 	 	28.98	%	 	 	7,008,353,115	 	 	 	29.26	%
	5 PRC shareholders
	 	 	0	 	 	 	0.00	%	 	 	448,930,069	 	 	 	1.86	%	 	 	448,930,069	 	 	 	1.87	%
	Telefonica(1)
	 	 	0	 	 	 	0.00	%	 	 	503,628,728	 	 	 	2.08	%	 	 	503,628,728	 	 	 	2.10	%
	ABLP
	 	 	0	 	 	 	0.00	%	 	 	599,252,490	 	 	 	2.48	%	 	 	599,252,490	 	 	 	2.50	%
	Other Public
Shareholders
	 	 	3,037,330,850	 	 	 	22.23	%	 	 	4,997,948,013	 	 	 	20.67	%	 	 	4,769,318,413	 	 	 	19.91	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	 	13,662,075,945	 	 	 	100.00	%	 	 	24,182,857,511	 	 	 	100.00	%	 	 	23,954,227,911	 	 	 	100.00	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 








 




			
	(1)	 	Calculated based on Telefonica’s existing shareholding of 333,971,305 Netcom Shares.






	9.	 	INFORMATION ON NETCOM
	 
	 	 	General Information
	 
	 	 	Netcom was incorporated in Hong Kong with limited liability on 22 October 1999. Netcom is a
leading broadband and fixed-line telecommunications operator in the PRC, with services
regions consisting of Beijing Municipality, Tianjin Municipality, Hebei Province, Henan
Province, Shandong Province, Liaoning Province, Heilongjiang Province, Jilin Province,
Neimenggu Autonomous Region and Shanxi Province. In its service regions, Netcom provides
fixed-line voice and value-added services, broadband and other Internet-related services,
information and communications technology services, business and data communications services
and advertising and media services.
	 
	 	 	The Netcom Shares were listed on the Hong Kong Stock Exchange on 17 November 2004 (Hong
Kong time) and the Netcom ADSs were listed on the New York Stock Exchange on 16 November
2004 (New York time).
	 
	 	 	Based on the latest published audited consolidated financial statements of Netcom, under Hong
Kong Financial Reporting Standards, the net asset value of Netcom as at 31 December 2007 was
approximately RMB82,052 million (HK$92,193 million).




26









 












	 	 	Based on the latest published audited consolidated financial statements of Netcom, under Hong Kong
Financial Reporting Standards, the net profit from continuing operations before and after taxation
and extraordinary items of Netcom for the financial year ended 31 December 2006 were approximately
RMB15,205 million (HK$17,084 million) and RMB11,478 million (HK$12,897 million), respectively, and
the net profit from continuing operations before and after taxation and extraordinary items of
Netcom for the financial year ended 31 December 2007 were approximately RMB15,267 million
(HK$17,154 million) and RMB11,471 million (HK$12,889 million), respectively.






	 	 	Shareholding Structure of Netcom
	 
	 	 	As at the Last Trading Date, there were 6,699,197,200 Netcom Shares in issue and 125,837,260

Netcom Options outstanding, and as at the Last ADS Trading Date there were 7,218,677 Netcom ADSs.
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.
	 
	 	 	Netcom Parent is the ultimate holding company of Netcom. Netcom Parent wholly owns Netcom BVI,
which in turn legally and beneficially holds approximately 69.37% of the issued share capital of
Netcom as at the Last Trading Date.
	 
	 	 	Based on publicly available information, the table below sets out the shareholding structure of
Netcom as at the Last Trading Date and following the completion of the Proposals:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Following completion	 	 	Following completion of the	 
	 	 	 	 	 	 	 	 	 	 	of the Proposals (assuming all of	 	 	Proposals (assuming none	 
	 	 	 	 	 	 	 	 	 	 	the outstanding Netcom	 	 	of the outstanding Netcom	 
	Name	 	As at the Last Trading Date	 	 	Options are exercised)	 	 	Options are exercised)	 
	 	 	No. of	 	 	 	 	 	 	No. of	 	 	 	 	 	 	No. of	 	 	 	 
	 	 	Netcom Shares	 	 	%	 	 	Netcom Shares	 	 	%	 	 	Netcom Shares	 	 	%	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Netcom BVI
	 	 	4,647,449,015	(1)	 	 	69.37	%	 	 	0	 	 	 	0.00	%	 	 	0	 	 	 	0.00	%
	5 PRC shareholders
	 	 	297,698,985	(2)	 	 	4.44	%	 	 	0	 	 	 	0.00	%	 	 	0	 	 	 	0.00	%
	Telefonica
	 	 	333,971,305	 	 	 	4.99	%	 	 	0	 	 	 	0.00	%	 	 	0	 	 	 	0.00	%
	ABLP
	 	 	397,382,288	 	 	 	5.93	%	 	 	0	 	 	 	0.00	%	 	 	0	 	 	 	0.00	%
	Unicom
	 	 	0	 	 	 	0.00	%	 	 	6,825,034,460	 	 	 	100.00	%	 	 	6,699,197,200	 	 	 	100.00	%
	Other Public Shareholders
	 	 	1,022,695,607	 	 	 	15.27	%	 	 	0	 	 	 	0.00	%	 	 	0	 	 	 	0.00	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	 	6,699,197,200	 	 	 	100.00	%	 	 	6,825,034,460	 	 	 	100.00	%	 	 	6,699,197,200	 	 	 	100.00	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 








 




			
	Note:
	 
	(1)	 	Includes 4,647,449,014 Netcom Shares legally and beneficially held by Netcom BVI, and 1
Netcom Share held by a wholly-owned subsidiary of Netcom BVI.
	 
	(2)	 	These 297,698,985 Netcom Shares are held by Netcom BVI as trustee on behalf of 5 PRC
shareholders.




27









 









	 	 	Interests in Netcom Shares and Derivatives
	 
	 	 	As at the date of this Announcement, save for an aggregate of 14,679,875 Netcom Shares

(representing approximately 0.22% of the issued share capital of Netcom as at the Last
Trading Date) held by the JP Morgan group (including its affiliate, Bear Stearns), neither
Unicom nor any of the parties acting in concert with it owns, controls or directs any Netcom
Shares or holds any convertible securities, warrants or options (or other outstanding
derivatives) in respect of Netcom Shares.
	 
	 	 	Unicom has not dealt for value in Netcom Shares or convertible securities, warrants or options

(or other outstanding derivatives) in respect of Netcom Shares during the six month period up
to and including the date of this Announcement. Any dealings in Netcom Shares and other
Netcom securities by the parties acting in concert with Unicom in relation to the Proposals
during the six month period up to and including the date of this Announcement will be
disclosed in the Scheme Document.






	10.	 	POSSIBLE VERY SUBSTANTIAL ACQUISITION, ALLOTMENT OF NEW UNICOM SHARES AND ADOPTION OF
SPECIAL PURPOSE UNICOM SHARE OPTION SCHEME






	 	 	The implementation of the Proposals will result in Netcom becoming a wholly-owned subsidiary
of Unicom and as the highest of the percentage ratios set out in Rule 14.07 of the Listing
Rules in respect of the implementation of the Proposals is more than 100%, the Proposals will
constitute a possible very substantial acquisition for Unicom under the Listing Rules. The
Proposals are therefore conditional upon the approval of the Unicom Shareholders in general
meeting.
	 
	 	 	The allotment and issue of new Unicom Shares to the Scheme Shareholders pursuant to the Share
Proposal and to the Unicom Depositary pursuant to the ADS Proposal is subject to the approval
of the Unicom Shareholders in general meeting pursuant to Rule 13.36(1)(a) of the Listing
Rules.
	 
	 	 	The adoption of the Special Purpose Unicom Share Option Scheme by Unicom is subject to the
approval of the Unicom Shareholders in general meeting pursuant to Rule 17.02(1)(a) of the
Listing Rules.
	 
	 	 	None of the Unicom Shareholders have a material interest in the Very Substantial Acquisition,
the allotment and issue of new Unicom Shares to the Scheme Shareholders and the adoption of
the Special Purpose Unicom Share Option Scheme by Unicom. Accordingly, none of the Unicom
Shareholders are required to abstain from voting at the Unicom EGM. However, notwithstanding
the foregoing, an independent non-executive director of Netcom who holds 6,000 Unicom Shares
has undertaken to Netcom that he will abstain from voting at the Unicom EGM.
	 
	 	 	The resolutions relating to the Very Substantial Acquisition, the allotment and issue of new
Unicom Shares to the Scheme Shareholders and the adoption of the Special Purpose Unicom Share
Option Scheme will be approved by way of a poll at the Unicom EGM.




28









 












	 	 	To the best of the knowledge, information and belief of the directors of Unicom, having made
all reasonable enquiries, Netcom and its substantial shareholders are third parties
independent of Unicom and its connected persons.
	 
	 	 	To the best of the knowledge, information and belief of the directors of Unicom, having made
reasonable enquiries, none of the Netcom Shareholders are connected persons of Unicom and
accordingly, the Proposals do not constitute a connected transaction for Unicom.






	11.	 	NETCOM IBC AND NETCOM IFA






	 	 	The board of directors of Netcom has established the Netcom IBC, comprising all of the
independent non-executive directors of Netcom, being Mr. Timpson Chung Shui Ming, Mr. John
Lawson Thornton, Dr. Qian Yingyi and Mr. Hou Ziqiang, to advise the Disinterested Netcom
Shareholders and the holders of Netcom ADSs and Netcom Options as to (a) whether the
Proposals are, or are not, fair and reasonable and (b) whether to vote in favour of the
Scheme at the Court Meeting and the Netcom EGM.
	 
	 	 	An independent non-executive director of Netcom holds 6,000 Unicom Shares and he has
undertaken to Netcom that he will abstain from voting at the Unicom EGM. As such interest is
de minimis, such independent non-executive director of Netcom is not considered to have an
interest in the Proposals. None of the members of the Netcom IBC has any direct or indirect
interest in the Proposals.
	 
	 	 	The Netcom IBC has appointed Rothschild as the independent financial adviser to the Netcom
IBC in respect of the Proposals. The Netcom IBC is evaluating the Proposals and the views and
recommendations of the Netcom IBC in respect of the Proposals will be set out in the Scheme
Document to be despatched to the Netcom Shareholders and holders of Netcom ADSs and Netcom
Options.






	12.	 	SCHEME DOCUMENT






	 	 	The Scheme Document containing, among other things, details of the Proposals and the Scheme,
the expected timetable, an explanatory statement, the recommendations of the Netcom IBC in
respect of the Proposals, the letter of advice from the Netcom IFA to the Netcom IBC and
notices of the Court Meeting and the Netcom EGM and proxy forms will be despatched to the
Netcom Shareholders and holders of Netcom ADSs and Netcom Options as soon as practicable and
in compliance with the requirements of the Takeovers Code.




29









 












	13.	 	INFORMATION FOR HOLDERS OF NETCOM ADS






	 	 	As holders of Netcom ADSs are not holders of record of Scheme Shares, they do not have the
right to vote at the Court Meeting or the Netcom EGM, but may instruct the Netcom Depositary
to vote the Scheme Shares underlying their Netcom ADSs in accordance with the terms of the
Netcom ADS Deposit Agreement. Holders of Netcom ADSs who wish to participate at the Court
Meeting or the Netcom EGM, or to participate at the hearing of the High Court, would need to
surrender their Netcom ADSs to the Netcom Depositary for withdrawal of Scheme Shares
underlying such Netcom ADSs in accordance with the terms of the Netcom ADS Deposit Agreement
prior to the relevant dates that will be set forth in the Scheme Document. Netcom will make
arrangements with the Netcom Depositary to ensure that the Netcom Depositary will provide
holders of Netcom ADSs with the Scheme Document and other relevant materials. Pursuant to the
ADS Proposal, all holders of Netcom ADSs will receive new Unicom ADSs rather than new Unicom
Shares. As will be described in detail in the Scheme Document, any holder of Netcom ADSs who
would prefer to receive new Unicom Shares rather than new Unicom ADSs, would need to
surrender their Netcom ADSs to the Netcom Depositary for withdrawal of Scheme Shares
underlying such Netcom ADSs in accordance with the terms of the Netcom ADS Deposit Agreement
such as to become holders of Scheme Shares not later than the Scheme Record Time. Holders of
Netcom ADSs seeking to become holders of Scheme Shares are likely to incur cancellation fees
and may incur taxes and other charges in connection with the surrender and withdrawal of
Netcom ADSs. Holders of Netcom ADSs should refer to the Netcom ADS Deposit Agreement for a
complete description of their rights. Moreover, the Scheme Document will contain important
information for Netcom ADS holders.






	14.	 	UNICOM EGM AND UNICOM CIRCULAR






	 	 	Unicom will convene an extraordinary general meeting to approve the Proposals, the allotment
and issue of the new Unicom Shares as consideration under the Share Proposal and the ADS
Proposal, the Very Substantial Acquisition, the adoption of the Special Purpose Unicom Share
Option Scheme and all the transactions and matters contemplated or required in connection
with the Proposals.
	 
	 	 	A circular containing, amongst others, further details of the Proposals, the Very Substantial
Acquisition and the Special Purpose Unicom Share Option Scheme together with a notice of the
Unicom EGM and proxy forms, will be despatched to the Unicom Shareholders as soon as
practicable and in accordance with the requirements of the Listing Rules.




30









 












	15.	 	FURTHER AGREEMENTS OR ARRANGEMENTS
	 
	 	 	Unicom confirms that there are no other arrangements (whether by way of option, indemnity or
otherwise) in relation to the Unicom Shares or the Netcom Shares and which might be material
to the Proposals. Netcom confirms that there are no other arrangements (whether by way of
option, indemnity or otherwise) in relation to the Unicom Shares or the Netcom Shares and
which might be material to the Proposals.
	 
	 	 	Unicom confirms that there are no agreements or arrangements to which it is a party which
relate to the circumstances in which it may or may not invoke or seek to invoke a
pre-condition or a condition to the Proposals.






	16.	 	DISPOSAL OF THE CDMA BUSINESS BY UNICOM






	 	 	On 2 June 2008, Unicom entered into a framework agreement with CUCL, a wholly-owned
subsidiary of Unicom, and China Telecom which sets out the terms and conditions on which CUCL
will dispose of its CDMA business together with relevant assets and liabilities to China
Telecom. Such disposal will constitute a major transaction for Unicom and is subject to the
approval of the Unicom Shareholders. Details of the disposal and the relevant transactions
which are proposed to be entered into in connection with the disposal are set out in a
separate announcement issued by Unicom dated 2 June 2008. Unicom expects that the disposal of
the CDMA business by Unicom will be completed before the Effective Date. The disposal of the
CDMA business by Unicom is a separate and independent transaction from the Proposals.






	17.	 	RESUMPTION OF TRADING






	 	 	At the request of Unicom, trading in the Unicom Shares on the Hong Kong Stock Exchange was
suspended from 12:26 p.m. on 23 May 2008 (Hong Kong time) and trading in the Unicom ADSs on
the New York Stock Exchange was suspended from 9:30 a.m. on 23 May 2008 (New York time). An
application has been made by Unicom to the Hong Kong Stock Exchange for the resumption of
trading in the Unicom Shares from 9:30 a.m. on 3 June 2008 (Hong Kong time). It is expected
that trading in the Unicom ADSs on the New York Stock Exchange will resume on either 2 June
2008, or 3 June 2008.
	 
	 	 	At the request of Netcom, trading in the Netcom Shares on the Hong Kong Stock Exchange was
suspended from 12:26 p.m. on 23 May 2008 (Hong Kong time) and trading in the Netcom ADSs on
the New York Stock Exchange was suspended from 9:30 a.m. on 23 May 2008 (New York time).
Applications have been made by Netcom to the Hong Kong Stock Exchange for the resumption of
trading in the Netcom Shares from 9:30 a.m. on 3 June 2008 (Hong Kong time). It is expected
that trading in the Netcom ADSs on the New York Stock Exchange will resume on either 2 June
2008, or 3 June 2008.




31









 












	18.	 	IMPORTANT NOTE FOR US INVESTORS






	 	 	The Proposals relate to the securities of a corporation incorporated under the laws of Hong
Kong and will be subject to the procedure and disclosure requirements of Hong Kong, which are
different from those of the United States. The financial information to be included in the
Scheme Document has not been, and will not be, prepared in accordance with US GAAP and thus
may not be comparable to financial information of US companies or companies whose financial
statements are prepared in accordance with US GAAP. The Scheme is subject to disclosure and
other procedural requirements, the Scheme timetable, settlement procedures and timing of
payments that are different from those applicable under US domestic procedures and law.
	 
	 	 	It may be difficult for US holders of Netcom Shares to enforce their rights and any claim
arising out of the US federal securities laws, since Unicom is located outside of the United
States, some or all of its officers and directors are resident outside of the United States
and a substantial portion of its assets are located outside the United States. US holders of
Netcom Shares may not be able to sue a foreign company or its officers or directors in a
foreign court for violations of the US securities laws. Further, it may be difficult to
compel a foreign company and its affiliates to subject themselves to a US court’s judgment.
	 
	 	 	All statements, other than statements of historical facts included in this Announcement, are
or may be forward-looking statements. Forward-looking statements include, but are not limited
to, those using words such as “seek”, “expect”, “anticipate”, “estimate”, “believe”,
“intend”, “project”, “plan”, “strategy”, “forecast” and similar expressions or future or conditional verbs such as
“will”, “would”, “should”, “could”, “may” and “might”. These statements reflect Unicom’s or Netcom’s
(as the case may be) current expectations, beliefs, hopes, intentions or strategies regarding
the future and assumptions in light of currently available information. Such forward-looking
statements are not guarantees of future performance or events and involve known and unknown
risks and uncertainties.
	 
	 	 	Accordingly, actual results may differ materially from those described in such
forward-looking statements as a result of a number of factors, including, without limitation,
any changes in the regulatory regime and significant policies for the PRC telecommunications
industry, including changes in the structure or functions of the primary industry regulator,
the Ministry of Industry and Information (which has assumed the regulatory functions of the
former Ministry of Information Industry), or any in the regulatory policies of the Ministry
of Industry and Information, the State- owned Assets Supervision and Administration
Commission and other relevant government authorities of the PRC; any decisions by the PRC
government in relation to the technology standards and licenses of third generation mobile
telecommunication; the results of the ongoing restructuring of the PRC telecommunications
industry; any changes in the effects of competition on the demand and price of the Unicom’s
and Netcom’s telecommunications services; the integration of Unicom and Netcom following the
effectiveness of the Scheme; any changes in telecommunications and related technologies and
applications based on such technologies; and any changes in political, economic, legal and
social conditions in the PRC including the PRC government’s policies with






32











 






	 	 	respect to economic growth, consolidations or restructuring of and other structural changes
in the PRC telecommunications industry, foreign exchange, foreign investment and entry by
foreign companies into the PRC telecommunications market. Shareholders and investors should
not place undue reliance on such forward-looking statements, and neither Unicom nor Netcom
undertake any obligation to update publicly or revise any forward-looking statements.
	 
	19.	 	PROFIT FORECASTS
	 
	 	 	This Announcement does not contain any profit forecasts, as defined under Rule 10 of the
Takeovers Code, in relation to Unicom or Netcom.
	 
	20.	 	WARNING
	 
	 	 	Holders of Unicom Shares, Unicom ADSs, Unicom Options, Netcom Shares, Netcom ADSs and Netcom
Options and potential investors in Unicom and Netcom should be aware that the implementation
of the Proposals (including the Scheme) is subject to the conditions set out in this
Announcement being satisfied or waived, as applicable, and thus the Proposals (including the
Scheme) may or may not become effective. Holders of Unicom Shares, Unicom ADSs, Unicom
Options, Netcom Shares, Netcom ADSs and Netcom Options and potential investors in Unicom and
Netcom should therefore exercise caution when dealing in Unicom Shares, Unicom ADSs, Unicom
Options, Netcom Shares, Netcom ADSs or Netcom Options or other securities of Unicom or
Netcom. Persons who are in doubt as to the action they should take should consult their
stockbroker, bank manager, solicitor or other professional advisers.
	 
	21.	 	DEFINITIONS
	 
	 	 	In this Announcement, unless the context otherwise requires, the following expressions have
the meanings set out below:





	 	 	 	 	 
	“ABLP”

	 	:
	 	AllianceBernstein L.P.
	 
	 	 	 	 
	“acting in concert”

	 	:
	 	has the meaning given to it in the Takeovers Code
	 
	 	 	 	 
	“ADS Proposal”

	 	:
	 	the proposal to the holders of Netcom ADSs for
the cancellation of the Scheme Shares underlying
the Netcom ADSs
	 
	 	 	 	 
	“ADSs”

	 	:
	 	American Depositary Shares
	 
	 	 	 	 
	“Announcement”

	 	:
	 	this announcement dated 2 June 2008
	 
	 	 	 	 
	“associate”

	 	:
	 	has the meaning given to it in the Listing Rules
	 
	 	 	 	 
	“Business Day(s)”

	 	:
	 	a day on which banks are opened for business
in Hong Kong
(excluding Saturdays, Sundays or public holidays
in Hong Kong)






33









 






	 	 	 	 	 
	“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
	 
	 	 	 	 
	“China Telecom”

	 	:
	 	China Telecom Corporation Limited, a joint stock
limited company incorporated under the laws of
the PRC, whose shares are listed on the Hong
Kong Stock Exchange and whose ADSs are listed on
the New York Stock Exchange
	 
	 	 	 	 
	“Concert Party Agreement”

	 	:
	 	the Concert Party Agreement which is anticipated
to be entered into between Unicom BVI and Netcom
BVI
	 
	 	 	 	 
	“connected person”

	 	:
	 	has the meaning given to it in the Listing Rules
	 
	 	 	 	 
	“Court Meeting”

	 	:
	 	a meeting of the Netcom Shareholders to be
convened at the direction of the High Court for
the approval of the Scheme
	 
	 	 	 	 
	“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
	 
	 	 	 	 
	“Executive”

	 	:
	 	the Executive Director of the Corporate Finance
Division of the SFC
or any delegate of the Executive Director
	 
	 	 	 	 
	“Fully Diluted Netcom Share Capital”

	 	:
	 	the total number of Netcom Shares which would be
in issue if all of the outstanding Netcom
Options are validly exercised
	 
	 	 	 	 
	“GSM”

	 	:
	 	global cellular system for mobile
communications, 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
	 
	 	 	 	 
	“High Court”

	 	:
	 	the High Court of Hong Kong
	 
	 	 	 	 
	“HK$”

	 	:
	 	Hong Kong dollars, the lawful currency of Hong
Kong
	 
	 	 	 	 
	“Hong Kong”

	 	:
	 	the Hong Kong Special Administrative Region of
the PRC
	 
	 	 	 	 
	“Hong Kong Companies Ordinance”

	 	:
	 	the Companies Ordinance (Chapter 32 of the Laws
of Hong Kong)
	 
	 	 	 	 
	“Hong Kong Stock Exchange”

	 	:
	 	The Stock Exchange of Hong Kong Limited






34









 






	 	 	 	 	 
	“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
	 
	 	 	 	 
	“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
	 
	 	 	 	 
	“Listing Rules”

	 	:
	 	the 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, a company incorporated under the laws
of Hong Kong with limited liability, whose
Netcom Shares are listed on the Hong Kong Stock
Exchange and whose Netcom ADSs are listed on the
New York Stock Exchange
	 
	 	 	 	 
	“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 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 BVI”

	 	:
	 	China Netcom Group Corporation (BVI) Limited, a
company incorporated under the laws of the
British Virgin Islands and the immediate
controlling shareholder of Netcom
	 
	 	 	 	 
	“Netcom Depositary”

	 	:
	 	Citibank, N.A.
	 
	 	 	 	 
	“Netcom EGM”

	 	:
	 	the extraordinary general meeting of Netcom to
be convened immediately following the Court
Meeting for the implementation of the Scheme
	 
	 	 	 	 
	“Netcom Group”

	 	:
	 	Netcom and its subsidiaries
	 
	 	 	 	 
	“Netcom IBC”

	 	:
	 	the independent board committee of Netcom
which has been established to advise the
Disinterested Netcom Shareholders and the
holders of Netcom ADSs and Netcom Options in
respect of the Proposals
	 
	 	 	 	 
	“Netcom IFA” or “Rothschild”

	 	:
	 	N M Rothschild & Sons (Hong Kong) Limited, the
independent financial adviser to the Netcom IBC
	 
	 	 	 	 
	“Netcom Options”

	 	:
	 	outstanding options to acquire Netcom Shares
granted under the Netcom Share Option Scheme






35









 






	 	 	 	 	 
	“Netcom Parent”

	 	:
	 	China Network Communications Group Corporation,
a state-owned enterprise established under the
laws of the PRC
	 
	 	 	 	 
	“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 share
capital of Netcom
	 
	 	 	 	 
	“New Netcom Shares”

	 	:
	 	the new Netcom Shares to be issued to Unicom
pursuant to the Scheme and being the same number
as the number of the Scheme Shares cancelled
pursuant to the Scheme
	 
	 	 	 	 
	“NYSE Rules”

	 	:
	 	the rules of the New York Stock Exchange
governing New York Stock Exchange listed
companies
	 
	 	 	 	 
	“OFTA”

	 	:
	 	the Hong Kong Office of the Telecommunications
Authority
	 
	 	 	 	 
	“Option Proposal”

	 	:
	 	the proposal to all holders of Netcom Options
for the exchange of their outstanding Netcom
Options for new Special Unicom Options
	 
	 	 	 	 
	“PRC” or “China”

	 	:
	 	the People’s Republic of China
	 
	 	 	 	 
	“Proposals”

	 	:
	 	the Share Proposal, the ADS Proposal and the
Option Proposal and the conditions thereof, as
described in the paragraphs headed “1. The
Proposals”, “2. Conditions of the Proposals and
the Scheme” and “3. Further Terms of the
Proposals” in this Announcement
	 
	 	 	 	 
	“Registrar”

	 	:
	 	the Registrar of Companies in Hong Kong
	 
	 	 	 	 
	“RMB”

	 	:
	 	Renminbi, the lawful currency of the PRC
	 
	 	 	 	 
	“Scheme”

	 	:
	 	a scheme of arrangement under section 166 of the
Hong Kong Companies Ordinance involving the
cancellation of all the Scheme Shares on the
terms, and subject to the conditions, set out in
this Announcement and to be set out in the
Scheme Document
	 
	 	 	 	 
	“Scheme Document”

	 	:
	 	the document to be despatched to all Netcom
Shareholders and holders of Netcom ADSs and
Netcom Options containing, among other things,
details of the Proposals and the Scheme
	 
	 	 	 	 
	“Scheme Record Time”

	 	:
	 	5:00 p.m. (Hong Kong time), on the record date
for the purpose of determining the entitlements
of the Scheme Shareholders under the Scheme, the
entitlements of the holders of Netcom ADSs under
the ADS Proposal and the entitlements of the
holders of Netcom Options under the Option
Proposal
	 
	 	 	 	 
	“Scheme Shareholders”

	 	:
	 	holders of Scheme Shares






36









 






	 	 	 	 	 
	“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 US Securities and Exchange Commission
	 
	 	 	 	 
	“See-Through Price”

	 	:
	 	the “see-through price” of an outstanding Netcom
Option determined by deducting the exercise
price of the relevant Netcom Option from the
value of HK$27.87, being the closing price of
each Netcom Share of HK$27.05 on the Hong Kong
Stock Exchange on the Last Trading Date and a 3%
premium, for each Scheme Share under the Share
Proposal
	 
	 	 	 	 
	“SFC”

	 	:
	 	the Hong Kong Securities and Futures Commission
	 
	 	 	 	 
	“Share Exchange Ratio”

	 	:
	 	the exchange ratio of 1.508 Unicom Shares for
each Scheme Share under the Share Proposal
	 
	 	 	 	 
	“Share Proposal”

	 	:
	 	the proposal to the Netcom Shareholders for the
cancellation of all Scheme Shares pursuant to
the Scheme
	 
	 	 	 	 
	“SK Telecom”

	 	:
	 	SK Telecom Co., Ltd.
	 
	 	 	 	 
	“Special Unicom Options”

	 	:
	 	new options proposed to be granted by Unicom
under the Special Purpose Unicom Share Option
Scheme to holders of Netcom Options at the
Scheme Record Time pursuant to the Option
Proposal
	 
	 	 	 	 
	“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
	 
	 	 	 	 
	“substantial shareholder”

	 	:
	 	has the meaning given to it in the Listing Rules
	 
	 	 	 	 
	“Takeovers Code”

	 	:
	 	the Hong Kong Code on Takeovers and Mergers
	 
	 	 	 	 
	“Telecommunications Ordinance”

	 	:
	 	the Telecommunications Ordinance (Chapter 106 of
the Laws of Hong Kong)
	 
	 	 	 	 
	“Telefonica”

	 	:
	 	Telefonica Internacional, S.A.U.
	 
	 	 	 	 
	“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, a company incorporated
under the laws of Hong Kong with limited
liability, whose Unicom Shares are listed on the
Hong Kong Stock Exchange and whose Unicom ADSs
are listed on the New York Stock Exchange






37









 






	 	 	 	 	 
	“Unicom A Share Company”

	 	:
	 	China United Telecommunications Corporation
Limited, a company incorporated under the laws
of the PRC, whose shares are listed on the
Shanghai Stock Exchange
	 
	 	 	 	 
	“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, a company
incorporated in the British Virgin Islands and
the immediate controlling shareholder of Unicom
	 
	 	 	 	 
	“Unicom Depositary”

	 	:
	 	The Bank of New York
	 
	 	 	 	 
	“Unicom EGM”

	 	:
	 	the extraordinary general meeting of Unicom
referred to in the paragraph headed “14. Unicom
EGM and Unicom Circular” in this Announcement
	 
	 	 	 	 
	“Unicom Group”

	 	:
	 	Unicom and its subsidiaries
	 
	 	 	 	 
	“Unicom Options”

	 	:
	 	outstanding options to acquire Unicom Shares
granted under the Unicom Share Option Schemes
	 
	 	 	 	 
	“Unicom Parent”

	 	:
	 	China United Telecommunications
Corporation, a state-owned enterprise
established under the laws of the PRC
	 
	 	 	 	 
	“Unicom Share Option Schemes”

	 	:
	 	the Pre-Global Offering Share Option Scheme and
the Share Option Scheme each 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 share
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 Securities Exchange Act”

	 	:
	 	the US Securities Exchange Act of 1934, as
amended, including the related rules and
regulations promulgated thereunder
	 
	 	 	 	 
	“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$”

	 	:
	 	United States dollars, the lawful currency of
the United States
	 
	 	 	 	 
	“Very Substantial Acquisition”

	 	:
	 	the very substantial acquisition referred to in
the paragraph headed “10. Possible Very
Substantial Acquisition, Allotment of New Unicom
Shares and Adoption of Special Purpose Unicom
Share Option Scheme” in this Announcement






38









 






This Announcement contains translations between Renminbi and Hong Kong dollar amounts at RMB0.890
= HK$1.00, being the exchange rate prevailing on 30 May 2008. The translations should not be taken
as a representation that the Renminbi could actually be converted into Hong Kong dollars at that
rate or at all.



	 	 	 
	By order of the board of
	 	By order of the board of
	China Unicom Limited
	 	China Netcom Group Corporation
	Mr. Chang Xiaobing
	 	(Hong Kong) Limited
	Chairman
	 	Mr. Zuo Xunsheng
	 
	 	Chairman






Hong Kong, 2 June 2008




As at the date of this Announcement, the board of directors of Unicom comprises Mr. Chang
Xiaobing, Mr. Tong Jilu, Li Gang and Mr. Zhang Junan as executive directors, Mr. Lu Jianguo and
Mr. Lee Suk Hwan as non-executive directors and Mr. Wu Jinglian, Mr. Shan Weijian, Mr. Cheung Wing
Lam, Linus and Mr. Wong Wai Ming as independent non-executive directors. The directors of Unicom
jointly and severally accept full responsibility for the accuracy of the information contained in
this Announcement
(other than in relation to the Netcom Group, Netcom Parent and Netcom BVI) and confirm, having
made all reasonable enquiries, that to the best of their knowledge, their opinions expressed in
this Announcement have been arrived at after due and careful consideration and there are no other
facts not contained in this Announcement the omission of which would make any of the statements in
this Announcement (other than in relation to the Netcom Group, Netcom Parent and Netcom BVI)
misleading.



As at the date of this Announcement, the board of directors of Netcom comprises Mr. Zuo Xunsheng,
Ms. Li Jianguo and Mr. Li Fushen as executive directors, Mr. Yan Yixun, Mr. Cesareo Alierta Izuel
and Mr. José María Á lvarez-Pallete as non-executive directors and Mr. John Lawson Thornton, Dr.
Qian Yingyi, Mr. Hou Ziqiang and Mr. Timpson Chung Shui Ming as independent non-executive
directors. The directors of Netcom jointly and severally accept full responsibility for the
accuracy of the information contained in this Announcement (in relation to the information
relating to the Netcom Group, Netcom Parent and Netcom BVI only) and confirm, having made all
reasonable enquiries, that to the best of their knowledge, their opinions expressed in this
Announcement have been arrived at after due and careful consideration and there are no other facts
not contained in this Announcement the omission of which would make any of the statements relating
to the Netcom Group, Netcom Parent and Netcom BVI in this Announcement misleading.



In accordance with Rule 3.8 of the Takeovers Code, associates of Unicom and Netcom are hereby
reminded to disclose their dealings in Netcom Shares and Unicom Shares pursuant to the
requirements of the Takeovers Code.



39









 





In accordance with Rule 3.8 of the Takeovers Code, reproduced below is the full text of Note 11 to
Rule
22 of the Takeovers Code:



“Stockbrokers, banks and others who deal in relevant securities on behalf of clients have a
general duty to ensure, so far as they are able, that those clients are aware of the disclosure
obligations attaching to associates and other persons under Rule 22 and that those clients are
willing to comply with them. Principal traders and dealers who deal directly with investors
should, in appropriate cases, likewise draw attention to the relevant Rules. However, this does
not apply when the total value of dealings
(excluding stamp duty and commission) in any relevant security undertaken for a client during any
7 day period is less than HK$1 million. This dispensation does not alter the obligation of
principals, associates and other persons themselves to initiate disclosure of their own dealings,
whatever total value is involved. Intermediaries are expected to co-operate with the Executive in
its dealings enquiries. Therefore, those who deal in relevant securities should appreciate that
stockbrokers and other intermediaries will supply the Executive with relevant information as to
those dealings, including identities of clients, as part of that co-operation.”




40